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At $60 a barrel, maybe oil really is liquid gold. As a result, ethanol—long a force in Midwestern states—is big money and gaining a toehold in Louisiana. At last count, six ethanol plants had permits from the state Department of Environmental Quality. Whether they’re all built, however, remains to be seen.

Ethanol is different, and that’s exactly what Shaw Capital will produce if it completes plans for its Greater Baton Rouge Ethanol Facility at the Port of Greater Baton Rouge. The project is permitted for more than 1 million gallons of ethanol a year, though construction hasn’t started. Shaw won’t discuss the project, though port officials say a late-summer groundbreaking is likely, with the facility expected to be operational by late 2008.

Port officials are happy at the prospect of the return of deep-draft ship traffic, in this case delivering millions of bushels of corn. Yes, corn. The vast majority of Louisiana ethanol, including that produced at the port, will be made from fermented corn. The St. Rose biodiesel plant, which had its groundbreaking in June, will make fuel from vegetable oil, not corn.

Corn is used as the primary feedstock for 97% of U.S. ethanol production, even though it’s not a highly efficient feedstock in terms of unit of energy produced per acre. Louisiana isn’t a big corn state, so most of the corn for ethanol production will come from other states and other parts of the world.

Even so, the state’s farmers this year planted 700,000 acres of corn—more than double the amount planted in 2006—to cash in on soaring prices because of ethanol’s demand for corn. Still, Louisiana can’t grow enough corn to satisfy much ethanol demand. South of Interstate 10, the climate is generally too wet.

But there may be life after corn.

Massachusetts-based Celunol Corp., which operates a pilot ethanol plant in Jennings, is attempting to bring sugar cane and other forms of biomass into the ethanol picture. The plant is currently producing trial batches of ethanol made from bagasse through cellulosic technology, a newer method for making ethanol that’s still under development.

Celunol is also working on what it believes is a better feedstock than bagasse: a high-fiber, high-yield, low sugar cane known as energy cane.

In February, Celunol broke ground on a plant with a 1.4 million gallon capacity per year, slated to be operational next year. Expansion plans call for several commercial-scale plants around the state within the next five years. If the company follows through on its plans and manages to make its cellulosic conversion technology cost-effective, it could be a lifeline for Louisiana’s struggling sugar cane industry.

Sixty percent of worldwide ethanol production—in countries like Brazil, China and India—use sugar crops as the primary feedstock because sugar is cheaper than anything else. In the United States, sugar is twice as expensive as in those countries, so corn is king when it comes to ethanol.

Michael Salassi, an LSU AgCenter professor of agricultural economics and co-author of a USDA study on the feasibility of sugar-based ethanol production in the United States, says those high prices are bound to fall as more corn is harvested and hits the market.

“We probably don’t produce enough corn in the state to supply more than one [ethanol] plant,” Salassi says.

But the corn frenzy is understandable. When it all was planted this year, prices were about a dollar higher per bushel than they are now. Louisiana’s corn fever is causing a couple of problems: One, there’s not enough storage capacity. Two, cotton gins are idle since farmers switched to corn and could go out of business if the trend continues.

Rather than trying to turn Louisiana into Iowa, it might make more sense to feed the state’s ethanol industry on what already grows extremely well here: sugar cane. Switch grass, wood chips and other forms of biomass have been talked about as potential feedstock, though cane—energy cane—is the most suitable since Louisiana already has the infrastructure to grow and harvest it. The trick is making it worthwhile enough for farmers to plant cane, which is relatively expensive—$400 to $500 an acre, Salassi says.

“They’re going to have to pay growers enough to cover costs and make a return,” he says.

To be able to do that, the cost of cellulosic conversion has got to be cost-effective. John Howe, Celunol’s vice president of public affairs, says the company is working on it.

“We do believe our process will yield ethanol on a basis that’s highly cost competitive with corn,” he says.

A few things must happen for cellulosic conversion to really take off. Celunol already has the process down, though engineering remains to be done and government policy obstacles cleared away. Ethanol distribution infrastructure, ubiquitous in the U.S. grain belt, is practically nonexistent in the sugarcane belt. Also, farmers should have access to federal crop insurance that covers whatever they plant to respond to market forces—not just crops supported by government programs.

But the biggest thing, Howe says, is the lack of a federal loan guarantee program to get cellulosic-based industry moving. A program authorized by Congress in 2005 still hasn’t been put in place by the Department of Energy. Without federal loans, the industry will be slow to mature.

“Several lending institutions have told us they’re eager to get behind the fourth, fifth or sixth facility, but that the first couple of facilities will need some degree of government financial backing,” Howe says.

He credits corn-based ethanol for making cellulosic ethanol research possible, but says the United States won’t be able to grow enough corn to meet its growing appetite for ethanol. Cane also requires a lot less energy to grow than corn, meaning higher net energy gain per gallon of ethanol, Howe says.

“From a given acre of land, you’ll be able to get more ethanol production from high-growth indigenous crops, rather than trying to overlay corn onto land where it’s not particularly well-suited,” he says.

The AgCenter just released three varieties of cane with higher fiber and more tonnage per acre as a potential feedstock for ethanol production. Biofuels are here to stay, Salassi says, though more and more people are realizing corn is not viable as a long-term feedstock.

The price of beer, meat and everything else that involves corn has already has already gone up because so much corn is going to ethanol. And U.S. ethanol production is expected to double to more than 8 billion gallons over the next couple of years.

That’s about the same length of time Salassi guesses it’ll take to develop a cost-effective substitute to corn. The answer may just well lie in cane, which would be good news for Louisiana’s beleaguered cane farmers. There’s got to be a better way, whatever it is.

“Corn ethanol production may be the process that got this country into the business,” Salassi says, “but it’s not going to be the process we move forward with.”