Idaho Straw Value-Added Committee: Southern Idaho

Rural Cooperatives, Jan-Feb, 2006 by Duane Grant

Iogen has already participated, as an end-user, to demonstrate the technology necessary to successfully convert the straw into fuels and chemicals, and to define the requirements of the receiving biorefinery. As part of the feasibility project, Iogen successfully processed two 20-ton loads of Idaho wheat and barley straw into cellulose ethanol at its Ottawa, Canada, demonstration plant.

Business model:

At this point, the committee has not determined the business structure best suited for the value-added business in Idaho. However, it is looking at several possibilities, each of which would require early negotiations and full integration into Iogen's biorefinery operating plan to be successful. Models include:

* A new-generation (closed) cooperative that follows a model successfully proven in other agriculture businesses (such as sugar processing co-ops). Members of the cooperative would purchase stock in proportion to the quantity of straw each member would sell to the processor. An advantage of this arrangement is the economic benefit that could be broadly shared, co-opting the broader grower community in the success of the venture and increasing the assurance of a sustainable supply of straw.

* A closely held stock company that raises initial investment capital by selling stock to a limited number of investors or entities currently involved in agricultural production in southern Idaho.

Apart from these dealings, Iogen is working with investors to secure financing to build a biorefinery. The company is also working to qualify for loan guarantees made available for new energy technologies through provisions of U.S. energy legislation enacted by Congress in 2005. Current development plans call for an investment of approximately $300 million for the cellulose ethanol plant plus cogeneration and enzyme facilities.

Importance of USDA backing:

"The USDA Rural Development grant provided the boost we needed to demonstrate how ideal Idaho is for siting a straw bio-refinery. Even more important, the VAPG is helping to demonstrate that cellulose-based ethanol has a place in the nation's energy portfolio," says Grant 4D Farms owner Duane Grant. "With this seed money, Idaho farmers demonstrated the feasibility of locating a bio-refinery in Idaho. And in 10 years, we'll look back and recall that receiving USDA's grant was the pivotal turning point in our push to launch the cellulose ethanol industry in Idaho. Thanks to the VAPG, we have demonstrated that we can consistently supply straw on an industrial scale to a commercial bio-refinery."

Major challenge/ opportunity facing co-op:

The major problem facing producers is how to best assemble, store, prepare and deliver nearly 1 million tons of straw that would be required by a cellulosic ethanol facility each year. The availability and cost of the feedstock, the lack of confidence in the conversion technology and the hesitancy of financial backers to lend capital are still seen as barriers to this business venture. But, with USDA's assistance and the persistence of Idaho farmers, these barriers are being overcome.