Birth of an Industry
Jones Backs Two New Ethanol Plants
Visalia & Madera to be State’s Largest

The nation’s largest agricultural state is also its thirstiest gasoline consumer. Now some local guys are putting two and two together. This comes at a time of both widespread decline in the farm economy in the Valley as well as unprecedented demand for renewable fuels. It comes also just as we have sent our soldiers to fight and die in the oil fields of Iraq.

Visalia - Former gubernatorial candidate and Secretary of State Bill Jones is a partner in a plan to build two new ethanol plants in Madera and Visalia that would each be the state’s largest. Papers were signed last week for a new company, Pacific Ethanol, to buy the former Coast Grain facility out of bankruptcy to be used as the site for the new 35 million gallon annual production ethanol facility.

The second facility - 35 million gallon Visalia plant will be located at Highway 99 and 198 - across 99 from the Visalia airport on a 100 acre piece of farmland owned by Kent Kaulfuss’ Wood Industries Company.

The plants would convert corn - at least some grown in California - to make a renewable motor fuel that is now in about 80% of California’s gas supply, having replaced MTBE.

Kaulfuss is a partner in Pacific Ethanol along with Jones, his son-in-law Ryan Turner and Neil, Tom and Paul Koehler of Davis California as well as Flin Mac - a Santa Rosa feed company. Also involved in this new start up will be WM Lyles Company who will be general contractors on the two facilities valued at about $45 million each.

Koehler says the Madera plant could be open by the end of 2004 and the Visalia plant would follow six months later.

Higher Demand

California’s demand for ethanol has grown from under 50 million gallons a year in 2001 when only one oil company used ethanol as an oxygenate to blend with gasoline, to likely 750 million gallons by the end of this year says Neil Koehler.

Today all of that ethanol is imported from the corn belt - in the Midwest except for production from two tiny plants in the state producing just 4 million gallons.

“We’re the biggest ag state in the nation and now the biggest user of ethanol,” says Koehler now that MTBE has been phased out due to widespread water pollution problems from underground tanks. Most of the state’s oil companies have begun blending ethanol with gasoline earlier this year.

Pacific Ethanol expects to have a shipping advantage over Midwest ethanol that must be sent hundreds of miles to reach the biggest transportation market in the US instead of made close to where it is needed. Ethanol made in the Valley is likely to be blended with gasoline in the Valley.

Timing Right

Contacted at his west Fresno County ranch this week, Bill Jones told the Voice that “the timing of ethanol production in California is right today” not just because we are blending ethanol in our gasoline, but the fact the state must reduce its greenhouse emissions at the tailpipe. California has a mandate passed by the legislature last year to reduce emissions of greenhouse gases by 2007. Fossil fuels are the largest component of green house gases.

“We think ethanol production in California will be a win-win for farmers, the consumers, for energy security and for our air,” says Jones.

Koehler has been working with Kent Kaulfuss for the past year on plans to build just one plant in Visalia to make ethanol “a long term vision of Kent’s,” says Koehler, particularly to generate ethanol using waste products like orchard clippings and cotton gin trash and convert them to renewable energy. Kaulfuss owns a waste wood recycling company and has dreamed of making ethanol out of cellulose. “This is a step toward that process,” says Kaulfuss glad to be working with “a strong coalition to make ethanol that will help clean the valley’s air.”

The Koehler brothers have been involved in ethanol for the past few decades owning a company called Parallel Products that turn food waste into ethanol.

Neil Koehler is also spokesman for the Renewable Fuels Association who have been lobbying the state for years to recognize the benefit of ethanol - made from corn and other crops and organic feed stock.

Better Than Competing

Neil Koehler says the Jones group working on their Madera project for the past year and the Visalia area group “heard about each other’s project” and decided that working together “might be better than competing” with one another. Koehler says they signed a letter of intent to form Pacific Ethanol some three months ago.

Jones and son-in-law Ryan Turner own J and J Farms on the westside and had been looking to get into ethanol. “They have the contacts in the ag community and can help on the financing,” says Koehler, but they didn’t have the experience in the ethanol industry, he says.

Jones logged more than 16 years as a California public servant but has been mulling new ways to tackle the state’s problems, Jones told an interviewer recently. That included solving problems like helping to clean the Valley air with ethanol he said on a PBS interview a few weeks ago.

Koehler says working on both projects will “certainly make a bigger splash.”

Jones says demand of ethanol is likely to increase in California given the fact that “no new oil refinery is likely to be permitted in the state in the foreseeable future - at least in my opinion.”

Ethanol is blended with gasoline at 6% by volume in California but could just a well be blended at 10% decreasing the need for gasoline while increasing the air quality benefit, says Jones. “Ethanol is the only way we can supply California’s appetite for more fuel - it is growing at about 2% a year - “while helping to clean the air” providing a domestic source for motor fuel.

A recent California Energy Commission report says that more of the California oil supply is currently coming from foreign sources as both in-state and Alaskan oil is declining in volume. (See last issue of Valley Voice)

According to the California Energy Commission, gasoline and diesel fuels account for 57 percent of state carbon dioxide emissions from fossil fuel consumption.

Every gallon that is replaced by ethanol or biodiesel will significantly reduce California’s contribution to global warming, says the CEC.

Calculations by the U.S. Department of Energy’s Argonne National Laboratory show that a fuel blend of 85 percent biomass ethanol and 15 percent gasoline reduces life cycle global warming gases dramatically - by 85 percent per mile drive.

Biodiesel made from vegetable oils or waste restaurant grease also leads to important reductions in global warming gases.

Politics of Ethanol

“We are in the middle of war over there (Iraq) and the price of gasoline is skyrocketing - this is one issue that everyone seem to agree on despite their politics,” says Jones whose partner Neil Koehler often votes for Green Party candidates. In the Midwest ethanol is supported by both bed rock conservatives and liberal Democrats.

Bill Jones says he plans to grow some of the corn needed to supply the plant from his Firebaugh farm and will encourage other area farmers to do the same providing an incentive to the hard hit farm sector in the Valley to build a new economic base here.

Direct employment at the two plants is likely to be 35 to 40 at each site although the overall impact on the Valley economy is likely to be far more dramatic.

Dairy Industry Key

“This business model doesn’t work without the presence of the dairy industry and its one million cows,” says Jones since about 30% of the profits come from the sale of wet distiller’s grain - a high protein grain source. Koehler says the model calls for distribution of the wet grains to farmers within a 30 mile radius to keep distribution costs down.

Jones points out that wet distiller’s grain as by products of making ethanol has another benefit in that wet distiller’s grain doesn’t have the air emission problems that dry distiller’s grain has - nor the extra cost it takes to dry the feed. EPA cited pollution problems at Midwest ethanol plants relate to the release of VOCs from the drying process last year.

Koehler expects limited air impacts for the two ethanol refineries expecting they won’t have to buy offsets to get the plants permitted through the Valley Air Board. He says permitting applications are close to being ready to file with the Valley air agency.

Bill Jones expects support from Valley farmers including the Farm Bureau. He says he has told California Farm Bureau president Bill Pauli about the project.

Jones says he expects far more grain corn being grown in the Valley because of the demand of grain corn from ethanol plants. “We get a lot of silage corn here but not grain corn that is grown to maturity,” he says. Jones points out that demand could increase the price of corn but that the price of distiller’s grain would increase as well helping to offset the extra cost. The increase in the price of corn could encourage more California production, he says.

More to Come

Jones says these two California production plants may be just the start of the flowering of ethanol “that’s why we picked the name because we envision a series of plants up and down the West Coast.”

A June 2002 study on Ethanol and the Community says that “A 40 million gallon a year ethanol plant will spend more than $56 million annually on goods and services ranging from corn or other grains to labor and utilities such as water, electricity, and natural gas.” The plant will generate the following economic benefits to the community in which it is located:

• Expand the economic base of the local economy by $110.2 million

• Generate an additional $19.6 million of household income

• Support the creation of as many as 694 permanent new jobs throughout the entire economy

• Generate at least $1.2 million in new tax revenue for the state and local governments

• Generate additional revenue for local grain farmers by increasing demand, which in the case of corn, in most circumstances results in an increase to the average local basis of an estimated 5 to 10 cents per bushel.

New jobs will be created as a consequence of the expansion of the local economic base, says the report.

The direct effect of operating a 40 million gallons a year ethanol plant will create approximately 41 permanent new jobs. However, as the dollars expended for goods and services in the local economy are spent and re-spent thereby creating new final demand for local businesses, an estimated 694 additional new permanent jobs will be created in all other sectors of the economy as a result of the ethanol plant (includes the 41 direct jobs).

The Central Valley has been highlighted in the recent report from the Great Valley Center as a natural for the development of renewable fuel technology creating jobs as well as meeting environmental, water and air quality concern, says the report released this week.

It turns out these guys are the first to put their money where years of rhetoric have been the only crop.

Koehler says he expects some help from USDA that has promoted the idea of new start up ethanol production offering a subsidy on the initial source of feed stock - corn for the plants.

In related ethanol news:

• The US Senate is poised to pass a national renewable fuels standard likely to double the amount of ethanol required fuels to about 5 billion gallons as a gasoline additive by 2012.

• California motorists may not notice it but the federal government has now reduced the gas tax by 3 cents as an incentive to suppliers because they now blend with ethanol instead of MTBE.

• The California Energy Commission told consumers not to blame ethanol for the recent runup in gasoline prices in the state stating that “Earlier concerns about the adequacy of ethanol supplies have since diminished as the ethanol production industry has added significant capacity to meet California’s annual demand of 565 to 660 million gallons of ethanol. Since the price of ethanol to refiners is currently at modest levels relative to gasoline, the recent increase in California’s gasoline prices can not be attributable to availability or cost of ethanol.”

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San Joaquin Valley - Back in 1988 a coalition led by the Natural Resources Defense Council filed suit to force the government to mandate the restoration of the San Joaquin River below Friant Dam.

The river - the second longest in the state - has kept the east side of the Valley green for decades because almost all its volume is used by farmers to irrigate their crops from Madera clear to Arvin. But environmentalists have suggested this export away from the watershed where it was born has meant the death of the river.

The matter was put plainly by journalist Gene Rose in his 1992 book The San Joaquin - A River Betrayed. “By the time the river reaches the delta nearly 400 miles and 10,000 vertical feet later, is little more than a public sewer - a fouled, controlled drain for agricultural and municipal waste water.” River supporters say there is so little flow left in the natural channel, much of the year the remaining river is essentially poisoned by what drains into on its way to the delta.

Before Friant Dam was built in 1944 the river supported the southernmost Chinook salmon population in North America, says NRDC attorney Hal Candee.

“The San Joaquin was probably the finest salmon spawning area in the state. It was a tragedy that we lost it. Back then people didn’t care about fisheries, wildlife habitat or conservation. There was no conspiracy. They didn’t see the CVP as a problem; but the diversion of the water was a tragic loss,” said Dave Selleck, a retired central regional manager for the California Department of Fish and Game.

What the 1988 lawsuit was all about was to return flows to the San Joaquin River enough to wet the river to provide for the restoration of that fishery.

Candee says that for more than 50 years the operation of the dam by the Bureau of Reclamation and the water used by the water districts of Friant Water Users have dried up the river along vast sections of it.

To force the issue, the environmental group got the water districts’ attention by threatening to invalidate Friant’s long term renewal contracts and by 1998 they got the 9th Circuit US Court to agree with them if the contracts were to be renewed - there had to be an acceptable plan in place to restore the river.

There were years of legal wrangling after that including an appeal to the Supreme Court who sent it back to the Federal District Court where it is today. By 2001 the two sides called a truce and talks of how to re-wet the river began.

It’s that classic case of fish vs farmer. Is there no way for both to thrive?

That’s been the approach of Friant Water Users. For the past two years they’ve been in dialogue across the table from the NRDC. In announcing the settlement between the two rivals Candee said in February 2001 that “We’re optimistic that the settlement process will lead to a positive outcome in the form of a restored San Joaquin River for all Californians. If we achieve that, it will show that environmentalists and farmers can successfully work together to make real progress on water issues in California.”

Small Farms

If the environmentalists make a compelling argument to restore the river, the small farmers of the east side of the San Joaquin Valley tell an equally persuasive story.

They put that water to beneficial use on some one million acres of farmland. There are a lot of familiar small towns along the 150 mile long stretch that Friant Kern canal runs through, Fresno, Tulare and Kern counties. Those towns, Orange Cove, Orosi, Woodlake, Exeter, Lindsay and half a dozen others would have probably blown away without the Friant Kern Canal. The canal helped create the booming east side of the Valley with some 15,000 small farms in the orange belt of California - an economy that would not be possible without the life giving water. Farms average about 100 acres.

The farmers produce an estimated $4 billion in crops every year and sustain what is felt an endangered way of life.

Today, 16 years after the original lawsuit, lurching toward a plan to restore the river remains at the top of the agenda. After the 1998 victory by NRDC the Friant Water Users agreed to a settlement process still in place today.

Now under threat that NRDC might head back to court because the talks are at an impasse - we find ourselves up to date.

For the past few months attorneys with both NRDC and Friant have been working with a mediator to try to work out some issues the two sides haven’t been able to come together on, says Kole Upton, FWU board chairman. The mediator offered some suggestions on how to overcome the impasse.

Now on April 21 the two sides will get back together and we are about to see if there is an acceptable plan or whether NRDC heads back to court - not just to force a court ordered restoration plan but to invalidate new water contracts. Yet to decide is just how much water is needed to have a healthy river and to what degree do we labor to restore the lost salmon population. How far downsteam do we target and where is the water going to come from. FWU Upton has said their plan includes trades of water that would re-wet the river but not take water away from the farmers along the east side.

The story of the litigation (NRDC vs Patterson) opened a new chapter. Former FWU director Dick Moss in testimony to Congress in 2000 about the CalFed process described the next step. “In the summer of 1999, CalFed supported the effort to stay this litigation by funding a pilot project jointly sponsored by parties to the litigation. This pilot project provided for new flows to be released from Friant Dam and the return of the water to the Friant Division service area, along with the purchase of water from outside of the Friant Division to cover any channel or conveyance losses. More importantly, it provided the opportunity for disparate interests to work closely together for their mutual benefit. This cooperative venture was integral to getting the parties to put the litigation on hold in order to spend time and resources researching San Joaquin River restoration in ways that keeps Friant Division water users, and the economy that depends upon Friant water, whole.”

Study Done

In October of last year a consultant study paid for by both the NRDC and FWU suggested just how much water would be needed to restore the river down to the confluence of the Merced River. It offered a variety of “bundled” alternatives including a plan to capture wet year water which would otherwise flow out to the ocean and capture it - store and reuse it as a supply to help do the restoration. Wet years occur about 20% of the time.

Three alternative plans were outlined that would all cost money to accomplish. The study suggested an additional 350,000 to 445,000 acre feet of water would be needed to do the restoration work every year. The study done by the consultant group URS says that of the 1.78 million acre feet of water that comes down through Friant Dam every year, about 1.37 million acre feet is diverted. FWU’s acreage is actually down from 1.1 million acres in the 1970s, says the report, to about 1 million acres today. It brings up the question - is the Friant unit contracting - growing smaller because of tough times in ag?

Water experts who talked to the Voice this week are privately skeptical that restoration of the fishery and the continued greening of the farm fields can be done at the same time particularly in dry years when water users get far less than average. What happens then?

But NRDC lead attorney Candee sounded a note of optimism over this - discussion point - the 4th stay in this litigation. “We would not have put our legal claims on hold after four years of repeated court victories if we didn’t believe we could achieve a balanced settlement that restores the river and improves water quality while protecting the valley economy.”

Parties in this lengthy litigation will report to Judge Lawrence Karlton of Sacramento on whatever progress the two sides have made. Karlton’s focus will be on water releases and how over time the restoration can begin. Or not.

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Kings Canyon - Endangered Bighorn sheep have found their way west in the past few years overwintering on the western slope of Kings Canyon above Bubbs Creek near Cedar Grove.

The news comes from multiple sources including an aerial survey in Kings Canyon National Park in January 2003 and summer hikers who saw a herd along the Western Divide. This would confirm the supposition that a small group of sheep have broken away from the remaining eastern Sierra population establishing a separate herd that remains year round on the western Sierra, says Sequoia Kings Canyon park interpreter Bill Tweed. “Historically the sheep were here - it’s very good news that a group has returned.”

The aerial survey done by Dr. John Wehausen found a large group of sheep on a south facing slope - around 20 who appeared to range from 6500 feet - to as high as 9000 ft. “The sheep seen in the Bubbs Creek support the idea that this is an independent group of sheep living entirely west of the Sierra Nevada crest,” says Dr. Wehausen writing in a recent article published in Nature Notes published by The Yosemite Association. He suspects the colony broke off from a group in the Kersarge Peak area around 1996.

Bill Tweed says a separate group of sheep helps protect the animals from diseases. “The remote terrain and steep slopes are perfect for sheep who like to run uphill if they feel threatened.” Tweed says the theory is that eastern sheep are being ravaged by both predatory mountain lions and disease (Scabies) from the mixing of eastern Bighorns with domestic sheep which has decimated the population in the 1990s.

Large numbers of domestic sheep were grazed seasonally over much of the Sierra Nevada prior to the turn of the century, and this practice continued well into this century along the eastern Sierra. It is now well documented that domestic sheep carry, as part of their normal respiratory tract flora, bacterial strains that are fatal to bighorn sheep, says Dr. Wehausen.

NPS researchers have discussed trying to reestablish sheep herds on the western slopes in places like Mineral King where the sheep enjoyed the Alpine slopes before 1920.

But now the sheep have headed west on their own accord. Dr. Wehausen conjectures that since deer winter range is further west the upper Bubbs Creek area may be free of mountain lions.

Ironically, the warm winter in the past few years may be melting the snow sooner on the south facing slopes allowing the ground to be good for habitat for the overwintering herd, suggests Tweed.

Dr. Wehausen states that the entire Sierra sheep population may now be about 300 with the addition of some 50 lambs in 2002. The Bubbs Creek group is estimated to be about 17 females, lambs and yearlings and two adult males probably only 4 years old. In 1995 the awe inspiring sheep had hit a low of only 100 adults in the entire Sierra Nevada. Estimates of the population prior to 1850 were about 1000.

Tweed says it’s hard to spot the Bighorn on craggy slopes. But if you go hiking this summer in the Bubbs Creek area - look up and be patient. Bighorn sheep have a generally stocky build. As adults, Sierra Nevada bighorn sheep stand about three feet tall at the withers and weigh up to 140 pounds for females and 220 pounds for males. Coat color is variable from almost white to dark brown with a distinctive large white rump patch and a short dark tail.

The Sierra Nevada Bighorn Sheep Foundation says that “entire herds of bighorn have died out following contact with domestic sheep. These facts alone explain much of the historic decline of bighorn sheep in the west since Europeans appeared and began grazing domestic sheep in the mid 1800s.”

“Domestic sheep have not been permitted to graze within bighorn sheep habitat in the Sierra Nevada for decades. However, domestic sheep have continued to graze close to bighorn habitat along the base of the eastern Sierra during summer. The problem has been that they have been too close for comfort. Domestic sheep are known to stray from flocks on occasion and can end up in bighorn sheep range.”

“Following the emergency listing of Sierra bighorn as an endangered species, the USFWS began working with the Forest Service and other land management agencies to solve this problem.”

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