Alternative Modeling Considerations to Land Use Change

Presented by:Steffen Mueller, PhD

University of Illinois at ChicagoEnergy Resources Center

Presented to:Emerging Issues Forum

Omaha, NebraskaApril 8, 2010

Presented by:Steffen Mueller

Ken Copenhaver

University of Illinois at ChicagoEnergy Resources Center

Presented to:LCFS Expert Working Group

Sacramento, CAJuly, 2010

Determine Corn Supply Areas Illinois River Energy Center (IRE):

– 115 mgpy, located in Rochelle– Startup: 11/2008– Corn Supply Area: Determined based on analysis of grower’s

database supplying to plant• 43 mile radius around the plant would include in excess of

90% of the growers Patriot Renewable Fuels (PRF):

– 100 mgpy, located in Annawan– Startup: 9/2008– Corn Supply Area: Determined based on interview with plant

personnel.• 23 mile radius around the plant would include in excess of

90% of the growers

Addresses for growers delivering to IRE in 2008 (>95%)

City addresses for growers delivering to Patriot in 2008 (>90%)

Corn Supply Areas for IRE and PRF

IRE

PRF

Corn Acre Assessment Methodology With the Draw Area established we combined USDA Cropland Data

Layer with the circle file Classification of all land other than crop was performed using the

national land cover dataset Acres in Corn were calculated using spatial data from the satellite

classification Additional Vetting was Performed:

– ¾ acre buffer along roadways was subtracted and classified separately

– Implausible conversions of ag to non-ag to ag use were classified separately

Vetting Routine Test Samples:Narrow Tree Stands

This seven acre area was classified as woodlands but appears to have been in agricultural production both years.

Trees surrounding the field may lead to the mis-classification

Roadways

This 11 acre area of roadway between two agricultural fields was identified as agriculture one year and urban in another year. Areas like this are often mis-classified when assessing land use change and were therefore removed from the project analysis.

What were 2008 Corn Acres in 2007Vetted Data

IRE PRFCorn 846,408 255,436

Soybeans 432,697 159,974

Fallow/idle cropland 518 5

Grassland 105 6Forest 534 609Pasture/Grass/Hay 29,091 10,134

Ag/Non-Ag/Ag removed 16,252 6,717

Road borders removed 301,131 102,222

Total Corn Acres in 2008 1,656,511 540,937

The start up of PRF and IRE (expansion) did not prompt a conversion of non-agricultural to agricultural land (less than 1,000 acres were converted in the vicinity of either plant)

supporting the notion that corn ethanol plants have a weak influence on non-agricultural land conversions

IRE&PRF Corn Acre History

Corn Acre History2007 2008

IRE 1,694,145 1,656,511

PRF 558,957 540,937

Despite the start-up of both PRF and IRE (expansion) in the fall of 2008 acres in corn in 2008 went down – providing further evidence that the ethanol plants have

a weak influence on corn rotations

IRE&PRF Pasture/Grass/Hay Acres Pasture/Grass/Hay Acre History

Additional grass/pasture/hay land would have been available for conversion to corn acres in the vicinity of either plant– supporting the notion that the

studied corn ethanol plants have a weak influence on agricultural land use in general

2007 2008IRE 327,812 340,421

PRF 84,418 83,729

2008 Pasture/Hay

2008 Other Classes

83,729 acres in PRF Corn Supply Area

340,421 acres in IRE Corn Supply Area

PRF and IRE Acres in Pasture/Hay Category

IRE&PRF Yield History

2006 2007 2008

IRE 176 186 177

PRF 175 192 193

Source: USDA NASS County Crop Yield Report. www.nass.usda.gov

High prevailing corn yields in the area/low soybean prices may drive planting decision

Illinois Corn Production and Use (Years 1975-2010)

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

thou

sand

bus

hel

Production CarryOut FeedUse OtherUse NetExports

Illinois Planted Corn Acres

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000th

ousa

nd a

cres

Illinois corn supply and use data shows that corn productionincreases on relatively constant corn acres were sufficient to– support both

increasing exports– as well as corn for

ethanol use.

Absolute Energy LLC, St. Ansgar, IA

Start-up: February of 2008.

From 11/2008 to 8/2009 plant produced 96 mg of ethanol using 35 million bushels of corn

Minnesota

IowaSt Ansgar, IA

Findings

Absolute Energy LLC did not, in all likelihood, contribute to the conversion of non agricultural land to agricultural land in the vicinity of the plant: – Small forest and grass/pasture/hay conversions

occurred before and after the plant start-up. – Also, forest conversions are so small that they

fall within the classification error of the data set.

2006 2007 2008 Corn Acres 1,145,421 1,120,380 1,155,774 Soybean Acres 951,176 705,088 852,075

St. Ansgar Land Demand

2006 2007 2008Area County Corn Yield (bu/acre) 173.7 173.1 172.3Area County Soy Bean Yield (bu/acre) 51.2 51.3 42.9Corn Acres 1,145,421 1,120,380 1,155,774Agricultural Acres 2,379,000Ethanol Production (gallons) 95,674,000Average ethanol yield per bushel (gal/bu) 2.78Required Bushels 34,459,000St. Ansgar Corn-Ethanol Area Harvested (acres) 200,052Area Harvest to Total Ag Land (%) 8.4

DDGS Production (tons) 215,570DDGS Corn Displacement Rate (%) 0.955DDGS Soy Meal Displacement Rate (%) 0.291Soy Meal Production Rate (tonnes/tonnes) soybean (%) 0.792DDGS Soy Bean Displacement Rate (%) 0.367DDGS Corn Equivalents (tons) 205,869DDGS Soybean Equivalents (tons) 79,206Corn (lbs/bu) 56Soybeans (lbs/bu) 60Corn Yield (tons/acre) 4.82Soy Bean Yield (tons/acre) 1.29DDGS corn eq - area harvested credit (acres) 42,685DDGS soy eq - area harvested credit (acres) 61,489Total Credit (acres) 104,174St. Ansgar Net Area Harvested (acres) 95,878Net Area Harvest to Total Ag Land (%) 4

Land Requirements with DDGS co-product credit total just 95,878 acres or 4% of total ag acres in area

Corn Prices In the Supply Area

Corn Prices in the Supply Area 10 cents to deliver to River Terminal from Rochelle,

3 cents to deliver to IRE IRE bids 2 cents less than the River

– IRE assures that grower gets 5 cents more to deliver to IRE

On average IRE grower revenues increase by 5 cents

In order to assure constant supply and consistent (no heat damage, no off colored corn) quality of 120 trucks per day

Summary Findings The start up of PRF, IRE, and Absolute Energy did not prompt

a conversion of non-agricultural to agricultural land Despite slightly higher corn revenues for growers ethanol

plants have a weak influence on corn rotations and agricultural land use in general

Land Requirements with DDGS co-product credit are small compared to corn supply areas surrounding the plants

In IL corn production increases on relatively constant corn acres were sufficient to support both increasing exports as well as corn for ethanol use.

Questions

Steffen MuellerUniversity of Illinois at Chicago312-355-3982