Personalities Plugged In: Sugar Daddy Economics

Amid stagnating fortunes brought by cheap international competition, a third-generation farming family is putting the final touches on a project they bet will create a significant economic breakthrough for the Imperial Valley’s agricultural economy. In the weeks ahead, Nora Batley and her 81- year old father William Batley, Jr., plan to apply for permits to construct California’s first, and the nation’s second, sugar cane-to-ethanol plant. The Batleys plan to make ethanol from sugar cane culminates their search since the 1970s for a way to smooth out the ups and downs of agriculture in the low desert area, said Batley Jr. These days, sugar cane ethanol is associated with Brazil, but the crop was grown in the Imperial Valley in the 1920s. The Batleys hope their project is the first of many such plants, which will provide a stable and profitable market for valley farmers. The difficulties of farming are well known to the Batleys. The family has been growing in the valley since William Batley, Sr., arrived in 1919 with a hundred dollars in his pocket. Batley, Jr., who attended U.C. Davis, had a momentary escape when he served in the U.S. Air Force. After being discharged he recalled coming home for what he thought would be a vacation, but his father put him to work on the farm. “I never saw anything but work since then,” he said. Life in the desert valley, where temperatures regularly surpass 110 degrees in the long summer, and little rain falls in the winter, is not attractive to many. “It’s an unusual person who can stay here,” said Jeff Lee, president of the Batley’s new energy company known as California Ethanol & Power. Lee, a former Bechtel financial officer, moved to the valley to manage the project. “First it impressed me as being the other side of the moon,” he said. Now, the Batleys are banking that a sugar cane ethanol economy will help farmers, like themselves, who have taken to growing marginally profitable crops in place of vegetables. Vegetables were king until imports became prevalent. “Agriculture, since I got out of the vegetable business, has gone downhill because of the global scope of marketing,” said Batley, Jr. Vegetables from as far away as Chile and New Zealand can be imported for less than it costs to grow them in the valley. In their place, the Batleys have been growing alfalfa for animal feed. But rising energy prices have made alfalfa uneconomical much of the time, he explained. The crop takes a lot of tractor work to plant every year, which requires high-priced diesel fuel. Likewise, high-priced natural gas is burned to dry the alfalfa for market. By comparison, once planted, sugar cane produces crops for five years so it requires less use of tractors. Meanwhile, the rise in the wholesale price of ethanol, which has gone from around $1.25/gallon at the beginning of the decade to around $2.50/gallon today, has the potential to provide a good profit margin for cane growers. Over the same period, the price of producing a gallon of ethanol from corn has gone up from around $1.10 per gallon to $1.40 per gallon, according to Matt Hartwig, Renewable Fuels Association spokesperson. The growing market for ethanol has boosted the price of corn. Hartwig reckoned it will cost even more to make ethanol from sugar cane due to the strong market for refined sugar. Yet, the Imperial Valley may be a good niche for a sugar cane-driven ethanol economy. First, compared to alternative crops, growing cane requires less labor on the farm. Second, the ethanol production plant is expected to generate 250 full-time jobs, many of them high paying, including laboratory workers and field crop managers, according to Nora Batley, who serves as general manager of Batley Farms. In addition, the Batley’s plan to burn the bagasse (crushed sugar cane) remaining after the sugar is extracted from the cane to make 30 MW of biomass electricity in a state hungry for renewable power under state mandate. Both San Diego Gas & Electric and the Los Angeles Department of Water & Power are seeking to purchase renewable energy from the valley, Batley, Jr., noted. Given the favorable economics of turning sugar cane into ethanol, he estimates that farmers who sell cane to his plant will be able to make an annual profit of $300 per acre. Producing at its full capacity of 50 million gallons of ethanol per year, the plant is expected to support 30,000 acres of sugar cane in the valley. Ultimately, Batley, Jr., thinks that farmers could grow up to 200,000 acres of cane in the valley. This could support some six or seven 50 million gallon a year ethanol production plants, yielding 300 million gallons or more of the alternative fuel. However, the Achilles heel of the Batleys’ plan is the availability of water in the desert area. The Imperial Irrigation District has been in the process of squeezing water out of farming to transfer it to urban areas along the Southern California coast. Next year the Bureau of Reclamation is planning to cut water deliveries to the valley in the face of continuing drought along the Colorado River, the source of irrigation water in the region. Yet, the Batleys contend that water will be manageable. Sugar cane, noted Nora Batley, uses no more water than alfalfa. Her father quickly added that it provides “three times the revenue” to farmers. Also, there is the potential for drip irrigation to cut the amount of water needed to grow sugar cane, said Juan Guerrero, University of California Imperial County Cooperative Extension farm advisor. However, he added, the irrigation systems are expensive to install and would affect the economics of growing cane in the valley. Sweet sorghum is an alternative source of sugar for ethanol production, said Guerrero. Tests by the extension show that it is “very, very water efficient,” the agricultural scientist said. However, based on earlier studies by scientists at U.C. Davis, the Batleys have set their course based on sugar cane. Their company plans to file for permits from local agencies within the next three to five weeks, said Nora Batley. Engineering work is being conducted by the Idaho-based Washington Group International. Once permits are approved by the local air pollution control district and other agencies, it will take about 15 months to build the plant, said Batley, Jr. The facility will be similar to those used in Brazil to make ethanol out of sugar cane, but will be equipped with pollution controls to meet California standards, he added. Meanwhile, the Batleys are raising seed cane that can be planted to produce large amounts of sugar cane when the plant becomes operational, expected around 2010. Batley, Jr., said that they already have a marketing arrangement for the ethanol with a company he could not disclose due to competitive reasons. --- For more climate change and greenhouse gas reduction news, see our sister publication E=MC2 - Energy Meets Climate Challenge at www.energymeetsclimate.com

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Personalities Plugged In: Sugar Daddy Economics

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