Food or Fuel? - Global demand for renewable fuels, along with a growing ethanol industry, is putting the state's corn use into question
By Dick Hagen
The Land Staff Writer
Published: July 14th, 2006
For 150 years this nation has depended upon a single source of energy, crude oil, said Bob Dineen, president and chief financial officer of the Renewable Fuels Association. That’s now history, he said, because renewable fuel is the future.
Speaking at a recent open house at the new Granite Falls Energy facility, just east of Granite Falls in Chippewa County, Dineen gave ample evidence to back his claim: It has been 35 years since the last oil refinery was built in the United States; there are now 101 ethanol plants in operation with 32 more currently under construction; it is the fastest growing energy industry in the world; the year 2006 will see 5 billion gallons of ethanol production; this “new energy” now employs 153,000 people, is generating $32 billion in gross productivity and adding $5 billion to household income across the nation; ethanol is now available in 40 percent of the nation’s fuel lines.
The Granite Falls ethanol plant, which became operational in November 2005, was built by the hometown firm of Fagen Inc. Twenty-four of the 32 new plants under construction are Fagen projects.
Production ramp-up
“With these new ethanol plants now online, Minnesota’s production is right at 500 million gallons per year,” said Minnesota Department of Agriculture Commissioner Gene Hugoson. “There are plans for another 500 million gallons ... which means Minnesota will eventually be at one billion gallons of the nation’s anticipated eight billions gallons of production.”
Responding to a question on whether corn should be grown for feed or for fuel, Hugoson indicated Minnesota farmers should continue to have growing opportunities for both markets — but that the real answer will be dictated in the marketplace. “Wherever a producer can best meet his financial goals for growing corn will be his marketing choice.”
Hugoson also reflected on trendlines in corn production, noting that combinations of increasingly better genetics, plus the crop protection generated by the various trait technologies, is producing better yields almost year after year.
“Today’s hybrids are able to take stress that five to 10 years ago we never would have thought possible,” he said. “Granted, we still can have weather disasters. Each year some section of Minnesota, or the Corn Belt in general, gets hurt because of bad weather. Last year, for example, much of Illinois, eastern Iowa, even parts of southeastern Minnesota had severe drought stress. But look what happened.”
Global supplies, demand
Noting a recent trip he made to China, Hugoson said that country — with a population of more than two billion people — is “desperately searching” for fuel sources. He said China now has two or three ethanol plants in operation, and sweet potatoes are being considered as an ethanol source in some parts of the country.
“As China gets more affluent, more of their people want to drive cars,” Hugoson said. “They already have over 10 million autos ... and expect to be at 40 million cars in 10 years. Beijing alone adds something like 500 cars per day to its already crowded streets. And they are now manufacturing their own cars which simply adds another dimension to the demand for fuel.”
International demand for renewable fuels is growing, but what about global supplies? Brazil will be a key provider of ethanol into both its domestic market — where virtually all automobiles are flex-fuel — and also into export markets, possibly including the United States.
Hugoson suggested this is the real world of energy marketing. “International trade is now a major factor of U.S. agriculture but we can’t expect to sell elsewhere unless we are also receptive to imports, even be that ethanol, made from Brazilian sugar cane. ... I can see possibilities down the road where U.S. ethanol producers and Brazilian ethanol producers cooperate with agreements into world markets.”
Hugoson gave as an example Japan, which has great interest in ethanol, but is concerned about finding a reliable source. He said Brazil, for instance, couldn’t meet its own ethanol demands, so the South American nation is not seen as a “huge threat” to the United States.
Room for expansion?
Hugoson noted that Minnesota is not the easiest state for getting permits for new construction, but that the state needs to deal with the reality that ethanol production is a growing part of the economy of rural Minnesota.
“The industry needs certainty as they make their plans,” he said. “They tell us the permitting process can be only a couple months in other states, but they don’t mind the five to six month process in Minnesota as long as they have certainty that it won’t drag on into 10 to 12 months and longer. There’s too much financial risk at stake if certainty is unpredictable. With science the key factor in protecting the environment in proposed new sites, then our various state agencies should be helpful and supportive of an industry that already is a key factor in the financial health of Minnesota agriculture and many rural communities.”
Gov. Tim Pawlenty, also in attendance at the Granite Falls Energy event, said America has been “asleep at the energy switch” for 30 years as worldwide energy demand has exploded.
“I think it’s obvious to most that renewable fuels are the answer,” he said. “Minnesota definitely is the nation’s leader, dating back 12 years to the 10-percent ethanol mandate which jump-started an entirely new industry. And now our goal is 20 percent by 2012. Perhaps from there we program directly into a statewide E85 program.”
The governor described renewable fuels as a win-win situation for everyone — good energy policy, good environmental policy, good economic development policy and good farm policy.
A ‘Midwest fuel’ for now
Notwithstanding efforts to make it a national fuel, Tom Branhan, CEO of Watertown, S.D. (based Glacial Lakes Energy) and manager of the Granite Falls plant, sees E85 primarily a Midwest fuel for the immediate future. This is simply because the infrastructure is not in place for handlers, fuel depots and service stations to make a quick change, he said.
“You need to work from the center out. We’re the center of the universe when it comes to ethanol production so expansion won’t leap-frog to new geography. It will be a methodical process from the Midwest to other regions of the country.”
Due to current permitting restrictions, Granite Falls Energy is currently “throttled back” to 45 million gallons of production but is designed as a 55-million-gallon plant. It processes about 50,000 bushels of corn daily, half by truck, half by rail. Railroad tank cars move out 90 percent of the 138,000 gallons of ethanol produced each day, most going to West Coast markets.
Branhan sees a huge future for renewable fuels, especially since President Bush signed the national energy bill and with governors in virtually every state in the nation now excited about this new industry. Even Kathleen Blanco, governor of Louisiana, the No. 1 oil-producing state, signed a bill in June requiring ethanol-blended gasoline be sold in Louisiana once in-state production of the fuel reaches certain levels. The state is big in sugar cane production, suggesting the crop might soon start working its way into ethanol markets as well.
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