Algae and cellulosic sectors at odds in D.C.; find synergy elsewhere

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, March 21, 2012 -Biofuels advocates are finding themselves divided by the nature in which their respective products are manufactured. Those who promote algae-based biofuels - regarded by most as derived from an industrial process - and supporters of biofuels derived from feedstocks developed through agricultural practices, including corn, soybeans and cellulosic materials, are in some conflict over their role in the nation's renewable fuel supply.

Of particular concern to agricultural biofuel advocates is the push by the algae industry to get Congress to open up language in the 2007 Energy Independence and Security Act (EISA) establishing the Renewable Fuels Standard to mandate the use of algae-based biofuels under the RFS. The fear is that critics of the RFS, particularly those lawmakers with large oil and gas industry constituencies, will use the occasion to dismantle the standard.

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Multiple attempts to scale back the RFS have been unsuccessful. But that has not stopped critics and opponents. Charles Drevna, president of the American Fuel and Petrochemical Manufacturers, the trade group representing mostly pretroleum-based transport fuel manufacturers in the U.S., recently expressed his frustration with the RFS. Referencing the RFS mandate requiring manufacturers to blend specific amounts of “advanced” cellulosic biofuels, despite the lack of those fuels on the commercial market, Drevna said: “I have as much chance of buying a unicorn as a gallon of cellulosic ethanol in the commercial market.”

The algae industry thinks it's only fair that the RFS be amended to include algae to the same extent as it currently does other advanced biofuel feedstocks, contending that the RFS now excludes algae-based fuels from nearly 80% of the 21-billion-gallon advanced biofuels mandate, due to a 16 million gallon carve-out for cellulosic biofuels.

“Because algae are not cellulosic in nature, algae-based fuels do not qualify as a ‘cellulosic' for the purpose of meeting the RFS's advanced biofuels mandate,” despite the contention that algae can be a feedstock for renewable biomass-based diesel and ethanol, and algal biomass could also be utilized to produce aviation fuels and gasoline, according to the Algae Biomass Organization.

The algae group also believes their product should receive tax parity with incentives for biodiesel and cellulosic ethanol, citing the $1.01-per-gallon tax credit for the latter. And the industry wants Congress to grant more government research and development funding.

A recent $12 million purchase by the Navy of biofuels from algae and used cooking oil came in at more than $26 per gallon. Many in the industry say it may be another five to six years before algae-based fuels reach price parity with petroleum fuels. However, scientists with the Defense Department, the driving force behind advanced biofuel production as an alternative to petroleum-based fuels, have said that they are testing algae-based fuel development that could lead to wider production in 2013 at less than $3 per gallon

Multiple companies are researching proprietary processes to produce cellulosic biofuels at a limited, demonstration-scale, some reporting costs of under $3 per gallon. However, start-up costs for cellulosic ethanol plants are running about four times greater than that for similarly sized corn ethanol plants. Still, cellulosic advocates say they need the certainty of the RFS, claiming that any reduction in the mandate for cellulosic biofuels would weaken investments.

Despite any policy divide at the federal level, some at the state level are choosing not to make the distinction. A bill adopted by the Ohio legislature and signed into law last month by Gov. John Kasich broadens the definition of “agriculture” under state law to include algae farming, or algaculture. The new law, which also brings anaerobic digesters under the agriculture definition, offers several benefits, including the assessment of real estate taxes on landowners with algae farming and anaerobic digester facilities based on the state's Current Agriculture Use Value, which taxes agricultural lands on production rather than its usually higher fair-market value. (It also waives landowners having to go before local zoning boards to build an algae facility or digester.)

Within the two industries, there is synergy with the announcement last month that BioProcess Algae LLC, a Rhode Island-based company, plans to expand a demonstration plant at the Green Plains Renewable Energy Inc. ethanol plant in Shenandoah, Iowa. Grower Harvester bioreactors installed in Shenandoah and tied directly into the 65-million-gallon-per-year plant's CO2 exhaust gas have been operating continuously since October 2009. BioProcess is building a 5-acre algae farm next to the Green Plains plant to use its waste, heat and water to initially produce 200 tons of high-grade algae annually. The algae company, which says its product can be used by third-parties to produce fuels, feed and biochemicals, including pharmaceuticals, ultimately plans to expand to 400 acres, producing some 16,000 tons of algae each year.

Once demand catches up with production, Green Plains officials say they plan to implement the algae-growing technology at all nine of the company's ethanol plants and make it available to other ethanol firms and industrial facilities with the requisite production of CO2.



Original story printed in March 21, 2012 Agri-Pulse Newsletter.

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