Louisiana Biofuels Plan Would Decentralize Production

How the 2008 Recession Halted the Progress of Louisiana’s Advanced Biofuel Industry Development Initiative
By Michael K. Bullard | July 21, 2011

Legislating environmental policy is not new, but rarely is it the case that advancing an environmental strategy to protect environmental resources is also good for business and the consumer. In recent years, Louisiana has ranked dead last in 27 states reported by the Renewable Fuels Association. Still suffering from the economic impacts of Hurricane Katrina, a few legislators recognized that the advanced biofuel industry could provide the opportunity needed to help Louisiana right itself economically and environmentally.

In 2008, the State of Louisiana hit the trifecta of environmental legislation when then-Rep. and now-Sen. Jonathan Perry (R-District 47), Sen. Nick Gautreaux (D-District 26) and 25 other legislators co-authored what was coined the “most comprehensive biofuels development and production legislation in the country.” The Advanced Biofuel Industry Development Initiative (Act 382) represents a complete strategy to not only address the aggressive federal mandates for ethanol production and use in the nation’s fuel supplies, but also positions Louisiana to become one of the top noncorn-feedstock-based advanced biofuel producer in the country, while creating jobs and improving the local economy along the way. Louisiana is the first state to enact alternative transportation fuel legislation that moves fuel ethanol beyond being just a blending component in gasoline by including a mandatory blender pump pilot program and a hydrous ethanol pilot program.

The overall strategy relies on decentralizing the biofuel manufacturing process by creating numerous small manufacturing facilities across the state. These facilities will rely on locally grown, noncorn-based feedstocks, such as sweet sorghum and sugarcane, which, in turn, benefit local growers and the local rural economy. Multiple suppliers reduce local water demands and reduce the risk of feedstock supply shortages. Costs savings realized by utilizing locally available raw materials should be passed onto the consumers.

What is the State Kicking in? 

To give this initiative a jump start, HB1270 provides for several financial incentives. First, grants have been authorized to complete pilot programs for blender pumps offering E10, E20, E30 and E85. Ethanol is typically splash blended in the delivery trucks at the bulk terminal and due to storage limitations, gas stations generally only offer E10. By blending ethanol with gasoline at the gas station, blender pumps offer the consumer a wider variety of ethanol blends than currently available and at a lower cost. Grantees are also required to develop guidelines for the installation and use of advanced biofuel variable blending pumps by complying with applicable National Type Evaluation Program and National Institute of Standards and Technology requirements and ASTM standards

Working in conjunction with the Office of Agro-Consumer Services, Division of Weights and Measures within the Louisiana Department of Agriculture and Forestry, small, advanced biofuel facilities can purchase vehicles to evaluate the performance of various hydrous fuel blends. This division of Agro-Consumer services will be working with the biofuel facilities on the introduction of the field-to-pump, ethanol-blending strategy on an experimental basis until 2012. The Agro-Consumer services will monitor the equipment used by those advanced biofuel facilities that qualify for dispensing the ethanol blends.

The legislation also requires the state to only purchase or lease motor vehicles that are capable of and equipped for using an alternative fuel, which increases the demand and market for ethanol fuel blends.

The overarching goal of the legislation is outlined in section 3761 of The Advanced Biofuel Industry Development Initiative which states, “The legislature hereby finds and declares that the development of an advanced biofuel industry in Louisiana is a matter of grave public necessity and is vital to the economy of Louisiana. The use of advanced biofuel will expand United States and Louisiana fuel supplies without increasing dependency on foreign oil. The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing:

1) Increased value added to the feedstock crops, which will benefit the producers and provide more revenue to the local community;

2) Increased investments in plants and equipment, which would stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed;

3) Secondary employment as associated industries develop due to plant coproducts becoming available at a competitive price; and

4) Increased local and state revenues collected from plant operations would stimulate local and state tax revenues and provide funds for improvements to the community and to the region … Therefore, an advanced biofuel industry development initiative in Louisiana is vital to ensuring the broad-based rural economic development of Louisiana and is a matter of public policy.”

Is it Working?

The governor signed the bill into law on June 21, 2008. Since that time, progress in the development and implementation of the small advanced biofuel facilities has been almost nonexistent. According to the Department of Agriculture’s Division of Agro Consumer Services, charged with monitoring the program, no company has expressed any interest in over a year or stepped forward to pursue these opportunities. The 2008 recession as well as budget cutbacks have clearly hampered the development of these plants as well as the availability of state-funded grants and implementation of this promising legislation.

The obstacle that has seemed to slow progress on the Advanced Biofuels Initiative on all fronts is clearly funding. The legislation is indeed ambitious, however, lack of funding on the production front has stalled the implementation of its goals. The recession that hit across America in 2008 no doubt has had its effect on the schedule and goals of many of these projects.

Feedstock concerns have also risen. The potential use of sweet sorghum in the production of ethanol has some worrying about the rise in the relatively low prices of food using Louisiana sugarcane syrup and molasses. Although somewhat easier to grow than corn, some believe that the repeated growing of sorghum year after year will require increased fertilizer inputs and crop rotation. The sorghum crop must be handled quickly in order for the juice to be successfully processed, resulting in a small harvesting window in order to optimize the best quantity and quality of the crop. This crop will also most likely be harvested in the summer months, just when hurricane season begins in the Gulf Coast. The goal of creating an ethanol supply from a decentralized network of plants, however, could help ease the concern of a hurricane substantially halting production efforts, if certain areas are hit harder than others.

The troubles that Louisiana Green Fuels has run into the past few years illustrate many of these concerns. Both the economic downturn and sporadic weather conditions have hampered the efforts of the company in its goal of getting a 25 MMgy sucrose-based ethanol plant up and running. The availability of feedstock also depends on the farmers’ willingness to invest. At this point, the lack of funding and the shakiness of different projects implementation seem to have made many farmers reluctant.

Is Louisiana on the Right Track?

Any new industry has its growing pains, learning curves, and bumps in the road and the promising goals set forth in the 2008 legislation have yet to even begin taking shape. However, by taking steps legislatively, Louisiana has committed to support and help build that industry rather than taking a back seat and just reaping the benefits. Progress may be slow, but it is still progress.

The nation’s dependency on foreign oil cannot be solved with one panacea approach using corn- or grain-based ethanol production that relies on megafarms. Louisiana’s decentralized approach, if successful, could result in a sustainable and reliable alternative fuel source that will serve as a model for all other states.

Author: Michael K. Bullard
Secretary, Environmental Law Society
Loyola University New Orleans College of Law