Economics of energy

Posted on Monday, September 4, 2006

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The combination of high gas prices, advancing technology and Arkansas’s variety of crops could bring the ethanol industry to the state.

Switchgrass, grasses, tree leaves and wood chips, even wheat stubble, corn stalks and rice are among the materials that may someday flow through gas tanks as ethanol from Arkansas.

For drivers it means another choice at the gas pump and, perhaps, lower fuel prices. For farmers it means new markets for their crops and even potential markets for the stalks left in the fields after harvest.

“ It appears that technology is turning third base and heading toward home plate on commercialization [for ethanol ], ” said Ron Bell, chairman of the Arkansas Energy Office, and a bioenergy services contractor.

“ We would expect that we will begin to see initial commercial facilities opening up here in Arkansas within the next two years. They will be using that diversity of Arkansas feed stocks to make ethanol, ” he predicted.

Ethanol is an alcohol fuel made from the sugars found in grains.

“ All ethanol, right now, is made from corn, which means it’s made in states that have corn, ” said Ed Clausen, professor of chemical engineering at the University of Arkansas in Fayetteville.

“ You don’t want to use ethanol if you’re not making it because it doesn’t do the state much good, ” he said, explaining that either the finished product or the raw material has to be purchased from other states.

But that could be changing.

“ Arkansas, it turns out, is a very rich agricultural state, ” said Clausen.

“ The good news is that technology has advanced to where it appears that ethanol can be made from a variety of other feed stocks known as cellulosic biomass, ” Bell said.

Cellulosic biomass can be made from residue from croplands, wheat stubble and corn stover, according to Bell.

“ It includes all the material of a tree, both hardwood and pine. Leaves to stem. And grasses from our grasslands, ” he said.

Farmers may also decide to plant crops particularly for energy, he said.

“ When the technology catches up, so that we can use cellulosics, that’s going to be something Arkansas is going to be a big player in, I’m quite confident, ” Clausen said.

Bell said there are two basic reasons that states which have ethanol have it.

It’s a matter of supply and demand.

Sales of ethanol are booming in states that have clean air mandates, like California, he said. Ethanol is blended with petroleum-based gasoline which reduces the amount of pollution emitted by the gasoline.

That’s the demand side.

Iowa, Missouri and other parts of the Midwest are examples of the supply side.

In those states, Bell said, ethanol is being used because it’s available.

He explained that growers in the corn belt formed a strong enough political block to persuade their state governments that the state’s economy was tied to production of ethanol because of the corn crops.

They have been successful in getting legislation passed that either encouraged voluntary use of ethanol by either lowering the price at the pump or by mandating its availability, he said.

Right now, Arkansas has neither the mandated demand nor the strong supply.

“ The reason Arkansas has never fallen into those two, of course, was, first, we’ve never been under a clean air mandate and had to use ethanol and the second is because Arkansas is such a diverse state in terms of agricultural production and its many different feed stocks that there has never been any one single group large enough or politically strong enough to encourage or persuade our state legislature to require the use of ethanol in our state, ” said Bell.

Both he and Clausen believe that, too, is changing.

State and regional conferences about bioenergy have been held around the state.

Bell said there will probably be bioenergy legislation introduced in Arkansas’ upcoming legislative session because farmers and others have recognized that the economics, the technology and the environmental desirability ingredients are there.

“ If Arkansas were like Iowa and it were one 300-mile long corn row from West Memphis to Fort Smith, we would probably have ethanol production and consumption in our state; but, since we have a diversity in our croplands of corn, soybeans, rice, wheat, and milo, farmers have not focused on just production of ethanol, ” said Bell.

“ When we make ethanol in Arkansas, I think it’s going to be from bio-mass instead of corn, ” said Clausen, who has studied biomass conversion to fuels and chemicals for about 30 years.

“ What has to happen here is these things that are being studied on a relatively small scale, somebody’s got to put the money in there so we can demonstrate it on a larger scale, ” said Clausen.

He is beginning to see that possibility.

“ For the first time, we’re getting companies that are really interested in doing this, as opposed to just the government, ” Clausen said.

The timing, he said, is anybody’s guess.

“ The neat thing about it is Arkansas is a biomass rich state with a lot of diversity and so we would envision, over time, that there would be several refineries established around the state, drawing upon the feed stocks that are available in that area, ” said Bell.

In western and southwestern Arkansas, it may draw on the grasslands and forest lands, using wood chips, bark and sawdust, he suggested.

“ Over in Eastern Arkansas, farmers would be looking at either growing specialized energy crops specifically for that purpose or using the residue from their other crops, corn and milo stover, wheat and rice straw, ” he said.

“ So in essence, farmers are going to be looking at their field and instead of thinking about how many bushels per acre, they’re going to be looking at their fields and crops and figuring how many net gallons per acre of fuel they can produce, ” said Bell.

“ It’s a whole brand new way of looking at agriculture for us down here in Arkansas, ” he said.

“ Maybe this is a time when this is actually going to take, ” said Clausen. “ I hope so. ”

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