Great Falls Tribune

April 12, 2009

Touting the benefits of biofuel

Story and photos by KIM SKORNOGOSKI Tribune Staff Writer

The Montana Ethanol Project is prepared to build a $265 million plant northeast of Great Falls that would be a market for 12 million bushels of wheat and another 34 million bushels of barley — at least that's what the company announced almost 20 years ago.

For decades, the biofuel industry has been on the verge of exploding in Montana.

It seems to be a perfect fit for the state. The country needs environmentally friendly, locally produced fuel, and Montana's small towns need to develop industries that add value to what area farmers are already producing.

But despite numerous planned plants, the only company producing biofuel in the state is Earl Fisher Biofuels, run by two farmers in Chester.

Biofuel backers say the industry has struggled to grow, largely because of shifting political policy and unpredictable gas prices.

"Heaven knows, we need economic development in rural areas like where I live," said Shirley Ball, executive director of Ethanol Producers and Consumers, which is based in Nashua. "It's good for our nation. We can take raw materials and turn it into energy that we now import from countries that don't like us."

When gas prices topped $4 a gallon, Brett Earl and Logan Fisher noticed a lot of interest in their fuel, some of it by competing companies.

Those same companies were soon scared away when the prices dropped to $1.40 last winter.

With 80 percent of their costs going to raw materials, namely oil squeezed from camelina seeds, Fisher figures the lowest they can sell their biodiesel is $2.50 to $2.75 a gallon.

"It's very political right now," Fisher said. "With the government giving a $1 tax credit to blenders, they control the profitability of the industry."

Inspired by the oil embargoes in the 1970s, Ball rallied other community members to partner in building an ethanol plant.

But in 1981, President Ronald Reagan rescinded the government guaranteed loan for the plant, and it was never built.

The proposed plant outside of Great Falls first obtained an air permit in 2001 and had investors lined up when the company filed paperwork to renew the permit in 2006. But not a scoop of dirt has been shoveled.

In August 2006, the Chippewa-Cree Tribe secured $20 million in tax credits to land private investors for a proposed $100 million ethanol plant capable of producing 40 million gallons a year. The project promised 200 construction jobs and another 43 to operate it, as well as the added economic benefit of providing a market for $45 million of wheat.

At the time, the tribe thought construction could begin outside the Rocky Boy's Reservation in the spring of 2007, but no investors bit.

For the last three years, Allied Bio Energies has been working to build a plant outside of Havre that would bring 50 good-paying jobs.

Company chairman Jim Lambert said while progress is slow, the project is making some progress.

The Colorado-based company broke ground and is partnering with Opportunities Link to train area people for the future jobs.

"Montana has a lot of assets that are potentially beneficial to biofuels," Lambert said. "There's a lot of talk up there, but there's very little action compared with other states. I would say that Montana is well behind the curve."

Lambert said Allied Bio Energies was lured to build near Havre by promises of $1.5 million to $2.5 million in support from the Department of Commerce. But what he didn't know is that the money from grants and fuel credits isn't available until after bank financing is in place.

"Had Montana showed some proactive interest in this, (the plant) would be up and running a year and a half ago," he said.

Lambert said the company has since secured private and bank financing, allowing construction to move forward.

Earl and Fisher said state grants and loans helped provide seed money to buy equipment. But they attribute their success to the fact that the two men invested their own money and relied on their knowledge of the oil and agriculture industries.

They started small — the Chester plant has a capacity of 275,000 gallons a year. Their plan is to build several similar plants around the state, buying grain from local farmers and selling fuel to those same people.

"We have to grow it here, produce it here and consume it here — then we have the full picture," Earl said.

They welcome quality competition, saying that farmers need multiple markets to be convinced to rotate biodiesel-producing camelina seeds with their usual wheat crops.

Nine states including Hawaii, Iowa, Oregon and Washington have spurred biofuel production by requiring gas stations to mix it with petroleum, setting the percentage between 5 and 20 percent.

In Minnesota, this has met mixed results.

Many people started producing it in their garages and couldn't meet quality standards, damaging the reputation of the entire industry. But eventually the requirement led to an industry so large that it's now exporting biofuels to other states and Europe.

During the last legislative session, Montana waded into the issue. The state set the standard that fuel be 10 percent biodiesel or ethanol, but that only kicks in once local plants are capable of producing 40 million gallons a year.

In the end, Ball said, the law sent out a mixed message and has done little to advance the industry.

"Montana can't seem to get it," she said. "You can spend all session down there (in Helena); it doesn't seem to help."

State legislators are now debating a pair of bills aimed at advancing the industry.

A house bill that would exempt biodiesel from the special fuels tax died in committee. While that would bring down the price for consumers, it would also cut revenue from the state.

The second bill removed legal and financial obstacles that discourage farmers and ranchers to produce and use fuel made from their own crops headed to the governor's desk Thursday.

"For small and community-scale biodiesel to be an economic stimulus, we need good public policies," said Helen Waller, with the Western Organization of Resource Councils. The group published recommendations to help the industry grow with plants like Earl Fisher Biofuels serving as a successful model.

But more beneficial than the bills, Montana could benefit from research and success in neighboring states and Canada.

While corn ethanol plants are well established, banks are more reluctant to back less-proven ethanol plants that use grains that are more conducive to Montana conditions like wheat, barley and wheat stock.

Earl and Fisher have been working with their local legislators, but they see more potential for help at a federal level.

Sens. Max Baucus and Jon Tester and Rep. Denny Rehberg have visited the plant, and Earl and Fisher contact their offices weekly.

"They realize that Montana has an opportunity here," Fisher said. "We can produce food and we can produce energy, and those are two things our country will always need."

Fisher said Washington is sending signals that it will support the biofuels industry. Key to that is a consistent policy, as biodiesel plants take years to develop.

He hopes that the federal government, which already provides credits to biofuel producers, extends subsidies to farmers to encourage them to grow more fuel crops.

Earl Fisher Biofuels also eagerly awaits FDA approval to sell the mashed camelina meal which is left over once the oil is removed. If the FDA finds that it can be mixed into cattle feed at a 10 percent ratio, then the Chester company will have two products to sell.

Until the approval comes through, they are storing it at the plant.

National research is needed to look into other crops — and even garbage, corn and wheat stocks and grasses — that could be converted into ethanol.

For now, the industry faces another public relations hurdle — the common belief that biofuels cut into the food supply.

Ball said that argument is pushed by the powerful grocery and oil company lobbies. But biodiesel production actually removes oils that animals' stomachs can't process, leaving behind healthy feed stock.

She is meeting with the U.S. Department of Agriculture this month trying to dispel what she calls the food vs. fuel myth.

A lifelong Republican, Earl reluctantly admits with a smile that for the industry, it was best that a Democrat was elected to the White House.

Congress is talking about passing vehicle emission standards or requiring that biofuels be mixed with petroleum at gas stations across the country.

"We have a president who is very, very strong about the need for clean renewable energy," Ball said. "I expect in the next four years we're going to see a lot of changes."