Why Minnesotans Should Not Subsidize the Burning of Poultry Manure

My name is David Morris. I am Vice President of the Institute for Local Self-Reliance, a 26 year old non-profit research organization based in Minneapolis and Washington, D.C. ILSR’s mission is to strengthen economies by promoting policies that extract the maximum value from local resources.

For rural areas, ILSR has been one of the country’s leading advocates of what we call a “carbohydrate economy”, an industrial economy where plant matter, not fossil fuels, comprises its materials foundation. ILSR has published more than a dozen books and reports and over 100 articles and fact sheets on many aspects of this subject, including energy generated from plants. We also publish a quarterly newsletter, The Carbohydrate Economy.

I come before you to urge you to reject this bill. It is premature and ill-conceived and works against the common good. When I explain to people the bill’s central proposition—that we should modify the existing biomass-to-electricity mandate to allow electricity generated from burning poultry manure to qualify—they immediately ask the obvious question, “Why in the world should we offer significant subsidies to burn manure?”

You are being asked to approve a bill that would offer a public subsidy of at least $80 to $140 million, and possibly a great deal more, for burning what by all accounts is an excellent and inexpensive fertilizer which may well be in short supply.

One would think such a bizarre idea would demand the highest level of proof. Yet little proof has been asked for, and little proof has been offered. The testimony on behalf of the bill largely consists of a presentation by one British company attesting to the fact that its manure-to-electricity technology works. I appreciate Fibrowatt’s entrepreneurial spirit and its accomplishments. But focusing on a specific company and its technology puts the cart way, way ahead of the horse. Before offering huge subsidies to one technology this Committee would be well-served by first addressing some basic questions.

The first and most important is, “What is the problem this bill is designed to solve?”

Fulfilling the 1994 Renewable Energy Mandate

This bill’s chief proponent and sponsor in the Senate, Steven Novak has publicly stated that it is designed to fulfill the 1994 legislative mandate for NSP to build or purchase 125 megawatts of electricity generated from biomass.

But if satisfying the Prairie Island renewable energy mandate is the goal, far less expensive and far more rewarding ways exist to do so.

We could, for example, modify the existing statute to allow for co-firing of biomass, a process in which plant matter is mixed in small proportions(3-10 percent) with coal and burned in existing power plants. This technology is 50-75 percent less expensive than generating electricity by burning manure. It directly reduces pollution from coal-fired power plants and offers a far larger potential market for biomassÜgenerated-electricity than does burning turkey manure. Yet last year the legislature refused to modify the statute to permit co-firing.

But if satisfying the spirit of the Prairie Island renewable energy mandate were really our goal, a much better strategy is available. Shift the money offered in this bill from burning poultry manure to generating electricity from wind.

ILSR was a principal member of the coalition that persuaded the state legislature in 1994 to enact the renewable electricity mandate. The purpose of the mandate was to force the state to extract more useful work from its renewable resources.

In retrospect it is fair to say that we significantly overestimated the cost of generating electricity from wind, and we significantly underestimated the cost of generating electricity from plant matter.

We also learned that unlike wind, plant matter has multiple end-uses. In the past half dozen years businesses have emerged which take agricultural and urban organic wastes and convert them into construction products(e.g. fiberboard) and soon, into liquid fuels and chemicals(e.g. ethanol and butanol). According to an ILSR report, this industry, which used only a few thousand tons of cellulosic wastes in 1994 this year will use over 1 million tons.

We have learned much in the six years since the Prairie Island mandate was enacted. We should be willing to learn from this experience.

Generating electricity by burning turkey manure is expensive and a kilowatt of turkey power generates far more electricity than does a kilowatt of wind power. The reason for the latter is that the manure-fired power plant runs virtually around the clock while the wind turbine generates electricity in significant quantities only when the wind blows. The combination of the high kilowatt hour cost and the large amount of electricity generated per kilowatt of installed capacity means that Minnesota could finance 400-500 megawatts of additional wind energy for the same price as 50 megawatts of manure energy. That would more than double the mandated levels for wind and accelerate the development of an industry that already has built an important infrastructure in the state.

There are some who say that expanding the wind energy mandate would require an upgrading of transmission lines. That may be, but if we are running up against transmission capacity problems at a few hundred megawatts of wind energy, and the state has the potential to generate tens of thousands of megawatts of wind energy, then we will have to deal with that bottleneck quickly in any case.

I can say with confidence that the environmental community would enthusiastically endorse such a shift, a shift consistent with the philosophy behind the renewable energy mandate urged by this community in 1994.

There are no dollar figures contained in the bill before you. That is unfortunate for this bill has profound financial implications. The cost of electricity generated from a Fibrowatt plant, according to estimates presented by the company a year ago, would be about 7.5 cents per kWh.(Apparently that price was based on a 20 year contract with NSP, but NSP has been offering only 10 year contracts for biomass-fueled power plants under the state mandate. A shorter contract translates into a significantly higher price per kilowatt hour. ) This compares to about 4 cents per kWh for wind electricity(including the federal tax credit) and 4-5 cents per kWh for co-firing biomass(no federal tax credit is available for this). As a result, NSP ratepayers may be forced to pay a subsidy of $8-14 million per year, or $80 to $140 million over a ten year contract, the length of contract NSP has offered other biomass-fueled power plants under the state mandate.

Some might argue that cost reductions for biomass-generated electricity will imitate the falling cost curves of wind-generated electricity. That is unlikely. Biomass-generated electricity has been around for 100 years and there has been at least 10 years of vigorous efforts to reduce its cost, with modest results. Wind turbines lend themselves to rapid cost reductions because of advances in electronics and materials sciences. The cost of biomass-generated electricity, on the other hand, heavily depends on the cost of the raw material and its transport costs. The boiler itself does not appear to lend itself to significant cost reductions.

Solving the Turkey Manure Disposal Problem

Some proponents of this bill argue that it is designed to solve the problem of turkey manure disposal in Minnesota. But it isnÍt clear that there is a turkey manure disposal problem in Minnesota. Indeed, a healthy network of manure applicators exists. According to several of them, they can not only handle any amount of manure supplied them, but turkey manure is such an attractive product that there is a growing competition for it.

Turkey manure is not a waste product. It is a cheap fertilizer that is in growing demand by farmers. It is true that state and federal governments are beginning to regulate manure handling by confined animal operations. But the manure applicators with whom IÍve talked say that this will not inhibit the expansion of the poultry manure market.

. As my colleague at ILSR, Jessica Nelson, testified before a legislative committee late last year, in Wisconsin, Creekwood Farms, an egg processing company, now sells their “specially composted” organic fertilizer. According to the company, their fertilizer product is becoming a profit center for the company. One more thing should be said about the market for poultry manure. Organic foods is by far the fastest growing segment of the food market both here and abroad. Organic agriculture is becoming a powerful marketing concept. And organic agriculture prohibits the use of commercial fertilizers and encourages the use of manure. If the present rate of growth in organic agriculture continues into the future, the demand for manure could soar.

It would be ironic if, in order to satisfy a renewable energy mandate promoted by Minnesota environmentalists this legislature were to destroy a major ingredient in a sustainable agricultural future.

Turkey growers may not be receiving the price they want for their manure because they now concentrate production. Concentrating animals means concentrating manure. Concentrating manure means that the manure must be hauled longer distances to be applied to the land in an environmentally sound manner. But presumably turkey growers and processors have concluded that the modestly increased costs of disposal are offset by the larger benefits of concentration. Therefore, why should the public be asked to subsidize these transportation costs?

To my knowledge, Minnesota does not subsidize the waste disposal costs of any other industry. Why make an exception for turkeys? Are MinnesotaÍs costs of manure disposal so much higher than other states that if we donÍt give the growers or processors subsidies they will move? IÍve seen no data that supports this proposition.

If this Committee were convinced that there is a turkey manure disposal problem and if it were further convinced that the turkey industry needs public subsidies to reduce manure disposal costs in order to continue to be competitive, then this bill should offer a subsidy per ton of manure disposed. That would put all alternatives on a level playing field. But this bill offers subsidies only for one particular end product–electricity. Why?

By offering handsome subsidies for generating electricity from poultry manure, this bill will undermine an existing industry that applies the manure to the land. An industry, it is useful to point out, that has not asked for public subsidies.

Manure applicators currently pay turkey growers an average of $4 per ton for manure, but this bill could translate into a subsidy of $10-20 per ton for manure converted into electricity. Fibrowatt says it will pay the going rate for manure, but it should have enough flexibility because of this subsidy to offer turkey growers a few more dollars for their manure.

The supply of manure for the scores of existing commercial solid manure applicators would drastically diminish. What would be the impact? That depends on whom you talk to. Fibrowatt, the company proposing to build the manure-fired power plant says there is plenty of manure to go around. It used to insist that 2.5 million tons of manure were available in Minnesota, but in its recent testimony it lowered that figure to 2 million tons. Other detailed estimates are in the neighborhood of 1 million tons.

I think the lower figure is more valid, but the argument about how much is available should not be the issue. The question is whether poultry manure is a waste product without a current market use. And everybody with whom IÍve spoken indicates that it is a product with an existing market. If the manure applicators are correct about the 1 million ton figure then a single Fibrowatt plant would put them almost completely out of business. If Fibrowatt is right then its plant would put only a significant proportion of the existing applicators out of business. Why should the state tilt the playing field in favor of burning manure rather than applying it to the land?

Manure is most valuable when it is returned to the soil. Manure contains valuable organic materials and nutrients crucial to the health of soil and crops. Moreover, it nurtures soil fertility, increases water holding capacity, lessens wind and water erosion and encourages beneficial organisms. Turkey manure is an excellent source for nitrogen, and the value of the nitrogen alone that may be burned as a result of this bill could be $2-3 million a year.

If we are tackling a poultry manure problem, we should learn from other states? Maryland, a state with about the population of Minnesota, would be a good teacher. Intense poultry industry concentration on the Delmarva Peninsula, combined with a history of lax regulations regarding the land application of manure led to an outbreak of pfiesteria.

The state responded with a multi-pronged approach. One of those prongs was the creation of the Animal Waste Technology Research Fund(AWTRF). It provides financial assistance to companies proposing to solve the manure disposal problem. Of the 120 proposals received, the state offered to fund two technologies, both of which render manure more easily transportable and useable for land application. As for generating electricity from manure, Brad Powers, co-chairman of the Fund, has publicly stated, “Our group, generally speaking, does not believe that burning the manure is the best solution. We believe the organic matter is sufficiently valuable that it doesnÍt make sense to destroy it.” The Fund has chosen not to finance a poultry manure-to-electricity facility, although it may test a small scale facility to evaluate how the technology operates.

One of the companies chosen, AgriRecycle of Missouri, chose instead to build a poultry manure pelletizing facility in Delaware in a joint venture with chicken giant Perdue. Construction begins this month. The pellets can be more cheaply shipped to areas of high demand outside of Maryland. Delaware reportedly offered $1 million in public funds for the construction of the plant.

To sum up. The renewable energy mandate written into law in 1994 can be met with modifications to the existing law that are cheaper, more sustainable, and more in keeping with the philosophy of the environmental coalition that fought to have this mandate inserted into law. This bill will compel those who live in the Twin Cities to spend hundreds of millions of dollars in a way that undermines existing businesses and encourages an inferior use of animal manure. No public urgency exists that would compel you to approve this bill. I urge you to reject it.

Thank you.