Arkansas still in pursuit of niche in alternative fuels market

The Associated Press

5/8/2008

LITTLE ROCK — Arkansas is still working to develop its place in the alternative fuels market, but Agriculture Secretary Richard Bell said Wednesday the state is well-positioned to use rice husks to generate ethanol.

One hitch is the $60 million to $70 million cost of building a facility to convert the rice waste to energy, though the nation's leading rice producer does have plenty of husks.

A number of biodiesel companies are operating in Arkansas, and Bell said the state has distributed between $6 million and $7 million in grants under the Arkansas Alternative Fuels Development Program. Sixty-one entities have applied to the program, with seven being approved and "three or four" more expected to meet requirements, Bell said at a meeting of the Arkansas Agriculture Board.

The rising price of soybeans has driven up the cost of converting soy oil to biodiesel. Bell illustrated his remarks with charts showing fuel prices and the feedstock costs of making alternative versions.

Bell said it costs $4.29 in feedstock to make a gallon of soydiesel. The pump price of diesel was $4.24 per gallon on Wednesday, according to the AAA. Blending tallow or lard with the soy oil would bring down the cost of raw materials. As with any commodity, soybean prices can could decrease amid changing market conditions.

"It may change in a month," Bell said.

Biodiesel plants are relatively inexpensive to construct, when compared to ethanol plants, which create fuel from corn. Despite criticism in which high food prices are being attributed to the expansion of biofuels, ethanol production is climbing. Congress has set the requirement of the nation producing 9 billion gallons of corn ethanol this year and has granted a 51-cent per gallon tax credit.

Criticism has been growing that food should not be used to produce energy, and members of Congress have said they should take another look at its ethanol program.

"It's the price of petroleum," Bell said. "Oil is at $120 a barrel, and there's going to be a lot of things we didn't anticipate."

Bell, who left as chief executive of Stuttgart-based Riceland Foods Inc. in 2004 and in 2005 became the state's first agriculture secretary, said rice husks could be a source of ethanol production in Arkansas, until forest products eventually become an affordable raw source to produce fuel.

He noted that 23 percent of the corn crop in 2007-08 is being used for fuel, up from 12 percent in 2004-05. However, 19 percent of U.S. corn is being exported in 2007-08, up slightly from 17 percent two years prior.

Corn acreage in the U.S. dropped this year to 86 million acres from 93.3 million acres last year, while soybeans were up to 74.8 million acres from 63.6 million acres a year prior. Rather than increase the number of acres planted for corn, new varieties with greater yields can be introduced to raise production, he said.

"We're going to have to have a bigger corn crop," Bell said.

Cellulosic ethanol produced from rice hulls would cost 43 cents per gallon in raw material, factoring the hulls at $40 per ton, Bell said. A ton of rice hulls yields 92 gallons of ethanol, he said.

"You've got lots and lots of margin to play with," Bell said.

The hulls are used in the poultry industry in chicken houses, but Bell said there would be enough hulls to go around for poultry and energy producers.

Another possibility for increasing corn and soybean production is bringing more land into farm production. Bell said that option may not be as attractive as it seems, saying that many of the 35 million acres in the conservation reserve are in Montana and west Texas, though some acreage in Iowa is in the program.