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Not Your Father's Ethanol


A new white-knight fuel could soon be coming to the rescue of motorists fed up with roller-coaster gasoline prices. It should also get a warm welcome from environmentalists.

This wonder fuel is ethanol -- with a twist. Unlike the ethanol that has been blended with gasoline for 20 years, the new flavor of ethanol isn't made from corn or other grains. Instead, it's distilled from the plant waste left in fields after farmers harvest their corn, wheat, or barley for food or animal feed. By trucking these plant stalks to the biorefineries that may soon sprout in the Midwest and in Canada, farmers could rake in an extra 15% in sales.

This new breed of ethanol promises a bigger gain. It would reduce significantly both the U.S. dependence on imported oil and the enormous output of greenhouse gases spewing from the 220 million vehicles on U.S. roads. When burned, cellulosic ethanol -- a name used to distinguish it from grain ethanol -- scores a modest reduction in tailpipe emissions, compared to gasoline. Factor in the CO2 that's sopped up by biomass crops grown for fuel, and the bottom-line decrease can be 90% or more.

Last December the bipartisan National Commission on Energy Policy released a report, Ending the Energy Stalemate, that analyzed the potentials of various alternative fuels, including both types of ethanol (which is just an industrial grade of alcohol). Only cellulosic ethanol got a decisive thumbs-up. By 2020, the commission predicts, its production cost could be less than 80 cents a gallon. In stark contrast, after 20 years producing grain ethanol, it still costs $1.40 a gallon to produce -- roughly twice as much as gasoline.

GREEN FUEL

Another December report, this one from the Natural Resources Defense Council and called Growing Energy, looks ahead to 2050 and sees cellulosic ethanol replacing more than half of the volume of oil used to fuel cars and trucks today. Both studies urge speedy development of this fuel. The holdup has been that crop stalks require special enzymes to convert their cellulose into sucrose, the easy-to-ferment sugar in grains. The U.S. Energy Dept. is now plowing $20 million a year into efforts co-funded by such companies as Cargill, Dow Chemical (DOW), and DuPont (DD). For example, a $26 million project led by Cargill-Dow LLC is working on conversion technology for a biorefinery to be built in the Midwest.

However, a small Canadian company has grabbed the early lead. Last April privately owned Iogen Corp. began selling the world's first commercial cellulosic ethanol. Iogen's pilot plant in Ottawa can milk 260,000 gallons a year from 3,200 tons of wheat straw and corn stalks. Canadian government agencies are the main users of E85 gasohol -- a gasoline blend containing 85% ethanol -- sold by Iogen investors Royal Dutch Shell (SC) and Petro-Canada (PCZ). E10, for 10% ethanol, has long been widely available in Canada, Europe, and the U.S.

Iogen is now prowling for a site for its first large-scale biorefinery. On the short list of locations are Alberta, Idaho, and Saskatchewan. By 2008 the $300 million plant could be pumping out some 50 million gallons a year. Initially, production costs will probably be a fairly steep $1.30 a gallon. "But costs will come down to under $1 a gallon with future plants," asserts Iogen Executive Vice-President D. Jeffrey Passmore. "We expect to learn a lot between plant one and plant four."

If the first full-scale plant isn't built in the U.S., later plants will be, says Iogen President Brian E. Foody. And if not by Iogen, then by rivals such as Cargill-Dow. There will probably be two or three core production technologies, he adds. "This will be a major industry with lots of significant players," he says. "We really will make a big difference by 2020." Drivers and environmentalists are hoping it may be even sooner.

By Otis Port in New York


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