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Kentucky farmers considering growing corn to make ethanol need answers to three questions: What’s the best way to use my land and resources to provide a good income for my family? What impact will my choice have on economic development within my community? How does what I do on my farm and within my community match the needs of our nation?

Dr. Nancy Cox, associate dean for research at the University of Kentucky’s College of Agriculture in Lexington, says, “One way to sum up the issue today is to ask another question: Is producing fuel from crops a permanent solution to the perceived worldwide shortage of petroleum? Petroleum is a finite resource, but crops can be grown season after season.”

Using an infinitely renewable resource to provide fuel for gasoline-powered engines looks great at first glance.

But that’s not what happened the first time around.

Back in the 1970s, Kentucky’s farmers had a brief fling with growing corn for ethanol production during the oil crisis. The thinking then was that with homegrown corn turned into ethanol, America could stop relying so much on expensive imported petroleum products. But manufacturing methods then were not very efficient, and as soon as petroleum products once again became plentiful and affordable, interest in ethanol production slowed, with many facilities ceasing production.

This time around, the federal Energy Policy Act of 2005 mandates yearly goals for biofuel production. By the year 2012, biofuels must reach 7.5 billion gallons.

In Kentucky, one ethanol facility in Hopkinsville began producing ethanol in February 2004; another facility under construction in Fulton should begin production in late 2007; and a third plant is in the planning stages, with a fourth one a possibility.

Nationally, more than 100 facilities produce ethanol today. Expansions at existing facilities and dozens of new plants under construction or in the planning stages in other states make it likely that the Energy Policy’s 2012 goal will be reached ahead of schedule.

But whether the current interest in ethanol production can be sustained depends on several factors.

Energy Outcomes, Crop Choices
A key problem surrounding ethanol in the 1970s—and again in the 21st century—involves the concept of “net energy balance.” Sure, one can grow the crop over and over again, but what about the energy it takes to plant, harvest, transport, and then process that crop into ethanol?

Carol Whitman, who studies environmental affairs at the National Rural Electric Cooperative Association, says, “The net energy balance of corn ethanol equation has changed over time as improvements have been made in every step of the ethanol process from the field to the finished product. Now corn ethanol production has a positive net energy balance of production and compares favorably with conventional gasoline production.”

At the local level, another key issue involves matching crops suitable for ethanol production with Kentucky’s soils and climate zones. Dr. Cox says, “One of our jobs here at the College of Agriculture is to do the research into particular crops, varieties, and yields.”

UK’s ongoing research projects cover many aspects of the plant-materials-to-motor-fuel process. UK’s researchers are investigating possible improvements to the traditional method of producing ethanol from kernels of corn. They are also testing which varieties of corn are most suitable for ethanol production. And they are trying to figure out a workable technology for producing ethanol from other parts of corn plants such as the stalks and leaves, or perhaps from an entirely different crop such as a grass.

Changing Expectations
Today, people don’t want just a renewable source for fuels—they also want great fuel economy and cleaner air.

Conventional engines in today’s vehicles, as well as home garden and farm machines such as leaf blowers and lawnmowers, operate very well using a commonly available ethanol blend, E10. Ten percent ethanol and 90 percent gasoline, this cleaner-burning product helps satisfy many local mandates to reduce air pollution.

Although the concerns in the 1970s about lower fuel economy with ethanol blends still linger, many of today’s redesigned vehicle and machinery engines offer so much better fuel economy all around that using E10 compares favorably with unblended gasolines.

The larger issue today is how rapidly fleet owners and individuals will add flexible fuel vehicles to their purchase plans. FFVs have an entirely different kind of engine that can operate with E85, a blend of 85 percent ethanol and 15 percent gasoline, although most are built to be flexible and will also operate on gasoline. Consumers still aren’t sure if they are willing to make the larger initial investment in these new vehicles until more comparisons are available that accurately show operating costs.

Another limiting factor for FFVs today is that the special E85 ethanol blend they can use isn’t yet widely available. So far, only two stations in Kentucky sell E85, one in Hopkinsville all the time and one in downtown Louisville on a limited basis. Solving distribution problems will affect the eventual peak demand for that ethanol product.

Economic Power of Ethanol
As demand for both ethanol blends, E10 and E85, continues to grow, profit opportunities multiply.

In far western Kentucky, Bluegrass BioEnergy LLC, a privately held business venture, broke ground in July 2006 for an ethanol production facility that will begin operation toward the end of 2007. President Jim Allen says, “This plant will need 19 million bushels of corn each year. We’ll receive that corn directly from area farmers and we will pay them a slight premium over the daily market price as shown at the Chicago Board of Trade. We’ll produce 55 million gallons of ethanol each year.”

The liquid ethanol will enter the distribution chain by either truck or railcar. Bluegrass BioEnergy has a 10-year contract with Noble Americas Corporation, Stamford, Connecticut, to handle sales. A byproduct of the ethanol process, distillers grain, is a nutritious animal feed. Bluegrass BioEnergy already has a three-year commitment from Land O’Lakes, a food and agricultural cooperative based in St. Paul, Minnesota, to handle sales to area and regional livestock producers. Bluegrass BioEnergy’s eventual profits from these activities will go to the private investors who’ve risked their capital to finance this new facility.

Penny Morgan, executive director of the Fulton County Economic Development Partnership, says, “Bluegrass BioEnergy’s $95 million capital investment, and the 52 permanent jobs created by this ethanol facility, will have a significant economic impact on our county. And several other related industries are already looking at this community because of Bluegrass BioEnergy’s investment.”

Northeast of I-24, the Commonwealth Agri-Energy LLC ethanol facility in Hopkinsville began producing ethanol three years ago in February 2004. Like Bluegrass BioEnergy, Commonwealth Agri-Energy also has an agreement with Land O’Lakes Cooperative to market their distillers grain byproduct. But Commonwealth has added a third feature. The carbon dioxide (CO2) that forms as part of the ethanol process will be piped over the fence to Payne Enterprises’ on-site dry ice manufacturing plant. Payne will sell the dry ice to regional meat processing facilities.

Commonwealth Agri-Energy General Manager Mick Henderson says, “We are an LLC (limited liability company) owned by a cooperative—100 percent farmer-owned—by members of the Hopkinsville Elevator Company and members of the Kentucky Corn Growers Association.”

This cooperative business model offers an extra benefit to farmers in Christian and surrounding counties. Henderson says, “When a farmer delivers corn to this facility, he or she receives payment for the value of the corn at the market price that day. Then later, at the end of the business year, this same farmer receives a patronage check, which is his or her share of the profits from selling the various value-added products that Commonwealth Agri-Energy makes. So with our ethanol facility, the farmer earns money twice.”

According to Henderson, the Commonwealth Agri-Energy ethanol plant needs about 12 million bushels of corn each year. That’s about the amount of corn grown in a typical year in Christian County, but many farmers continue to sell their corn as livestock feed, so the supply comes from many counties in both Kentucky and Tennessee.

Together, the Fulton and Hopkinsville ethanol plants will offer Kentucky farmers a potential corn market of 31 million bushels. That’s about 20 percent of Kentucky’s annual five-year average (2001-2005) of 149 million bushels of corn, although 2005’s annual production was 155 million bushels.

Nationally, ethanol production consumes about 10 percent of each year’s corn crop. Many agricultural analysts believe that is a sustainable percentage; many advocates continue to look for ways to increase ethanol production through use of more corn, and through improved efficiency.

Should I Grow Corn for Ethanol?
High-quality corn grain is needed for efficient ethanol production, and county agents with the Kentucky Cooperative Extension Service can help. Drs. Chad Lee and Jim Herbek, grain crops Extension specialists, work with farmers throughout the state on growing high-quality corn. Lee says, “Of all the annual crops that we grow here in Kentucky, corn will out-produce any other crop. Of the 1.2 million acres of corn grown in Kentucky, currently only about 80,000 acres is used for ethanol production. That figure will likely hold steady until more processing plants are completed.”

So what’s a Kentucky farmer to do? Is it reasonable to continue to grow a corn variety intended solely as animal feed, or switch to one for ethanol production? Will a single variety work equally well for either purpose? Should a Kentucky farmer consider what other farmers in Tennessee or states farther away are doing?

How do transportation costs to move the corn to an ethanol production facility affect net farm income? Should a farmer wait another season or two when more ethanol facilities are ready?

UK’s Dr. Cox says, “The College of Agriculture has expert agricultural economists who can give a Kentucky farmer the tools to help him or her make the choice of whether to grow corn to produce ethanol. Ultimately it’s a business decision.”




SOYBEANS—THE OTHER BIOFUEL

Soybeans can be processed to be either a component of a blended diesel fuel, or as a stand-alone diesel substitute. Diesels work differently from gasoline engines, so different raw materials are used.

In Kentucky, more than 30 retailers offer various kinds of biodiesel.

• B2: 2 percent biodiesel, 98 percent petroleum diesel. Commonly available at retailers.

• B20: 20 percent biodiesel, 80 percent petroleum diesel. Commonly used by fleet owners (governments, utility companies, school bus systems).

• B100: 100 percent biodiesel. Complete substitute for petroleum diesel.

For more information on biodiesel, go to www.kysoy.org.




WANT TO LEARN MORE ABOUT ETHANOL?

Kentucky ethanol resources on the Web include:

http://energy.ky.gov/dre3/renewable/ biofuels.htm • Kentucky Governor’s Office of Energy Policy

www.kycorn.org/keyissues/ethanol/ethanol.htm • Kentucky Corn Growers Association

National overviews on ethanol are on the Web at:

www.ethanol.org • American Coalition for Ethanol (ACE); click on the FAQ section.

http://eere.energy.gov/ethanol • U.S. Department of Energy has extensive information for consumers and businesses, including ethanol basic information, current models of flexible fuel vehicles, and stations that sell E85 across the U.S.

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