TESTIMONY BEFORE THE UNITED STATES SENATE

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY

May 27, 1999

By Professor Bruce E. Dale, Ph. D.

Chairman, Department of Chemical Engineering

Michigan State University

"THE NATIONAL SUSTAINABLE FUELS AND CHEMICALS ACT OF 1999"

Thank you, Senator Lugar, for the opportunity to appear before this committee today. I wish to commend you and the Ranking Minority Member for your foresight in proposing this legislation. This bill would create a knowledge base on which to build a multi-hundred billion dollar per year biobased industrial products industry. If the research envisioned in this act to reduce the cost of converting plant material to useful products is done, the resulting industry would cost-effectively and sustainably meet many human needs from our renewable agricultural and forestry resources. In my testimony, I will make five points to support this contention:

1) Biobased raw material and petroleum raw material costs are already equivalent

2) Biorefineries must produce a variety of products, including fuels

3) Processing cost reduction is key to the biobased products industry

4) Life cycle analysis of biobased products must be done to ensure sustainability

5) Research centers/consortia must be large enough to address and integrate key issues

As you know, I chair the Department of Chemical Engineering at Michigan State University. I received my bachelors degree in chemical engineering (summa cum laude) from the University of Arizona in 1974, the masters degree from Arizona in 1976 and the Ph. D., also in chemical engineering, from Purdue University in 1979. Chemical engineering is that engineering discipline that is concerned with the conversion of raw materials to more valuable finished goods by chemical, thermal, physical and biological processes.

I have been involved with research on the conversion of agricultural materials to fuels, chemical and other materials since my days at Purdue. In my testimony, I will refer to these agriculturally-derived commodities for industrial use as biobased industrial products. I recently directed a National Research Council panel report entitled Biobased Industrial Products: Research and Commercialization Priorities from which many of my remarks today are derived. The publication of this report is imminent.

I will now briefly discuss each of the five points outlined above.

1) Biobased raw material and petroleum raw material costs are already equivalent

Chemical engineering has been a discipline for nearly 100 years. In that time we have learned that approximately one half of the cost of producing commodity products is due to the cost of the raw material(s) that go into the process. This is true for a wide variety of industries, products and processes. In this context it is critical to realize that plant-based raw materials already compete very well with fossil-based raw materials on a cost per pound basis. For instance, crude oil at about $18 per barrel is roughly equivalent in cost to corn grain at $2.75 per bushel- both cost about $110 per ton. Hays, grasses and crop residues, which we refer to as cellulosic materials, are in fact much less expensive than petroleum and are available in very large quantities for approximately $30-40 per ton. However, I do not believe that a domestic biobased products industry will undermine our petroleum-based industry. Much of the existing infrastructure and expertise in the petroleum processing industry can, over time, be adapted to biobased products as these processes are developed, improved and commercialized over the next few decades.

To date, however, the processes to convert cellulosic materials to biobased industrial products are very underdeveloped. We must learn how to overcome the resistance of cellulosic materials to biological conversion if we are to realize their full potential. The Act gives research in this area of overcoming cellulose resistance to biological conversion an appropriately high priority.

The fact that agriculturally-based raw materials cost the same or less than petroleum per ton is a crucial point, the importance of which cannot be overstated. In our effort to cost-effectively produce biobased industrial products, we are already essentially half way there because we have very low cost plant-based raw materials available to us. Roughly half of the cost of producing these biobased products will ultimately be due to raw materials. In essence, we can reap the benefit of many years of agronomic research to produce low cost plant raw materials if we now devote the necessary research effort to learn how to cost-effectively convert these raw materials to biobased industrial products. This leads to my second point, the importance of "biorefineries".

2) Biorefineries must produce a variety of products, including fuels

There are strong technical and economic reasons why many biobased industrial products will be produced in large, integrated processing systems that we might call "biorefineries", to highlight their similarities to petroleum refineries. Prototype biorefineries in fact already exist. These include corn wet and dry mills, soybean processing facilities and pulp and paper mills.

In petroleum refineries, the principal raw material, crude oil, is converted to a wide range of higher value (lower volume) and higher volume (lower unit value) products such as fuels, chemicals, polymers and other materials. To somewhat oversimplify, the high value products, which are often chemicals and polymers, provide the overall profit margins required by the industry. The high volume products, principally the fuels such as gasoline, diesel and kerosene, provide the economies of scale that drive down the cost of production for all refinery products.

Indeed, a recent Department of Energy study highlights the fact that an oil refinery built only for fuels production would not be economically viable. The coproducts of fuels production are absolutely essential to overall economic viability of the oil refining industry. Biorefineries will face the same competitive pressures. They will evolve to produce a variety of products, including higher value chemicals and polymers, as well as lower value, but high volume, fuel and feed products. In this context, I wish to quote directly from the Executive Summary of the National Research Council report mentioned previously.

On page 6 of the Executive Summary we read: "As in oil refineries, biorefineries would yield a host of products that would tend to increase over time. Many biorefinery products can be produced by petroleum refineries, such as liquid fuels, organic chemicals and materials. However, biorefineries can also manufacture many other products that oil refineries cannot, including foods, feeds and biochemicals. These additional capabilities give biorefineries a potential competitive edge and enhanced financial stability."

Thus to lay the foundation for a large scale biobased products industry we must learn how to cost-effectively produce a wider variety of such products. These products will include fuels, chemicals, biochemicals, polymers, foods and feeds. Since biobased raw materials such as corn stover contain appreciable amounts of protein, biorefineries will probably always produce animal feed proteins, and probably other feeds and foods. The Act appropriately recognizes this fact. The emphasis in the Act on product diversification is therefore essential as is the emphasis on research to reduce the costs of converting plant materials to these biobased products. This brings me to my third point, the need to focus research on the cost-sensitive process steps.

3) Processing cost reduction is key to the biobased products industry

Here I will be brief and blunt. There are many interesting fundamental scientific topics surrounding biobased industrial products. However, many of these science issues will not materially affect the cost of producing these products. If the intent of the Act is to be realized, fundamental research must focus on those aspects of the overall conversion processes that significantly affect the cost of producing these products. An appropriate term to describe such research is applied fundamentals. We have a variety of empirical and analytical tools to help us evaluate the likely impact of specific research directions on the costs of converting agricultural commodities to biobased products. To achieve its goals, the Act must be administered in such a way as to ensure that the fundamental research work done is applied to the areas where significant cost reduction potential exists and which will reduce the risks of commercializing these products-- not just to interesting scientific problems.

4) Life cycle analysis of biobased products must be done to ensure sustainability

If the intent of the Act is to be realized, and the maximum benefit to our country and our world achieved, we must consciously and thoroughly integrate evaluations of sustainability and environmental impact into all research directions and decisions. This implies the development of overall systems models, called life cycle analyses, for biobased industrial products. These life cycle analyses must integrate information on the energy and materials usage of the agronomic production, processing, utilization and disposal of biobased industrial products. With such analyses, we can hope to maximize the potential environmental and other benefits of biobased industrial products by anticipating and adapting to potential problems. I believe the Act gives an appropriate and deserved emphasis to sustainability and life cycle analysis.

5) Research centers must be large enough to address and integrate key issues

The Act envisions research that will be inherently interdisciplinary and quite broad in scope. Careful integration of research effort will be necessary to achieve the goals of the Act and to make best use of taxpayer funds. Such integrated, goal-directed work is probably best carried out in research centers or consortia. Few, if any, institutions have all of the necessary expertise to address the goals of the Act. Multi-institution "virtual" centers or consortia funded at an appropriate level for the necessary breadth and scope of research that is to be conducted probably represent the best approach to achieving the goals of the Act. Therefore I believe that the language of the Act should be strengthened somewhat to reflect the fact that multi-institution "virtual" centers or consortia are a preferred means of conducting the bulk of the research. Otherwise the research funding is likely to be dispersed ineffectively in a number of small, uncoordinated efforts. Such a dispersed effort is unlikely to achieve the necessary advances that will lay the knowledge base for a multi-hundred billion dollar per year biobased products industry.

This concludes my prepared, written testimony. I would be happy now to try to respond to your questions. Thank you again for the invitation to appear here today.