Hoosier ethanol gets second chance


When Altra Biofuels shuttered its Cloverdale, Ind., ethanol plant in December, 2008, the plant had scarcely been operational for half a year.

The 147-acre, $170 million plant had been touted by Altra, a California-based company, as a "state-of the-art" facility, creating 45 new jobs for the residents of Putnam County and a new buyer for area corn growers.

But almost as soon as production began in May, 2008, Altra closed its doors and laid off the majority of its workforce. With profits tied directly to plummeting oil prices (ethanol is a government-mandated additive in gasoline) and a crashing commodities market, the plant seemed like yet another victim of the worst economy in generations.

Just last month, however, POET, a South Dakota-based company, announced it had bought the Cloverdale facility, with plans to implement a $30 million upgrade and bring back the 40-plus jobs lost in 2008. It was welcome news in a bad economy, and in a state whose life's blood is agriculture.

"We're glad that POET is making another commitment to Indiana and its workers," Indiana Lieutenant Governor Skillman said when the news was announced. "These new jobs and the use of this existing facility will be a tremendous boost for Putnam County."

But ethanol isn't just back in Putnam County, it seems to have recaptured attention nationwide: In May, 2009, the White House announced it would dedicate $786.5 million from its American Recovery and Reinvestment Act — the so-called "stimulus package" — to biofuel research and development nationwide.

And that was before the BP oil spill. Indeed, with the crisis in the Gulf of Mexico, the need for alternative energy has hardly been more apparent. Add two costly, ongoing wars — each tied in some way to America's thirst for oil — and the need is more urgent still.

But is more ethanol the answer?

Ethanol is big business

Ethanol is big business in Indiana. As of March, the state Department of Agriculture valued the ethanol industry, along with its byproducts, at $1.3 billion statewide. But ethanol isn't just big business for ethanol makers: The fates of Hoosier corn farmers are tightly bound to ethanol as well. The DOA estimates that 38 percent of all Indiana corn went toward ethanol in 2009.

Hardly surprising considering all the help it's gotten: The Environmental Working Group, a non-profit advocacy group, estimates the feds doled out nearly $74 billion in subsidies to the corn industry from 1995 to 2009 — including nearly $5.6 billion to Indiana. American taxpayers subsidize corn more than twice as much as wheat, the next highest recipient. All of this usually adds up to big yields, low corn prices at home and abroad, and big profits for ethanol makers, if not always for farmers.

Still, William Dory, executive director of the Putnam County Economic Development Center, said it was likely that local farmers would benefit from having an additional big buyer in Cloverdale.

"Ethanol plants usually only draw from within a 50- to 70-mile radius so they aren't cannibalizing each other's supply," he said. As long as POET pays competitive prices for its corn, that could translate to transportation savings for local farmers who might otherwise deliver to buyers further afield.

"From a farmer's perspective, there are no other processing plants in the county," Dory said. "Local farmers are very positive about the fact that the plant is going to open again."

Sustainability in question

In 2005, David Pimentel, of Cornell University, and Tad Patzek, of the University of California, Berkeley, published controversial reports that called ethanol's sustainability into question. Among other things, they asserted that corn ethanol required 29 percent more fossil energy to produce than ethanol produced itself.

But numerous studies have seemingly disproven their claims since. Wallace Tyner, a professor of agricultural economics at Purdue University, said the pair had made their calculations based on 20-year-old technology, outdated crop-yield levels and outdated methods of fertilizer use.

"The studies got a lot of publicity among journalists — for some reason they all saw that," he said. "But all the people that have looked at (the energy balance) since then have come up with gains for ethanol."

Studies led by the University of Minnesota, University of Nebraska, the U.S. Department of Agriculture and others support Tyner's claim.

However, another issue with corn-based ethanol is its potential environmental impact. Several credible reports, like a 2008 study led by Princeton's Timothy Searchinger, claim biofuel production does more environmental damage than gasoline because it devours land formerly used for food, with the potential to double greenhouse gas emissions over 30 years.

Another study published last year, led by Jason Hill from the University of Minnesota, asserts that the aggregate environmental and health costs associated with corn-based production are worse than gasoline's.

As importantly, another study led by Hill in 2006 points out that the 14.3 percent of U.S. corn used for ethanol production in 2005 created an equivalent to only 1.72 percent of gas consumption. At that rate, even the entire U.S. corn harvest would have offset only 12 percent of American gasoline demand.

The environmental implications of such studies are hotly contested. Tyner has placed ethanol's contribution to greenhouse gases at closer to 15 percent of Searchinger's estimates — less than gasoline's. He noted, however, that any such global-scale, indirect calculations, by him or any other researcher, were by their nature "fraught with uncertainty."

Cellulose preferred

One thing most researchers seem to agree upon is that ethanol production is most energy efficient and least environmentally harmful when made from cellulose instead of corn. Cellulose comes from sources like corn stover (the leftovers from kernel harvesting, like cobs and stalks) and switchgrass — a renewable crop that produces nothing edible, but can be grown on less-than-prime land.

Research indicates that corn stover is a cheaper, more economic base of cellulosic production for growers compared to switchgrass, in part because farmers can profit from both the kernel and the cob. "For cellulosic ethanol in Indiana, corn stover is where it's at," Tyner has said.

But for all the subsidies propping up corn, cellulosic production is still not economically viable on a wide scale. Why? The short answer is it still costs way more to make than corn ethanol. "It is technically more challenging to convert cellulosic raw materials to biofuels than corn starch," Tyner said, making it "much more expensive."

Many have argued that the federal government should redirect its huge subsidies toward this end.

POET is already developing a plant in Emmetsburg, Iowa — known as "Project Liberty" —which looks to be among the first plants in the country to produce cellulosic ethanol on a commercial scale. The cellulosic component alone cost $200 million, largely possible because of a 2007 federal grant.

Once completed, "Project Liberty" will produce both corn and cellulosic ethanol — the only way to make cellulose profitable at the moment, said Nathan Schock, a spokesman for POET. Estimates say the plant will reduce carbon emissions by 111 percent compared with gasoline, in part because of a process that uses cellulose byproducts to create biogas, which in turn powers both the cellulose and grain-based plants.

Upgrades to Indiana's Cloverdale plant include a process that uses enzymes instead of heat to convert corn into ethanol. POET says the technology should reduce energy expenditures by 10 to 15 percent, and allow room for an integrated model expansion like Project Liberty's down the road.

"For POET, it's not an either-or situation," Schock said. "The challenge is making cellulosic production economically viable, and an integrated plant is the way we get there."


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