Local company to build first ethanol plant using sugar cane as feedstock

A Manhattan Beach company is trying to build the first-ever ethanol plant in the United States that uses sugar cane as a feedstock.

California Ethanol and Power plans to build the $650 million plant on a 160-acre parcel in the Imperial Valley. It’s part of a larger $1.1 billion project that also includes craft deals worth more than $100 million cumulatively with local farmers in the Imperial Valley to grow sugar cane. for the ethanol plant and an agreement with a large agricultural cooperative to market the ethanol once it is produced.

Assuming the company secures the funding it seeks for the project, it hopes the plant will be operational by the end of 2025, producing around 68 million gallons of ethanol per year and, as byproducts , generating about 49 megawatts of electricity and about 740 million gallons of biomethane that can be transported through pipelines to heat businesses and homes.

In addition, the plant would produce approximately 200,000 tonnes of carbon dioxide which the company intends to capture and then sell to companies in need of CO2 offsets.
“We will produce the lowest carbon ethanol on a commercial scale in the United States,” said David Rubenstein, general manager of California Ethanol and Power. “We will supply the California market with ethanol that helps oil companies meet the state’s low-carbon fuel standard.”

Rubenstein added that the project will help financially challenged Imperial Valley farmers and the overall Imperial Valley economy. In May, Imperial County’s unemployment rate was the highest in the state, at 11.4%. The poverty rate in 2019, the last year for which federal data was available, was around 24%.

“This project will provide struggling farmers with a viable cropping option and bring economic development to one of the most economically disadvantaged counties in the nation,” said Rubenstein.

But these farmers might face another significant problem when considering whether to participate in the project: sugarcane requires a lot of water to produce. And while the Imperial Irrigation District that supplies water to farmers now has enough water for everyone, the problem is that if the drought continues and water allocations drop, the costs of water will increase and growing sugar cane may become a less attractive option.

“The question is, ‘Will farmers be able to get enough water to grow sugar cane?

The sugar cane option

Rubenstein said the company has been growing sugar cane on about 100 acres of land in the Imperial Valley on a trial basis for several years. “We found that the water use was equivalent to the water used to grow alfalfa, which is the crop grown by many farmers with whom we seek contracts.”

He added that by signing long-term contracts with California Energy and Power, farmers would have guaranteed prices for their sugarcane crops for several years, longer than the annual contracts alfalfa growers currently have.

California Ethanol and Power was founded in 2007 by a group of Imperial Valley farmers looking for a more financially viable crop. According to Rubenstein, who became an early investor soon after, farmers were struggling to find enough workers to harvest their leafy vegetable crops that are the mainstay of the Imperial Valley’s agricultural economy. They also faced the prospect of paying ever higher wages to their farm workers.

Sugar cane farmers in the Imperial Valley.

“The main problem they faced was that the crops they were growing were too labor intensive,” Rubenstein said. “They were looking for a less labor-intensive crop.”
Some have turned to alfalfa, the legume primarily used for grazing, hay and silage production. But some have also started considering sugar cane.

Unlike leafy vegetable crops which are harvested mostly by hand, sugarcane harvesting is highly mechanized, requiring much less labor. It’s even more mechanized than harvesting alfalfa.

But there was another problem: In the United States, sugar cane production is heavily regulated, with strict limits on how much can be grown for table sugar and other human consumption. Under federal laws and regulations designed to support sugar crop price levels, anyone wishing to begin growing sugar cane for human consumption must obtain allocations from a limited pool.

Rubenstein said that instead of growing sugarcane for human consumption, this group of farmers in the Imperial Valley decided to follow the example of Brazilian farmers, who grew sugarcane as a raw material for production of ethanol for several years. In California, all gasoline sold must have 10% ethanol content, providing a ready market for ethanol.

According to the California Energy Commission, in 2021 only about 10% of the ethanol used in the state was produced within its borders; the rest was imported either from other parts of the country or from Brazil. This makes the state vulnerable to ethanol supply shortages elsewhere or sudden increases in transportation costs.

Long road

In 2009, the young company started the planning process for the ethanol plant. Over the next decade, he secured full rights and authorized environmental reviews of the project.

In 2020, California Ethanol and Power signed two major agreements with private parties for the project. The first was an agreement with MasTec Power Corp., a subsidiary of MasTec Inc., an infrastructure and energy development company based in Coral Gables, Fla., to build the plant for $610 million. The second, in December 2020, was an exclusive 15-year contract signed with the agricultural cooperative giant CHS Inc. of Inver Grove Heights, Minnesota, to market and sell the 68 million gallons of ethanol produced by the plant.

In late June, the company received a state sales tax exemption for production equipment for use in the plant; the company estimates this will save about $10 million on the $235 million purchase of equipment.

But California Ethanol and Power still faces one last key hurdle before construction can begin: securing the necessary financing. So far it has only raised about $30 million – $27 million in funding from family and friends of key leaders and a $2.5 million grant from the Imperial Irrigation District , which supplies water to thousands of farms in the Imperial Valley.

The company is seeking the lion’s share of funding through a loan program administered by the US Department of Energy to foster innovative energy projects. According to Rubenstein, the company applied for an $800 million loan under this DOE program and cleared some preliminary hurdles.

“We hope to have the loan in hand by the end of this year,” he said.
But the loan is not a sure thing. And even if the DOE approves a loan for the project, it may not be for the full $800 million.
Rubenstein said the company aims to fill much of any remaining funding gap with the sale of tax-exempt bonds – tax-exempt because the project would also include an on-site wastewater treatment plant that would provide a greatest benefit to the community.

Big market

USC’s Prakash said the market is definitely there for additional ethanol production, especially for ethanol produced in California.

“It’s mostly import substitution,” Prakash said. He also noted that overall, the amount of ethanol this plant would produce – 68 million gallons per year – is tiny compared to the overall volume of ethanol needed in the state to comply with the requirement of 10% mixture. Those 68 million gallons could be mixed with about 680 million gallons of gasoline.

According to the U.S. Energy Information Administration, in 2018 Californians consumed about 48 million gallons of gasoline every day, meaning the ethanol produced by California Ethanol Energy and Power’s plant would only cover a few weeks of fuel. gasoline usage in the state.

“It will only have a minor impact on California’s ethanol supply,” he said. “But it will help at the margin.”

Rachel J. Bradford