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[media id=2 width=480 height=360] Harvesting for fuel - Corn cobs being harvested in south Texas for use in making ethanol. Video by Brett Coomer. July 23, 2009

Brett Coomer Chronicle

Salton Willems helps gather corncobs left from harvest Wednesday in Santa Rosa, near Harlingen. The cobs, already stripped of kernels, are used for conversion into ethanol. 

SANTA ROSA — The high-stakes race to make a better renewable fuel took a small step forward this week in a secluded cornfield near the Mexican border.

In tiny Santa Rosa, a few miles northwest of Harlingen, the nation's largest ethanol producer was secretly testing farm equipment that only a few years ago might have seemed absurd.

The machine collects corncobs, naked of kernels and typically left in the field after a harvest, for eventual conversion into ethanol.

The testing by Sioux Falls, S.D.-based Poet is part of a larger project that could help usher in a new era for ethanol, which today in the U.S. is produced mostly from corn. The privately held firm aims to be among the first in the country to produce ethanol on a large scale from nonfood sources — in its case, corncobs — at a plant it is building in Emmetsburg, Iowa. That plant is set to begin production in 2011.

Company officials say, however, that at this point they are less concerned about bringing that project to fruition than about external challenges they fear could hurt demand for ethanol and hobble development of next-generation biofuels.

“Our biggest question right now is, ‘Is there going to be a market for what's produced?'” said Michael Roth, Poet's biomass program director, who was in South Texas on Wednesday to oversee field testing.

The U.S. Energy Independence and Security Act of 2007 requires greater use of ethanol and other biofuels in coming years, growing to 36 billion gallons in 2022 — about 25 percent of the 140 billion gallons of gasoline U.S. drivers consume annually.

More than half of the federal biofuel mandate, known as the Renewable Fuel Standard, calls for fuels made from nonfood crops and agricultural waste. But there are doubts the industry is ready to meet production targets that call for phasing in next-generation biofuels through 2022, starting with 100 million gallons next year.

Larry Russo, with the office of biomass programs at the U.S. Department of Energy, called next year's goal “extremely challenging.”

In the U.S., ethanol is blended with gasoline to reduce dependence on oil and improve air quality in densely populated areas, including Houston and Dallas. Boosted by government subsidies, the industry has grown rapidly in recent years.

But ethanol producers have struggled recently amid volatile corn and oil prices and weaker demand for transportation fuels in the recession. Many producers have cut output and idled plants, while several filed for bankruptcy protection.

About 11 percent of the nation's 12.5 billion gallons of corn ethanol production capacity is temporarily shut down, said Matt Hartwig, spokesman for the Renewable Fuels Association, an ethanol trade group. But he noted that improving economics for the fuel have helped some plants come back online recently.

Moving the ‘blend wall'

The ethanol industry is asking the Environmental Protection Agency for permission to increase the federally set ceiling for the amount of ethanol that can be blended with gasoline. It says raising the “blend wall” — now at 10 percent — would be a catalyst for development of what's called cellulosic ethanol, made from agricultural waste and nonfood crops.

“That blend wall is holding up cellulosic ethanol,” Poet CEO Jeff Broin said.

But critics fear higher blend levels could harm engines, drive corn prices higher and give the biofuels industry less incentive to move away from corn-based fuel and into next-generation fuels.

“They're going to hold cellulosic ethanol hostage so they can expand their market,” said Nathanael Greene, director of renewable energy policy for the Natural Resources Defense Council, an environmental group that opposes increases to the blend wall.

The EPA is expected to rule by December.

Meanwhile, Poet and other biofuel companies are continuing research.

Broin said Poet can now produce cellulosic ethanol from corncobs for about $1 per gallon more than corn ethanol and hopes to make the costs equal within seven years.

At the same time, the company is working on an efficient way to collect corncobs.

That's why, for the last two summers, it has quietly dispatched crews to South Texas to test a variety of cob-gathering machines. The remote location protects the design of equipment not yet on the market, while giving Poet a chance to practice where hot weather makes corn ready for picking in the summer, months ahead of the harvest in the Midwest.

It can be a slow process. This week, one test machine that scooped up discarded cobs, stripped them of husky residue and shot them into a storage tank pulled by a tractor nearly overheated in the midday sun. That led to more tinkering.

But better now than later, Roth said. “If the collection method isn't going to work the way a farmer thinks it should work, then it's no good.”

brett.clanton@chron.com