Milwaukee's Best

Drawing nearly 3,400 people to Milwaukee in June, the 2006 International Fuel Ethanol Workshop & Expo once again defied its acronym—FEW—and maintained its status as the largest, and certainly one of the most prolific, ethanol events in the world.
By Tom Bryan | August 01, 2006
Mike Bryan was momentarily awestruck when he stepped into the dimly lit ballroom of the Midwest Airlines Center on June 21.
The CEO of BBI International was paused by the sight of some 3,000 empty chairs arranged for the opening session of the 2006 International Fuel Ethanol Workshop & Expo (FEW). It wasn't surprise that gripped him—Bryan was well aware of the number of people registered to attend—but rather, he said, it was a fleeting moment of pride, appreciation and astonishment. "When I walked into this room this morning, I thought, ‘My gosh. What a transformation this industry has gone through,'" he told a packed house at the downtown Milwaukee convention center.

"Linking Industry and Innovation" was the theme of the 22nd annual FEW, which took place June 20-23 in the city made famous by fermentation, but "Growth and Transformation" might have been an equally fitting slogan. "Right now, we are experiencing unrestrained growth," Bryan said, likening America's Corn Belt to "the Saudi Arabia of renewable energy."
While the ethanol industry has never had a more solid financial footing, Bryan said its precipitous growth is a little nerve-racking. This oddly ironic sentiment is shared by other veterans of the business who have remained faithful to the promise of biofuels over the past few decades. It's a feeling Rod Nilsestuen, Wisconsin's secretary of agriculture, said he could relate to. In his keynote address, Nilsestuen said he himself had "traipsed across the state" of Wisconsin 20 years ago "promotin' gasohol." He told the audiance, "I know and deeply appreciate the long haul you all have been a part of."

Nilsestuen, who welcomed FEW attendees to Milwaukee on behalf of Wisconsin Gov. Jim Doyle—himself a strong proponent of biofuels—said, "[Ethanol's] time has come. It's a time of great change. We're looking at skyrocketing gas prices, concerns about global warming and domestic energy security. Those things have come together to make ethanol a very, very hot thing."

Wisconsin, the seventh-largest ethanol-producing state in the nation, was what Nilsestuen called a "late bloomer" in the ethanol world, having completed its first ethanol plant just four years ago. Now, the state has six existing ethanol plants that collectively produce 172 MMgy, and another two facilities under construction that will together add 82 MMgy to the state's capacity. Ethanol use in Wisconsin increased 20 percent in 2005—E85 use alone shot up 600 percent—while a promising E10 proposal stalled in the state's legislature this spring. Nilsestuen blamed the bill's failure on "shortsighted politics" and called it a "bump in the road" but "not a barrier."

Like Bryan, Nilsestuen expressed a sense of cautious exhilaration over the growth of the ethanol industry. "Three years ago, we had to beg gas stations to install E85 pumps," he said. "Now we've got a list of over 200 in queue."

That kind of sudden, steep growth is what Bryan said is "a little bit scary" right now, especially in terms of new plant construction. For good or bad, he said, "Projects are backed up and we can't seem to get [ethanol plants] built fast enough." Some say the ethanol industry's construction bottleneck—which has reportedly pushed the waiting list for new plants as far out as 2009—creates an inadvertent, yet potentially beneficial, governor on growth. The uncertainty it creates, however, has left even the most seasoned industry players asking seemingly indissoluble questions. "We ask, ‘When will it end?'" Bryan said. "Will it end at all?"

It's a question a lot of folks in the burgeoning U.S. ethanol industry are asking. The industry now has a production capacity of more than 4.8 billion gallons per year, and another 2.4 billion gallons of capacity represented by plants under construction or undergoing expansions. Like Bryan, Bob Dinneen, president and CEO of the Renewable Fuels Association (RFA), himself a 15-year veteran of the industry, said he is continuously amazed by the industry he represents in Washington D.C. "When you wake up and realize that almost half of the gasoline produced in the nation today is blended with ethanol, you have to almost pinch yourself," he told FEW attendees.

Dinneen credited the industry's success to the people the FEW is tailored for: plant personnel, researchers, suppliers and service providers. "You have made us real," Dinneen said. "Look at what you've wrought. You've created an industry with 101 plants and nearly 5 billion gallons of capacity. You've created an industry that last year was responsible for $32 billion in gross output in this country. … You've created an industry that's made it possible to now blend ethanol in 40 percent of our nation's fuel. … You're doing your jobs extraordinarily well."

Presenting what he described as a "top 10" list of the most consequential growth factors since the middle of last summer, Dinneen rattled off a virtual ticker list of items that helped catapult ethanol into the big leagues over the past year. Prefacing his list by saying, "The best is yet to come," Dinneen credited such things as the passage of the Energy Policy Act of 2005, the "hemorrhaging" of MTBE from the marketplace and President George W. Bush's unprecedented plugs for ethanol on national television.
"The [renewable fuels standard] has done exactly what it is intended to do," Dinneen said, explaining that 12 new ethanol plants have come on line and 22 plants have broken ground since the bill became law last August.

Dinneen cited the aggressive addition of new production capacity as a driving force behind industry growth. He said 500 MMgy had been added to the nation's production capacity during the first half of 2006; 700 MMgy would be added in the 3rd and 4th quarters of the year; and another 1.4 billion gallons of new capacity would come on line in 2007. "Those numbers are probably low," he said.

Of course, over $70-per-barrel oil prices clearly had positive implications for the U.S. ethanol industry—something that probably won't change, Dinneen said. "The era of cheap oil is over," he stated, adding later that he does not believe the price of oil will ever fall back to levels that threaten the economic viability of ethanol.

An Inseparable Link with Oil
Although the petroleum industry and the ethanol industry sometimes exchange political blows, Dinneen was quick to remind FEW attendees who buys their fuel. "At the end of the day, [petroleum companies] are our customers," he said. "At the end of the day, they're the ones bringing our product to the consumer. At the end of the day, they sell our E85. … At the end of the day, there are no real discussions about ethanol without the oil industry being involved."
Coincidentally, Bryan said clues to the ethanol industry's future may lie in the oil industry's past. "What we need to do is look to history," he said. "We need to compare the ethanol industry to the oil industry of 100 years ago, or 125 years ago," Bryan said, explaining that the state of the oil industry just before the turn of the past century was surprisingly similar to today's booming ethanol industry. "Money was pouring into the industry. It was absolutely unprecedented, and production capacity was absolutely stretched to the limit. … People were waiting on new construction capacity. If you don't believe me, read the history books."
However, there are a few stark dissimilarities between the golden days of oil and today's ethanol boom. "The difference is that we contribute to a cleaner environment," Bryan said. "The difference is that we grow a new crop of energy every year. The difference is that this is a grassroots industry with hometown values and main street motivations."
Nilsestuen echoed those sentiments, saying the world is "hungry for energy"—particularly clean, sustainable mobility—and ethanol offers a viable, immediate starting point to work toward greater energy independence. "Whether you're from next door or across the puddle, we share one thing in common—and that's a passion for helping the world kick its addiction to petroleum," Wisconsin's ag secretary said. "We don't produce a gallon of oil in Wisconsin—we don't have oil fields—but we have corn fields, and a very diversified ag base."

Building ‘Good Public Policy'
Both Nilsestuen and Bryan said the ethanol industry is at a sort of crossroads. Bryan likened the industry's condition to a lanky, awkward teenager. "Growing fast can hurt," he said. "But I can tell you this: Like our big brother the oil industry, we will grow into a fine adult—and we will become a strong, confident and productive member of the world's energy pool."
The industry will need more than passion to get there, though, Nilsestuen said. It will need a plan first, and the widespread support that is necessary to "get the job done."
"In my opinion, there are three essential ingredients needed, when you break it down to the basics, if we are going to take ourselves to the next level of sustainability as an industry that can satisfy the very rapidly growing hunger for renewable fuels," Nilsestuen said. "The first is good public policy. The second is world-class infrastructure. The third is sustainable profits …"
Nilsestuen said the ethanol industry should embrace free enterprise but only to the extent that a "fair and healthy" business environment thrives. He said allowing "greed and concentration to the degree that it stifles fair competition" is unacceptable. Later, he said "good policy, world class infrastructure and sustainable profits" will ensure the ethanol industry's long-term success. "The sum of those three things will be greater than the whole," he added.

While the ethanol industry has enjoyed a major windfall based in part on the federal renewable fuels standard, Nilsestuen said now is not a good time for policy influencers to rest. In fact, he said, the one key to the industry's long-term success is the coupling of state and federal legislation that would lead to stronger, more dependable biofuels markets. He also said there should be a concerted effort to make sure the incentives for producing, marketing and using biofuels are targeted and operate in tandem.

On a federal level, Dinneen said the public discourse has changed dramatically. In the nation's capitol, he said lobbyists and policymakers are now talking about how much and how fast the ethanol industry should grow—not if it should grow. "That's a fundamental change," Dinneen said. "[Federal legislators] are talking about a 60-billion-gallon industry by 2030."

Dinneen said there have been roughly 200 energy-related bills—57 of which have included some type of ethanol language—introduced in Congress since the Energy Policy Act of 2005 was signed into law. However, he said it's highly unlikely any new legislation would survive the U.S. Senate and make it to the president's desk anytime soon. Still, he said current efforts are not worthless. "While there is unlikely to be any energy legislation this year, we're setting a predicate for future years when … there are real efforts to legislate on the Hill."

Bio-Industrial Age Begins
Nilsestuen made it a point to talk about responsible growth, maintaining value-added opportunities for farmers, and preserving American farms and forests. He said ethanol industry ownership should be dispersed enough so that farmers have a "significant opportunity to own a piece of the action in a supply chain they've done so much to help create."

He continued, "If we aren't going to depend on the most volatile place in the world for our fuel—and we're going to produce it ourselves—we have to preserve the places that it comes from. We can't get the ethanol if we don't have the farms and forestland for cellulosic ethanol over the long run."

Wisconsin is now losing approximately 24,000 acres of top farmland every year to sprawl and development, Nilsestuen said, explaining that other states are losing prime cropland at similar rates. Furthermore, he said 95 percent of Wisconsin's industrial forestland has changed hands in the past five years as the logging industry has gone global. Suddenly, the need to start protecting the state's "land base" has become critical.

"It's not ‘growth versus no growth,' but more a matter of developing where it should be done, and doing farming and forestry where it should be," Nilsestuen said.

Wisconsin has established a Consortium on Biobased Industry, made up of a broad range of stakeholders including those in agriculture, energy and manufacturing, as well as academics and environmentalists. The consortium's goal, Nilsestuen said, is to utilize the state's strengths to become a leader in the embryonic biobased economy. With that in mind, Nilsestuen said, the type of progress being achieved by the ethanol industry represents the early stages of what may be a bio-industrial revolution. "It's the next chapter in U.S. economic history," he said.

Building and continually making advancements to biorefineries—in whatever form and function they might take—is the key to unlocking green power and moving America toward greater energy security, Nilsestuen said. "I know—having spent my life working in rural development, working with cooperatives and working on state policy over the years—that biorefineries are the best opportunities we have for rural economic development, not only in this state but across the country," Nilsestuen said. "When we can create $20-an-hour jobs at plants that start at $50 million gross per year, and bring that kind of business into some of the smallest towns in our state, we've got something going."

On a similar line, Dinneen said technological developments in the grain ethanol industry are bringing researchers and entrepreneurs closer to cellulose-to-ethanol commercialization. "We are very close," Dinneen said. "There are limits to what we can do with grain, and that's OK. We want ethanol to be more than just an additive. We want it to be a replacement fuel, and that means moving beyond [grain] but certainly not replacing grain. … It will happen."

Finally, Dinneen told the audience, "Keep doing what you're doing because it's incredibly important. … You're the ones making this happen. Keep doing it."

Tom Bryan is editorial director of Ethanol Producer Magazine. Reach him at tbryan@bbibiofuels.com or (701) 746-8385.