Missouri Timber Price Trends
July - September, 2012

Missouri Organizes For Energy Independence

By: Jim Lane

THE hottest new material in town is light, strong and conducts electricity. What's more, it's been around a long, long time.

green line

Independence, MO - Despite having as much as two billion barrels of fossil petroleum at attractive depths in the southwest part of the state, Missouri has never developed much of a liquid fuels production industry. It's heavy oils have been costly to extract, and attempts to use new technologies such as microbial enhanced oil recovery and fracking have not yet proved generally successful.

Like many states (or countries) that have limited oil reserves or reserves that are economically unfeasible to extract at this time - the path to energy independence lies generally in Missouri's substantial "above-ground oil fields" - which is to say, in her considerable biobased resources.

To date, the state has become home to six corn ethanol plants with 275 million gallons of fuel capacity and can produce 825,000 tons of distillers grains, using up about 15 percent of the Missouri corn crop in the process - and eight biodiesel plants that with 228 million gallons in capacity.

Missouri's progress to date: first-gen biofuels

Overall, Missouri consumes 4.2 billion gallons each year of motor gasoline and diesel - so it's a long road to energy independence. Which, according to the Digest's thesis, has kept the state overly exposed to the boom and bust economies that result from energy dependence.

As the Digest noted in a previous report, states that produced enough fuel to meet their internal demand for gasoline maintained growth rates 2.5 times above the national average, and either completely avoided the 2007-09 recession or experienced a lighter version of it. These states maintained a GDP growth in 2007-08 at five times the rate of states that were less than 20 percent energy independent.

Cellulosic biofuels production in Missouri

There's production here today of cellulosic biofuels in Missouri on a pilot scale. Last summer, ICM finished construction of its $31 million cellulosic ethanol plant near St. Joseph. The facility has the capacity to produce 250,000 gallons a year from switchgrass, sorghum and corn stover from a 250 mile radius. The facility is one of a handful the company has received federal loans for in order to complete construction.

Growth down in the Boot Heel

Here's the great news. In the southeastern section of the state, Missouri Delta AgBioWorks - partnered with the state's Dept. of Agriculture, Sikeston Area Chamber of Commerce, Memphis BioWorks, Delta Regional Authority, Mo Technical Corporation as well as many other organizations and Universities - has set a goal to build a Bio-based economy in the 7 counties of Missouri's most productive agriculture region known as the Boot Heel of Missouri.

AgBioWorks is, itself, a multi-state consortium focused on development of a bio-based economy in a region encompassing parts of Missouri, Kentucky, Arkansas, Tennessee and Mississippi - 98 countries that make up the Mississippi Delta region. . The group has estimated that in its region is up to 59 million tons in sustainable biomass reserves - up to 7.9 billion gallons of ethanol-equivalent fuels (using the maximum yields from cellulosic productino we've seen to date in demonstration-level projects).

That's enough to lift Missouri, were all of the production realized and enough directed the Show Me State's way, into energy independence.

The full AgBioWorks report on regional biomass resources, and the proposed development of its bioeconomy, is here.

Among the near-term advantages the group sees: redeployment of existing industrial infrastructure; introduction of new, high-value crops; opportunities to attract regional investment in pilot and demonstration projects; and the opportunities to increase grower incomes by making marginal lands economically feasible.

Specifically, the AgBioWorks plans envisions up to five 200 ton per day oilseed crushing facilities, between 13 and 33 150,000 ton pellet plants for wood biomass, and up to 117 biorefineries using lignocellulosic feedstock, with average production capacities of 40 million gallons each. In the process, creating more than 5,000 new, direct jobs.

"Our focus is not only on bio-fuels but bio-based products," explains

Missouri Delta AgBioWorks director Chris Evans. "Biomass energy crops such as Giant Miscanthus, Sweet Sorghum, sugar beets, and Canola are just a few of the crops that are being grown and researched here and show the most potential as future feedstock for the region. Missouri Delta AgBioWorks along with MRI Global are also in the process of organizing an Algae Summit to be held November of 2012 in Sikeston, Missouri."

"Our top priority from day one has been to create and protect Missouri jobs and help folks get back to work," Missouri governor Jay Nixon explained recently as he announced a $635K Delta Regional Authority grant, which included $75K for Missouri AgBioWorks.

"The new ag economy can be energy - it can also be food or pharmaceuticals," Sikeston Area Chamber executive director Missy Marshall told local reporters at the time of the grants. "There are chemical components from crop residue used to make plastic. Literally anything a petroleum product may be involved in can be produced."

USDA steps in to assist

Last year, the USDA announced today the establishment of its first Biomass Crop Assistance Program (BCAP) Project Area to promote the production of dedicated feedstocks for bioenergy, and chose a 39-county contiguous region in Missouri and Kansas for the project.

A likely candidate for turning all that feedstock into bioenergy - in the short term, the Abengoa Bioenergy project in Hugoton, Kansas is one possible destination.

Producers in the area will plant up to 50,000 acres of mixes of perennial native plants, such as switchgrass, for the manufacture of biomass pellet fuels and other biomass products to be used for power and heat generation. The proposed crops also will provide long term resource conserving vegetative cover. The project is a joint effort between the agriculture producers of Show Me Energy Cooperative.

The program provides an opportunity for teams of crop producers and bioenergy facilities to submit proposals to USDA to be selected as a BCAP project area. If selected, crop producers will be eligible for reimbursements of up to 75 percent of the cost of establishing a bioenergy perennial crop.

Other feedstock developments

Yesterday, researchers from the University of Missouri were awarded a $5.4 million grant from the DOE to research non-food crops as potential biofuel feedstocks. About 100 million acres of marginalized agricultural land in 10 states along the Missouri and Mississippi Rivers are unused or underutilized but could potentially grow non-food feedstocks for biofuels.

Just last month, a $200,000 grant opened up a new biofuel research field in Southeastern Missouri designed to test soybeans and sweet sorghum. The grant, coming foam the Delta Regional Authority, the Missouri Research Corp., and the Missouri Department of Agriculture, is sponsoring Southeast Missouri State University as it pioneers the 10-acre test plot to be harvested this fall. The plot will also look at miscanthus, switchgrass, sunflowers, canola, and sugar beets as it aims to arm local farmers with new crops and techniques to increase their earnings.

Earlier this summer, CLC bio and the International Laboratory for Tropical Agricultural Biotechnology at the Donald Danforth Plant Science Center, announced a collaboration to benefit the Virus Resistant Cassava for Africa project.

The partnership includes researchers at the Donald Danforth Plant Science Center in St Louis, MO, the National Crops Resources Research Institute in Uganda and the Kenya Agricultural Research Institute. VIRCA is applying RNAi technology to enhance resistance to virus disease in cassava cultivars preferred by farmers. VIRCA's goal is to develop, test and deliver virus resistant cassava to smallholder farmers with no royalty fees.

Local financing and capacity expansion

As we have noted in the Digest over the years, communities that take an active role in financing energy projects see stronger project flow, and also retain more of the profits within the community, which can then be redeployed into other opportunities for economic diversification and high technology.

Missouri's St. Joseph City Council last December took a step in this direction, in authorizing up to $25.5 million in industrial development bonds to kickstart the local Terra Bioenergy biodiesel facility that started and stalled in 2008. In order to qualify for the bonds and property tax abatements, Blue Sun must create at least 30 jobs by Dec. 31, 2014, with an average salary of $41,600 per year, plus benefits. The project is expected to result in the addition of 30 million gallons in biodiesel capacity when completed this summer - adding to the 30 million gallons already being produced in St. Joe by AGP.

What can the Show-Me state show you?

Five themes emerge from the story of Missouri's biobased development.

1. If you can't drill it, mill it.

No state or community needs to be left behind in the search for energy independence. Those communities that have fossil resources - well, you know that most of those are going to be developed. But those who have less wealth below the ground, have opportunities above-ground that can supply both food, fuel and fibers.

2. Slow but steady wins the race.

Missouri built its initial wave of bioenergy capacity, based on existing biomass resources it knew how to aggregate and process - primarily, its abundant corn and soy assets. The state has generally avoided the irrational exuberance that usually greets new energy technologies - and thereby avoided the waves of irrational skepticism that follow in the boom-and-bust cycle.

3. Invest locally.

The state has been investing and, using their bonding authorities, localized communities are getting involved too. That's keeping "eyes on the prize" in terms of assuring that all resources in the community are directed towards a project's success, while ensuring that the rewards from the risks are enjoyed at home.

4. Have ambition.

130+ biobased production facilities sounds outrageous" Well, its ambitious - at $8 per gallon of capacity for capital expenditure, it would require more than $35 billion in financing. But think of it this way - the F35A fighter program at the Pentagon is expected to cost $323 billion, at $132 million per fighter

5. Work regionally - partner early and often.

It's a mighty lift, and biomass boundaries have nothing to do with state boundaries - in fact, river resources, which form a lot of state boundary lines, are generally the heart, not the border, of project opportunity areas. Inter-state and inter-community cooperation is a must.

But public-private partnership is even more key. Take, for example, the bond program that the St. Joseph City Council approved - to revive the Terra Bioenergy project - done in partnership with Blue Sun Biodiesel and with some strict covenants on that organization.


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