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King Corn slips from throne in biofuel race Government backs off on innovation subsidy

The biofuel company Gevo is about to break ground in the southwest corner of Minnesota on a system that will make it the first in the country to commercially produce a gasoline additive called isobutanol.

Gevo believes that isobutanol could become an important alternative to regular gasoline. It burns more powerfully and efficiently than ethanol and runs just fine in existing automobile engines.

The plant in Luverne, Minn., appears to be everything the Obama administration wants to reduce America's dependence on fossil fuels and foreign oil -- except for one thing: The plant will use corn to produce isobutanol.

So the federal government refuses to provide loan guaranties to support the innovation.

Attempts to dethrone King Corn in the renewable-fuels market are more frequent and forceful than they used to be. Corn ethanol no longer qualifies as an innovative technology that garners broad federal subsidies. When the Obama administration recently announced its plans to increase the market share of renewable fuels, it trumpeted "breaking ground on at least four commercial-scale cellulosic or advanced biorefineries over the next two years."

Those priorities matter in Minnesota, which helped develop the corn ethanol industry and now produces 1 billion gallons a year at 21 corn ethanol plants. Many of them are owned by farmer cooperatives.

The bigger question is how corn ethanol fares going forward.

Rep. Collin C. Peterson, a Democrat who represents Minnesota's rural 7th Congressional District, believes that corn ethanol represents the country's most economically viable renewable energy in the next several decades.

"It's not going to be some high-tech gang from Silicon Valley that's going to make this work," Peterson said of next-generation renewable fuels. "You need farmers."

Still, Peterson says that U.S. Energy Secretary Steven Chu "has announced that corn ethanol is dead."

At a Senate Energy Committee hearing last week, some speakers questioned the bill sponsored by Minnesota's two senators, Al Franken and J. Amy Klobuchar, both Democrats, as well as Sen. Tom Harkin, D-Iowa.

The bill would require automakers to build flex-fuel engines and mandate installation of ethanol pumps in service stations nationwide. Critics call the bill an overcommitment to corn.

On the day of the hearing, the New York Times published an article saying that using corn and other crops for ethanol causes hunger and higher food prices. The day before the hearing, environmental activists of the Environmental Working Group circulated a position paper saying that corn ethanol costs more to produce than it saves in fossil fuel use.

"That's just not true," Franken said in an interview. "The yields go up and up. We're meeting the need for feed."

Any gridlock over renewable fuels is a win for oil companies, said Rep. Tim Walz, a Democrat whose southern Minnesota district encompasses 11 corn ethanol plants.

"The problem with our energy policy is that it is a disincentive to renewables," Walz explained. "We steer you to oil because oil has tax breaks."

Walz would take away those breaks and use the revenue that results to fund renewable fuel projects. "The Holy Grail is cellulose," said Ralph Groschen of the Minnesota Department of Agriculture.

In the world of renewable energy, cellulose means whatever grows naturally in renewable supplies. Theoretically, this is the 50-state solution to American energy independence -- biorefineries that convert anything from sawdust to saw grass into alternatives to gasoline.

The problem, say people such as Kelly Nixon, is turning theory into practice. Nixon runs the Central Minnesota Ethanol Co-op in Little Falls, Minn. That corn ethanol plant hoped to add a facility that made ethanol from the wood of fast-growing poplar trees.

"We looked at the cost, and it was too expensive without millions from [the federal government]," Nixon said. "I think the little guys are probably out [of the cellulosic conversion business]."

The future for the big guys looks brighter. Mascoma, a bio-fuel company, bought out another company that would have partnered with the Little Falls ethanol plant on cellulosic conversion. Now, it has a deal with the oil company Valero to produce 40 million gallons of ethanol a year from a wood-fueled plant in Michigan.

The project is supposed to produce 70 skilled jobs on-site, 700 spinoff jobs and a technology that rivals the cost of oil production. The company hopes to get a government guarantee to back a private construction loan.

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