EPA Ruling Could Rev Up Ethanol Production
This week’s Environmental Protection Agency ruling that probably will require the use of ethanol in California’s reformulated gasoline could give a huge boost to several projects in the state that seek to produce the fuel additive from crops such as sugar cane and corn, and agricultural waste such as rice straw, forest thinnings and orchard prunings.
A number of California entrepreneurs have been trying for months, and in many cases years, to get funding for plants that will both produce ethanol for gasoline and generate excess power for the state’s overburdened grid.
Most are small potatoes, each promising to produce 10 million to 40 million gallons of ethanol a year when they open two or three years from now. At that rate, they could supply only a fraction of the state’s demand for ethanol when the additive methyl tertiary butyl ether, or MTBE, that ethanol would replace is phased out at the end of 2002.
The rest of the state’s estimated 600 million gallon needs would be supplied by ethanol plants in the Midwest.
But energy officials say it could be a positive first step in getting a state industry up and running rather than relying exclusively on Midwest ethanol. Moreover, it would provide new jobs in many depressed agricultural areas and provide an outlet for the state’s huge amount of green waste.
“I think having our own in-state industry provides a lot of economic and environmental benefit to California,” said Pat Perez, manager of the California Energy Commission’s ethanol project. “Most of these facilities are being proposed in rural agricultural areas which have historically some of the highest unemployment in the state.”
Tuesday’s announcement by the federal government is what many of these projects need to have a shot at securing funding, analysts say. In turning down the state’s request for a waiver from gasoline additives, the Bush administration has practically guaranteed that demand for ethanol will surge in California. The state will consume more than 30% of the nation’s capacity of 2 billion gallons in 2003, according to a March report by the California Energy Commission.
But analysts say entrepreneurs around the state will have to first prove their ventures can be profitable. Although their complex processes for extracting ethanol from various farm products have been proved to work, most have not been done on a commercial scale.
And a cloud still hangs over these ventures. Sen. Dianne Feinstein (D-Calif.) is pledging to move forward with legislation that would allow refiners to produce reformulated gasoline without ground-water-polluting MTBE or ethanol as long as producers can meet clean air standards.
Feinstein and Gov. Gray Davis have argued that requiring ethanol could add significantly to the already high price of gasoline in the state and prompt shortages.
Ethanol producers and state energy officials dispute the 50-cent-per-gallon figure, claiming that ethanol would add only 3 to 6 cents to the price of gas.
California entrepreneurs also will have a difficult time competing with subsidized producers in the Midwest, which already have the equipment and infrastructure.
“If we want to jump-start this [business], the state has to get rid of the notion that ethanol is a threat to California and develop some producer incentives to get these plants established,” said Neil Koehler, a co-founder of one of the state’s two existing ethanol plants, Parallel Products in Rancho Cucamonga.
The other plant operating in California, which extracts ethanol from whey, is operated by Golden Cheese Co. in Corona. That plant produces just 4 million pounds of ethanol a year, mainly for Tosco Corp., which owns the 76 gas station chain.
The California Energy Commission report said it would require about $500 million in state incentives to achieve an annual production capacity of 200 million gallons of ethanol, which would meet about a third of the state’s estimated demand. But the payoff for the state could be large, the commission estimates: As much as $1 billion could be reaped from new jobs and taxes.
John Sheehan, an economic development official in Plumas County, is working with Collins Pine, a lumber company in Chester, to produce ethanol from its forest trimmings, generate electricity and market other byproducts as food additives or supplements to the pharmaceutical industry.
“The conversion of technology [from biomass into ethanol] is just in the embryonic stages,” Sheehan said. “But it looks very promising.”
Only in a few cases will ethanol give farmers a lucrative market for their crops. Most will simply provide growers or companies with a low- or no-cost way to get rid of their waste, such as rice and wheat straw.
In Gridley, a town of about 5,000 south of Chico, for instance, city officials are trying to build a manufacturing facility that would produce ethanol from rice straw, the stalks of the rice plant. The stalks are normally burned after harvest, a practice air quality boards are curtailing because it sends ash and silica into the air. The plant would provide a way for about 40% of the rice growers in the Central Valley to dispose of their straw.
In addition to producing ethanol, the $100-million plant’s byproducts would make gypsum and enough lignin from the pulp to supply 15 megawatts of power for the surrounding area.
Perhaps the strongest selling point of many of these facilities is their ability to generate excess electricity to supplement the state’s overburdened grid and deal with green waste.
“We’ve definitely got more biomass available in California than corn,” said Charles Lombard, president of Palo Alto-based Waste Energy Integrated Systems, which is proposing a biomass and corn ethanol plant at the abandoned Spreckels sugar plant in Woodland. “We’re drowning in organic waste, and this project would kill two birds with one stone.”
Yolo County officials hope the $70-million two-phase project would help replace the hundreds of jobs lost when the plant closed down last year, plus reduce the large amounts of waste carted off to the state’s landfills.
