As Ethanol Takes Its First Steps, Congress Proposes a Giant Leap

NY Times
December 18, 2007

By CLIFFORD KRAUSS

Congress is on the verge of writing into law one of the most ambitious dictates ever issued to American business: to create, from scratch, a huge new industry capable of converting agricultural wastes and other plant material into automotive fuel.

The potential benefits include reducing the nation’s dependence on oil and the emissions of gases that contribute to global warming. But the goals Congress is considering are so sweeping, analysts say, that it is not clear they can be achieved.

No fuel of the type in question has been produced commercially in the United States. Even in the view of people who back the idea, the technology to do it is immature, the economics are uncertain, and the potential for unintended consequences is high.

Hundreds of new factories will be required, perhaps a billion tons of plant material will need to be hauled around every year, and estimates of the required investment start at tens of billions of dollars.

“It’s not clear that it is doable, but it wasn’t clear you could send a man to the moon, either,” said Mark Flannery, head of energy equity research at Credit Suisse. “You don’t know until you try.”

As a new energy bill has slogged through Congress on the way to the president’s desk, much of the debate has focused on a historic revision of fuel-economy standards intended to make American cars 40 percent more efficient.

Less attention has fallen on other portions of the bill, but they could be far-reaching. One measure calls for a huge increase in the amount of ethanol used in the nation’s fuel supply. Much of it would be made from corn, as ethanol is today. Producing about seven billion gallons of ethanol a year from corn has reshaped agricultural markets and sent corn prices soaring. Congress wants to double that level of production, to 15 billion gallons.

But the bill goes much further. It calls on the country to use, by 2022, an additional 21 billion gallons a year of ethanol or other biofuels produced by unlocking the energy contained in such biological materials as straw, tree trimmings, corn stubble and even garbage, material known collectively as biomass.

To reach that goal, the nation’s scientists and business leaders will need durable political and financial support to overcome a host of technical, environmental and logistical obstacles.

The end result, if it worked, would be the sort of energy transformation that was promised in the 1970s and 1980s, until government and industry lost their motivation when oil prices plummeted.

Congress says this time will be different. The new legislation would oblige farmers to grow new crops in new ways, automobile companies to produce more vehicles capable of running on a high-ethanol blend, and the oil industry to retrofit its refining and distribution networks to deliver the new fuel.

“We have the opportunity to revolutionize the way we create fuel for transportation,” said Martin Keller, the director of the federal Department of Energy’s BioEnergy Science Center at the Oak Ridge National Laboratory in Tennessee. “If we focus on this, we can replace between 30 and 50 percent of our gasoline consumption with new biofuels.”

A broad energy bill in 2005 took the ethanol industry from infancy to a coddled but uneasy adolescence. The legislation set off a frenzied buildup of ethanol plants across the Midwest, with the number of distilleries increasing to 134 today from 81 in January 2005, according to the Renewable Fuels Association. Plants under construction or being expanded have increased to 77 from 16.

The new energy bill, if enacted as it stands, would convert the ethanol industry to full partnership with the oil and gas industry. But if ethanol’s recent past offers any lessons, the transformation will not be easy.

Ethanol companies have been canceling distilleries and distillery expansions in recent months as the price of their product has slumped and the price of corn, their main feedstock, has climbed. The infrastructure still does not exist to blend and transport the relatively small amount of ethanol that is produced today, resulting in huge price gaps between markets.

“We’re still trying to digest the energy bill from 2005,” said Charles T. Drevna, president of the National Petrochemical and Refiners Association. He warned that the billions of dollars that it will cost to build and refit blending terminals and refineries for ethanol would be passed on to consumers.

Ethanol producers acknowledge the hurdles but say the strong mandates will encourage industry to step into line. “It certainly is a challenge, but an achievable challenge,” said Christopher G. Standlee, executive vice president of Abengoa Bioenergy.

The bill would represent a striking advance for a fuel that has been quite controversial in the last 25 years.

The seven billion gallons of ethanol the country will consume this year will be used largely as an additive, displacing about 4 percent of total gasoline consumption. That is well ahead of a schedule set in the 2005 energy bill. The legislation catapulted the United States to become the world’s biggest producer of ethanol, followed by Brazil.

Under the new legislation, corn ethanol use would reach 15 billion gallons by 2015, a big jump considering that 20 percent of the American corn crop is already going into ethanol. Mandates for next-generation biofuels use would reach nine billion gallons in 2017 and 21 billion by 2022. The bill does contain an escape clause, allowing the government to modify the mandates if they do not prove feasible.

Energy experts express wonderment at the scope of the new mandates and the short timelines, 5 to 15 years, for achieving them.

“Congress is making the assumption that the technology will appear,” said Aaron Brady, an ethanol expert at Cambridge Energy Research Associates. “To make billions of gallons of next-generation biofuels, a lot of things have to go right within the space of only a few years.”

Mr. Brady estimates that more than 100 additional corn ethanol plants will be required, along with at least 200 other biomass fuel plants, a number that could rise depending on how the technology develops.

A loose alliance of national-security advocates and environmentalists has promoted biomass ethanol as an alternative to fossil fuels, arguing that it can reduce the country’s reliance on imported oil and help contain global warming, especially if biomass sources like switchgrass and trees can be developed that would need little water and fertilizer to grow.

But many environmentalists remain uneasy about corn ethanol because it requires energy and fertilizer made from natural gas, oil and coal, and they are concerned that biomass fuels may also have unexpected environmental consequences.

According to food producers who oppose expanding ethanol production, the additional eight billion gallons of corn ethanol use outlined in the bill will require growing 20 million more acres of corn. “That means fewer acres for fruits, vegetables, soybeans, alfalfa and other crops, and higher food prices,” said Jesse Sevcik, a vice president at the American Meat Institute.

Ethanol producers say the food-cost concerns are overblown, but they concede that corn has limits as a fuel. They say ethanol made from other plants not vital for food production is the answer.

As a scientific matter, it has been clear for years that biomass can be converted into fuel. Plants contain large amounts of a tough material called cellulose that consists of tightly linked sugar molecules. If the cellulose is dissolved, the sugars can be fermented into ethanol. Biomass can also be converted by chemical means into fuels resembling gasoline or diesel.

Decades of work, still incomplete, have gone into figuring out how to do the conversions. Scientists are still tinkering, and companies are just breaking ground on small-scale production lines.

“Obviously there are concerns, because it’s not simple,” said Carlos Riva, chief executive officer of Verenium Corporation, a leader in ethanol research.

Energy Department and Congressional reports suggest the country has sufficient land and biomass to replace a third or more of American gasoline needs, depending on how efficient cars become in the future.

In theory, that could cut the nation’s emissions of carbon dioxide, the principal greenhouse gas. Engines that burn biomass-derived fuels emit carbon dioxide, but the fuels will have been made from plants that absorbed carbon dioxide from the air months earlier. Burning oil and coal, by contrast, converts carbon that was trapped underground for millions of years into carbon dioxide, raising the atmospheric concentration.

However, scientific reports about biomass ethanol raise some of the same concerns that have been raised with corn ethanol, including potential problems with soil erosion, runoff and soil fertility.

The sheer bulk of many of the necessary biomass sources is one of the biggest problems, posing challenges for harvest, transport and storage. Mr. Brady, the energy analyst, estimates that 700,000 tons of biomass would be needed each year for a distillery to produce 50 million gallons of ethanol.

“You’re talking about a huge amount of material that has to be hauled back and forth, and that will cost energy,” Mr. Brady said. “I don’t know if it will be a deal-breaker, but I don’t think the logistics of this have been worked out.”