Building For Biofuels

Jan. 14, 2005
Uncertainty in oil prices is just one reason ethanol producers are building more plants in the U.S.

One might assume that the recent surges in oil prices would prompt fuel consumers to beat a path to U.S. ethanol producers -- but where in the heck are they? The answer is that indeed producers are building ethanol plants here, albeit their plans predated this year's oil-price panic. "It hasn't hurt," Maurice Hladik says of the jagged nature of oil prices. "But we're not planning on that as a strategy because the minute the prices go back down, you look silly. But we think below-$20-a-barrel prices are a thing of the past." Hladik is marketing director for Ottawa, Ontario-based Iogen Corp., a long-time enzyme manufacturer that is looking to build at least one plant in the Midwest to produce ethanol from crop waste. In April, Iogen, which has a $15 million business in enzymes, opened a large-scale demonstration plant in Canada to make its version of ethanol, which varies from the better-known version that's made from the edible part of crop plants. Now, the company is looking for a U.S. site, in western Nebraska, Idaho or elsewhere. Producers don't foresee a widespread swapping of petroleum-based fuels with pure ethanol but rather anticipate regulations that will make gasoline/ethanol mixed fuel a U.S. standard. Indeed, major automakers foresee this as well and are making their fleets compatible with ethanol/gasoline mixes. The manufacturers see regulations coming fairly soon in response to concerns over noxious emissions from production and use of carbon-based fuels, U.S. dependence on foreign oil, erratic oil pricing, and a desire to use more domestic agricultural products. (One ton of plant waste yields 75 to 85 gallons of ethanol.) Corporations, governments and private citizens are starting to use more and more ethanol-containing fuels when they are available. Government support for ethanol was apparent in October when President Bush signed the American Jobs Creation Act, which includes several tax breaks for alternative-fuel producers. Hladik says a requirement to use a 10% ethanol mixed fuel would require at least 200 U.S. ethanol plants. Seventy-nine plants exist, and a dozen are under construction, according the Wisconsin Agconnection information services. The U.S. industry is at record production, about 225,000 barrels a day. Another company building ethanol plants in the U.S. is Spain's Abengoa Bioenergy Corp. It produces 200 million gallons of ethanol a year and will produce 340 million when two more plants open next year in Nebraska and Spain. Already Abengoa has four plants -- two in Spain, one in Cotwich, Kans., and one in Portales, N.M. Abengoa, which also provides construction and information technology services, sees ethanol as a "growth" industry for the same reasons Iogen does. "We are establishing long-term capabilities on both continents," says Gerson Santos-Leon, an R&D director at the company. "We want to be the supplier of choice." Among its clients are major petroleum producers including Shell, British Petroleum and Exxon, which have an obvious interest in ethanol technology. Similarly, Shell partners with Iogen, as does Petro Canada. The buy-in of traditional producers is important because they own the country's fuel-delivery infrastructure. "We've got a very good relationship with Big Oil," Hladik says. Iogen's ethanol is already being used in government vehicles running on mixed fuel in Canada. The private sector-market isn't too far of a reach, the company thinks. "This is an industry of the future," Hladik says. "But the future isn't very far away."

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