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Iowa Leaders Call For Biochemical Tax Credits For Ethanol, Biodiesel

By Dave Dreeszen

Quad County Corn Processors passed a major milestone last month, producing its 1 millionth gallon of cellulosic ethanol.

The farmer-owned plant near the small Northwest Iowa town of Galva is the first in the U.S. to extract ethanol from corn kernel fibers. Most cellulosic, a next-generation biofuel, is made from inedible plants, such as corn stalks and switchgrass.

The bolt-on technology developed by Quad-County is an example of innovations that hold promise for adding value to Iowa’s $11.5 billion-per-year biofuels industry, said Debi Durham, the state’s economic development director.

Durham, a former Siouxland Chamber of Commerce president, is championing legislation that would set aside up to $15 million in tax credits per year to encourage ethanol and biodiesel plants to extract chemicals that could be used in consumer products such as plastics and textiles, pharmaceuticals and cosmetics.

“Iowa has already proven its might in the biofuels arena – our future opportunities can be found in the development of biochemicals,” Durham said in a recent presentation to industry leaders.

Iowa, the largest U.S. corn-producing state, leads the nation in ethanol production, boasting 43 plants with a combined capacity of 3.9 billion gallons. The Hawkeye state also ranks second in biodiesel, with 12 refineries capable of producing 315 million gallons.

Durham said a recent study of the state’s economic prospects show the biofuels sector runs the risk of low growth in future years unless it expands beyond fuel and livestock feeds.

Enter biochemicals, which she said could grow the industry by 20 to 30 percent, depending on the chemicals harvested.

The petroleum industry, she said, currently produces more than $400 billion worth of petrochemicals, nearly as much as it gets from motor fuels. If crude prices remain at current levels or increase, research shows chemicals produced from biomass should reach parity in five to 10 years, she said.

Consumers are the driving force behind the movement to biochemicals with a greener footprint.

“They want to know what’s in their food, and they want to know how their products are being made,” Durham told the Journal last Wednesday.

The biochemical tax credit bill has passed the Iowa House and the Senate Economic Growth Committee. It’s currently sitting in the Senate Ways and Means Committee, awaiting a vote to advance to the full Senate floor.

“I think it would be a great program,” Sen. Bill Anderson, R-Pierson, a member of the Ways and Means Committee. “It’s another component that we can add to our renewable fuels industry.”

Durham said she’s confident the bill, which has strong bipartisan support, will win final approval before the Legislature wraps up its annual session. Gov. Terry Branstad has pledged to not only sign the legislation but hit the road to promote the incentives, she said.

“We’re going to move very quickly and start marketing it,” she said.

The legislation would offer a production tax credit of 5 cents per pound, with a maximum award of $1 million for startup companies and $500,000 for existing businesses.

The building block chemicals would have to be produced from biomass feedstocks, such as starches, oils, sugar or lignin, and sold for uses other than fuel, food or feed. Products used in food additives would be eligible, however.

Durham pointed out the money would come from the Iowa Economic Development authority’s existing tax credit cap of $170 million. As a result, lawmakers would not have to add to the state budget.

Ethanol and biodiesel producers would be eligible for credits only once every five years, and the program would sunset after 10 years.

The state’s economic development head said the incentives will remove some of the risk of investing in new technology.

“These plants are very capital intensive,” she said. “Many of them are startups. The biochemicals, even though they have been tested in the lab, have not been done in commercial scale.”

The tax credits could be a boon to the 11 ethanol plants and three biodiesel refineries in Northwest Iowa, home to one of the state’s largest biofuel clusters.

Quad County Corn Processors has had some early conversations about converting some of its cellulosic ethanol into biochemicals,” said CEO Delayne Johnson.

“We’ve had a number of companies reach out to us, and have had some high level discussions,” Johnson said. “We’ve just been honest with them, that right now our plate’s a bit full. But we want to bring those concepts up a little bit further down the road.”

Johnson and other Quad County officials have been busy showing its unique “Cellerate” process to officials from around the country. Last year, Syngenta signed an agreement with a subsidiary formed by Quad County to license the technology to other ethanol plants.

“People are spending a fair amount of time, money and effort to see the technology,” Johnson said.

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