Can industry meet U.S. EPA's 2012 cellulosic biofuel requirements without purchasing renewable fuel credits? During today's OnPoint, Jim Collins, president of DuPont Industrial Biosciences, explains why he believes the cellulosic ethanol industry is in a strong position to produce a commercially viable product in the near term. He also discusses how the expired volumetric ethanol excise tax credit has affected the cellulosic industry.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Jim Collins, president of DuPont Industrial Biosciences. Jim, thanks for coming on the show.
Jim Collins: Great, Monica. Great to be here.
Monica Trauzzi: Jim, there are some crucial policy issues relating to biofuels that are coming up for consideration this year and I want to first talk about API's recent challenge to EPA's 2012 cellulosic biofuels requirements. Can producers generate the 8.65 million gallons of cellulosic that are required or will we see a situation where renewable fuel credits need to be purchased in order to meet those requirements?
Jim Collins: So, it's a great question, Monica. And I think maybe one of the questions out there is why is DuPont here with you today talking about biofuels and interested in some of these big policy issues? And one of the things that DuPont did a number of years ago is it picked some key global challenges to kind of go after with its science and technology. And, clearly, one of those is how do you feed 9 billion people? And one of those is how do we lessen our dependence on fossil fuels? And a third area is around protection, both people and the environment. So, it's that second big focus on lessening our dependence on fossil fuels that created the business that I now manage within DuPont Industrial Biosciences. So, we've been investing for years to develop cellulosic-based technologies that would bring the second-generation of biofuels. And so, clearly, the debate that you mentioned that's going on, while important, we believe it is kind of a short-term distraction opposite the very long-term focus that we've had around renewable fuels. If you step back just a little bit and look at what did the Renewable Fuel Standard do for first-generation biofuels? You know, arguably, created one of the greatest rural job growth initiatives that we've had in this country, some 14 billion gallons today of biofuels that are produced and that's over, what, 480 million barrels of oil that we don't import. So there's an energy security element here. And then I think, finally, when you think about the environment, you know, this focus on biofuels is just good for the environment. So, yes, a lot of short-term energy around whether we're going to meet the requirement last year or this year or next year, but I think as industry, we're really on a track for the long term and we're going to be in a position very shortly to meet those requirements.
Monica Trauzzi: OK, not everyone is as optimistic as you about the future of cellulosic. Actually, the EIA has said it's somewhat more pessimistic, their words, about the growth of the cellulosic industry. So you qualify the industry as what right now?
Jim Collins: Think about in terms of maybe the risks that we've been managing. Clearly, the technology risk has been the biggest that companies like DuPont and others - and a few years ago these were things that we worried about, but I'm real happy to be here today and tell you that I believe we've solved the technology issues. At DuPont we've been managing a facility in Tennessee, our Vonore facility, and today it produces ethanol from cellulose that we've been harvesting in the Midwest, we power many of the vehicles at University of Tennessee on cellulosic ethanol. So, the technology risk, solved. Our next risk then is kind of feedstock risk and I think this is an area that folks have underestimated. So, we've actually been at it now for three years in Iowa, sustainably harvesting stover. We just recently won an award from the World Biofuels Congress for this program. And, as I mentioned, DuPont being so connected to agriculture and food, you know, we know more about that acre that that farmer is growing on than most and so now we can help to also manage not only the grain that comes off that acre, but the stover as well. So then the third risk I think is just the execution risk of us investing the capital, building the facilities, and bringing these plants to a commercial scale. And we're ready to do that as DuPont as well.
Monica Trauzzi: So, talking about feedstocks, there was recently some conversation because EPA withdrew a rule that would have added feedstocks to the RFS. Are those changes restrictive for the industry or did they do the right thing by removing those feedstocks?
Jim Collins: Yeah, I don't believe they'll be restrictive. I think this issue of managing the feedstock supply chain, whether it's a corn stover feedstock supply chain or whether it's something like switch grass, you know, these are going to be things that we just have to deal with as the normal course of business of starting up a new industry. In the case of stover, you know, I think it's actually an interesting period of time, because as growers are continuing to find ways to produce more corn per acre, corn grain, you can directly equate corn grain to the amount of biomass that's left after we harvest that. So, growers would tell you today that this is becoming a bigger issue for them to manage the stover that's leftover. So, as we come along now and look for ways to actually remove a little bit of that stover, it's actually a part of a very positive agronomic system now. So, again, I think it's just part of the industry developing the sustainable processes for bringing these supply chains along.
Monica Trauzzi: So, what timeframe then are you looking at for the commercial viability of cellulosic ethanol and when it will be ready to hit the market in a competitive way?
Jim Collins: We've already heard just recently a number of companies out there have announced groundbreakings here in 2012 and DuPont will be right in there with them. Sometime mid this year we'll be breaking ground on our own facility I mentioned in Iowa. This will be a 28 million gallon per year cellulosic ethanol facility. The location is in Nevada, which is near Iowa State near Ames, so a great location for this type of facility. And I mentioned others, so between three or four of the big companies involved in this space through 2012 and '13 are going to be making those kinds of announcements. So I think the next 18 months a very exciting period here for us. And, like I said earlier, we're going to catch up to the production quantities that have been out there that have been in the mandate. So, our schedule, about an 18-month construction schedule from groundbreaking to startup. So late 2013, early 2014, you know, we'll be up and running.
Monica Trauzzi: And with the expiration of the ethanol tax credit, do you think that it makes it easier for cellulosic because corn isn't getting that money anymore?
Jim Collins: You know, I look back at what this whole first-generation of grain-based ethanol did, as I mentioned before, good energy security, you know, great for the economy and good for the environment. Those tax credits, I think, were necessary to spawn that first wave of investment. So, as we think about cellulosic ethanol, sure, as they phase down on grain-based ethanol, we still think the use of tax credits on cellulosic ethanol is appropriate. And rather, you know, those credits reward success. They're on the backend. You know, you have to have a facility, it has to be up and running and it has to be producing something before you can tap into a tax credit. So at DuPont, you know, we invest our own money, we build the facility and we encourage others to come look at the technology. And I think a second point to make is our business model actually won't be to be in the business of building many of these sites. We'll build the first one or two as showcase facilities, but then we hope to really encourage others to, we'll license our technology, we'll help them with supply chain development, we'll help them get started up. And so it's those tax credits that, not for DuPont, but for the many others that are out there that will help them take those next steps.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.
Jim Collins: Great, thanks for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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