A new cellulosic ethanol plant opens in Iowa aiming to produce fuel from corn — but only from the husks, cobs and leaves. Sound too good to be true? For producers’ sake, let’s hope not.

In the wake of a food fight over EPA’s proposed reduction in the Renewable Fuels Standard — which is likely to be dropped from 18.15 billion gallons of biofuels to 15.21 billion gallons — there is some good news on the ethanol front: A partnership known as POET-DSM Advanced Biofuels has opened the first U.S. cellulosic ethanol plant in Emmetsburg, Iowa.

Commentary:  Ethanol to the rescue?Sioux Falls, South Dakota-based POET is considered one of the world’s largest ethanol producers, with 25 years’ experience as a U.S. renewable fuel producer. The company currently operates 27 “conventional” grain ethanol plants across the Midwest, including seven in Iowa and one at the Emmetsburg, Iowa, site of the cellulosic facility.

The new plant, named “Project LIBERTY,” was formally opened last week in a ceremony attended by King Willem-Alexander of the Netherlands; USDA Secretary Tom Vilsack; Department of Energy Deputy Under Secretary Michael Knotek; Iowa Gov. Terry Branstad and Lt. Gov. Kim Reynolds; and other dignitaries and thousands of guests.

That’s a heck of an “A List.”

According to a company news release, the plant will convert biomass, consisting of baled corn cobs, leaves, husk and stalk (corn stover) into ethanol. The plant has officially processed its first batch and is proceeding toward full operation. At capacity, the plant is expected to convert 770 tons of biomass a day, yielding about 20 million gallons of ethanol a year, with full capacity eventually topping 25 million gallons annually, the company stated.

“Some have called cellulosic ethanol a ‘fantasy fuel,’ but today it becomes a reality,” Jeff Broin, POET founder and executive chairman, said in a statement released after the ceremonial opening. “With access now to new sources for energy, Project LIBERTY can be the first step in transforming our economy, our environment and our national security.”

Easy, Jeff. Let’s start with making biofuel production profitable, shall we?

According to POET’s news release, farmers will be paid $65 to $75 per dry ton of stover, and at 770 tons trucked in daily, that works out to about 285,000 tons of biomass a year, costing about $20 million annually. All of the biomass material is expected to be delivered from farms within a 45-mile radius of the Iowa plant. (Emmetsburg is about 150 miles northwest of the state capital of Des Moines.)

Broin said the new facility is “a step forward in wider adoption of biofuels” in North America and worldwide. “It is also a victory for the Renewable Fuel Standard, which prompted increased investment into advanced biofuels that accelerated development of this new technology,” he said.

Although no details were disclosed, the Liberty plant uses proprietary technology to efficiently convert agricultural residue using a specialized “cocktail” of enzymes and yeast to produce liquid ethanol. Broin indicated that the technology would shortly be available via a licensing process.

Some questions to answer

This is a welcome development. Obviously, few farmers in Iowa are going to stop growing corn — not as long as market demand, export sales and federal subsidies ensure its profitability. But that corn needs to be processed for food and feed ingredients, not distilled into fuel to burn up in our cars and trucks. If cellulosic technology can be proven effective, it would be a big step toward continued development of practical, cost-effective biomass utilization, rather than cannibalizing our agricultural production to support existing motor vehicle fuel supplies and distribution systems.

However, there are some questions about cellulosic conversion technology lingering, even as POET-DSM pumps up the volume on its proprietary operation.

For starters, the corporate line is that the Emmetsburg plant will purchase 285,000 tons of biomass a year at a cost of about $20 million annually. Yet the plant is expected to produce only 20 million gallons of ethanol from all that biomass. Thus, there is a $1-a-gallon cost just for the raw materials, before operations begin. Even with gasoline selling for $4 a gallon now, can cellulosic ethanol be competitive when it costs 25 percent of the finished product’s retail value just to obtain the substrate, before a single leaf is processed or a single drop is distilled?

Along those lines, Broin admitted that the state of Iowa has invested about $20 million in the new plant via tax credits and job training and the U.S. Department of Energy has provided $100 million in grants over seven years.

That means that the plant would need to generate $120 million in profit to theoretically break even — that is, if private investors were ponying up the start-up cash instead of you and me. How long would that take in real-world years?

Or maybe the better question is, how many decades?

Second, the issue of carbon footprint and net energy production is never addressed, as POET’s business model is clearly about ramping up a pilot plant — thanks to Uncle Sam and the state of Iowa — then aggressively licensing the technology to operators of existing ethanol plants as a potential add-on to their current operations.

This isn’t about focusing on making Project LIBERTY profitable; it’s about hustling licenses to entrepreneurs who will attempt to tap the same public funding pool from which POET so lucratively sucked up its cash — only they’re likely to have a lot less success.

Since various experts already question whether a gallon of ethanol produced by distilling corn kernels actually delivers a net gain of energy, or whether it’s — at best — a transfer of potential energy from a corn crop to a liquid fuel — it’s totally appropriate to ask if corn stover that has to be baled and trucked and processed is actually delivering a whole lot of net energy.

The answer is probably yes, since the biomass would likely be either be turned into silage, disked under or left to deteriorate in the field. Any of those options certainly don’t capture the full value of a corn crop’s “waste material.”

Cellulosic technology is indeed a step forward, and it should be pursued in an effort to find newer and better ways to extract energy from all kinds of biomass — including crops grown specifically to produce biodiesel or ethanol.

But it shouldn’t be viewed as a panacea, nor should it become a sinkhole for millions in government subsidies, nor should the biofuels produced be targeted for distribution through a regional or national pipeline-storage tank system.

The only way this technology makes sense is if efficiency can be fully developed — which is years away — and if the fuel goes right back to those same farms within a 45-mile radius of the plant.

That’s the only way cellulosic ethanol makes sense for the long run, which is why any hosannas for POET-DSM at this point need to very, very muted.

The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.