Agency of Progression

After 35 years in existence, the Nebraska Ethanol Board has reason to boast about its state's success in the ethanol industry. However, the board's leader and his partners continue to roll up their sleeves and look ahead.
By Dave Nilles | October 02, 2006
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Imagine a scenario in which a young legislator proposes a bill aimed at replacing gasoline with alcohol. Petroleum marketers claim it will raise the price of gasoline, and the public will never stand for it. Peers claim it will waste valuable state dollars and potentially damage vehicles. Still others question the move's questionable economic returns. It sounds like a scenario pulled from today's headlines. In some ways, it is.

However, the above scene occurred March 9, 1972. It was the day Nebraska state Sen. Loran Schmit introduced a bill intended to provide incentives to petroleum companies to remove lead from gasoline and replace it with 10 percent blended grain alcohol. His hope was that such a move would result in less pollution, a market for Nebraska's plentiful farm grains, and conservation of the world's diminishing supply of petroleum.

While the trials of time have shown that Schmit's progressive thinking was on target, the legislation also paved the way for the creation of the first state agency aimed at developing the fuel ethanol industry. The Nebraska Gasohol Committee was created 35 years ago as the forerunner to today's Nebraska Ethanol Board. In return, the board has helped create an industry that is giving back to Nebraska's communities, farmers and investors.

"I didn't intend in '71 to make one or two people rich, or help build one or two plants," Schmit says about his efforts when preparing to introduce legislation promoting ethanol use in the state. "We were trying to create an industry."

Indeed, an industry has developed. Nebraska has 12 operational ethanol plants, and 12 more under construction or expansion for 1.346 billion gallons of capacity. The Nebraska Ethanol Board is now tracking an additional 33 projects under development, according to board Administrator Todd Sneller.

Sneller is a veteran of the Nebraska Ethanol Board. He's been the board's administrator for 28 of its 35 years. He joined the board's predecessor in 1976 on the heels of several international crude oil disruptions. "I was intrigued by the idea of a focus on energy," Sneller tells EPM. "Most people didn't realize at the time what effect a series of disruptions would have on the economy and energy supply."

After two years with the Nebraska Department of Economic Development, where Sneller gained valuable experience with industrial site development, he returned to head the board in May 1979. He's been leading the charge for ethanol development in Nebraska ever since, and his perseverance is paying off.

Getting a Start
At first glance, ethanol seems to be a perfect fit for the Cornhusker State. Nebraska has an ample supply of corn, producing nearly 1.3 billion bushels in 2005. The state also produces large numbers of beef cattle, which provide a market for distillers grains. Its central location in the continental United States also offers rail transportation to serve key ethanol markets in California, Texas and the coasts.

While its location makes Nebraska an ideal choice to build an ethanol plant, the industry was slow growing in its formative stages. The state's first ethanol plant was Chief Ethanol Fuels. Located 100 miles west of Lincoln in Hastings, the plant began producing ethanol in January 1985. The plant now produces 62 MMgy of ethanol. Chief Ethanol was built years before the first ethanol boom occurred.

Sneller says there have been two primary build-outs of ethanol plants in the state. The first came shortly after the federal Clean Air Act of 1990 was initiated. It coincided with a state funding boost, which was the result of a check-off on Nebraska corn, sorghum and wheat. The fund was administered by the Ethanol Authority & Development Board, which later merged in 1992 with the Nebraska Gasohol Committee to create the Nebraska Ethanol Board. The moves brought a build-out of plants that lasted from 1990 to 1995. Sneller says this timely combination of state and federal policy put ethanol on the map.

The second build-out began approximately in 2000 and is still gaining momentum. It's building so quickly, in fact, that Nebraska may soon supplant Illinois for second in the nation for annual production.

It's an amazing step from what now look like small, initial goals. "Early on, the vision was to get a couple of plants here, maybe produce 50 MMgy in three plants," Sneller says. "That would be a spectacularly successful program."

The state's first plant was considered massive in its day, according to Sneller. The facility churned out 10 MMgy. "If you could get to 20 MMgy, it was considered immense economies of scale," he says.

Today there are four 100 MMgy-plus facilities under construction. Archer Daniels Midland Co. intends to build a 275 MMgy dry-grind plant that is permitted to 400 MMgy.

While it isn't quite the vision Schmit foresaw when he introduced pro-ethanol legislation, it is providing value-added benefits to Nebraskans. "It was my hope at the time to get a lot of farmer-owned facilities," Schmit says. "They could sell cheap corn and make money on ethanol. There are not as many as I wanted, but we got some and we'll get some more."

Leading By Example,
Joining Forces

The Nebraska Ethanol Board continues to provide a wide array of tools for developing the state's ethanol industry. The board supports research and development, administers incentive programs, and conducts outreach programs to markets and petroleum marketers within and outside Nebraska. The board has also developed consumer promotions and information campaigns.

Nebraska Corn Growers Association (NeCGA) Executive Director Scott Merritt recalls a situation that led to a market development campaign in the state. He says Sneller once met with the lieutenant governor of California regarding ethanol usage. The official told Sneller, "If ethanol is supposed to help us, how come you only have 22 percent consumption rate in rural areas?"

The comment sparked the NeCGA, Nebraska Ethanol Board and Nebraska Corn Board to cosponsor an E10 Unleaded campaign, which was launched in September 2000. At one point, ethanol-blended fuels held a 78 percent market share in the state, according to Sneller. Nebraskans have purchased a total of more than 6 billion gallons of ethanol-blended fuel. "We achieved uniformity in referring to the fuel and displaying at the pump," Sneller says, referring to the campaign's success.

The E10 Unleaded campaign isn't the only example of the ethanol board unifying groups. The board itself is comprised of seven members appointed by the governor. Each member represents a specific area or interest related to the ethanol industry in Nebraska, including general farming, the petroleum industry, sorghum industry, business and industry, wheat industry, labor, and the corn industry. The interests help the board to keep its focus on four key issues: ethanol production and industry support, market development, research and technology issues, and public policy development.

The board is available to assist ethanol plant site consultants with feasible plant site locations in the state. The board also assists Nebraska communities in evaluating prospective plant sites. Staff members offer project development consultation to communities and ethanol developers. "We're constantly working for the plant that hasn't been built," Sneller says.

Outlasting the Opposition
Despite its notable role in advancing ethanol in the state, the Nebraska Ethanol Board has faced its opponents. In February 2005, the Nebraska Legislature's Revenue Committee voted in favor of a bill abolishing the Nebraska Ethanol Board. Introduced by state Sen. Ron Raikes, the bill was eventually defeated. It wasn't the first opposition Sneller has seen, and it likely won't be the last. Sneller says the agency has its detractors, but he lets the economic benefits of the ethanol industry prove the board's validity.

"It's the best economic tool we've ever had in this state, and we've just scratched the surface," Schmit says. "We're at less than 5 billion gallons (of ethanol production). [To be] 10 percent of the (nation's gasoline) market, we need 16 billion gallons."

Sneller refers to a hypothetical, yet significant, example to prove ethanol's importance to the state. Nebraskans consume between 800 million and 900 million gallons of gasoline per year, Sneller says. If the state was to have its borders shut and no gasoline imported, the fuel ethanol industry would hypothetically be able to handle the disruption. "We make the point with legislators that every gallon of gasoline comes from outside the state," Sneller says. "We need to displace it any way we can. By the end of '07, we'll have enough ethanol to replace every gallon of gasoline entering the state."

That is quite a step up from Schmit's aspirations when he introduced his initial bill. "I was hoping we'd get 10 percent ethanol blended in gasoline," he says. "I was nave enough to think it would happen because it was the right thing to do."

The board's controversial aspect may be related to the board becoming a figurehead when asking for dollars to go into an incentive fund. The perception sometimes appears that the board is a trade association, Sneller says, but "there is an ongoing need for a state agency that works for economic development in the state for rural development."

The numbers of those opposing the board appear to be dwindling while the majority embraces ethanol. In fact, Nebraska Gov. Dave Heinemann declared September "Renewable Fuels Awareness Month" in the state. The announcement would have seemed incredulous in 1971, signifying a change in political views that has been more than three decades in the works.

While political views are sometimes stubborn, Nebraska's traditional corn patterns are changing more abruptly. By 2007, more than 30 percent of the state's annual corn crop will flow through ethanol plants. Sneller says Cargill's 85 MMgy Blair plant is an example of the positive effect ethanol is having on the state's corn supply. "For 125 years, the normal corn pattern was that corn flowed from north to south down to Freemont, Neb.," Sneller says. "It's a huge rail hub to export to the West Coast. After the addition of the Cargill plant, we literally saw the grain pattern reverse from the south to north because [the north is] an aggressive buyer of corn."

That trend is continuing. Nebraska has historically exported a large portion of its corn production. Now, with consumption rates increasing, the state will likely keep up to 60 percent in-state, according to Randy Klein, the director of marketing for the Nebraska Corn Board.

Ethanol is indeed creating an expanding market for the state's plentiful grain supply. In addition to creating cleaner air and reducing reliance on petroleum, it would appear Schmit's 1971 goal is closer to fruition. With the Nebraska Ethanol Board's experienced oversight, the industry will continue to progress. "We've tried for many years to get something slowly evolving," Sneller says. "We hit the evolution mode the last two years."

For more information on the ethanol industry in Nebraska, check out the following Web sites:
Nebraska Ethanol Board
www.ne-ethanol.org

Nebraska Corn Growers Association
www.necga.org

Nebraska Corn Board
www.nebraskacorn.org

Nebraska E10 Unleaded campaign
www.e10unleaded.com

Dave Nilles is an Ethanol Producer Magazine staff writer. Reach him at dnilles@bbibiofuels.com or (701) 373-0636.