VALUE - ADDED CORNER
Idaho Straw Value-Added Committee
Southern Idaho
About the group:
The Idaho Straw Value-Added
Committee (SVAC), led by Grant 4D
Farms, consists of an 86-member steering
committee of wheat and barley
growers in the southern and eastern
third of Idaho. The group is pursuing
the formation of a cooperative or producer-owned Limited Liability Co.
(LLC) to develop advanced harvesting,
storage, pre-processing and transportation
systems to supply straw to industrial
processors. The systems are being
designed to meet the industry standards
that growers and suppliers have to comply
with to supply feedstock for ethanol
and other bio-products.
Business objective:
The committee’s objective is to have
member-growers supply nearly 1 million
tons of high-quality straw annually
to a cellulose ethanol biorefinery. Iogen
Corporation, a Canadian firm partially
owned by Royal Dutch Shell, is considering
the construction of such a refinery
in Idaho. Current plans call for a facility
capable of processing 600,000 to
800,000 tons of straw annually, with an
output of approximately 55 to 65 million
gallons of ethanol.
If the committee is successful in
forming a cooperative and meeting its
production goals, farmers could collectively
earn an additional $25 million to
$30 million annually, by selling straw
products to Iogen. This Idaho industry
could produce up to 65 million gallons
of ethanol beginning in 2009. This
emerging technology not only would
invigorate and revitalize Idaho’s rural
agricultural economy, it would also contribute
to the nation’s energy security.
Key players:
The Idaho Wheat Commission, a
grower-funded market development
agency, funded a 1995 study to quantify
the tonnage of straw available across
Idaho. Building upon the base knowledge
that more than 2 million tons of
straw was available for development, the
commission conducted several outreach
programs to raise awareness of the
unused asset. Interested Idaho growers
were informed and, working with a
variety of groups — including the
National Association of Wheat
Growers, the Idaho Grain Producers,
the Idaho Wheat Commission and the
U.S. Department of Energy’s Idaho
National Laboratory (INL) — began
exploring new markets. These efforts
culminated in a “straw tour” of Idaho,
during which Iogen — as an invited
participant — saw the potential of a
plant in southern Idaho.
USDA VAPG funding:
The availability and suitability of
Idaho straw — as well as numerous
logistical issues associated with harvesting
and delivering the required 800,000
tons of straw annually — were serious
impediments to successfully locating a
bio-refinery in Idaho. Growers decided
to seek a USDA Rural Development
grant for a feasibility study on whether
they could supply a large bio-refinery.
Grant 4D Farms, serving as lead for the
project, was awarded $450,000 through
USDA’s Value-Added Producer Grant
(VAPG) program for planning purposes,
including a feasibility analysis, marketing
and business operations plans.
This initial funding was supplemented
by $475,000 in cash and in-kind contributions
by project partners, including
Iogen, Diamond Z Corporation, Trinity
Trailer Corporation, MacRae Custom,
D&L Custom, KM Custom and
CaseIH Corporation.
The technology:
Iogen, with a significant investment
from Petro-Canada, began producing
the world’s first cellulose ethanol fuel for
commercial use in 2004. After looking
around the world, it identified southern
Idaho as one of the best locations for a
straw-to-ethanol facility. Idaho’s assets
include a highly productive and relatively
dry climate, as well as proximity to
INL’s energy research center.
According to Iogen’s Maurice
Hladik: “Iogen is an enthusiastic participant
in what is probably the most serious
and practical research effort into
new fundamental approaches of harvesting
and transporting massive amounts
of feedstock for the cellulose ethanol
industry. The cooperative approach by
Idaho farmers that took the lead on this
initiative, along with USDA, the Idaho
National Laboratory and the private
sector, has proven to be a highly effective
combination of diverse resources
and skills to yield such practical
results.”
Iogen officials say their long-term
plans call for siting additional bio-refinery
facilities in biomass-basins throughout
North America and other continents.
Other public and private groups
have expressed a similar belief that cellulose
ethanol will be viable wherever
sufficient quantities of feedstock are
available. Consequently, producers of
wheat, corn, sugarcane, switch grass and
other commodities throughout the
United States will have opportunities to
access a new market as cellulose bio-refining
comes of age.
Collaborative efforts:
Under this partnership, growers and
other collaborators have identified and
resolved issues related to the quantity
and quality of straw to be harvested,
use and condition of existing harvesting
equipment, alternatives for storing
straw and transporting it to a potential
biorefinery. The University of Idaho
characterized and quantified aspects of
feedstock production. Southern Idaho
farmers worked with INL and others
to understand and resolve issues related
to harvesting, storing and pre-processing
the feedstock; to protecting the
integrity of the straw while in temporary
storage; and to clarify methods to
transport biofeedstock in compliance
with a refinery’s product specifications.
Iogen has already participated, as an
end-user, to demonstrate the technology
necessary to successfully convert the
straw into fuels and chemicals, and to
define the requirements of the receiving
biorefinery. As part of the feasibility
project, Iogen successfully
processed two 20-ton loads of Idaho
wheat and barley straw into cellulose
ethanol at its Ottawa, Canada, demonstration
plant.
Business model:
At this point, the committee has not
determined the business structure best
suited for the value-added business in
Idaho. However, it is looking at several
possibilities, each of which would require
early negotiations and full integration
into Iogen’s biorefinery operating plan to
be successful.
Models include:
- A new-generation (closed) cooperative
that follows a model successfully
proven in other agriculture businesses
(such as sugar processing co-ops).
Members of the cooperative would
purchase stock in proportion to the
quantity of straw each member would
sell to the processor. An advantage of
this arrangement is the economic
benefit that could be broadly shared,
co-opting the broader grower community
in the success of the venture
and increasing the assurance of a sustainable
supply of straw.
<
- A closely held stock company that
raises initial investment capitol by
selling stock to a limited number of
investors or entities currently
involved in agricultural production in
southern Idaho.
Apart from these dealings, Iogen is
working with investors to secure financing
to build a biorefinery. The company
is also working to qualify for loan guarantees
made available for new energy
technologies through provisions of U.S.
energy legislation enacted by Congress
in 2005. Current development plans call
for an investment of approximately $300
million for the cellulose ethanol plant
plus cogeneration and enzyme facilities.
Importance of USDA backing:
“The USDA Rural Development
grant provided the boost we needed to
demonstrate how ideal Idaho is for siting
a straw bio-refinery. Even more
important, the VAPG is helping to
demonstrate that cellulose-based ethanol
has a place in the nation’s energy portfolio,”
says Grant 4D Farms owner Duane
Grant. “With this seed money, Idaho
farmers demonstrated the feasibility of
locating a bio-refinery in Idaho. And in
10 years, we’ll look back and recall that
receiving USDA’s grant was the pivotal
turning point in our push to launch the
cellulose ethanol industry in Idaho.
Thanks to the VAPG, we have demonstrated
that we can consistently supply
straw on an industrial scale to a commercial
bio-refinery.”
Major challenge/
opportunity facing co-op:
The major problem facing producers
is how to best assemble, store, prepare
and deliver nearly 1 million tons of
straw that would be required by a cellulosic
ethanol facility each year. The
availability and cost of the feedstock,
the lack of confidence in the conversion
technology and the hesitancy of financial
backers to lend capital are still seen
as barriers to this business venture. But,
with USDA’s assistance and the persistence
of Idaho farmers, these barriers are
being overcome.
Other challenges, revolve around the
successful launch of the cellulose-based
ethanol industry. Significant technical
and political issues remain to be
addressed. Iogen is clearly the world
leader in this area, and through ongoing
work at its Ottawa pilot plant, is making
consistent progress at resolving technical
constraints. As this new technology
requires a large initial investment to
construct a facility, Iogen may face difficulty
securing sufficient private investment
capital to launch the first plant.
Idaho’s growers face challenges and
opportunities. First among the challenges
is capitalizing the equipment
required to bale, handle and transport
the straw. Initial estimates are that
growers will need to acquire baling
equipment costing about $7 million,
tractors costing about $11 million, and
handling and hauling equipment totaling
an additional $13 million. Certainly,
farmers in the area already own or have
access to some of the required equipment,
but without question, significant
investment will be required.
Perhaps the greatest opportunity
offered to farmers, other than that of a
brand new ag market, is the opportunity
to make tremendous gains in productivity
over time. Assessments conducted as
part of the VAPG indicate that by shifting
from a bale system to a modified loaf
system, growers can significantly lower
per-ton straw harvest costs. Additional
modifications to the transportation system
promise further improvements in
efficiency. Put simply, there will be
ample opportunities for farmer ingenuity
to fine-tune the collection system.
For more information , contact:
Duane Grant, Grant 4-D Farms; (208)
531-5149, (208) 431-0006 (mobile),
grant@pmt.org
