By David A. Hill, Executive Editor

Last Friday’s U.S. Department of Agriculture’s announcement of grant funding for four Colorado wood-to-energy projects was a bit of good news in an otherwise dismal year for biofuels. Grants worth $250,000 from the ARRA will go to projects designed to convert wood collected during wildfire mitigation projects into energy, including wood derived from pine-beetle infested regions. The grants will help fund installation of woody biomass boilers and the processing of wood waste for a wood pellet facility.

Commenting on the grants, Governor Ritter said, “Wood-to-energy is a key component of our New Energy Economy, and these USDA grants reflect Colorado’s national leadership in advancing biofuels and renewable energy.”

The wood-to-energy strategy may, indeed, become a key component in the New Energy Economy as envisioned by the Governor. From a real market perspective right now, however, it is still languishing in the starting block. That could change, perhaps sooner than you might think, if the ideas tendered at a recent meeting on advanced biofuels take hold. Officially billed as “Developing the Next Generation of Biofuels in Colorado,” the event was sponsored by the Governor’s Energy Office and the Western Governors” Association, with the intent of helping to develop policy recommendations on advanced biofuels for the Ritter Administration.

The whole biofuels issue is a big one, as far as Ritter and his fellow Western Governors are concerned, primarily because of  the millions of acres of dead trees from the bark beetle infestation in Colorado and neighboring states. The Governor will be joining  leaders from other states at a meeting this week to discuss several key energy and environmental topics, including the national forests - pine beetle issue.

The Denver meeting and workshop was not your garden variety introduction to biofuels — far from it. Instead, it brought together roughly 70 biofuels/biomass stakeholders from industry, the environmental community, R&D, government and public policy. All have a stake in the future of biofuels, in one form or another, according to Stacey Simms, the GEO’s resident biofuels expert and one of the workshop leaders. She and others believes strongly that advanced, low-carbon biofuels will have a major role to play in climate policy, but acknowledge it is still a work in progress.

Advanced Versus Standard

Just what is an advanced biofuel? “Anything currently not on the market,” responds Simms. Or, to put it another way, an advanced biofuel is anything but soy or corn.

Simms and several of her fellow attendees said they still see a role for corn or soy-based biofuels in the revised Renewable Fuel Standard currently out for public debate, albeit a much smaller role than what ethanol suporters envision. That sentiment is shared by a growing number of market analysts who have watched the ethanol industry already absorb plenty of hits in 2009. Among the former high-flying corn-based fuel companies that have filed for bankruptcy are VeraSun Energy Corp., Northeast Biofuels L.P., and Aventine Renewable Energy.

Colorado Energy News Contributing Editor, Rick Martin, pointed out in last week’s blog that the ethanol industry has not fared much better at the governmental and regulatory level, either: Reflecting the growing awareness that corn-based ethanol is not the “clean” energy source it was once purported to be. New environmental standards announced earlier this month by the Obama Administration would account more fully for the indirect energy costs of growing crops for fuel, such as dramatically increased water use.

Getting Down to Business

“We wanted this to be a working session between professionals who were already involved with biofuels, not an introductory meeting for those interested in learning more,” Simms told Colorado Energy News. The results went beyond even her expectations, “because we were able to get a well-rounded collection of viewpoints from across the board, especially in our hands-on breakout sessions in the afternoon.”

In the morning, attendees heard from two Federal officials, Paul Argyropoulos, Senior Policy Advisor, for the EPA’s Office of Transportation and Air Quality, and Roxanne Dempsey, Senior Project Manager, for the EPA’s Golden Office Biomass Program. The pair provided an overview of the Federal Renewable Fuel Standard and the American Recovery and Reinvestment Act in order to frame the national perspective on the future role of biofuels.

Other presenters discussed the results of the Western Governors’ Association’s regional stakeholder initiative and its implications for Colorado, and Governor Ritter delivered the keynote address - Advanced Biofuels in Colorado. Alice Madden, the Governor’s Climate Change Advisor, led a roundtable discussion zeroing in on what issues state agencies and industry are contending with when looking at developing advanced, low carbon biofuels in Colorado, including the barriers and future opportunities.

The afternoon was devoted to three break-out workshop-style groups with every sector of the biofuels market represented in each. This enabled everyone to receive a full menu of input, ideas and viewpoints and contribute their own.

How Colorado Can Lead

Several concrete recommendations came out of the June 4th meeting. At the top of the list and what virtually every participant sees as most important, is the need for a biofuels/biomass Master Plan for Colorado.

“We need an overarching master plan that would identify different feedstocks and where they are located in the State,” Simms explained. “The plan would detail environmental constraints and take into consideration the economic factors involved with developing an advanced biofuels/biomass facility in a particular location. For example, would it be located near big end-user populations, or would transportation be an issue? Infrastructure limitations are a critical factor in determining the viability of any facility.”

Given the current economy and the high costs associated with building large scale process facilities, “It may be that advanced biofuels will have to rely on existing, slightly modified infrastructure already available,” explained Simms. “Instead of 100,000,000 gallon type refineries, you would have smaller plants with infrastructure already in place, such as local companies that do aggregation of materials or fuel reduction.”

Show Us the Money

Besides the infrastructure limitations, growth of advanced biofuels from a nascent market to a real industry in Colorado will require legislative change.

“Money is a huge factor, of course. Tax incentives, credits, grants and other funding mechanisms must be in place for the industry to really accelerate,  said Simms. “For advanced biofuels to gather real momentum, we are going to have to cap the existing ethanol and soy-based markets and then provide much more incentive for advanced development.”

Another important issue which generated a strong consensus of opinion at the meeting is the current situation in which feedstocks taken from federal lands were not counted in the initial Renewable Fuel Standard. Everyone felt this should be changed so that the beetle-devastated forests here in Colorado and elsewhere could become a huge feedstock resource. Right now, there is just no incentive to harvest the fuel source from the forests under BLM management.

Clearly, the GEO sees the renewable fuel standard evolving to what they believe will be a better version. Right now it is still out for public comment and will be closed the first or second week in July.

Simms says the RFS will provide federal leadership on this important issue. “It is a complicated standard and some definitions are left vague because documents should be fluid as new technology comes along. It captures what is in the market now– and where it is now. Things like the life cycle analysis of fuels, and indirect land use emissions, these weren’t fully developed in the original standard and should be part of the new standard,” Simms said.

So what’s the bottom line when it comes to advanced biofuels? It probably depends on who you ask. Make no mistake, the next 12 to18 months will be a crucial time period for determining whether Colorado becomes a leader in this field, or an also ran when it comes to impacting future energy policy.