DOE Sets Ethanol-Fuel Effort

The Wall Street Journal
March 1, 2007
John J. Fialka

WASHINGTON -- The Department of Energy has kicked off a technological horse race to see which among six companies can produce a transportation fuel that is an alternative to corn-based ethanol, in commercial quantities, at a cost of around $1 a gallon.

Companies successful in producing low-cost ethanol could have first crack at a new fuel market that offers a domestic alternative to gasoline. Until then, the agency says it will pony up as much as $385 million to help the competitors, but how much each company gets will be negotiated later, based on their progress.

"This effort is a big deal," said Energy Secretary Samuel Bodman, who estimated that the companies will commit a total of at least $1.2 billion to their ventures.

Since Congress has been slow in appropriating the agency`s budget, an additional prize, promised by a $2 billion loan-guarantee program, has yet to be established. Most of the six companies, which will make ethanol from materials such as wood chips, orange peels, corn stalks and municipal garbage, have also applied to participate in that effort.

Congress approved aiding makers of so-called cellulosic ethanol in the Energy Policy Act of 2005. Cellulosic ethanol is made by extracting and distilling sugars from the woody fibers of plants, rather than from corn kernels, which makes the process much more difficult. President Bush has since made the program part of his goal to introduce 35 billion gallons of alternative fuels into the transportation sector to lessen U.S. dependence on imported oil.

Currently the U.S. produces about six billion gallons of ethanol. Mr. Bodman estimated that corn-based production could increase to 12 to 15 billion gallons, but farm experts worry that soaring demand for corn by ethanol refineries will push food and meat prices up to politically unacceptable levels.

DOE scientists and officials will determine who gets what portion of the funding. One competitor is the agency`s National Renewable Energy Laboratory. It is teamed up with Broin Cos., of Sioux Falls, S.D., which plans to use enzymes to make ethanol out of corncobs and corn stalks at a plant near Emmetsburg, Iowa. Another partner in the venture is DuPont Co.

The other selected companies are:

-- Abengoa Bioenergy, a St. Louis, Mo., affiliate of Abengoa SA, a Spanish conglomerate that is the leading ethanol producer in Europe. The company has selected a Colwich, Kan., site for a plant that would use enzymes to make ethanol from corn stalks and wheat straw.

-- Alico Inc., a producer of citrus products and minerals. It plans to build a facility near its headquarters at LaBelle, Fla., which will use heat and chemicals to produce ethanol from orange peels and wood wastes.

-- BlueFire Ethanol Inc., an Irvine, Calif., company that is teamed with Waste Management Inc., to make ethanol out of selected garbage from municipal landfills, using sulfuric acid and steam. The company`s first facility will be at a landfill in Corona, Calif.

-- Iogen Biorefinery Partners LLC, an Arlington, Va., affiliate of Ottawa-based Iogen Corp. It is teamed with Goldman Sachs Group Inc. and Royal Dutch Shell PLC to use an enzyme-based process to make ethanol from wheat and barley straw and other farm wastes at a site near Shelley, Idaho.

-- Range Fuels Inc., Broomfield, Colo., which has picked a site near Soperton, Ga., for a facility that will use heat and steam to make ethanol out of various forest wastes.

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