The 7th meeting of the Interim Joint Committee on Agriculture and Natural Resources was held on Wednesday, December 10, 2008, at 1:00 PM, in Room 149 of the Capitol Annex. Representative Tom McKee, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representatives Jim Gooch Jr., Co-Chair, and Tom McKee, Co-Chair; Senators David E. Boswell, Ernie Harris, Dan Kelly, Bob Leeper, Vernie McGaha, Joey Pendleton, Dorsey Ridley, Richie Sanders Jr, and Brandon Smith; Representatives Royce W. Adams, Dwight D. Butler, Hubert Collins, James R. Comer Jr., Tim Couch, Milward Dedman Jr., Mike Denham, C. B. Embry Jr., Jeff Greer, Richard Henderson, Jimmy Higdon, Charlie Hoffman, Brad Montell, Tim Moore, Fred Nesler, David Osborne, Sannie Overly, Tanya Pullin, Marie Rader, Rick Rand, Tom Riner, Steven Rudy, Dottie Sims, Jim Stewart III, Greg Stumbo, Tommy Turner, Ken Upchurch, Robin L. Webb, and Susan Westrom.
Legislative Guests: Representatives Rocky Adkins, John Will Stacy, and Ruth Ann Palumbo.
Guests: Dr. Karl Dawson and Donna Moloney, Alltech, Inc.; Dr. Czarena Crofcheck, Dr. Rodney Andrews, and Dr. Tom Robl, Center for Applied Energy Research; Abby Powell and Ron Price, Kentucky Division of Water; and Lora Gowins, Kentucky Division of Air Quality.
LRC Staff: Tanya Monsanto, Biff Baker, Stefan Kasacavage, Lowell Atchley, and Kelly Blevins.
Rep. McKee called the meeting to order and the secretary called the roll. Sen. Kelly was recognized to introduce Senator-elect Givens. Rep. Collins moved that the minutes be approved. Rep. Couch seconded the motion and the minutes were approved by voice vote. Rep. Denham then gave the Subcommittee on Rural Issues report, after a motion and second the minutes were approved.
Rep. McKee then recognized Rep. Montell to discuss the new federal regulation on bovine spongiform encephalopathy (BSE) and dead animal disposal. Sen. Pendleton agreed it is an important issue and posed the question of what will be done with older cattle. He noted that dead animals may be disposed of improperly and that the United States Department of Agriculture (USDA) does not recognize the consequences of these regulations. He encouraged the committee that this issue needs to continue to be addressed and find possible solutions.
Sen. Smith recognized Representative-elect Fitz Steele and welcomed him to the committee hearing.
Next, Rep. McKee stated the agenda topic for this meeting is cellulosic technology and invited Dr. Karl Dawson from Alltech, Inc. to the table. Dr. Dawson described Alltech and their technologies in alternative energy using cellulosic or lignocellulosic plant materials that are not easily digested.
He stated that Alltech’s current infrastructure can be adapted for current energy utilization that comes from renewable fuel and they have made ethanol for a long time.
Alltech Company began as an ethanol company, they are now dealing with animal feed and flow to energy industry. They are in the forefront of fermentation technology. Currently ethanol comes from starch in corn grain. There is a competition between food and fuel. This competition is blamed for the rise in corn commodity prices. Dr. Dawson noted that wood, straw, grasses, corn stover, and other agricultural by-products can be converted to ethanol. There is an excess of lignocellulosic technology, 1.3 billion tons. If converted, represents 100 billion gallons of fuel or 3/4 of the energy we get form gasoline.
Dr. Dawson described the way lignin is broken down. Currently breaking the bond and making the material available for fuel use is costly. Technologies use heat or pressure to release the sugars for fuel, alkaline, acid, and other treatments. Enzymatic treatments use biological systems to break down the substrate for fuel production.
Alltech proposes a solid state fermentation or the growth of fungus on a substance to produce an enzyme that promotes fiber digestion. It will change cellulosic into something for energy production. They can customize solid state enzymes to do what they want for efficiency and efficacy. He stated that it changes what we use as material feedstocks, new biomass such as corn cobs, manufacturing wastes, and agricultural residues. It is not completely efficient but it promotes its use. Alltech does SSF? In Mexico but will move it to Kentucky for a biorefinery system. A rural community biorefinery not large product plant, for small scale production using feedstock. Alltech is able to make 100 million gallons a year using 79 tonnes a day and 45 gallons from 1 tonne of corn cob. They have ways to improve the process and can use other feedstocks such as biomass and wood chips.
They can take residuals from the biorefinery as an enhancement to distiller’s grain for livestock feed, they can increase protein content by 30% and double the fee value of the material. They also can integrate with communities, a value for many industries.
In April Alltech received a $30 million Department of Energy (DOE) grant for a biorefinery. They are still talking with the DOE about how to develop the system. Another aspect is Algae Carbon capture. They are in initial stages but doable with these systems.
Another area of interest to Alltech is the need for an educated population and their commitment to Kentucky. They need to harness intellectual energy to the state, with a technology fellowship, training and retaining students. We have one student and are trying to attract new students.
Rep. McKee asked for clarification that one bushel of corn produces 45 gallons of ethanol. Dr. Dawson said yes.
Rep. McKee then asked if they expect to see construction in 2009 and Dr. Dawson replied that yes they do expect to be building.
Rep. Stumbo noted that they have been making ethanol for a long time. In regular processing does it need more or less energy. Dr. Dawson said it is controversial. Generally it is positive; more energy out than in.
Rep. McKee wished Alltech luck in the project. A copy of Dr. Dawson’s presentation is on file with the LRC Library.
Then Rep. McKee introduced Dr. Czarena Crofcheck, associate professor in bioengineering at the University of Kentucky. She described biomass and distinguished it from lignocellulosic, they are the structure of the plant. She provided perspective on the quantity of land for cellulosic production and said Kentucky does have significant amounts. She explained that ethanol needs sugar; you can start from sugar or convert it from other substances.
Cellulosic sources come from wastes and are dedicated crops. Lignin is not broken up. She described how to break down the plants, then summarized by saying that sugar is easiest to convert but it rots and they have to consider storage. Then she described the ethanol production process generally then compared the process to ethanol production from sugar. She then talked about lignocellulosic ethanol production. Dr. Crofcheck went on to discuss butanol as an energy product. Its properties are better than ethanol but it cannot be made through fermentation.
Rep. McKee asked if she thinks we are far away from producing cellulosic ethanol. She replied that part of the problem continues to be economics, technology is improving but corn prices go down will be the motivation.
Rep. Adkins said expanding rural developemtn as the place to come from energy research was was focus of our legislative efforts. And asked is it simpler to gasify cellulosic feedstocks reather than ferment them?
Dr. Crofcheck stated that UK bioengineering and the Center for Applied Energy Research work together on it. She said gasification is good in that it does care about what you start with, but gasification requires us to put the energy in rather than the enzyme doing the work. Gasification is a viable option.
Rep. Adkins asked if you can do things in eastern Kentucky for feedstock and use biomass as feedstock to reduce carbon. Dr. Crofcheck replied yes.
Sen. Leeper remarked that the Council on State Governments awarded House Bill 2 as model legislation. Rep. Adkins remarked there was a lot of help on the bill and that Kentucky is on the forefront of energy issues.
Rep. Gooch remarked that the United States spends $700 billion a year on foreign oil and asked if that was invested in the United States economy could it turn the US around and develop ethanol. He noted there are moral questions of reducing food to fuel productivity and there are economic consequences. He asked if we are still experiencing substitution of corn for ligno?
Dr. Crofcheck responded that no, corn is too valuable; they will continue to grow corn. Also the need to examine other biomass feedstocks and discover the suit of biomas feedstocks and build the best portfolio.
Sen. Boswell mentioned that we have observed high gasoline prices and now months later it has gone down. He said he hopes we continue to work towards an alternative fuel solution, we need to continue aggressive pursuit of new solutions.
Rep. McKee invited Dr. Len Peters to the table. Dr. Peters commented on these issues at the state level. He said they must silence the debate on food versus fuel. Cellulosic is one way. Corn is the primary source for ethanol but there are other methods.
Kentucky produces 3.5 billion gallons in transportation fuels. Biobased, soy based fuel 80 billion gallons. He mentioned Kentucky has opportunities at 1.5 million for switchgrass. 120 million gallons from corn stover and 10 to 20 fold increase in fuel production in this state. It was recognizes in the fuel incentives of House Bill 2 must look at special incentives for encouraging cellulosic. In the energy plan we have an alternative transportation fuel standard using in-state/domestic transportation resources. By 2025, 60% of fuel could ocme from bio based fuesl. We can also replace the petroleum equivalent. Dr. Peters also mentioned the gasoline price decline. He said we continue to see price volatility which distracts the public from solutions.
Rep. McKee commented that the General Assembly appreciates the work of Dr. Peters and the Environment and Energy Cabinet.
Rep. Moore asked if there is any question about the use of food for fuel. Dr. Peters replied yes.
Rep. Moore asked how much that affects the increase in food prices. Dr. Peters replied that the trends are upward but he did not have precise figures. He noted it is an emotional debate that is not productive.
Rep. Moore said there is research to convert because those are wastes and take away from our food chain. There is pressure south of the border. The debate is tremendous; so I am gratified by the information from Alltech. Silencing comes from overcoming the negative impact.
Rep. Gooch responded, that he appreciates the plan but in the energy policy there was talk about using existing natural gas but not coal. He notes that 70% is exported and we import more than what we use, has the Cabinet looked at that?
Dr. Peters responded that there is a gynamic balance. We export to surrounding states and much of that is based on coal characteristics. We have – 120 to 130 million ton per year for several years. It is significant and it is dynamic.
Rep. McKee then turned the meeting over to Rep. Gooch who introduces Dr. Tom Robl. Dr. Robl presented that Kentucky consumes a lot of coal because we are an industrial state, but it doesn’t change much year to year. Alsmot all electricity comes from coal. Kentucky makes a lot of cement and lime, that is exported. We produce 120 million tons of coal, four to one is eastern. Overall, we gave 77 million ton difference. We ship 95 million out of state. Western Kentucky coal is a domestic resource and eastern Kentucky coal isn’t burned in Kentucky.
Dr. Robl said that we receive a lot of coal from West Virginia, Indiana, and Ohio, we also get 15% from Wyoming and Colorado. He stated, if graphed it makes more sense. The movement of which is dominated by geography. We use raillink to the east. This comes from Central Appalachian coal fields. We also send it south to Florida.
The reason for imports has to do with the way coal is moed in the Ohio Valley. The Big Sandy doesn’t feed the coal plants in Kentucky. Most comes from Indiana and West Virginia which is dominated by barge and raillink. Rail is cheaper than truck and as prices increase for diesel we use more barge. All the power plants, can be fed by barge-raillink so all the coal then comes from West Virginia. It ensures lowest cost.
The price of Central and Northern Appalachian coal is pectacular. Spot prices are higher and more volatile. Cenral Appalachian coal has gone above $100 per ton, adjustes for BTU it is competitive agains PRB coal, in high demand and high quality.
Rep. Collins noted we have heard testimony about the use of Polish coal, is that occurring? Dr. Robl said Polish coal is good, but how can you afford to move it from Poland. Venezuela is a more reasonable competitor due to their port facilities. WE move coal from here to Israel and Japan. It all has to do with transportation.
Rep. Collins mentioned he had heard that 1 ton of Poland coal is the equivalent to 2 tons of Kentucky coal and that some plants were importing it. Dr. Robl said that yes, there were issues of supply and it has happened but not a permanent situation and the real competitor is Venezuela.
Rep. Gooch mentioned that one company bought fractionally cheaper coal but he didn’t thinkthat would alter utility rates. He asked if Dr. Robl was familiar with this situation and Dr. Robl noted that would be better answered by the Public Service Commission.
Rep. McKee noted this being the last meeting for Sen. Sanders and Rep. Dedman, he thanked them for their service and commitment to the Commonwealth.
There being no further business the meeting was adjourned.