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Project depends on energy, environmental policy

An ambitious plan to enlist farmers to grow grass for fuel on thousands of acres of their land depends in the short term on federal funding that’s uncertain and in the long term on national energy and environmental policy that’s changeable.
To plant up to 50,000 acres of Miscanthus Giganteus in each of three project areas, MFA Oil Biomass needs federal funding through the Biomass Crop Assistance Program to pay farmers the costs to plant the crop and reimburse them for the three years it takes for it to mature.
If the funding survives the budget battle in Washington, the project’s long-term chances are heavily tied to whether US environmental policy continues pushing for lower coal emissions and whether energy policy retains a mandate to produce ethanol with non-food crops such as grasses.

“The government involvement is going to be very important on a number of fronts,” said Tom Voigt, a professor of crop sciences at the University of Illinois who studies miscanthus. “If the government doesn’t get involved, we’ll muddle along and use fossil fuels until they become too expensive.”
MFA’s plans, at least in the medium term, are to get the crop established and initially use it as a feedstock for power plants. The company thinks those markets are already there. The MU power plant has plans to switch to 100 percent biofuel. Columbia Water and Light is in the process of buying 200 to 500 tons of the grass from MFA for a “test burn” at its power plant to determine its heat content and how it interacts with the city’s boilers, said Assistant Water and Light Director Ryan Williams.
But if MFA’s project grows as much miscanthus as it hopes to in the next couple of years — about 2.25 million tons on 150,000 acres — it will need more than a few small municipal markets looking to buy its grass.
That’s where the uncertainty of national energy policy comes in. Take, for instance, the Environmental Protection Agency’s “transport rule,” which mandates coal-fired power plants reduce their sulfur dioxide and nitrogen dioxide emissions by 71 percent and 51 percent, respectively. Burning miscanthus could help achieve those goals because it is harvested in the winter when the plant is dormant and its nutrients have gone back into the soil.
“The sulfur content and nitrogen content (in Miscanthus Giganteus) are very low, so certainly compared to burning coal, there’s a lot less of those pollutants in the feedstock,” said Stephen Long, a professor of crop sciences at the University of Illinois.
Jerry Taylor, MFA Oil’s president and CEO, said the cooperative has begun preliminary discussions with large utilities such as Ameren that depend heavily on coal power. But that EPA rule could easily change whenever a new administration takes over in Washington. That’s why, he said, the company is hoping for BCAP funding to take out some of the risk in establishing the crop.
“This project stands on its own financially if you look at it over a 10-year period, if, if, you can count on energy policy in this country not changing,” Taylor said.
Without federal subsidies or mandates, biomass could struggle to compete with traditional fossil fuels, he said, especially if the price of oil falls from its current high prices.
“If the price of oil comes back down to $30 (per barrel), we’ll probably have a hard time making this go because at that point it’s only dependent on policy and, mainly, clean air policy,” Taylor said.
Longer term, there’s another big potential for the miscanthus crop if current policy doesn’t change. The federal Renewable Fuel Standard mandates that 16 billion gallons of cellulosic ethanol, or non-corn-based ethanol, must be produced by 2022.
“That’s a big mandate,” Taylor said. “The problem is there’s no commercialized technology; but it’s getting there. We believe it will get there. But even when it gets there, there’s not enough biomass to make that type of ‘gallonage.’ So we’ve got to get on with growing the right biomass.”
A commercial-scale ethanol plant will require as much as 50,000 acres of miscanthus, Voigt said, and it would need to be in close proximity.
MFA’s proposal seems tailored to that eventual need and calls for three relatively small project areas to produce up to 50,000 acres of miscanthus. Taylor said MFA might just supply the miscanthus to ethanol producers, but it could get into production itself.
Subsidies exist to support the sale of cellulosic ethanol, and blenders such as MFA are required to use a certain amount of ethanol in their fuel under the RFS.
MU Professor Seth Meyer, a policy analyst with the Food and Agricultural Policy Research Institute, pointed out that not only could MFA get paid for selling the cellulose material or the actual ethanol, but it could also be reimbursed for producing more than the amount the law requires. As the regulations are set up, blenders have to mix a certain amount of ethanol with their gas, and for anything over that amount, they receive a certificate they can sell to blenders who can’t meet their own requirement.
Still, Meyer said the risk remains that energy policy could be changed during the next 12 years and that some existing provisions are set to expire.
“There’s a lot of economic risk for this process because, one, those (ethanol) subsidies end in a couple years, BCAP ends in a couple of years,” he said. “In addition, this (RFS) mandate is out there, but there are specific provisions within cellulosic ethanol that can be waived.”

Ronnie Felten
Ronnie Felten said the miscanthus he plans to grow will be enough to heat his home, with a wood-burning stove.

In the short term, MFA is focused on establishing the crop and selling to the markets it can now. Regardless of how the ethanol mandate turns out, growing the fuel and selling to electricity producers would give a substantial boost to the Columbia region and other rural economies.
MFA Oil Biomass’s gamble is already supported by a few niche markets, which it hopes will sustain the project as it grows. Taylor said the crop can already be used to power heating for livestock and poultry in addition to the power generation market.
Ronnie Felten, a 52-year-old farmer who sits on MFA’s board of directors and plans to grow miscanthus on his land, already thinks he’ll be able to use the grass himself.
The wood-fired generator that heats his home and water takes a lot of work, he said. “As I get older, I probably won’t want to cut wood anymore.”

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