Iowa Partners to Develop Cellulosic Ethanol Projects

Incentives, research capabilities, workforce development among advantages Iowa offers
By Bill Northey, Iowa Secretary of Agriculture | April 11, 2012

When it comes to offering a place for cellulosic ethanol producers to prosper, Iowa rises to the top of the list. The state lends key assistance on a number of different fronts. From research support to the crucial infrastructure ethanol producers need for operations, state government in Iowa is a willing partner to companies making significant capital investments and creating well-paying, high-quality jobs.

As the nation’s top corn-producing state, Iowa leads the U.S. in raw biomass production to fuel the biorenewables industry, with the ability to harvest 15 million to 20 million dry tons of biomass each year. That makes Iowa a natural location for cellulosic ethanol companies looking for a reliable source of feedstock. In cases where corn stover is used as the feedstock, it takes an organized effort to develop and nurture the supply chain, something that partnerships in Iowa have helped build for cellulosic ethanol producers locating operations here.

The concentration of raw materials in Iowa also helps the state lead the way in developing value-added, biomass-based fuels and chemicals.

Developing State
Government Partnerships
With Iowa’s choice to be a leader in developing the biosciences, biofuels and bioprocessing sectors, comes attentiveness to their needs. Iowa offers a number of potential partnerships with state government to help cellulosic ethanol developers. Those partnerships could include assistance with the following:

• Tax incentives.
• Research.
• Feedstock supply chain.
• Specialized workforce.
• Finding plant efficiencies.
• Energy sources.
• Infrastructure.

And, when cellulosic ethanol companies are looking for air and water permits for their facilities or are facing other regulatory issues, Iowa’s state government is more focused than ever on making it easier for them to proceed through the regulatory process so they can get on to doing business.

To make the most of partnerships with state government in Iowa, it helps for cellulosic ethanol developers to identify what assistance they might need as they explore locations. A special Iowa working group, made up of state and federal officials, the Iowa Farm Bureau Federation and other organizations, can help provide technical and financial assistance to value-added agricultural businesses. The Value Added Agriculture Support Team has a history of working with ethanol projects and others to add value to Iowa commodities.

The biggest issue VAAST has worked on in the area of cellulosic ethanol producers is the logistics of moving cellulose—in most cases corn stover—and building the kind of structure that rewards farmers enough to pay to harvest it and, in turn, transport it.

Iowa Advantages
One significant advantage Iowa offers qualified cellulosic ethanol producers is its refundable Research Activities Credit for research and development (R&D) investments. The state is one of only a handful that offers a refundable research activities tax credit. Credits may be paid in cash directly to the company when its tax liabilities are met. It is just one of the ways Iowa rewards innovation by companies investing heavily in R&D and in creating cutting-edge advantages in biofuels and other industries. Iowa has been consistent in its support for the credits over the years when federal research credits have fluctuated.

Iowa’s High Quality Jobs initiative, administered by the Iowa Economic Development Authority, is another potential source of tax incentives for cellulosic ethanol producers. Qualified companies can earn tax incentives to help offset the costs of locating, expanding or modernizing a facility in Iowa. Incentive packages are flexible to meet the needs of companies and can include tax exemptions, credits or refunds. Businesses must meet wage threshold and other requirements to qualify.

Research is another advantage. Iowa State University, located in the central Iowa community of Ames, has provided significant support to help build a thriving biofuels industry in the state. The BioCentury Research Farm is just one of the many research centers at ISU that are supporting the groundbreaking progress in biofuels. The BioCentury Research Farm assists corn ethanol plants in becoming more efficient and expanding into advanced biorefineries that produce not just fuels, but products that include industrial chemicals, food, feed and biomaterials. Its focus spans the whole system—from plant genetics to biofuels production. 

ISU’s BioCentury Research Farm partnered with ethanol producer Poet LLC to study the effects of corn stover harvest on soil quality as Poet’s plant in Emmetsburg prepares to produce up to 25 million gallons of cellulosic ethanol every year. Research found that 1.5 to 2 tons of corn stover per acre can be safely harvested. The study is just one recent example of how Iowa state government—in this case one of its public universities—is able to team up with private industry to advance the next generation of biofuels.

The BioCentury Research Farm has worked with DuPont Cellulosic Ethanol to develop a supply chain of feedstock corn stover including harvesting, storing, and transporting it. DuPont’s 25 million gallon cellulosic ethanol plant to be built nearby in Nevada, Iowa, is expected to use 300,000 tons of feedstock every year.

The research farm is also where start-up Avello Bioenergy, founded by ISU students, is building a demonstration plant to produce petroleum replacement products for precommercial testing. The company’s bioasphalt is being used on a demonstration bike path in Des Moines.

Another important research effort at Iowa State University is the Bioeconomy Institute, which brings together efforts across the university to advance the use of biorenewable resources in producing fuels, chemicals, materials and energy.

Workforce, Innovation
Because of the cluster of biofuel companies and entities doing groundbreaking research, Iowa has a skilled workforce in this area. Besides its public research universities, the state is home to a strong network of community colleges that can partner with private industry to train workers. The Iowa Bioprocess Training Center operated by Indian Hills Community College was designed especially to meet the training needs of the value-added agriculture and bioprocessing industries and works with companies that include Cargill Inc.

A convergence of biofuels companies and research makes Iowa a natural place for innovation to bloom. Iowa can count more than 40 existing ethanol plants, many biodiesel plants and two commercial-size cellulosic ethanol plants coming online—as well as the cutting-edge collaboration being done at the BioCentury Research Farm

The development of coproducts that can make ethanol production more efficient and cost-effective—such as biochar in field applications, or other products in livestock feed production—is another Iowa advantage, with ISU providing the research capacity.

What started out as highly sophisticated wet-mill corn processing plants has grown into a number of additive industries helped by government incentives. In particular, Iowa’s research activities tax credit is something that has been a benefit for companies in this area.

It all adds up to create a cluster effect of expertise. Businesses with various skills are brought together where they can learn from each other, perhaps be each others’ customers and discover something in their own businesses that could be beneficial to another, creating value to their operations.

Cellulosic ethanol projects have unique needs that must be met in order to get their operations off the ground. The state of Iowa, its research entities and other interested groups in the state can lend support to making those types of projects happen. The state of Iowa stands ready to partner with cellulosic ethanol and next generation projects planning on bringing innovative projects and high-quality jobs to Iowa.

Author: Bill Northey
Iowa Secretary of Agriculture
(515) 281-5321
agri@iowaagriculture.gove