By Eric Morath
The Detroit News

Michigan is on the verge of a biofuel boom — one that experts and lawmakers say could provide a high-octane kick to the state’s economy and put the state at the forefront of efforts to end the nation’s addiction to foreign oil.

Two years ago, Michigan had one biofuel plant — a corn-feed ethanol facility in Caro. Today, it has six operating ethanol and biodiesel facilities and at least 16 more in the works — including a cutting-edge cellulosic ethanol plant and two proposed biodiesel locations in Detroit.

That growth puts Michigan in the middle of a biofuel industry that has tripled its output since 2000 and is projected to continue its expansion.

Some say Michigan is chasing the same glittery dream as a dozen other states and may find nothing more than fool’s gold. Already the primary biofuel, corn-based ethanol is being blamed for rising food prices, and a west Michigan biodiesel plant that uses soybeans to create the alternative fuel recently laid off all but three of its workers when soybean prices made producing the fuel unprofitable.

But Lansing lawmakers, university researchers and industry leaders say the state is poised to play a larger role in biofuels.

Last week Michigan landed a big win. Massachusetts-based Mascoma Corp. announced plans to build a cellulosic ethanol plant in the state by 2009. Cellulosic ethanol, made from plant matter such as woodchips and switch grass, is widely considered the future of biofuel. Such ethanol could be made from cheaper and more abundant sources than corn and, in some eyes, turn ethanol from a small factor to a major player in the world’s fuel markets.

“Mascoma’s decision to choose Michigan is helping us achieve a key part of our economic plan — making our state a leader in alternative energy production,” Gov. Jennifer Granholm said at the announcement. “This puts Michigan on the leading edge of technology that will create good-paying jobs for Michigan citizens.”

Auto heritage influences role

In terms of corn-based ethanol production — the most popular biofuel today — Michigan ranks ninth in the country, but far behind big corn states such as Iowa, Illinois and Nebraska. Michigan’s 212 million gallons in annual ethanol production capacity is 10 percent of Iowa’s capacity.

Several factors however, put Michigan in a good position to take a larger role in the biofuel industry:
# Its automotive heritage gives the biofuel industry willing partners, as well as engineering, manufacturing and logistics talent.
# The state’s research universities are tackling shortfalls in fuel technology. Michigan State University received $125 million in federal funding to establish the Great Lakes Bioenergy Research Center with the University of Wisconsin.
# The state is not tied only to corn-based fuels and is already moving toward cellulosic production.

In fact the state’s Michigan Renewable Fuels Commission’s June report recommended more state support for research into future biofuels, but said the state should not extend tax credits to attract additional corn-based ethanol plants. The report stated that corn demand for the 12 plants in the pipeline already exceeds the state’s 2006 corn crops.

The commission’s report outlined how Michigan could lead in the development and production of future biofuels.

“Mascoma is an example of that,” said James Croce, CEO of Detroit-based NextEnergy and a member of the commission. “By getting early commercial placements in Michigan you build up an entire supply chain around this technology.”

Bob Dinneen, president of the Renewable Fuels Association in Washington, D.C., agrees that Michigan has a good chance to become a leader in biofuels because the state’s current ethanol plants have established markets for the fuel, and the state is making strides in the development of cellulosic ethanol.

“Big corn producing states don’t necessarily have an advantage because their focus will continue to be on grain,” Dinneen said.

He said the growth in recent years of Michigan’s biofuels industry has been “pretty phenomenal and that’s just the beginning because Michigan has a tremendous amount of cellulosic feed stock as well.”

The state’s automakers also are playing a big role in moving ethanol from a niche product toward a mainstream fuel.

“The commitment from GM, Ford and Chrysler to make to flexible fuel vehicles has done a tremendous amount to let investors know ethanol is more than just a blend, it can be a primary fuel,” he said, referring to the automakers’ commitment to have half their fleets capable of using alternative fuels by 2012.

Critics say it’s not enough

Despite nearly $1 billion in recent and planned investment from the biofuel industry, it’s far from the silver bullet for the state’s economic woes.

The idea that biofuel production will make up for the loss of manufacturing jobs is questionable. Today, the state’s six operating biofuel plants employ 178 workers. A biodiesel plant in Bangor, which opened to much fanfare last year, this summer laid off nearly all of its staff because skyrocketing soybean prices added 80 cents to a gallon of biodiesel. The plant now runs at a sixth of its total capacity.

Proponents say biofuels are Earth-friendly because they are renewable and the plants, which are the source of fuel, take carbon dioxide out of the air, but some environmentalists say the products are not as green as they are marketed.

Gayle Miller, legislative director for the Sierra Club of Michigan, said the process of growing and processing corn, for instance, requires much more energy than ethanol produces. She also said biofuel plants may pollute surrounding areas, and land set aside for nature could be turned into farm fields to grow more fuel feed.

Others say biofuels have yet to prove themselves to consumers. E85, a motor fuel made from 85 percent ethanol, sells at 30 cents more per gallon than regular gasoline, despite significant subsidies.

“Gas station owners will sell products their customers want, but we’re not seeing that right now for E85,” said Mark Griffin, president of the Michigan Petroleum Association, which represents gas station owners. “Customers aren’t willing to pay more for a product that doesn’t get them as many miles per gallon as gasoline.”

State’s making right moves

Those in the biofuel industry say Michigan is making the right moves to become a sector leader. Several producers who have or intend to build plants in Michigan said state and local officials were quick to offer assistance both in terms of tax incentives and cutting through regulatory hurdles.

POET LLC, operators of Michigan’s first ethanol plant, call that facility “an overwhelming success.”

“What most attracted us to the Thumb area was the abundance of corn and access to ethanol markets in Detroit and elsewhere,” said Larry Ward, POET vice president for project development. He said his company is working to develop a cellulosic ethanol plant that garners fuel for corn fiber and cobs. Ward added that Michigan could be in the running for a similar site in the future.

With oil prices hitting $70 a barrel and fears growing about relying on oil from volatile areas of the world, more than ever before biofuels are becoming a mainstream reality, said Bruce Dale, associate director of MSU’s Office of Biobased Technologies.

While Dale says the nation may already be nearing limits on corn-based ethanol production, cellulosic ethanol holds the possibility of significantly displacing petroleum-based fuel. Research on how to extract energy from the cell walls of most plants has taken off recently.

As oil prices rise, the viability of technology for making cellulosic ethanol increases, Dale said.

“We have more of alternative at hand than people realize,” he said. “This is the beginning of the revolution for how we will fuel ourselves.”
� Copyright 2007 The Detroit News.

Source: The Detroit News.