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POET Chief Upbeat On Ethanol’s Future

By Staff | Nov 13, 2008

Despite tough times in the national economic scene, the chief executive officer of POET is upbeat about his company and the ethanol industry in general. In remarks to members of the media at POET’s Cob Harvest Field Day on Nov. 6, Jeff Broin noted that POET is watching the current economic conditions closely, especially in light of the recent bankruptcy filing by ethanol producer Vera-Sun of Sioux Falls, SD.

“Obviously, at POET we’ve been positioning ourselves for tough times for 21 years, now,” Broin said. “We’ve been investing in both technology and development, as is evidenced by our investment of $50 million in research and development in the past six years in grain ethanol development. But, I can assure you, we have very viable risk management strategies in place.”

According to Broin, as the cost of grain has fallen in recent months, one of the biggest obstacles to the production of ethanol is not supply, but rather demand. The demand for product is there, but there is another restriction to production that is not well known by the general public.

“What the ethanol industry is facing is the regulatory cap of 10 percent ethanol usage, which was set by the U.S. Environmental Protection Agency,” Broin explained. “That limitation has caused significant loss of revenue to the industry in the past several months. The most critical thing for out industry is to move that cap to a higher level of 15% or event more. Gasoline has access to 100% of the market for fuel, and ethanol just has access to 10%.”

Broin continued, “If our nation is truly concerned with energy independence, we have to give more market access to ethanol, which is our only domestic replacement for gasoline today. The only domestic replacement that’s going to be here in the near future is ethanol and we have to have market access to the market for that product.”

With the election of Senator Barack Obama to the Presidency, Broin is optimistic about the new administration’s support for ethanol.

“With Senator Obama coming from Illinois, he understands ethanol and understands how important it is to our nation,” Broin explained. “We had one of his directors, Heather Zichal, the Senator’s policy director on Ag, Energy and Environment, at our plant opening in Ohio two weeks ago. She indicated to us that the Senator is very much interested in increasing the fuel standard to 60 million gallons. We believe President-elect Obama will definitely be behind this industry and that he understands the importance of energy independence and understands that ethanol is one of the only ways we’re going to get there.”

POET officials gave a presentation on the cob harvesting procedure, as rain wiped out any chance of actually putting combines in the field to harvest during the field day. According to Broin, Project Liberty will draw cobs from a 25 to 35 mile radius of POET’s Emmetsburg plant, which will be the home of the cellulosic process.

“This will be the first facility that will create a demand for cob, so the closer to our plant the better, as far as cobs go. We will have some storage at the plant for cobs, but the majority of cob storage will be done in the fields. The farmers will pile their cobs at the end of the field, and POET will come out, pick them up and transport them to the plant, so farmers won’t need to buy a truck to do that. They will just need to obtain the specialized equipment to use for the actual cob harvest.” Broin said. “There is some assistance for producers who deliver cobs in first two years of a facility’s operation through the farm bill, where they can receive a match of up to $45 per ton to help with the purchase of the harvesting equipment.”

Broin noted it was POET’s hope that farmers would contract for cobs, like they do for corn, with cob price being negotiated. “We don’t have an exact pricing figured out for cobs yet, but those cobs will become a new commodity for farmers.”

With target production of 25 million gallons of ethanol through the cellulosic process using cobs, POET officials have a handle on what they will need to meet that goal, according to Broin. “We know that it takes a ton of cobs to produce 85 gallons of ethanol, and you get an average of three-quarters of a ton of cobs off an acre, or about 65 to 68 gallons, based on what we collected last year in South Dakota.”

Overall, Project Liberty is on track, according to the POET CEO. “We are on schedule. Our lab work is on schedule and we are looking at actual groundbreaking here in Emmetsburg in the Fall of 2009 and completion in 2012. Broin said. “However, one of our key partners, Novazymes, informed us that they are a year ahead of schedule with their enzyme process, which is one of biggest hurdles in the entire process. Having the enzymes at the correct robustness for the process keeps costs down which helps us to be more viable. So we are very pleased and excited that Novazymes say they will be ready to go all out in 2010.

Since its announcement, public interest in Project Liberty has remained strong. “The response here in the Emmetsburg area to this concept has been wonderful. There has been great turnout for all of our events and we see significant interest here in the Emmetsburg area,” Broin noted. “I really think that the people in the area truly understand that this is a fantastic opportunity. Today, the corncob has very low nutrient value. It’s very close to a waste product, but through Project Liberty, it is going to help our nation become energy independent.

“We understand that farmers are being naturally skeptical, wondering ‘what’s in it for me?’ and that’s natural,” Broin continued, “There has to be some return in it for the farmer or they won’t do it. We’re designing all our models around profitability for the farmer. But, we hope they will remember that we will have room for only so many cobs, so early participants will have some good incentives, such as with the federal matching program that can help offset the cost of the machinery.