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Published February 23, 2010, 09:02 AM

NDSU economist helps sort out biofuel’s future

FARGO, N.D. — Need some help in deciding what to make into biofuels and what the government should be spending on it?

By: Mikkel Pates, Agweek

FARGO, N.D. — Need some help in deciding what to make into biofuels and what the government should be spending on it?

If you’re a North Dakotan, you’ve hired Cole Gustafson to do some of this thinking for you. Gustafson is North Dakota’s biofuel economist — a position expressly created by the North Dakota Legislature in 2007. Gustafson, who has been at NDSU since 1986, took on this role in 2007.

Gustafson often is on the road, but his office is in the newly refurbished and expanded facility, now known as Barry Hall, in downtown Fargo.

“We’re fostering closer ties to the college of business and are blending with the economics department. We have a dual mission to serve agriculture and to serve businesses broadly, in all economic aspects,” he says.

“I’m the one in the state who has been asked to look at these projects objectively and help foster the development of the industry as well as provide the research,” he says, noting there is collaboration with the Energy and Environmental Research Center at the University of North Dakota in Grand Forks.

“They do a wonderful job of looking at specific research aspects, but they don’t have the outreach mission — looking at local groups, helping them to think through their opportunities and organizing the tools to move forward.”

The state also hired a bio-fuels agricultural engineer, Igathinathane “Igathi” Cannayen, who was hired about five months ago. Cannayen is housed at the U.S. Department of Agriculture’s Agricultural Research Service laboratory in Bismarck, N.D., and will work in tandem with Gustafson.

The renewable economy is a hot topic.

Last year, Gustafson was in 10 states and conducted some 40 workshops. This exposure has helped him realize that not everyone agrees on the new policy directions, or the underlying science that drives them.

Questions about such things as water balance, energy balance or economics can change when research is applied.

“Our federal policy goals are for energy independence and reduced greenhouse gas production,” he says, without offering any editorial comment. “We’re working toward diversifying our fuel supply and providing a new market opportunity for farmers.

“As a public educator you want to be neutral,” Gustafson says. “Certainly there are downsides to these technologies. But we need to alert the general population of what these opportunities are, as well as the risks.”

Two of those opportunities are energy beets and biomass.

Energy beets

The energy beet project is simply making ethanol from a kind of beet that is designed not for its sugar content for human consumption, but for its potential for producing ethanol.

A group calling itself the “Green Vision Group,” headed by Maynard Helgaas of West Fargo, N.D., is looking at getting an industry going at least partially under irrigation that would feed a series of 20 million gallon ethanol plants in small communities across the state.

The Green Vision Group is partnering with Heartland Renewable Energy in Iowa to work on the project, and recently held a meeting with leaders of Cooperstown and Finley, N.D., to become familiar with the concepts.

Helgaas, formerly a Jamestown, N.D.-based agribusinessman, approached Gustafson on the concept about two years ago. Scott Pryor, an assistant professor in NDSU’s Department of Agricultural and Biosystems Engineering, looked at fermentation technology of converting sugar beets into biofuel. Gustafson worked on the economic structure, including the cost of getting the beets to a market.

“At the first pass, it looked promising,” Gustafson says.

After that, there were questions about how to get people involved in the business, how to find capital.

Gustafson’s work included creating proposals to take to the North Dakota Renewable Energy Council, which was established by the 2007 Legislature under the control of the North Dakota Industrial Commission. The council is charged with promoting the growth of the state’s renewable energy industries — wind, biofuels, advanced biofuels, biomass, biomaterials, solar, hydroelectric, geothermal and renewable hydrogen, among other things. In 2009, the Legislature appropriated $3 million for the biennium to pursue these goals, offering grant deadlines in Jan. 1, May 1 and Sept. 1 of each year.

Helgaas continues to lead the group, organizing people and contacting potential sponsors. Gustafson handles grant-writing and studies ways to look at the role of federal policy and the economics.

Policy ‘game changer’

Some farmers remember that several years ago, when it appeared the U.S. sugar industry would produce more sugar than it could legally market under federal law, the sugar industry studied options of using sugar from beets to produce ethanol.

It wasn’t.

So, what has changed?

“What’s changed is the federal mandate that we’re going to have it,” Gustafson says.

National energy legislation in 2007 determined three categories of ethanol — conventional (traditional corn-based), advanced (beets and cane) and cellulosic (ethanol from grasses and crop residue) and how much of each will be produced.

“The Environmental Protection Agency just a couple of weeks ago made an important determination in terms of which feedstocks qualify for different types of biofuels,” Gustafson says.

Everything changed when it came to the motivation for biofuels.

“In the past, the motivation for the biofuel industry was to provide farmers with a better market for their crops, to enhance their payments. We soon found there were also rural development benefits — good high-paying jobs, in addition to paying farmers.

“Right now, those original motivations have fallen by the wayside,” Gustafson says. “The real discussion with biofuels now is the extent to which it reduces greenhouse gas emissions. That’s the only factor of discussion in Washington, D.C.”

Under the “advanced” category of biofuels, “the only things that qualify for that are sugar beets and sugar cane,” Gustafson says. “It’s a unique market opportunity that many aren’t aware of, yet it’s going to be part of our nation’s fuel supply, regardless of the cost. It’s mandated to happen. The only question is where is it going to be produced? Will it be from sugar cane, energy beets or potentially even a new crop like sweet sorghum?

“It really doesn’t matter whether it’s profitable; it does matter whether beets can be competitive with sugar cane.”

Racing beets vs. cane

Cane-to-ethanol proponents are further along because they started their projects earlier and because cane produces “bagasse” — a leftover product in the process — to fire their plant.

Beets don’t have that, but they have some pluses, Gustafson says. Europe and South America — even Brazil — have used sugar beets to make ethanol. Also, India has used beets for biofuel, and the North Dakotans are using some that country’s technology.

Gustafson says that besides a new mandate, there also is new technology.

“What we’ve found is a unique, patented process that improves the efficiency of beets-to-ethanol, producing a lot of the heat that’s required for the plan, internally,” Gustafson says. “That technology wasn’t available before.”

The process uses the stillage, the wet slurry left over from the fermentation process.

“In the corn-to-ethanol plant it becomes distiller’s dried grains. In our plant, we’re proposing to spray-dry it to create a high-energy powder that is used to produce energy — 75 percent of the needs of the plant. That needs to be proved in a commercial-sized plant. It has only been tested in the lab.”

Recently, the group met in Cooperstown with about 20 leaders from Steele and Griggs counties to discuss how that area might be home to a yield test site for such a plant.

A key factor in the energy beet equation will be the so-called “BCAP” or Biomass Crop Assistance Program, which provides interim one-for-one payments for producers delivering biomass to users. If the plant gives you $40 a ton, the government would match that, Gustafson says. The government just released its BCAP implementation policy. The program was slated to cost about $70 million, but caught criticism because experts think this might go to $2 billion.

Sourcing biomass

Another type of energy potential is from cellulose.

“The cellulosic source is creating a buzz in the industry — switchgrass, crop residues, timber,” Gustafson says.

People are thinking about that, and some are getting their feet wet in it.

One of the people at the Cooperstown meeting was young entrepreneur whose tree chipping business is taking off. Rod Zorn has farmers lined up to remove and chip some 38 miles of shelterbelts, Gustaf-son says. Some of the wood chips are being made into mulch, but some have gone to Benson, Minn., for they’re being used as a fuel.

“That’s the other large opportunity,” Gustafson says.

Two years ago, he was approached by the Great Plains Institute to help with a feasibility study for biomass components of the Spiritwood project, which also will use coal for electrical generation. He did this in partnership with the EERC at UND.

“It was a great relationship,” Gustafson says. “We started with a blank sheet of paper, looking at waste products and new crops that could be used.”

Among the possibilities were potato waste from the Cavendish Farms operation, and sunflower hulls from the Archer Daniels Midland plant in Enderlin, N.D. There was waste from the city of Jamestown and a range of agricultural products. All were analyzed for their delivered cost to Jamestown.

Agricultural residue has risen to the top for offering the “greatest opportunity” to supply biomass to Spiritwood. Part of Gustafson’s role would be producer education.

“If producers are going to supply products to Spiritwood they have to be more profitable than conventional practices,” Gustafson says.

He says there are new partnerships with Bismarck State University. His new colleague, Cannayen, has expertise in desiccation techniques — how a bale can be packaged and shipped.

“The Legislature had incredible foresight to create these two positions, and to make them work together,” Gustafson says.

He says some of these technologies are being developed by counterparts at the University of Minnesota, where a cubing device is being developed.

“We’re hoping to get machines from each of these places, put them on a trailer, and take it to NDSU field days so farmers can see how this is going to work,” he says.

The new mind-set

Gustafson says farmers are going to need to look at biomass differently to make it profitable.

“Biomass is best when it’s dry and doesn’t have any nutrients,” Gustafson says. “Collecting will be either the last project before the snow flies, after all of the nutrients have been passed down into the soil, or the first thing in the spring. You’re not concerned about nutritional value. You’re just looking for the brown material.”

If farmers are going to capitalize on these opportunities they need to organize themselves to evaluate the profitability, and may need to acquire some equipment for the purpose.

Gustafson is in the process of evaluating prices and determining quality standards.

“It’s not like No. 2 yellow corn. There are no federal standards for biomass,” he says.

Gustafson, in fact, is proposing to develop quality standards for biomass for the state of North Dakota. That way, if there is a dispute between a farmer and a processor there is a way to settle it. Part of this will be a laboratory, probably in Bismarck, where biomass can be tested. The North Dakotans have been working with Show Me Energy Cooperative of Centerview, Mo., on this issue.

The three primary characteristics will be tonnage, moisture content and Btu, or energy, content, he says.

End-game dilemma

Gustafson acknowledges personal, practical questions whether he thinks all of this activity is ultimately for the good.

“As economists, we believe the best signals are the signals the marketplace sends,” he says, adding, “When we’re developing industries in North Dakota are based predominantly on federal demand, we raise a lot of questions. Especially in periods of federal deficits there could be a policy change that would render our developments useless. That’s always in the back of your mind.”

On the positive note, he says, these kinds of government policies have created important things. The corn ethanol industry in the 1970s was not profitable, but with federal research the industry now “could stand by itself without federal support, depending on the price of oil.”

“It is my hope that many of the projects we’re talking about now, with energy beets or with biomass, would go down the same path. These industries would become economically viable and stand alone at some point in the future,” he says.

Part of that is to get benchmarks in place, and more technological innovation, including genetics.

The way Gustafson thinks about it, states such as North Dakota provide the best locations in the country to develop new industries.

“We have that entrepreneurial spirit,” he says. “We have 14 crops where we’re the nation’s leader, and that’s far different than other states. Soybeans are a newer crop in this area. Corn is relatively new. Producers here are adept in adopting new technology.”

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