Statement of Jerry Whitfield, PhD.

Mr. Chairman and members of the Committee, the Biomass Investment Group (BIG) of Gulf Breeze, Florida, appreciates the opportunity to submit this statement for the record on the potential role of the “closed-loop” biomass tax credit in helping to achieve our nation’s energy security and environmental policy objectives.  We at BIG are very excited about the possibilities associated with this technology, and urge the committee to extend the placed-in-service date window for the “closed-loop biomass” production tax credit for at least five years.

The term “closed-loop biomass” was coined to describe the production of energy from a dedicated biomass crop.  The “loop” refers to the balanced and sustainable planting, growing, and harvesting of the biomass crop, its transformation into electrical energy, and finally, the redistribution of remaining ash over the plantation as a fertilizer for further plant growth.  As described below, the use of a dedicated crop potentially provides a number of energy and environmental benefits, including displacement of fossil fuels for production of electricity by renewable biomass derived fuels, and absorption of atmospheric carbon via photosynthesis and carbon sequestration in the roots of the plants. In addition, there are energy and environmental benefits from the increases in facility efficiency due to the ability of the operation to control the type and condition of the feedstock.  In the context of this testimony, “closed-loop” refers specifically to the Internal Revenue Code Section 45(c)(2) definition “any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.”

As you know, the closed-loop biomass production tax credit was enacted as part of the Energy Policy Act of 1992.  At that time, electricity production from a closed-loop biomass process was not economic, and no closed-loop facilities existed.  Since the early 1990’s, to the best of our knowledge, no production tax credits for electricity from closed-loop Section 45 biomass electricity production tax credits have ever been claimed (there may be some current activity associated with the co-firing of biomass with coal, which has a separate definition in the tax code).

Until recently, one of the most significant technological hurdles facing prospective closed-loop developers involved finding a way to efficiently convert the feedstock into an intermediate liquid biofuel that could subsequently be transformed into energy.  Another hurdle that vexed entrepreneurs involved the search for a feedstock that would grow rapidly enough to keep a baseload power facility stocked with fuel from an economically sized farm.  As I will describe, we at BIG believe that we have developed solutions for these two challenges that will allow our facility to be very efficient in transforming the feedstock into electricity, thereby making it more economical, and we also have identified an energy crop that can generate the tons of raw biomass necessary to keep our turbine in operation 24 hours a day, 7 days a week, year round.

 Although we have made great strides in bringing the cost of our green, renewable electricity closer to being competitive in the market, we will not be able to further narrow that gap until we have gotten a first commercial facility up and running.  After the flagship plant is placed in service, and after the period wherein the plants grow mature root systems, we will doubtless spend several years perfecting the process to allow us to obtain the maximum amount of energy from each ton of biomass fuel. 

As you might guess from the above discussion of our infant technology, the availability of the production tax credit is an absolutely essential ingredient in our plans.  One of the impediments to convincing the financial community to partner with us in building this first facility is the recent trend wherein Congress provides one - or two - year extensions of tax credits.  These extensions are not sufficiently long to allow taxpayers to design, finance, and build a groundbreaking commercial facility. Five years is a more realistic timeline. Therefore there has never been a period of certainty within which an investment decision on this type of plant can be made knowing that PTCs will be available when the plant comes on-line. As you can see, these short extensions, relative to the timeline for building such renewable energy facilities, appear to be counterproductive to the original intention of these production tax credits, namely promoting the development of renewable biomass energy.

Since this is all new technology, I will provide some details of our plans.  BIG is developing the first commercial scale, farm based, closed-loop biomass-to-electricity plant in the U.S., using a dedicated farm energy crop as fuel. The facility will be located in South Florida, where the climate is suitable for year round growing and harvesting, enabling continuous base load electricity production. Without a long-term extension of the Section 45 closed-loop biomass production tax credit, I can assure you, we will not be able to obtain the financing necessary to get this first facility built.

Our facility is designed to produce 130 MW of electricity from a high yielding energy crop known as E-Grass^TM requiring 18,000 acres of cultivation and providing electricity for over 80,000 homes. This crop is a perennial plant and after initial planting and grow-out, only requires harvesting and hauling to the centrally located fuel processing and power plant facility. The fuel conversion utilizes a fast pyrolysis process to produce a combustion turbine grade liquid bio-oil from the E-Grass^TM feedstock. Electricity is produced from an integrated combined cycle power plant for optimum power generating efficiency.

We believe that this type of facility could play a critical role in reducing the nation’s dependence on fossil fuels, eliminating atmospheric carbon emissions from electricity production, and helping to create jobs and boost the economy of our farmers. Importantly, this biomass-to-electricity power plant model has significant environmental attributes. It will save 930,000 tons of CO₂ emissions per year compared to the same size coal-fired power plant, or 440,000 tons of CO₂ from a natural gas-fired plant. Indeed, the integrated farm and power plant process will be CO₂ negative since although the crop will absorb the same amount of CO₂ as released by the power plant, the below-ground biomass (rootstock) will sequester additional CO₂ over the 20+ year life of the crop. Air emissions will meet all air quality standards for this type of facility. Mineral matter (ash) absorbed by the crop during growth will be recovered during the fuel conversion process and returned to the farm as a soil amendment, thus completing the “loop.”

BIG has successfully secured a Power Purchase Agreement with Progress Energy of Florida to purchase 100% of the power produced for a term of 35 years (including extensions). The project is planned to be placed in service in 2010. Design and development of this facility is well underway, but it will not be built unless investors are certain that the facility will be eligible to receive the PTCs under the placed-in-service date window.

I urge this committee to extend the qualifying period for the Section 45 closed-loop biomass energy production tax credit by at least five years to enable developers of this type of technology to make investment decisions with the knowledge that these important incentives will be in place when such a facility comes on-line.

Again, we appreciate the opportunity to provide this information.  If Members, or staff, have any questions regarding the technology, we would be pleased to serve as a resource to the Committee on closed-loop biomass issues.