Appetite for ethanol fermenting in Pa.

PITTSBURGH – Is Pennsylvania, a corn deficit state, a good place to develop an ethanol industry?

A farmer’s co-op in York County has approached the area’s economic development council to get the entire community looking into just that question.

And a Pittsburgh brewer is speculating whether or not he is situated close to enough corn fields, that he stands to survive longer with ethanol than with beer.

The questions that involve developing ethanol production in Pennsylvania and the Northeast were on the table late last month with a pair of “Ethanol Workshops for Rural America” sponsored by the U.S. Department of Energy’s Regional Biomass Energy Program, and organized by Ethanol Producers and Consumers.

Best location. Of the Northeast states, Pennsylvania is the most centrally located, closest to the corn-growing areas to the west, has the most extensive transportation infrastructure, and is still the most agricultural.

Two workshops were scheduled in Pennsylvania, one in the western part of the state, in Cranberry just north of Pittsburgh, and the other near Harrisburg, in Grantsville.

More than 1,500 people attended the Grantsville workshop, although the Pittsburgh session was much smaller. Pennsylvania farm organizations were well represented and there were a number of ag producers looking for ideas on how they might get involved.

County extension and economic development people were interested enough to check it out.

There were also people working on developing ethanol facilities in other northeast states, including one in New Jersey.

Environmentalist with a wide range of orientations came to find out what was happening.

For the legislature. And Kristen Ebersole, legislative aide to Senate Agriculture and Rural Affairs Committee chair Michael Waugh, came looking for ideas on what the legislature might want to do to encourage ethanol.

The question, “Can it work in Pennsylvania? was approached from a variety of perspectives, but the economic outlook, provided by ethanol consultant, John Urbanchuk from AUS Consultants in Moorestown, N.J., indicates that it can.

Since current ethanol technology is directed toward distilling it from corn starch, Urbanchuk talked primarily about corn and the economics of a corn-based dry milling operation.

But ethanol can be, and is, produced from anything that grows, he said. In other areas and in other countries, sugar cane, barley, wheat, and other high starch produce are being utilized.

Right now, he said, there are more than 50 ethanol plants in production, but none east of Indiana and Tennessee. There are others in the planning stages, but nothing even under construction in the Northeast.

Current production. The plants in operation currently use 615 million bushels of corn annually and produce less than 2 billion gallons of ethanol.

If Congress approved proposed federal legislation to set a standard blend of ethanol for all gasoline sold in the country, Urbanchuk said, even at a 5 percent blend, that would require 15.5 million gallons a year.

As side products, Urbanchuk said a dry mill ethanol plant produces distillers dried grains, a high protein product used as cattle food, and carbon dioxide, that can be marketed to food processors or for pharmaceuticals.

The plant can be designed to produce, as an alternate output, food grade alcohol, or grain alcohol.

“Ethanol is the only product that you can either run your car on or pour over ice and drink,” Urbanchuk said.

Feasible idea. Even in a corn deficit area like Pennsylvania, which produces 137 million bushels and uses 200 million bushels, cost efficient production is feasible. While corn prices are slightly higher in Pennsylvania, he said “the true cost of corn is only what you can buy it for plus the cost of transportation.”

“Every bushel of corn that goes into ethanol can be replaced,” he said, “and when you make ethanol, all you need is the starch. The rest of the product is available for other uses.”

His projections indicate the cost of producing 25 million gallons of ethanol in Pennsylvania would be $41 million, providing a positive net return of 24 cents a gallon.

“Every acre of land that produces corn to produce ethanol is really an oil patch that never runs dry,” Urbanchuk said. “Every barrel of ethanol that is produced displaces a barrel of oil.”

Producers interested.

Chris Scheppis, legislative representative for the National Farmers Union, talked about the surge of interest from his members.

The prices farmers are getting are predicted to stay at their current low level for the next few years, Scheppis said. “Farmers are desperate for their rural communities to hang on, and are looking to get into these value-added products.”

There are a number of innovative things the USDA can do to help farmers get into the ethanol business, he said, but the “most important thing is to have producers involved. It has to be a community effort. Farmers have to be part of a cooperative to provide the continuing support any plant will need.”

Larry Johnson, formerly the “Ethanol Answerman,” promoting and directing the Minnesota ethanol model, and now an ethanol consultant for Delta-T Corporation, the leading builder of ethanol plants, said that any cooperative should set a high standard for investor equity.

A minimum investment of at least $15,000, he said, will insure investor involvement. In most producer-owned plants that he has been involved with, the average investment was double the minimum.

“If you get 600 producers into the cooperative,” he said, “that is a lot of investor equity. And if a project starts with a 40 percent equity, it generally can get financing.”

In all states. While ethanol plants have generally been located in the Midwest, that is no longer true, Scheppis said.

“Today, a farmer-owned cooperative is building an ethanol plant on the banks of the Alabama River in Selma, Ala.,” he said. “If they can do it in Alabama, you can sure do it in Pennsylvania.”

The ethanol industry, he said, should be expanded tenfold. If Congress passes even a 5 percent mandate, ethanol will be produced in all sections of the country. The country would incur a $1.3 billion savings in the cost of oil imports. The price of corn would increase from 55 cents to 85 cents a bushel, it will take clean air to another level, and it will involve the farmers and producers.

Johnson said that in Minnesota, where ethanol production has been supported by the state in the form of a production subsidy of 20 cents a gallon for the first 30 million gallons for five years, the program has been a wonderful success. But it was a 15 year effort.

“When we started ,” he said, “our goal was to produce the same amount of ethanol we were already using in the state. We are now just about at that level of production.”

York County underway. In Pennsylvania, York County, one of the most heavily agricultural in the state, and in the area in which the majority of Pennsylvania corn is grown, wants to become the major player in developing the new industry.

The York County area industrial development corporation is re-examining its traditional lack of support for agriculture, thanks to a producer-directed initiative to bring ethanol production to southeastern Pennsylvania.

Russ Montgomery said there is now a 23-member community organization investigating the ways in which agriculture and the district can interact.

The development of an ethanol production facility on the table, and the industrial development corporation is lending its considerable weight and expertise to help make it happen.

* * *

Thirteen plants under way

WASHINGTON – Since 1999, more than a dozen ethanol production facilities have opened and six major expansions to existing facilities have been completed. Currently, 13 ethanol plants are under construction.

Fifty-seven ethanol plants now have the capacity to produce more than 2 billion gallons per year, according to the Renewable Fuels Association.

The 13 ethanol plants currently under construction will result in 330 million gallons of new production capacity. More than 30 existing companies are undergoing expansions totaling 310 million additional gallons.

Dozens of additional proposed production facilities across the country are in various stages of development and financing.

Annual ethanol production capacity is expected to reach 3.5 billion gallons during 2003, according to the association.

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