POETry in motion so far

It's been a topsy-turvy year and a half for the ethanol industry, but POET Biorefining's Portland ethanol plant has seen pretty smooth sailing.

"We're right on top of 18" months of operation, Portland plant manager Greg Noble said in an interview last week.

"The full team came in without any experience in ethanol," said Noble. "But with training and development by POET, it's been a very successful experience for both POET and the team."

He added, "Of course, we're affected by what happens in the industry."

Over the past 18 months, that's included volatile corn prices, volatile oil prices, and an economic downturn that has Americans cutting back on their driving.

Those three factors - consumption, oil prices, and corn prices - have to be in the right balance for the ethanol industry to flourish. Right now, they're a little out of whack so ethanol plants have reduced production and are running below capacity.

"From an industry perspective all of us are affected," said Noble, citing an "exuberance in the market" that made business a little too unpredictable.

The same 18 months saw some competitors fall by the wayside.

"POET is number one in ethanol production in the world," said Noble. VeraSun, which was either number two or number three, has gone into bankruptcy and liquidation. And some plants, including one at Lima, Ohio, have failed.

The difference with POET, according to Noble, is that all the different aspects of the business - grain buying, production, marketing, and risk management - are under one umbrella and are closely coordinated.

Some nearby ethanol plants, for example, contract out their grain buying or their marketing.

POET, Noble said, maintains "a disciplined risk management program."

Another factor is the company's corporate culture.

"Attitude, teamwork, and communication are the three pillars of our culture," he said. "Jeff Broin (the company's CEO) elaborates on culture every time he speaks."

The Portland plant has 41 employees on site and most are members of the original team that opened the facility in the fall of 2007.

"We didn't lose any to the neighboring plants," said Noble. "We work hard to keep team members."

The past 18 months has seen a continuing and sometimes contentious food vs. fuel debate nationally, with some arguing that ethanol production pushes up the price of food.

That's an argument Noble rejects, citing a recent Congressional Budget Office report which noted that there has been a 5.1 percent increase in the consumer price index on food with only about one-half of one percent attributable to biofuels.

Broin, writing in industry publications, is even more adamant.

"The issues of food and fuel and environmental issues are a smokescreen," he wrote earlier this year. "They're dealing with phony science and false numbers to slow or stop the growth of their competitors, which are grain-based and cellulosic ethanol. They want to stop us in our tracks. There may even be some companies that use agricultural products that go along with it because they want cheap grain."

Cellulosic ethanol - produced from corn cobs rather than corn - has been the subject of much media attention over the past year and a half.

Noble said that in late November POET opened a cellulosic ethanol laboratory plant at its Scotland, S.D., facility.

"We are producing ethanol," he said, though not at levels associated with a full-scale ethanol plant.

Iowa will be the site of the company's first cellulosic ethanol plant, scheduled for late 2011.

Cellulosic ethanol poses its own set of unique challenges. "The mass of corn cobs needed will be enormous," said Noble. "We could do it here in the future."

But the next step in development for the Portland POET plant is likely to involve fractionation of corn. Currently, the entire kernel goes into the production of corn ethanol. But the hull is cellulosic material, so the kernels would need to be broken down so that two different streams are created.

"POET continues to work on efficient means of production," said Noble.

At the company's Chancellor, S.D., plant, woodchips are being burned as a heat source to reduce the consumption of natural gas.

The same plant is also using methane gas generated by a nearby landfill.

The key to cellulosic ethanol is getting more corn ethanol into the market. "If we don't have the ability to get more into the market we'll never get to cellulosic," said Noble.

Right now, there are 157 ethanol plants in the country with about 2.5 billion gallons of unused annual production capacity.

One way to spur that production, industry officials say, would be for the Environmental Protection Agency to allow a 15 percent blend of ethanol with gasoline rather than the current 10 percent.

"If we don't move that regulatory cap, without question grain supplies are going to grow and the next group looking for a bailout will be the American farmer," POET's Broin told The Wall Street Journal last week.

That over capacity has been linked to the VeraSun bankruptcy. And The Journal noted that ethanol producers continue to be squeezed as corn prices stay relatively high and ethanol prices stay relatively low.

Noble said a change by the EPA to 15 percent would create 6,000 new construction jobs and 300 new production jobs in Indiana alone.

"These are full-time green jobs that aren't going to be shipped out," he said.

Regardless of how the EPA's decision-making plays out, Noble remains optimistic.

"Hopefully we can continue to add value to the farmers and the community," he said.[[In-content Ad]]