Beebe high on wood chips

Editor’s note: This is the second of three stories resulting from a July 12 interview with Gov. Mike Beebe. Link here for the first story.

Compressed natural gas may have a future in helping the U.S. become less dependent on foreign energy, but the energy alternative that excites Gov. Mike Beebe is wood chips.

Yes, wood chips.

To be sure, Arkansas is smack dab over the top of one of the more lucrative natural gas fields in the country — the Fayetteville Shale Play. The play is one of many reasons the U.S. is sitting on an estimated 100-year supply of what many consider the cleanest energy source available.

A federal effort to push new infrastructure to support more use of compressed natural gas (CNG) in vehicles has stalled in Congress. The New Alternative Transportation to Give Americans Solutions (NAT GAS) Act introduced April 1, 2009 by U.S. Rep. Dan Boren, D-Okla., is designed to make it easier to buy natural gas vehicles, refuel them, and convert existing cars to use natural gas. The bill would extend and expand tax credits — up to 80% of the incremental price to buy a CNG vehicle — and encourage through tax credits the construction of more natural gas fueling stations. For light-duty vehicles, the tax credit cap increases from $5,000 to $12,500. The bill also proposes to increase the refueling property tax credit from $50,000 to $100,000 per station.

Beebe said during a July 12 interview that it is a “relatively easy process” to set up CNG stations for fleet vehicle use, especially for municipal fleets and fleets that return to a central location each day. The hard part, he noted, is to set up the infrastructure nationwide, especially to support trucking companies.

“We are in discussions with other states as to what they may be wanting to do along major (interstate) corridors. Because it’s the major corridors where you’re first going to have to see the infrastructure in place,” Beebe explained. “And it’s not going to do Oklahoma any good to try to foster the use of compressed natural gas for large truck fleets if all you can do is go to the border and then you run out. It’s got to be a cooperative effort, and it naturally entails … cooperation between the states as well as the federal government.”

Mike Callan, president of Fort Smith-based Arkansas Oklahoma Gas Corp., has said the critical need in promoting domestic natural gas over foreign oil is to develop public infrastructure. Callan noted: “The lack of CNG fueling stations and the unavailability of CNG vehicles creates a conundrum. The investment necessary for both is substantial, and one cannot effectively develop without the other. Simultaneous development of this ‘symbiosis’ is critical to expanding the use of CNG as an alternative to petroleum-based automobile fuels. The federal government’s role in creating this symbiotic relationship is of paramount importance.”

It’s the infrastructure issue and requirement to retrofit existing vehicles that may deter widespread CNG use, Beebe said. A new energy source for vehicles must be economically feasible AND convenient before consumers — the ultimate arbiter of success in the alternative energy field — will respond, Beebe claims. If the energy is priced right (like CNG), but not convenient, it’s not going to work. If it’s convenient, but higher priced it won’t work.

That’s why Beebe says the CNG push “may be tempered in the near future by amazing technological advances that are on the horizon and we have been talking about but that are really virtually here, for cellulosic gasoline.”

Beebe was hesitant to speak in detail about developing “cellulosic gasoline” from wood chips (biomass). He said there are developments coming soon of which he is not at liberty to disclose, but he’s convinced that the best way to generate alternative gasoline “at scale and non-subsidized real profitable current prices is wood chips.”

Continuing, Beebe noted: “This country is on the verge, in my opinion, I can’t tell you all the specifics I know about because it’s still part of ongoing negotiations.  … But I honestly believe we are very, very close to scaling gasoline production out of wood chips. … You’re going to drive up to your Exxon or your Citgo station and you’re going to get a tank of gas and you don’t know” how much of that is from Saudi Arabia oil or wood chip oil.

He professes that it’s not “pie-in-the-sky stuff,” but is being proven in a 14-month demonstration cycle that includes major players like Conoco.

Beebe said the wood chip alternative may have some small effect on the price of wood, but not anywhere near what happened to the price of corn and other feedstocks during the ethanol craze.

“Deep in my gut, based upon what I know today, I really think we are as close as we’ve been in my lifetime to an actual scale production, domestic alternative, renewable motor fuel. And that’s different than some of these other things we’ve been talking about,” Beebe said.

He did note that his chief of staff, Morril Harriman, is skeptical of the wood chip solution. Harriman, an attorney and former State Senator from Van Buren, has good reason to be skeptical.

Efforts to find an alternative fuel have resulted in any number of fits and starts, with the promises of technological breakthroughs rarely finding their way into practical, daily use. And then there was the ethanol debacle. The corn-based fuel looked promising when gas was $3.50-$4 a gallon but resulted in a huge spike in the price of corn and other critical food-supply staples, and fell out of favor and profitability when oil prices fell sharply from their $100-per-barrel highs.

Also, the biomass and/or biofuel sector has seen a fair number of near-term “solutions” and questionable investment “opportunities” since the federal government began handing out sizeable grants and tax credits to existing and start-up energy companies.

One of those companies is Vancouver, Canada-based Dynamotive, which has made several announcements in and around Arkansas. The company previously announced a $40 million plant in El Dorado — supported by the Arkansas Economic Development Commission — but never followed up to seek permits. Dynamotive insiders sold a large amount of stock soon after the El Dorado announcement.

A plant in West Lorne, Canada, the company frequently touts as its success model was forced into receivership July 7 after a few years of sporadic production.

The last quarterly report from the publicly traded company was for the third quarter of 2009.

But there are several research programs showing progress in the area of converting wood chips into a bio-oil that can then be converted into gasoline, diesel and other petroleum products. The University of Georgia, University of Rochester along with several major oil companies have spent millions researching the “fast pyrolysis” method of converting wood chips and other biomass (switchgrass, corn stalks, etc.) into fuel oil or oil from gasoline can be produced.