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Natural gas opportunities

The boom in natural gas production has some interesting ethanol industry angles, besides record low prices for the major energy source for ethanol producers.
By Susanne Retka Schill | July 30, 2012

The boom in natural gas production has some interesting ethanol industry angles, besides record low prices for the major energy source for ethanol producers.

Several commodity groups have taken a page from the playbook of ethanol project developers for a big project they are advocating in North Dakota, according to a recent report in the regional agribusiness publication, Agweek.    North Dakota’s oil boom is creating a second boom in natural gas production, which at least initially, is being flared while the infrastructure to collect it is developed. A collaborative effort of corn and soybean grower groups in surrounding states and provinces are raising the funds to do a comprehensive business plan for a proposed anhydrous ammonia fertilizer plant to make use of that natural gas. Darin Anderson, chairman of the N.D. Corn Growers Association and chair of the steering committee, is quoted in the article as saying a plant will be built by someone, and the goal is to make it majority farmer-owned and controlled. “Anderson says the idea isn’t to produce fertilizer, cut the market and sell it for cheap,” the article says. “It’s to allow farmers an investment that means if nitrogen prices are high, they’ll get a dividend in the market for producing fertilizer.”

Have a familiar ring to it? The article continues: “The project would be different from other equity drives for farmers because it would not require delivery of any commodity as a value-added product. The concept might be similar to a farmer investing in a corn ethanol plant, Anderson says. It would make more money on the ethanol in times when corn prices are low, but make more money on corn when corn prices are higher.” While it’s a familiar model, these project developers have quite a challenge ahead of them—the price tag is an estimated $1 billion.

The boom in natural gas production is having other ripple effects among ethanol industry participants. This week Coskata announced that it is changing the feedstock focus of its first commercial operation using its syngas fermentation technology from using biomass to natural gas. Their plans to use biomass to make ethanol won’t be abandoned entirely, but the natural gas project will be developed first.

The natural gas boom is also providing some new opportunities for enzyme developer Verenium Corp. The company announced last week that it received regulatory authorization from the U.S. EPA to market its next-generation cellulase for new applications. "While our Pyrolase cellulase product currently used for breaking guar during hydraulic fracturing is effective in fracturing jobs at temperatures under 180 degrees F, our work with the industry enabled us to define the characteristics of a more robust enzyme breaker,” Verenium President and CEO James Levine, is quoted in the news release about the EPA approval. “Our next-generation product has been tested in the labs of several oilfield services companies demonstrating that it functions well in more extreme temperature ranges and higher pH conditions.” Verenium estimates the U.S. market for guar breakers used in hydraulic fracturing is $250 million. “Verenium's next-generation enzyme breaker represents an advancement in performance properties that the company believes can expand the share of this market addressable by enzymes well beyond the current 10 percent,” the news release reports. The company expects to launch this next-generation product in the second half of 2012.