Energy Policy:

Corn Growers' Slater, Paperworkers' Squires explore ethanol industry growth

With a new push for alternative fuels from President Bush and the incentives contained in last year's energy bill, the ethanol industry is poised to see rapid expansion this year. Plus, growing interest in cellulosic ethanol derived from forest waste and other types of biomass could provide a new market for the forest products industry. During today's OnPoint, Samantha Slater, director of public policy for the National Corn Growers Association, and Owen Squires, director of the Rocky Mountain region of the Pulp and Paperworkers' Resource Council, talk about new demand for ethanol produced from corn and other sources.

Transcript

Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. Joining me today to talk about ethanol is Samantha Slater, Director of Public Policy for the National Corn Growers Association. Also with us is Owen Squires, Director of the Rocky Mountain Region of the Pulp and Paper Workers Resource Council. Thank you both for being here today.

Samantha Slater: Thank you.

Owen Squires: Good morning.

Brian Stempeck: We saw the president outline a major new push towards ethanol in the State of the Union address then we saw the budget come out earlier this week and also more funding for ethanol, from corn and from forest and paper products. First off, just a general take from both of you. Samantha what did you feel about the president's speech?

Samantha Slater: He gave a great speech last Tuesday night and I was actually over at the Department of Energy yesterday when the secretary presented his budget. And we were thrilled to see the $150 million going to biomass and bio refinery, which is a 65 percent increase over last year's 90 million. So we were thrilled to see that happen.

Brian Stempeck: Owen, your take on what the president had to say?

Owen Squires: Well I think the president was on point and the country needs to be on point. That the way for us to become independent is to use our resources within the country. We have a great potential of ag products and we need to move forward on that.

Brian Stempeck: Samantha, the president talked quite a bit about E85, which is ethanol, it's 85 percent ethanol, 15 percent gasoline or blend. How available is that right now? And what kind of steps do you think need to be taken to make that available to more people?

Samantha Slater: There are about 600 filling stations nationwide right now. I know that there is potential out there given the infrastructure tax credit that was included in the energy bill that the president signed in August. We expect to see upwards of 2000 E85 filling stations put in over the next year or two. That's obviously a great way to get ethanol into use and once we get more FFVs, flexible fuel vehicles, that will also greatly expand E85 use.

Brian Stempeck: There have been some critics though, I mean even from the renewable fuels industry, who've said that maybe it's time to slow down a little bit. I mean there's already a massive ethanol mandate that the industry is trying to meet, that going to E85 this quickly might not be feasible. Your reaction to that?

Samantha Slater: Well the 7.5 billion gallon renewable fuels standard that was included in the energy bill, we are already at 4.3 billion gallons. And by the end of this year I would imagine we could be close to 6 billion gallons being produced nationwide. And I think we could meet the RFFs, probably, by the end of 2008. So it's not quite that massive. But the push for E85 obviously is going to be the best way to let consumers choose ethanol. So the more pumps that we have out there the greater awareness we can have for consumers of ethanol.

Brian Stempeck: On the consumer side also, on Sunday during the Super Bowl, we saw an ad campaign from General Motors talking about a new push on ethanol and their vehicles that can already run on that. What would you like to see from the automakers? And to basically help consumers be more aware of what their options are?

Samantha Slater: Well GM's move to the yellow gas cap for their flexible fuel vehicles is fantastic and we applaud that effort. The corn growers would like to see more FFVs on the road, possibly doing a mandate toward FFVs. Senator Harkin has a bill out there now that mandates 10 percent a year over 10 years to get to 100 percent. We support Senator Harkin's bill. We would also like to see a permanent label on FFVs, on the tailgate, you know, a little FFV symbol on the back, something like that. And also the auto industry really needs to educate their salespeople on FFVs and the benefits. And make sure that consumers who come in looking for FFVs or those who might not know about the benefits and where they can buy E85, that they know that information. And that they have it on hand and that that information also gets out to the garages and to the people who work on the FFVs. It's very important.

Brian Stempeck: Owen, your group is in town this week to lobby House and Senate lawmakers, also testify at a hearing tomorrow. The president also talked about cellulosic ethanol during his speech, basically looking at ethanol that comes from other sources besides corn, things like forest products. What is your group telling lawmakers this week about the energy that can come from biomass?

Owen Squires: There's a tremendous amount of biomass laying on the forest floor and laying around America. We own, as Americans, 190 million acres. Right now the fires are raging in California. They rage every year in the West. To achieve forest health we have to be able to do something with the matter this laying on the forest floor. Let's utilize it. Let's utilize it to make ethanol. Let's utilize it in other products. We can make everything. Every bio product we need is lying out there on the forest floor and also laying in biomass around the country. We just need long-term contracts so that we can set up the plants and move towards tax credits and the things that will make that happen. And those can be done by lawmakers on the Hill. We just need to move forward on this and time is of the essence.

Brian Stempeck: As you meet with those lawmakers, what are you telling them in terms of what specifically needs to happen? I know you mentioned some work with the forest service and contracts there.

Owen Squires: Well, there needs to be the mechanism put in place so that we can protect everybody's forest. We can protect yours and my forest first off. But to achieve forest health and to remove the biomass there needs to be long-term contracts. There needs to be subsidies in place so that we can get pilot plants up and running to make this process work, because it's a process in its infancy. We can extrapolate everything out of the biomass on the forest floor that's in oil. All oil is, crude oil is and coal is, is biomass that Mother Nature compressed over millions of years. Well we can do that and we have the technology now to do that. So what we need Congress to do is to help out here. We need Congress to move forward to help us have long-term contracts so that people can make the investment for 20 to 30 years to recoup their investment. We need the tax credits, the transportation to move that because most of these forests lie in rural America, which has suffered greatly with the shutdown of the timber industry. To move these industries into where we can use the biomass to provide the fuel for America.

Brian Stempeck: Is it really feasible though to turn biomass into ethanol? I mean we've seen, the corn industry has been doing this for a long time, for 30, 40 years, has a lot of experience as you mentioned. Taking biomass from the forest and turning it into ethanol is more in its infancy. It's a lot earlier in the stage. I mean there aren't many plants doing that now, so what steps need to be taken to get that off the ground?

Owen Squires: We do it all over the country now. In the paper making process, as you cook chips to make paper, the relief gases that come off there, we take turpentine out of that. And we ship the turpentine overseas because we can't use it here in the country. The liquors that come off from when you cook chips are sent back through recovery boilers. So we are taking that material out of the cellulose fiber now as we speak. This is not the greatest leap forward. It just needs to be a new industry to use bio refining products. We can extrapolate natural gas. Once you turn cellulose into the gas form then you can do anything with it. And we do it every day in this country, in pulp mills all over the country.

Brian Stempeck: Samantha is there any concern from the corn growers? I mean President Bush, there's been a lot of attention to these new forms of ethanol. Is there concern at all that you're turning too far away from corn?

Samantha Slater: Absolutely not. First and foremost ethanol is ethanol. And whether you make it from corn or wood chips or switch grass, all ethanol is good ethanol. And we think that given over time the market will determine which feed stocks and we would hope there would be a multitude of feed stocks because that's good for the American consumer. The market is going to determine which way we go, which acres are used to plant which crops. But that's something that will be determined over time and it's out of our control. But in the meantime we think the biofuels tent is big enough for everybody and we welcome all the players. And we think this market is growing. It can be huge. And as long as we're all working together on this and focusing on what bio fuels can do better than the oil industry can do, we'll be all right.

Brian Stempeck: Last year we saw Congress with the energy bill with the ethanol mandate. There's also a number of tax credits for ethanol. Is there really a need for any more policies when it comes to corn based ethanol? I mean it seems like the industry pretty much has everything it needs at this point.

Samantha Slater: They do have a lot of what they need at this point. From the corn grower perspective about 50 percent of the ethanol plants currently up and running today are farmer owned ethanol plants. We will be focusing, over the next year, next several years, on keeping farmer ownership and at least keeping the 50 percent, if not increasing that. That's very important to our growers. And also working on other bio based products, other value added markets, which are very important to our growers. And then of course, first and foremost, is successfully implementing the RFFs. It's a big priority for us.

Brian Stempeck: And the other thing the forest industry is working on is basically taking biomass and turning it, as you mentioned, into natural gas and powering a lot of timber plants, powering actual buildings with that. Talk about some of the products that are going on in terms of how that happens.

Owen Squires: Well throughout the forest products industry right now, like at the mill I work at in Lewiston, we have a 50 MW generator that we use biomass in. The thing that a lot of people don't realize is that stuff used to be burned up in smoke. There is a pilot project that's being looked at in Arkansas, to turn biomass into, in a bio refining project, which will supply half the natural gas, maybe 80 percent of the natural gas needs of the mill down there. And also when the project is finished will produce 650,000 barrels of crude oil a year. We use 20 million barrels of crude oil a day in this country. And what we need to do is to bring ag and the timber industry together, under a mandate from the government, well funded, to get away from that, so that we're not importing all that. And we can do that if Congress and the states will work together with ag. The basis of this country is agriculture. It doesn't make any difference if you're harvesting trees or if you're harvesting corn. It's agriculture. And we need to protect the ag community and we need to utilize those materials that come off from the ag community and off from the forest floor. Because it's going to take us all to do this. And Congress needs to get that done.

Brian Stempeck: All right. We're out of time. Thank you so much for being here today.

Samantha Slater: Thank you.

Owen Squires: Thank you.

Brian Stempeck: I'm Brian Stempeck. This is OnPoint. Thanks for watching.

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