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Ethanol produer: SJV plants boosts ethanol output

Ethanol from corn offers an alternative fuel for consumers now gripped by mounting hydro-carbon energy prices, according to Bill Jones, chairman of Pacific Ethanol Inc. (PEI) and Fresno County, Calif., farmer and rancher.

“With the diversification of fuel source, you have opportunity for choice, and that's what America is all about,” Jones told a recent outlook forum in Visalia held by the California Chapter of the American Society of Farm Managers and Rural Appraisers.

The former California Secretary of State and assemblyman heads the company's goal of building an ethanol plant in Madera and planning another four in the San Joaquin Valley.

They will extract ethanol from wet distillers grain corn, sourced from the Midwest, which will be then shipped on for use as dairy feed in California.

Ethanol, Jones said, has replaced the fuel extender, MTBE, once used in California but now banned because of environmental and health risks. The state's market for ethanol, now used to reduce “greenhouse” gases, is about 900 million gallons, although the current supply from the state is only about 35 million gallons.

Noting the great potential for growth of the ethanol industry in the state, Jones cited Gov. Arnold Schwarzenegger's recent executive order setting a target of 20 percent of the ethanol used in California to be purchased from in-state production by the year 2012.

The 35-million-gallon ethanol plant, Jones said, means about 750 jobs and $2 million in annual taxes that will remain in California. The other plants will be strategically placed near dairies and facilities where ethanol is blended with gasoline before delivery to retail gas stations.

The plant in Madera will be the largest fuel refinery built in California in the past 30 years. “That's a staggering thought. Not because it is so big, but because nothing else has been built during that time,” he said.

Jones said the zero-discharge water technology of the Madera plant was chosen as an environmental measure.

The advent of the San Joaquin Valley dairy industry's expansion to more than 1.4 million cows in about 30,000 square miles is a key reason for PEI's entry into ethanol production. About 125,000 cows are needed to consume the wet distillers grain corn after processing in a 35-million-gallon plant.

“We save about a third of the energy used by an ethanol plant in the Midwest because they have to dry the corn before shipment. Here we can use wet distillers grain corn from a 30-mile radius of our plant without drying it,” Jones said.

He said the ethanol industry has potential for growth in California. Sugar is another raw material, as is green waste. “There's more than enough green waste in California to generate all the fuel we need. We believe strongly that opportunities are there for agriculture to grow some of the crops, including corn,” Jones said.

Grain corn has not normally been grown here because it is not price competitive with the dryland production of the Midwest. However, he added, due to recent hikes in corn prices, PEI sees prospects for meeting 10 percent to 15 percent of their needs from western production.

Jones said about 15 percent of the U.S. corn production now goes for ethanol manufacture. “That amount will increase by some in the future. People are concerned that it will put pressure on the supply of corn, but, as we know, if the price goes up farmers just might grow more.”

In addition to other fundamentals typical of any new venture, PEI's business model established three years ago is based on ethanol becoming a product for the western U.S. Previously, he explained, it had traditionally been considered a product for use in the Midwest. “Our model is destination ethanol, rather than origination ethanol. Twenty years ago we did not have the 110-car-unit trains and the infrastructure to bring large amounts of corn to the West. But now we have a tremendous amount of infrastructure that enhances the opportunity for this business model to work.”

In addition to uses of other raw materials, new technologies for ethanol processing are also emerging, and plants can be built without requiring additional distribution infrastructure financed by government.

Even so, Jones added, scheduled, new automobile engines that can run on either 85 percent ethanol or 85 percent gasoline will require special equipment, costing $125,000 per pump at filling stations and requiring time for conversion.

“That will take time, but it's been my experience in public life that when you have a solution, you also have to be able to deliver it in a reasonable time-frame. That's what biofuels can do.”

He said given federal and state government support for the new fuels, he expects broad consumer acceptance by consumers across the United States.

Biodiesel fuel produced from vegetable oils, he said, is now where ethanol was about a decade ago. “It is still a boutique fuel and needs consistency, scalability, standards and financial infrastructure so wholesalers become confident that they can sell it in volume. Those are being worked out, and our company is looking into it also.”

A common issue with ethanol is whether it requires more hydrocarbon energy to produce than it saves. Jones pointed to a University of California, Berkeley, survey that concludes that ethanol production has a positive energy balance of 30 percent to 60 percent. He said USDA and U.S. Department of Energy surveys support the same results.

In another part of the ASFMRA forum, veteran Visalia, Calif., cotton industry leader Dick Shannon, whose family settled in the San Joaquin Valley in the 1880s, was named the 2006 Distinguished California Agriculturalist.

Shannon, 96, was unable to attend the event, but the award was accepted on his behalf by his grandson, Eric Shannon.

The elder Shannon planted his first cotton crop on 60 acres near Visalia in 1928, and two years later he began marketing his cotton through the fledgling Calcot organization. About 1940, he took a seat on the Calcot board and remains the longest-serving director in the cooperative's history.

Dick Shannon expanded his farming to grapes and tree fruit, along with ventures in custom harvesting, farm equipment and pump sales, an aircraft charter service and farming in Washington State.

One of his greatest achievements was the conception, building and operation of Elbow Gin, which continues today.

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