Minnesota, the Green Giant: Going all out on agrastructure and the advanced bioeconomy

April 9, 2015 | Jim Lane

In “The Iowa Renaissance” we looked at the rise in Iowa’s fortune through development of bioenergy and its sustainable agricultural base.

Today, we look at how Minnesota, too, has been experiencing success via its bioeconomy, and how and why.

The traditional view of “Minnesota”? A giant metropolis in the Twin Cities, replete with giant ag-focused corporations like Cargill, CHS, Hormel, General Mills and Land O’Lakes and technologists like 3M and Honeywell, coupled with a progressive, artsy and sciency society built around the University of Minnesota. Add to that, a region to the southwest with thrifty Minnesotans raising corn, soybeans and hogs, and those vast tracts of timber, mining and water to the north. Throw in hockey and some ice fishing.

It’s a postcard-picture version of the real story, but not entirely all that far off. Land of the Green Giant and Paul Bunyan? Yep, indeed, Minnesota’s been standing pretty tall in the world of advanced bio.

The move into ethanol and biodiesel

greengiant Like many Midwestern states, Minnesota has deep roots in the traditional bioeconomy of food and fiber production — but has turned to the advanced bioeconomy in recent years, and become an energy giant, producing the equivalent of 40% of its own transportation fuel demand, through biodiesel and ethanol development.

As the state highlights on its websites: “Minnesota is currently home to 20 ethanol plants and one biobutanol plant. Ethanol combined production capacity of more than 1 billion gallons of ethanol. Minnesota also has the most E85 stations in the nation…Minnesota was the first state to mandate the use of biodiesel, establishing a B2 mandate that took place September 29, 2005. The currently higher level mandate is in effect for the “summer” months, April through September, and reverts to B5 for the winter months. The mandate is now scheduled to jump to B20 for the summer months in 2018.

Expanding into advanced biofuels and chemicals

“It is estimated that the state’s B10/B5 requirement will replace over 65 million gallons of diesel fuel with domestic, renewable biodiesel—and Minnesota’s 63 million gallons of biodiesel production capacity will cover almost all of that demand.”

More recently, the state has branched out into advanced fuels and chemicals. Gevo’s first commercial isobutanol-and-ethanol distillery, is located in Luverne, while Green Biologics is developing its first commercial-scale plant in Little Falls, and Butamax is proceeding with a phase-one installation in Lamberton at Highwater Ethanol. Segetis committed to building a first commercial renewable chemicals plant in Hoyt Lakes, in the state’s northeast.

Expanding R&D into advanced manufacturing and renewable polymers

Last August, we reported that the University of Minnesota’s Center for Sustainable Polymers recently announced it has been awarded a $20 million grant over five years from the National Science Foundation focused on discoveries of the next generation of biobased plastics. The Center for Sustainable Polymers will be one of only eight NSF Centers for Chemical Innovation in the entire nation.

The Phase II Center for Chemical Innovation program represents one of the most significant investments by the NSF’s Division of Chemistry. The Center for Sustainable Polymers draws together top researchers from the University of Minnesota, Cornell University, and the University of California, Berkeley, along with more than 30 companies from across the nation.

Committed to expanding biofuels production distribution

In February 2015, legislation introduced in both houses of the state legislature sought to support cellulosic ethanol production along with renewable chemicals and biomass thermal. The House version of the bill would create an incentive $2.1053 per MMBtu of annual production of cellulosic advanced biofuels with a 20% bonus payment for using perennial plants while sugar and starch-based advanced biofuels would receive $1.053 per MMBtu.

Minnoco said last September will be offering higher ethanol blends in the Twin Cities area, including E15, E30, and E85. Minnoco is a brand of gasoline developed by a group of independent gasoline producers. The E15 fuel debuted last year with prices 15 cents per gallon cheaper than competing gasoline brands.

That followed news from last August that E15 will be more available to consumers if CHS’s new program across their 1400 locations is a success. For Cenex retailers wanting to offer E15 in addition to their current gasoline products, the Cenex Tank Program will cover a significant portion of the cost to purchase and install an additional storage tank for the purpose of offering E15.

The Cenex network was among the first in the country to offer mid-level ethanol blends under its brand and has achieved significant increases in ethanol sales over the last five years, according to Doug Dorfman, CHS vice president of refined fuels for the energy, grain and food company and the nation’s leading farmer-owned cooperative.

It’s not all a bed of roses

The 2014 EPA proposal to lower the nation’s corn ethanol blending target in 2014 from 14.4 billion to 13 billion gallons, is hitting the economy hard even after the proposal was ultimately abandoned by the Obama Administration.

We reported last August that the most recent quarterly survey of agricultural bankers by the Federal Reserve Bank of Minneapolis, which tracks the important asset, shows Minnesota farmland prices have started to decline after a boom accompanying ethanol development. Prices per acre had fallen at that time about 4.5 percent from what they were a year ago. That would reflect a decline of about $4 billion in farm wealth across the state, reversing a steady upward trend for much of the past decade, when land prices more than doubled in value.

The state, meanwhile, estimated that the direct impact of the EPA’s proposal would be a direct GDP loss of $610 million from loss of ethanol production, a loss of $101 million in value-added processing, and a loss of 1532 jobs.

Why Minnesota?

“Minnesota has a long history in ag and forestry and bioprocessing,” says Minnesota Department of Employment and Economic Development’s Lisa Hughes, “and we are very careful to craft intentional and strategic plans to build that broad continuum of activity in value added use of our plant and animal resources, in all of its food, health, fuel and industrial chemical components.”

Let’s look at those resources in a little more depth — both the hard assets of raw biomass, and other assets such as incentives, talent, infrastructure and that intangible asset of a “state that has the experience and gets it” that can lead to fewer slow-downs of the “first of kind permitting process” type, or the kind of stop-and-start that we see in, say, Florida when policy shifts with the arrival of every new state administration and with it sharp changes in direction on energy policy.

Biomass

How much available biomass does Minnesota have. A lot. “In wood,” says Lisa Hughes, “because of the decline in the pulp & paper industry, we have 3.2 million cords of wood lying in the forest and you multiply by 2 and that’s green tons. So that’s a huge focus for us.”

But consider that, according to POET Biomass’ estimates, 100 million gallons of ethanol infrastructure and grower contracts can support 40 million gallons of cellulosic ethanol. So, think at least 400 million gallons of cellulosic ethanol potential, or 5 million tons of available biomass.

More detail on the biomass resource? Try these links below.

Biomass Resources DNR:

http://www.dnr.state.mn.us/forestry/biomass/resources.html

Biomass Resources Xcel Energy document:

http://www.xcelenergy.com/staticfiles/xe/Corporate/RDF-Biomassfeasibility-Report.pdf

Infrastructure and Agrastructure

“We have 4444 miles of railroad, representing 20 companies, including 4 class 1 railways,” says Hughes. “We also have 4 ports on Lake Superior that reported 61 million net tons of shipping, and the Mississippi River supports five port areas shipping 10.7 million tons.”

Power infrastructure is strong — not only in the more heavily-populated south but also in the timber-replete north, where support for the mining industry has led to large investments in power infrastructure, and Hughes says “it’s never been an issue, even for projects that need 20 megawatts.”

Incentives

“We have targeted incentives all over the place”, says Hughes. “First, there are the standard programs. There’s the bill that’s in front of the legislature now. But we can also tap into the Minnesota Department of Agriculture’s agri-fund and when you look at the Northeast part of the state, there’s the IRRRB, which has a whole other set of options for that region.”

More detail on incentives? Try these links below.

Minnesota Department of Employment and Economic Development Financing Programs and Incentives:

http://mn.gov/deed/business/locating-minnesota/incentives/

Minnesota department of Agricultural grants, loans and financing:

http://www.mda.state.mn.us/grants.aspx with special attention to http://www.mda.state.mn.us/en/grants/agri.aspx and http://www.mda.state.mn.us/renewable/nextgen.aspx

A special case in incentives: The IRRRB

“We’re a state agency, and our sole mission is economic development in northeast Minnesota,” says Steve Peterson, Executive Director of Development of the Iron Range Resources & Rehabilitation Board. “We are heavily dependent on mining up here, and mining has a finite timeline, though we keep finding value added. Our job is to diversify and keep the growth going, and we are funded with a taconite production tax from mining. Like a local property tax, this is money that stays in our region, and goes back in our communities, for diversification and growth.

Targets? “What could make a significant impact, is not displacing mining, but industries that help us to weather the ups and downs of cyclical mineral markets. So, we have an overabundance of timber, but over the years, paper mills started to close with the economic conditions, and

the timber wasn’t being harvested any more. So we have started looking at the possibilities of fuels from timber, and we love the disruptive technologies. We contacted several companies, and Segetis was in our backyard, and we courted very hard. They’re not here yet, still a success story waiting to happen as we are waiting for them to raise capital, but we hope it’s the first of many in the region. We see a lot of opportunity in the green chemical industry.

“In our case as an economic development agency,” adds Peterson, “we don’t have off the shelf incentives. We have a lot of flexibility and creativity. So, in the case of Segetis, they said, “we need x dollars”. And we have the ability by statute and authority to do what needs to be done, to help fund companies and make it happen.”

Indeed they did, as Segetis reported last April, the Iron Range Resource and Rehabilitation Board (IRRRB) voted unanimously to approve $21.2 million in funding for Segetis to construct a commercial-scale plant at the Laskin Energy Park in Hoyt Lakes, MN.

“We are delighted with the support from the State of Minnesota and particularly the IRRRB,” said Segetis CEO Atul Thakrar at the time “This is the foundational funding for our project which will catalyze a biochemical industry cluster in the Iron Range.” Andrew Skinner, Segetis VP of Operations, worked with the IRRRB team for several months in the process of developing this proposal. “This first commercial project is significant to the future growth of Segetis. It will bring sustainable economic benefits to the Iron Range through job creation and use of Minnesota’s renewable resources.”

Talent and training

“The University of Minnesota feeds our industries,” says Hughes. “Whether it is chemistry, biology, engineering or separate programs in biotechnology and biocomposites.” But there are the Minnesota state universities and colleges — the MNSCU system — and there are certificate and associate degree programs specific to the industry available through 9 technical colleges. The showcase in the state perhaps is Minnesota West college, which has set up Biofuels Technology associate and certificate courses.

More detail on talent and training? Try this link below.

Training and Education: UMN and MNSCU

Intangibles: the “state that has the experience and gets it” factor

In the Midwest, in particular, one looks for the intangibles that help crush development timelines and eliminate policy uncertainty. “There are things we can do better because of our ag and ethanol experience,” says Hughes. “For example, what we did with the production payment incentive, that encouraged the construction of more ethanol plants. It led to more infrastructure being built, and just like the pulp & paper industry, people become more accustomed to the technologies and that helps expedite the local permitting process. And because these technologies are not new, they don;t scare communities. For example, in the northeast they may not have seen a lot of energy or chemical production in the past, but they are used to logging trucks.”

And, there’s bipartisan support for bioenergy. “What we’re doing in this industry is supported by both sides of the aisle,” says Hughes. “[Republican] Governor Pawlenty did some very progressive things, and [Democratic] Governor Dayton is adding on to all that, too. It’s been very stable, and they are going to support industrial bioscience. The metro folks love the R&D opportunities, and the industry partnerships and the new products, while you have the value add to rural areas.”

“These are $50-300 million investments, and for sure, we’ll put in the infrastructure to support industry and we have lots of people we are happy to train.”