Corn-Waste Fuel Market Needs Gov't Help, Ethanol Maker Says

Creating a viable market for fuel derived from the leftovers of a corn harvest will require Congress to extend tax breaks for ethanol and increase the amount of the alternative fuel allowed in gasoline, according to the head of one of the industry’s leading companies.

“We need to have better market access and more stable government policy,” said Jeff Broin, chief executive of POET, a South Dakota-based ethanol producer, at an April 21 Newsmaker press conference.

The day before his National Press Club appearance, Broin’s company applied for a loan guarantee from the Department of Energy to build the first plant for commercial production of cellulosic ethanol, a product manufactured from corn cobs.

If POET gets the loan, it can start construction of a plant in Emmetsburg, Iowa, which it hopes to put into operation in 2012.

The facility is one of many that POET plans to build. The company will contribute to the production of 3.5 billion gallons of cellulosic ethanol annually by 2022, according to Broin. The effort, dubbed Project Liberty, will amount to nearly 20 percent of the 16 billion gallons per year called for by Congress in the Renewable Fuel Standard.

Congress will have to help POET and other companies meet that goal by extending excise tax credits for ethanol and maintaining tariffs on imported ethanol, Broin said. Both of those policies are set to expire at the end of the year. An excise tax credit for cellulosic ethanol will end in 2012.

Extending tax breaks used to be routine on Capitol Hill. This year, however, it’s become more of a challenge amid political fights over how to pay for them.

When it comes to ethanol, Broin justifies government assistance by arguing that the alternative fuel reduces U.S. dependence on foreign oil and protects the environment.

“I think the chances are good,” he said of the prospects of Congress approving the ethanol tax breaks. “Through cellulosic ethanol, every state can participate and be part of the solution to increase our country’s energy independence, while cleaning our air and creating jobs.”

Broin acknowledged that he’s battling widespread skepticism about the viability of cellulosic ethanol based on production difficulties.

POET, however, is achieving success in its cellulosic ethanol pilot project, Broin said. The company has cut production costs from $4 per gallon to $2.35. It hopes to reduce costs to $2 per gallon when the Iowa plant is in operation.

By 2022, POET plans to manufacture one billion gallons of cellulosic ethanol by adding production technology to its current 26 corn-based ethanol plants; licensing the technology to other corn-based ethanol producers for another 1.4 billion gallons; and making 1.1 billion gallons from other biomass products like wheat straw, switchgrass and municipal waste for a total of 3.5 billion gallons annually.

The effort will create about 35,000 to 70,000 jobs by 2022, Broin said.

The key to achieving these results is government support of the fledging industry, he said. Such help is criticized by America’s trading partners. For instance, Brazil has raised objections to U.S. ethanol subsidies. Brazil produces ethanol from its sugar crop.

“If there’s one thing we want to import from Brazil, it’s their desire to be energy independent,” Broin said. “We want to follow their lead in creating a domestic industry and making sure we decrease our reliance on foreign oil and maybe eventually replace foreign oil with domestic energy products.”