Thank you, Alan. And thank you to the other members of the press in attendance here today. It s an honor to be back at the Press Club and I greatly appreciate the invitation. This is the third time I ve been here in the past two years. The first time was for the launch of Growth Energy and the second time was to watch former General Wesley Clark announce the Green Jobs Waiver filed by Growth Energy. Today, I m here to talk about POET; our efforts to commercialize cellulosic ethanol and our future expansion plans. My name is Jeff Broin and I m the CEO of POET. We are a Sioux Falls, SD based ethanol producer with 26 production facilities located across the Midwest. I grew up on a farm in Southeast Minnesota, and it was on this farm where our company actually got its start. My father, who was frustrated that the government was paying farmers to leave productive land idle while we imported more and more foreign oil, built a small scale ethanol plant right on the family farm so we could put the excess grain we were producing to good use. Now that we had this small ethanol plant, we were always in need of spare equipment and parts. Since there were a number of ethanol plants going bankrupt at that time, we spent a lot of time traveling to auctions looking for deals. In 1987, while we were at an auction in Scotland, South Dakota, instead of coming home with some extra parts, we ended up owning the entire plant. We mortgaged the family farm and bought the whole thing for $70,000. So at the ripe old age of 22, I moved to South Dakota to renovate this plant even lived in the plant for a time. I ll spare you most of the details; but through a lot of hard work, good public policy, trusting bankers, and a bit of luck; this one little plant has grown into what is now the largest ethanol producer in the country with 26 plants and 1.6 billion gallons of ethanol capacity.
And all of the protein, oil and fiber from the corn we process becomes over nine billion pounds of our Dakota Gold distillers grain which is a high protein animal feed sold around the world. We have over 10,000 farmers who are invested in our plants 30,000 farmers who deliver grain to our plants And we employ over 1,500 people in green collar jobs throughout rural America There has been a lot of talk lately about cellulosic ethanol. We ve heard the hype that so often accompanies a new technology, especially one with such great potential. Cellulose is the world s most abundant organic compound and the prospect of deriving fuel from it has generated much hype. And where we find hype, skepticism can t be far behind. With cellulosic ethanol, we ve seen no shortage of skepticism lately. That skepticism has been fueled by some companies lack of success and the industry s inability to scale up to meet government projected timelines. As if the task wasn t difficult enough, the industry was battered by the twin storms of global economic crisis and government indecision. At POET, we ve tried to remain as transparent as possible while we develop this new technology. Six months ago, after a year of operating our pilot facility, we gave an update on our progress. In an effort to continue that transparency, I d like to give you a brief recap of what we told the DOE about Project LIBERTY. There are three broad areas where we have made some significant progress: The first is in the process technology. As we said six months ago, we ve been able to cut costs from over $4 per gallon to $2.35 per gallon. Our goal will be to have the cost at $2 per gallon when we start up, which will make us competitive with gasoline but more expensive than grain based ethanol. To achieve those additional cost reductions, we re still learning and improving the process. Later this month, we ll install an improved pretreatment system at our
pilot facility that will better simulate what we ll have in our first commercial plant. We expect the $2 million addition to be completed in August and it will help us scale the process to commercial size. The second area is in feedstock collection, where we are working with DOE and USDA to incentivize agricultural equipment manufacturers and farmers to accelerate their participation. We are in the process of signing multi year contracts with this fall being our first commercial harvest. We already have contracts signed or verbal commitments for 25,000 tons of biomass, which is a third of what we will need this fall. The third is in financing the facility. We ve received generous support from the DOE and the State of Iowa, but like others in the industry, we will be unable to get the financing needed for this project without a loan guarantee. We filed an application with the DOE yesterday and need to have a favorable ruling from them this calendar year. If we get that favorable ruling, we told the DOE that we will start construction by the end of this year, which puts us on track to start up the facility in early 2012. That first commercial production facility, which we call Project LIBERTY, will be colocated with our grain based ethanol plant in Emmetsburg, Iowa. Last month, we completed a comprehensive review of the project with the Department of Energy. The review went very well and we received very positive feedback from our partners at the DOE. They were pleased with our progress on a number of fronts, specifically citing our industry leading work on commercializing the harvest and transportation of the feedstock. They also noted a good predicted energy return and water use as well as the fact that environmental and sustainability issues have been satisfactorily addressed. We have made significant strides with Project LIBERTY and that progress has given us confidence that it will be the first of many such facilities. Once our team of scientists and engineers get inside that facility, they ll do what we ve done with corn ethanol production for the past two decades: continually increase efficiency and decrease operating costs. Within 4 6 years, our goal is to make this process
competitive with grain based ethanol so it can make significant contributions to our nation s fuel supply. How significant? That s what we re here to talk about today. By 2022, POET plans to be responsible for 3.5 billion gallons of cellulosic ethanol production by adding the technology to our existing facilities, licensing our technology to other producers and finally, transferring our technology to other forms of biomass such as wheat straw, switchgrass and municipal waste. To put this in perspective, 3.5 billion gallons is over 20% of the cellulosic ethanol mandated in the Renewable Fuel Standard. The first step is adding the technology to our 26 existing grain based ethanol plants. POET has a history of developing new technologies in our labs and pilot facility, commercializing it and then quickly spreading it to the rest of our plant network. These plants enjoy advantages similar to our Emmetsburg facility that will make them natural fits for cellulosic ethanol production: First, they are located in areas of abundant ag residues, Second, they already have land, utilities, roads and rail spurs onsite, Third, they have existing relationships with area farmers who are selling us grain, Fourth, they have team members, more than 1,200 of them, ready to make the process work And fifth, in the case of the plants built in the last several years, they were designed with the expansion of cellulosic ethanol in mind. Our model that co locates grain and cellulose plants takes biomass from the same acres and gets us to the commercialization of cellulosic ethanol faster. It also makes both ethanol processes more efficient, significantly reducing Green House Gas emissions for corn ethanol, and maximizing the use of the corn plant. By adding this technology to our plants, it will give POET the ability to produce one billion gallons of cellulosic ethanol per year by 2022.
But that number may expand as we build additional grain based ethanol plants. With dramatically expanding corn yields predicted by the USDA and seed biotech companies, in the near future this country will be awash in corn just as it has been for most of my lifetime. Those rising yields will lead to additional surplus corn that will enable expansion of corn based ethanol production and more cellulose as well. POET will also take this technology and make it available to other existing corn ethanol producers. Because of the advantages provided to the corn ethanol production process, this technology will be necessary for those plants that desire to be among the industry s most efficient and environmentally friendly. Many of the corn ethanol producers we talk to are watching and waiting for the commercialization of cellulosic technology and are interested in installing it. We project that these opportunities represent another 1.4 billion gallons of production capacity. Finally, we see another 1.1 billion gallons coming by transferring our technology to other forms of biomass, much of this outside the Corn Belt. This will be accomplished through a variety of joint ventures led by POET Biomass. In our work to develop a biomass logistics chain for our cellulosic project and our biomass boiler, we have developed significant expertise in this area. We are already exploring opportunities where that expertise can be used to source a wide variety of biomass from diverse geographic areas to produce ethanol. We are looking primarily at other waste products: ag residues such as wheat straw and rice hulls, wood chips, paper waste and municipal solid waste. With much of the work on corn stover nearing completion in our labs, we will soon turn to studying these other feedstocks. I can tell you that our scientists, who rose to the challenge of corn cobs, eagerly anticipate tackling these next waste products. Research has shown that there is 1.3 billion tons of available biomass in the United States and it is available in each and every state in the Union. So through cellulosic ethanol, every state can participate and be part of the solution to
increase our country s energy independence, while cleaning our air and creating jobs. So that is POET s vision. We plan to take a direct or supporting role in the production of 3.5 billion gallons of cellulosic ethanol by 2022 over 20% of what has been required by Congress: One billion gallons from our existing network of plants 1.4 billion from other corn based biorefineries in the Corn Belt and 1.1 billion from other waste products and dedicated energy crops from around the country That s our goal as we move forward developing our technology, increasing the size of our team and working with our many partners in universities, government and the private sector. The DOE estimates that 10 20,000 jobs are created for every one billion gallons of ethanol production capacity, so our goal would employ an additional 35 70,000 people. But in order for this vision to become a reality, policy makers must provide access to the market and the stability needed to attract the large amount of capital that will be required to finance its construction. Let me take these two policy issues one at a time. The first is that government policy must allow ethanol more access to the market if cellulosic ethanol is to achieve the large quantities that are required by law. Today, the U.S. effectively has a 90 percent mandate for oil in the gasoline supply. With regular gasoline limited to a ten percent blend and a lack of higher blend infrastructure, there is no market for cellulosic ethanol. Good policy can ensure that market access by approving E15 and supporting the construction of dedicated pipelines and the proliferation of flex fuel vehicles and ethanol blender pumps, which allow drivers to choose their blend of ethanol: E0, E10, E20, E30 or E85.
Second, it will take a lot of capital to get this industry off the ground. In addition to financially supporting the first few plants, there must be long term, stable policy so that the cellulosic ethanol industry can attract that needed capital. To achieve the goals set by Congress, there must be long term extensions of the tax credit and the secondary tariff while this industry emerges. In addition, there needs to be a long term extension of the cellulosic ethanol production credit, which is set to expire in 2012, or these first cellulosic plants will never get off the ground. This credit also needs to be made refundable. To conclude, make no mistake, cellulosic ethanol presents a tremendous opportunity for our nation. Congress has set a target of 16 billion gallons of cellulosic ethanol by 2022. This is a lofty goal, but it is achievable. If we can put a man on the moon in less than a decade, a country as great as ours can meet this challenge as well. But we first need to take the first step. At POET, we are ready. Once policy is stabilized, we are ready to begin construction of our first commercial facility Project LIBERTY. Then we ll get to work on meeting our longterm goal of producing 3.5 billion gallons of cellulosic ethanol. Thank you.