-------- Original Message -------- The great green hope; Governments are banking on a big bang for fuels made from grains. The move essentially pits the livestock industry against the ethanol industry, and who will come out the winner remains to be seen The Calgary Herald Sun 29 Apr 2007 Page: E2 Section: Calgary Business Byline: Hanneke Brooymans Dateline: EDMONTON Source: Edmonton Journal Edition: Final Story Type: Business Length: 3187 words Illustration: Photo: Brian Gavriloff, Edmonton Journal / Bill Churchward, general manager of Alberta's only ethanol plant, Red Deer-based Permolex, holds some fuel-grade ethanol. ; Colour Photo: Brian Gavriloff, Edmonton Journal / Drew Pritchard, operations superintendent of Husky Energy's Lloydminster, Sask., ethanol plant, looks at a pile of dried distillers grain, a byproduct of ethanol. ; Graphic: How ethanol is made from grain ; EDMONTON - Alberta thinks of itself as an energy leader, but the petro-rich province has been a laggard when it comes to biofuels. The industry's undisputed pioneer is Brazil. After three decades of hard work, the South American giant last year squeezed about 17 billion litres of ethanol from sugar cane. The United States has surged ahead of the pack. Its 115 ethanol plants, fed by the massive Midwest corn belt, can churn out almost 22 billion litres annually. Another 86 plants are under construction. Plants are popping up in Canada, too, though at a more modest rate. Alberta, so far, has just one. But the province wants to change all that. The Ed Stelmach government has grand visions of a vast biofuels industry extending its tendrils into all corners of Alberta. Farmers will prosper by growing crops for biofuel production; the shaky forestry sector, besieged by pine beetles and low prices, will branch into producing ethanol from cellulose, or plant fibre. But huge questions remain, including: Who will pay to build the plants and infrastructure needed to get the fledgling industry on its feet? And is bioenergy actually of any benefit to the environment? Alberta took a big step toward a biofuels future last October when it announced a $239-million bioenergy program. It was taking a cue from the federal government, which had announced the previous May its intention to legislate the blending of ethanol into the gasoline we pump into our vehicles. Ottawa backed this up in March by budgeting $2 billion over the next seven years to promote investment in renewable fuels. Though the federal ethanol mandate isn't yet law, it's coming, and many provincial governments are acting to ensure their voters don't miss out on a guaranteed market. Provinces like Saskatchewan, with three ethanol plants, and Ontario, with 10 ethanol plants either operating or under construction, have proved that when it comes to producing fuel from crops, initiative matters. Figuring out the formula to attract these plants is becoming crucial, as federal and provincial cash pours into the industry, allowing companies to pick and choose where to locate. Alberta's program "is really just the first step," said Matthew Machielse, director of biofuels for Alberta Energy. "If we can attract the ethanol infrastructure here, then likely those plants will extend into green chemicals, extend into green materials, all of those other constituents that have even higher value than just ethanol." He even envisages Alberta's shoppers swinging grocery bags made from bioplastics manufactured in the province. Machielse says Alberta wants to be a player in meeting the federal government's mandate, which would require five per cent ethanol in gasoline by 2010 and two per cent biodiesel in diesel by 2012. "Otherwise all we're doing is exporting our feedstocks to other jurisdictions who capture the value added." While the provincial government recently distributed the first $5 million of its bioenergy program, it still has a lot of catching up to do. Some of the major players in the industry are showing little interest in locating here. Husky Energy, a biofuels pioneer that has declared its ambition to be the largest ethanol producer in Western Canada, seems to be building plants everywhere but in Alberta. Last fall, it opened a plant in Lloydminster on the Saskatchewan side of the border. Now, it's busily erecting its clone in Manitoba. And it just might put up a third plant near Prince George, B.C. Iogen, an Ottawa-based biotech company, was considering Alberta as one of a handful of potential sites for its first commercial-scale plant that would produce ethanol from plant fibre. Since then, it has shied away from its Alberta option -- the province's labour market is too hot, the company decided. Ideally, the province would prefer that farmers themselves invest in ethanol facilities by forming co-operatives and pooling their money together. But scrounge might be a more accurate word after the financial thrashing farmers have taken from drought and mad cow disease. Alberta farmers have come out of the worst five or six years in the industry's history, said Rod Scarlett, executive director of the Wildrose Agricultural Producers. "So to get a farmer to invest something in this value-added process like an ethanol plant -- there isn't the money in the farm economy to make that investment. "It would be like squeezing blood from a stone." If the government really believes in the industry and their farmers, it should consider financing construction of facilities and leasing them back or making them a rental to purchase, Scarlett suggested. But Machielse doesn't see that as an option. "The policy has always been, as far as government policy, that we're not going to get in the business of being in business," he said. Still, Machielse doesn't want imports used to meet the federal mandate for ethanol in Alberta. That would mean we need to produce 300 million litres of ethanol by 2010. The one ethanol plant in the province, Permolex in Red Deer, recently finished an expansion and pumps out 40 million litres annually. The general manager, Bill Churchward, said the plant may expand again soon, and the company is looking to build another one in Alberta. A plant announced recently by Dominion Energy for Innisfail is supposed to produce 378 million litres of ethanol, as well as a similar volume of biodiesel. Scarlett worries this one $400-million plant will swamp demand in the province and squelch impetus to build more farmer-run projects. But agricultural economist Richard Gray thinks farmer-run biofuel plants are a risky venture, anyway. For one thing, the farmers will be competing with biofuel producers on an international market, said Gray, a University of Saskatchewan professor. This means once the domestic mandate for ethanol is met, plants will sell to a market that includes producers who get European and American subsidies. Gray also worries the current biofuels building frenzy could morph into an oversupply problem. "Partly it is this capacity issue," said Gray. "There's nobody out there telling people not to build (biofuel) plants. And if you build too many, and you're over your mandated use, what are you going to do with it? Then you're into this low- price situation, and everybody's losing money." But others see biofuels as a huge opportunity for farmers. Greg Porozni is a fourth-generation farmer who grows wheat and canola on his land 45 kilometres north of Vegreville. He plans to invest in an ethanol plant and a canola plant. "I see this as a once-in-a-lifetime opportunity for us farmers to get involved in the value chain," said Porozni, who is also chairman of the Alberta Canola Producers Commission. "This is a true market signal." Besides, Porozni said he's tired of the stereotype of farmers relying on government handouts. "I don't expect the government to help us time and time again. They don't do that with any other industry, so why should farming be any different?" Not all farmers are optimistic about the burgeoning biofuels industry. Alberta's livestock producers are deeply concerned. Beef, pork and poultry producers all feed their animals the same grains coveted by the ethanol industry. The province's cattle industry is feeling especially vulnerable, since it's still recovering from the fallout of mad cow disease. "We're not whole yet," said Stuart Thiessen, chairman of Alberta Beef Producers' cattle feeder council. "The industry got beat up, recovered a fair bit, but this is just going to add a challenge now." Producers don't know how much more they'll have to shell out for their crucial feed and they're not sure what crops farmers will choose to grow. "The farmer is going to decide to plant whatever based on where he thinks he's going to get the best return, and that's fair," Thiessen said. "Obviously, when you introduce an industry like ethanol, which is highly subsidized, they're going to be able to pay quite a bit relative to an industry that's not as subsidized." What it comes down to, Thiessen said, is the livestock industry competing for acreage with the ethanol industry. Gray agrees, and predicts the consequences will appear in grocery stores. "This will affect eventually all food prices probably because it will compete for land on all sorts of fronts," he said. "You're not going to run out and say, 'Gee, I'm going to expand my cow herd,' when you see this." Instead, livestock producers say they'll have to cut back on production. That will result in less meat -- at higher prices -- in stores. The federal mandate for fuel means consumers will have to buy ethanol when they fill up their gas tanks, whereas they have choices when they shop for food, Thiessen said. "It's a lot easier to step away from the meat, which is probably going to get hit the hardest, and go to less meat, versus not drive." Ed Schultz, general manager of Alberta Pork, the organization representing the province's 1,250 hog producers, also thinks the industry should be left to grow on its own, without subsidies. He has other objections to the industry. "From a moral and economic point of view . . . I don't think it's justifiable to pull food away from the mouths of people to produce energy to drive cars," he said, delving into another raging controversy surrounding biofuels. The grain required to fill a 114-litre SUV gas tank with ethanol will feed one person for a year, according to Lester Brown, head of the Earth Policy Institute, a U.S. think-tank. The grain it takes to gas up the SUV every two weeks over a year will feed 26 people, he says. Machielse objects to the implication that there is conflict between biofuels and food. "It's not that we don't have enough food in the world," Machielse says. "This year we're predicted to carry over two million tonnes of canola. That means producers couldn't market two million tonnes that was left on the farm. "Now, why didn't that two million tonnes make it out to the world's poor? It's just how national policies are dealing with starving people in the world." Machielse added the farming industry is capable of growing more corn or wheat per hectare than it does now. The Canadian Renewable Fuels Association also points out that the ethanol industry doesn't use the protein portion of the grain; it only takes the starch. The portion of the grain not used for ethanol becomes a nutritious feed for livestock, said Robin Speer, the association's director of public affairs. When wheat is used to produce ethanol, for example, a byproduct called dried distillers grain is also made. The feed byproducts are crucial to the viability of the industry, though, which would sit on the razor's edge of profitability without big subsidies or tax exemptions. The Permolex plant in Red Deer, which emits a distinct yeasty smell that wafts across the Queen Elizabeth II Highway, was actually built in the late 1990s and run by API Grain Processors as an integrated agricultural processor. (Nowadays, it's called a biorefiner.) Besides ethanol, the plant produces flour, gluten, a wet distillers grain, and a syrup that is also sold to the animal feed industry. When the company went into receivership in 2003, Permolex took over, fully aware it had to maximize the extraction of value-added products, says Churchward, the general manager. "If one market is down, you have the others to rely on." When Husky Energy built its ethanol refinery next to its heavy oil upgrader at Lloydminster in Saskatchewan, it was also hunting for efficiencies, said Roy Warnock, vice-president of upgrading and refining. On its own, the ethanol plant would have required more staff. And exhaust heat from another unit can be used to dry some of the distillers grains destined for cattle feedlots. To keep trucking costs down, both plants will only accept grain from farmers who live within about 1.5 to two hours driving time. Even with all the efficiencies, many economists doubt the biofuels industry would survive without being propped up by government subsidies. "At its current cost of production, it is unlikely that fuel ethanol production in Canada would occur at all without government supports," said a recent paper from University of Saskatchewan agricultural economists Rose Olfert and Simon Weseen. For the last two years, ethanol producers have enjoyed an optimal situation of high oil prices and low feedstock prices, they note. But if oil prices are low and feedstock prices are high, ethanol becomes even less competitive and would need even greater government subsidies, Olfert and Weseen say. Out on the land east of Red Deer, Aubrey and Bonnie Bickford farm their 960 hectares and hope fervently that the biofuels industry thrives. Selling their crops to nearby Permolex has been mighty handy, says the couple. The plant is very flexible about when it will take grain, which means the Bickfords can time their deliveries for when they need cash flow. And the Bickfords, like all good business people, know it helps to have more than one place to sell their product. "It doesn't hurt to support a local market," said Bonnie. "We like to have more than one market competing for the grain." YOUR CAR ON ETHANOL Drivers may wonder if they can safely use the ethanol blend in their vehicles. Fear not -- the Canadian Renewable Fuels Association says all automobiles sold in North America are designed with full warranty protection to operate with ethanol-blended gasoline at a concentration of up to 10 per cent ethanol, without modifying the engine. The federal government is requiring that gasoline contain an average of five per cent ethanol by 2010, so blends are unlikely to be much higher than that. In fact, your car may run even better with ethanol-blended gasoline, says the association. Ethanol, like other alcohols, is an excellent solvent for many compounds. It will clean out deposits that build up over time with conventional gasoline. Your car's fuel filter may need to be changed after the first few tankfuls of the ethanol blend, says the association. After this, the ethanol will maintain a clean system. In Alberta, Husky and Mohawk are the only retailers of ethanol so far, but that will change by the time the federal government's mandate comes into effect. Some new vehicles are being manufactured to run on an ethanol blend of 85 per cent, also known as E85, even though no commercial fuelling stations in Canada carry the fuel yet. For a complete list of the vehicles that run on E85, go to www.e85fuel. com/e85101/flexfuelvehicles.php ETHANOL QUESTIONS & ANSWERS So what exactly is ethanol? For millennia, humankind has enjoyed ethanol in beer, wine and other spirits. Turns out, it can also be used as a fuel. Ethanol, or grain alcohol, is made when yeast ferments sugar. IS ETHANOL BETTER THAN GASOLINE? That depends on your definition of better. The energy required to extract crude, refine it and transport it from oil well to gas tank is about 30 per cent of the energy in the gasoline itself. For ethanol, the process requires about 56 per cent of the energy in the ethanol, if it's made from corn. If ethanol is made from wheat, this number jumps to 60 per cent. WHAT ARE THE BENEFITS? If we can meet the Canadian government's mandate, which requires five per cent ethanol in gasoline by 2010, greenhouse-gas emissions would be reduced by three million tonnes. Ethanol contains about 35 per cent oxygen, allowing for more complete fuel combustion. This reduces emissions of chemicals such as benzene and particulates, both harmful to human health. But the combination of ethanol and gasoline also results in overall increases in smog-producing volatile organic compounds. WHAT ABOUT ETHANOL'S ECONOMIC BENEFITS? The ethanol industry is currently basking in the promise of truckloads of government incentives and funds. Alberta, for example, plans to spend $239 million on the biofuels industry over the next five years and much of that will go to encouraging the growth of ethanol production. The industry is also favoured by federal and provincial mandates, which make ethanol a required fuel. As long as oil remains high and feedstocks remain affordable, the industry will do well and farmers will benefit. ISN'T THERE A BETTER RENEWABLE FUEL SUBSTITUTE FOR GASOLINE? Scientists think it would be better to make ethanol from non-food crops, such as switchgrass, wheat straw and even poplar trees. This would involve breaking down cellulose in these plants and converting it to fuel, a much more difficult process than breaking down sugars in grains. A Canadian company called Iogen is about to select a site for its first commercial cellulosic ethanol plant. The market will expect Iogen's ethanol to cost the same as corn-based ethanol. WILL ETHANOL SOLVE ALL OUR PROBLEMS? No. Ethanol can help us replace a portion of the non-renewable fossil fuels we use with a renewable source. It's a way to address some of the greenhouse-gas emissions from the transportation sector. But if we really want to get serious about reducing emissions, we need to put ourselves on a carbon-reduced diet, experts say. That means driving less, buying a smaller car, taking public transportation, walking or cycling. SO THE FEDERAL GOVERNMENT HAS MANDATED THAT GASOLINE CONTAIN FIVE PER CENT ETHANOL BY 2010. WHERE IS THIS ETHANOL GOING TO COME FROM? Nationally, this would require the production of about two billion litres of ethanol. To meet the mandate within the province, Alberta would need 300 million litres of ethanol by 2010. If the country can't produce enough of its own ethanol, the fuel can be imported from other ethanol-producing countries, including the giants in the industry, Brazil and the United States. ARE THERE ANY ETHANOL PLANTS IN ALBERTA NOW AND HOW MUCH DO THEY PRODUCE? Alberta has just one ethanol plant, the Permolex plant at Red Deer. It has recently expanded and can now produce 40 million litres a year. Another plant, announced last week by Dominion Energy, will pump out up to 378 million litres of ethanol annually once it is running full bore by mid- to late 2008. WILL THIS BLENDED FUEL COST MORE THAN GASOLINE? In its most recent budget, the federal government removed an excise-tax exemption for producers of blended fuel. The Canadian Petroleum Products Institute has said that when that excise tax exemption disappears in April 2008, consumers can expect to make up that tax, which totals $200 million across the country. However, the institute could not say how much the increase would be per litre of fuel. MEXICANS HAVE BEEN PROTESTING HIGHER COSTS OF CORN TORTILLAS. WILL SOMETHING SIMILAR HAPPEN IN CANADA IF WHEAT IS USED TO MAKE ETHANOL? Wheat prices have already increased due to pressure on corn prices in the U.S. Livestock producers have looked for something cheaper to use as feed and have shifted from corn to wheat. As this trend increases, economists expect more wheat will be produced. They still expect prices to increase somewhat. Canada produces millions of tonnes of wheat for export, so it's not known yet how large the price increase will be here and how that might trickle down to the cost of bread.
-- Darryl McMahon It's your planet. If you won't look after it, who will? The Emperor's New Hydrogen Economy (now in print and eBook) http://www.econogics.com/TENHE/ _______________________________________________ Biofuel mailing list Biofuel@sustainablelists.org http://sustainablelists.org/mailman/listinfo/biofuel_sustainablelists.org Biofuel at Journey to Forever: http://journeytoforever.org/biofuel.html Search the combined Biofuel and Biofuels-biz list archives (50,000 messages): http://www.mail-archive.com/biofuel@sustainablelists.org/
