It's the enormity of the colossal blue and white tarped haystacks that makes you stare. They're so big they look like aircraft hangars stuffed with hay bales.

There are more than a dozen of them just off Highway 99 on the outskirts of the Sacramento Valley farm town of Gridley, Calif., population 5,000.

The cocoon-like array of large, one-ton rice bales total 18,000 tons of straw put up by producers over the past several rice-growing seasons in hopes of turning the rice byproduct into ethanol. However, they have become monuments to frustrated rice growers and a small town who are not trying to emulate Rumpelstiltzkin and turn straw into gold…just give some value to an agricultural waste product and economic stability to a struggling rural community with a 15 percent unemployment rate.

Gridley, the rice producers hay cooperative and Massachusetts company BC International Corp. (BCI) have been partners in a rice straw-to-ethanol plan that was to culminate with the opening next year of a 23-million-gallon $100 million ethanol plant that would brings jobs to Gridley and get rid of rice straw. That partnership is dead.

It evaporated when BCI said it wanted to build an ethanol fermentation plant much larger than originally planned using far more rice straw than produced in Butte County.

Plant too big

“There was not enough money in it for the farmers to make it worthwhile for them to participate,” said Jack Slota, Gridley city manager. The size of the proposed plant was also more than Gridley bargained for.

Farmers could not recover their costs of collecting and transporting enough straw to operate the BCI plant. It costs about $45 per acre to harvest and haul rice straw. Rice straw is the not the most efficient feedstock for an ethanol plant, certainly not in the same category as corn.

Now the haystacks await a new future. Slota said the city is working with the U.S. Department of Energy in developing electrical power generating facility that also produces ethanol.

“It is a gasification process rather than a fermentation process like BCI was looking at,” said Slota. The process has shown promise in getting rid of forestry waste in Alaska and Mississippi.

“We hope to have results from a pilot scale testing soon. It is cleaner system than the fermentation technology which put off a lot of fumes and wastewater,” he said. He called gasification a “closed system” that does not emit anything into the air or produces wastewater.

Gridley is trying to get into the power/ethanol business as an economic development. Rice straw growers are in it to get ride of rice straw, one of knottiest problems in California agriculture.

Ken Collins is a respected Biggs, Calif., rice grower who has put countless days into finding an economic return for rice straw since the state banned rice straw burning. As president of the Gridley Rice Straw Cooperative, Collins is the keeper of all those straw bales.

Frustration

He is frustrated at the lack of progress in turning the straw into a useful, paying product.

“We have spent five years putting up that straw to have a feedstock for the ethanol plant, and we are now back to square one,” he lamented as the setback with BCI.

It has been a decade since rice producers began looking for viable alternatives to burning rice straw when the state began legally ratcheting down the acreage growers could burn each year. Now only one-fourth of the Sacramento Valley's rice acreage can be burned and only after a certification process that validates burning as the only way land can remain productive for rice. Burning removes diseases and weeds that would result if the straw was incorporated or baled.

While the burning issue is called a rice industry issue, it actually only impacts a portion of the industry. Several years ago a survey in Colusa County, one of the valley's largest rice producing areas, found that almost half the rice straw was being returned to the soil. Many producers incorporated it long before burning was banned. Others flood fields in the winter to reduce the residue.

For many rice growers, however, their soil conditions limit straw removal to burning only. The straw does not break down; creates an anaerobic condition and spawns disease problems in the following crop.

“Burning and bailing are issues that do not affect everyone and some growers who don't have straw disposal problems have been accused of being less than fully supportive of the efforts of others to resolve the issue,” said one rice grower.

State criticized

The real fight, though, is not among rice producers. It is with the state of California that many rice growers see as dropping its end of the deal when rice growers agreed to reduce burning.

“Growers feel like they have been let down by the state in the bargain to reduce burning,” said one industry observer. “Growers kept their end of the bargain, but the state has not.”

Rice growers believe California has given little more than lip service to resolving an important issue for a significant number of rice growers.

Slota is not a rice grower, but he acknowledges that most of the support Gridley has received in developing a rice straw biomass energy plant has been from the federal government, not state.

“We have enjoyed strong support from the federal government. We have not received the same quality and quantity of support from the California Energy Commission,” said Slota.

Of course the federal government's interest in turning agricultural products into energy involves far more than rice straw. It involves involving millions of acres of cheap, oversupplied Midwest corn.

There are 61 ethanol plants in the U.S., primarily in the Midwest, producing 2.3 billion gallons of ethanol per year. An additional 14 more are under construction and the industry expects output to reach 3 billion gallons by the end of the year. Much of this ethanol production is supported by federal tax incentives.

Biggest market

California represents the biggest market in the nation for ethanol. If ethanol were blended with gasoline rather than the MTBE now used in areas where oxygenates are mandated because of air quality regulations, California would require an annual ethanol supply of 760 million gallons. If ethanol were blended in all the state's gasoline supplies, it would take 950 million gallons.

California now produces only 5 million gallons of ethanol annually from two small Southern California plants, one at a cheese plant and another at a beverage plant. This ethanol is used industrially, according to Pat Perez, fuels manager of the California Energy Commission's fuels office.

However, there are 100-million gallons of ethanol now blended annually into state's gasoline as an oxygenate to reduce auto emissions, Most of this is from Midwest corn-to-ethanol plants. Recently BP, the nation's largest oil firm, announced it would switch over to ethanol in 2003 and that should send use even higher.

This is a year ahead of the 2004 continually moving ban date on the use MTBE in California.

Nevertheless, the ethanol industry continues to be miffed at California Gov. Gray Davis, who has twice pushed back the ban date on the use of MTBE, a carcinogen that has leaked into groundwater wells. Davis contends an immediate ban on MTBE would send gasoline prices skyrocketing, and he doesn't want that to happen in the year he is running for re-election.

Meet demand?

The ethanol industry says it can meet California's demand. According to Davis' administration, it cannot.

“It would seem to me if that ethanol industry says it could meet California's demand for ethanol if MTBE is banned, they believe then can do it. Why would they lie?” said Collins.

Refineries want MTBE out of gasoline probably more than rice growers and Midwest corn producers because of the liability it represents. Those same refineries have told Davis they can make gasoline that meets air quality standards without MTBE or ethanol, but so far California has not been able to convince the federal government of that.

Meanwhile, Collins and his rice straw cooperative and the farming community of Gridley are not the only ones who are still banking on a future for ethanol in California — perhaps a one-billion-gallon-per-year future.

Perez said at least two dozen companies have expressed interest with the state's energy commission in building ethanol plants, producing the additive from corn, sugar beets, sugar cane and other sources.

It is all part of the 50-year federal government odyssey to turn the nation's garbage into energy or something else useful. Hundreds of millions of dollars have been spent on well-intentioned efforts to make fuel from biomass. Most have failed or at least needed considerably taxpayer buoying to stay afloat.

Skepticism grows

Collins is hopeful that those gigantic rice straw haystacks alongside Highway 99 near Gridley do not go on the failure list, but his frustration level grows with each passing rice season.

“We are farmers who have worked hard at putting up and transporting quality rice straw — 18,000 tons of it so far,” said Collins. That is no easy task because it is done in late fall where weather conditions in rice country can be far from ideal for putting up any forage or straw into bales.

Farmers are not experts in producing ethanol or energy from rice straw or anything else, said a frustrated Collins.

Rice producers are beginning to feel like they have been left holding a bagful of empty promises. If Collins sees one more photo of his colorful haystacks, it will be one too many.

“If you take a picture of them, paint my face on a bulls-eye on the side of one. That is the way I am beginning to feel about this whole process,” said Collins.

e-mail: hcline@primediabusiness.com