“What about that, er, cellulosic feedstock?” Pacific Ag CEO Bill Levy on the where, when and how

levy-pacificagFeedstock. Now that cellulosic ethanol has reached scale, it has replaced Motherhood and Apple Pie as staple faves for industry chat. Meanwhile, Pacific Ag has been rolling up the acres, getting it done.

How’s it working, where are the challenges, how is energy transformation happening from the stalk on up.

Pacific Ag CEO Bill Levy joins the Digest for a QA.

In the land of cellulosic biofuels — or, to put it more broadly, the transformation of transportation fuels to a lower-carbon mix — there are the processing technologies and then there is the underlying raw material. We’ve been waiting so long for these immensely complex technologies to come along, after gigantic effort by real titans of process development — that we forget that the corn stover and other residues, while there already, come with a science and a challenge all their own.

That would be, cough cough, the world of logistics. Which sounds mundane until you begin to wonder how all that great technology is going to benefit from sustainable, affordable, reliable, available feedstock.

Meanwhile, we really don’t know what it is about massive logistics and the Pacific Northwest, but they seem to go in hand. Take for example, the birth of Boeing or United Airlines, or United Parcel Services, or Amazon.com, or CostCo. Getting things moved around the globe faster better, cheaper seems to be in the grade school curriculum up there.

Add in to the mix Pacific Ag Solutions, which these days is gathering up a lot more cellulosic biomass in the US Midwest than in the Great Northwest, but is Oregon-based none the less. To find out how they are getting it done, we sat down with CEO Bill Levy.

Digest: Who are you working with now?

BL: We have worked with POET on small scale, with DuPont we are the largest individual supplier, and we have a 10-year Abengoa exclusive.

Digest: How have things changed in 2014?

BL: Everyone would admit prior to this year, really, they have been doing demo scale harvests. Now, the commercial scale harvest is happening. Now we are meeting the economic and the scale targets.

Digest: Daunting?

BL: Even for me as someone removing residues and baling for growers, there were questions in my mind: can we successfully harvest the amount or residue. It’s never been done on this scale, like 40,000 tons a week, we couldn’t say that before. And it comes from six different supply sheds in 8 states.

Digest: What’s the newest?

BL: North Carolina is the newest, we began this year.

Digest: The others?

BL: California, Oregon, Washington, Kansas (in two locations, working there with about 200 growers represent 400,000 acres or corn), Iowa and North Carolina.

Biomass stacked up and ready to go at the Abengoa Biorefinery in Hugoton, Kansas

Biomass stacked up and ready to go at the Abengoa Biorefinery in Hugoton, Kansas

Digest: What are the markets, besides bioenergy?

BL: North Carolina, our newest, is a good example, because there is a lot of opportunity for us in all three segments of out business: export feed forage, domestic markets for feed and bioenergy.

Digest: Tell us about the learning curve.

BL: It’s been steep, over the last three years, learning at demo scale as the commitments came from the plants to build inventory.

Digest: How does the dialogue go with the grower, how fast do they adapt to the new opportunity?

BL: The harvest part of getting access to the corn stover at a sustainable level is really a function of the growers getting used to it. They see the agronomic and economic benefits, and they know there are so many more things than the payment.

Digest: Such as?

BL: They see less pest pressure, less disease. Retention is high.

Digest: So what’s the challenge?

BL: The challenge is to show the growers in their own fields the practices that work. At demo scale you don’t have the opportunity to show the growers, in their ground,  the benefits?

Digest: What is the retention rate?

BL: We rarely lose a grower, once they are in the system. A grower might have 2000 acres and gives you, at first, 200 to work with. Then you get another, and another, and by the end of the harvest you’ve done it all.

Digest: So, grower relations are the hardest part?

BL: In 16 years, we’ve found the hardest part is opening up the sheds.

Digest: What about purpose-grown energy crops?

BL: The challenge is that these plants have been focused on residues…DuPont, Abengoa, POET-DSM, the grower is reluctant to invest in the feedstock, they are much more expensive to establish. Bottom line, it wont happen until after the plants are built.

Digest: How do you address sustainability?

BL: First of all, the growers care, it’s their livelihood, their acres. And, we have NRCS looking over our shoulder. One thing that’s important, we never cut plants to the ground, we stop at 4-6 inches and there’s a nice mat on the field.

Digest: What’s the impact?

BL: In no till and continuous corn there’s a much better seed-in, a much better emergence, and a slight yield bump. And you can’t underestimate the pest and disease potential, and tying up fertilizer.

Digest: Logistics – what’s it like to supply an entire fully-scaled operation?

BL: With POET at a ton per acre, you have to do 250-300,000 acres that’s a logistical challenge. It’s hard enough to do 150,000. But the stover yields will continue to rise, and we are going to see ever increasing residue levels.

Digest: So, one ton per year for some time, or will that end soon?

BL: The challenge is [the memory of the] drought. The challenge is to get them to embrace this new option on top of drought and $7-$8 corn. What we see now are yields normalized. Nature helped us this year.

Digest: How big is the circle around the plant?

The size of your circle is proportionate to your adoption rate, the higher your rate, the smaller the circle. You can be inside of 20 if your rate is very high. So far, that rate has not has been as high as needed to keep that circle tight. There was an underestimation of the need for growers to understand how it will work well, and everyone thought biomass would be readily available in 10 year contracts. And it will, but not until you build that plant and show the value.

It’s a lot of value – and helps them manage their farm, but it will take time before some of them judge a feedstock program. It’s like a product adoption curve. There are the early adopters,  a set of growers who are your biggest champions and will sign long term contracts. Now, we’re working into the second wave that require the interaction and the proof. And that’s great because we have the proof.

Digest: With yields rising, are there other opportunities in biotech?

BL: We’re breeding shorter stem and less residue with wheat; conversely, could see have specific traits with more biomass. It’s the beginning of an exciting time. The days of trash are numbered. We are seeing ways of optimizing for highest and best use.

Digest: What about  the rise of intermediates – technologies that use biomass to make an industrial sugar?

BL: Absolutely we are seeing the business model of taking biomass and making a fermentable sugar, and the industry is going to grow and shift, focused on creating that fermentable sugar. That is a real possibility. But we’ll also see bolt on and add on capacity. It’s not just going to be about putting hundreds of millions into these plants at scale. There will be a lot of avenues.

Digest: What about pellets?

BL: 4-5 years when we looked at biorefineries, I thought it would be pellets, That became a disappointment. There were all sorts of business cards with no address, and a lot of people would come and go. I mean, how many guys have been through the midwest, made a big announcement and [the project] never happened.

Digest: But that’s changed?

BL: What’s really changed – is that these first plants got approved and got built.

Digest: Here you are, Pacific Ag, mostly in the midwest. What about the Northwest?

With the northwest, we’re not in the wood business, and the challenge with energy crops is that the Northwest has some of the highest value farmland in the world. It is really hard for a high biomass sorghum to compete with onions and potatoes, they have such a premium for ground in the Northwest, and water is so valuable here.

Digest: The DOE issued its Billion Ton Study some time ago. Do the numbers hold up?

BL:  Today, you have a baler and a tractor, that’s going to change and that will help us access the harder to reach areas. Manufacturers are rising to that challenge, plus balers that create higher density. So you can’t thumb your nose at the Billion Ton study, and we don’t.