The federal energy bill passed by Congress this month has given a boost to two Black Hills area ethanol companies.

KL Process Design Group LLC of Rapid City already operates two corn ethanol plants, in Nebraska and eastern South Dakota, and it began making ethanol from wood chips and other wood waste last summer at a small plant near Upton, Wyo.

"It's really going to help on the project we're working on at Upton," KL Process president Randy Kramer said of the energy bill. The bill requires ethanol production to increase to 36 billion gallons a year by 2022. Of that, 21 million must come from cellulosic feedstocks such as grasses and wood materials.

At Belle Fourche, ProEco plans to build an ethanol plant using corn at first and then cellulosic materials.

The energy bill shows the country is behind the push for ethanol, said Dale Barker, chief executive officer of ProEco. "It's going to continue to substantiate the marketplace for ethanol," he said.

ProEco plans to break ground next spring for its ethanol plant at Belle Fourche, Barker said. The plant could be operating by March 2009.

It will start out using corn.

Barker acknowledged there isn't enough corn grown now in the immediate area to supply the ethanol plant, which, when finished, will produce 56 million gallons of ethanol a year.

Initially, corn will be trucked to the plant from Nebraska and eastern South Dakota, he said.

But, Barker said, there is enough land in the region to grow enough corn for the plant if there are adequate incentives for farmers.

"Years ago, there was a sugar-beet factory, and everybody grew sugar beets," Barker said.

ProEco is preparing to launch an incentive program for farmers to grow corn, with the company helping pay for seed and fertilizer, offering group medical insurance and a college fund. It plans to announce details sometime in the next three months, Barker said.

"Our first production train, of course, is corn, because that's a proven technology. It's a proven business model," he said.

But ProEco will advance to cellulosic technology soon, Barker said.

"We're keeping abreast of all the changes taking places in the cellulosic environment," he said. "The holdup is the enzymes that make it viable now." Enzymes are put into the ground-up biofeedstocks to separate the sugars used to make alcohol. "But thanks to the bills being passed, there's money out there to continue that research," Barker said.

The new farm bill would provide $25 million for renewable fuels research coordinated by South Dakota State University. It also includes incentives for farmers to grow crops dedicated to cellulosic ethanol production. The bill, passed by both houses of Congress, still needs approval from a joint conference committee and President Bush. Bush signed the energy bill this month.

Barker said the Belle Fourche plant has the necessary state and local permits. Cost of constructing the plant's first phase is estimated at $112 million. When finished, the project will total about $222 million, he said.

The plant will employ about 40 workers for its first phase, Barker said. More jobs will be created to support the plant, he said.

Barker already is looking ahead to moving to cellulosic ethanol production.

"We're poised very well in the Black Hills for the cellulosic given the local logging operations," Barker said.

KL Process Design Group says it already has the technology for cellulosic ethanol. Its Upton plant has been making alcohol from wood waste since August, Kramer said.

"Everybody was talking about cellulosic ethanol being five years down the road. It's not," he said. "There's tweaking to do, but we're there."

Kramer said the Upton plant is the first wood-waste ethanol plant in the country.

The company has about 55 employees in Rapid City, Upton, Sioux Falls, Rochester, N.Y., and Colorado Springs, Colo. Its affiliate, Western Biomass Energy, employs about 50 people at its Sutherland, Neb., ethanol plant and about 40 at its Rosholt plant in northeast South Dakota. The Upton plant has about a dozen workers.

Kramer and his partner, engineer Dave Litzen, coordinated their cellulosic research with help from South Dakota School of Mines & Technology.

They haven't produced enough alcohol for a truckload yet, Litzen said. "We're working toward it in a very meticulous way."

The plant grinds up wood chips, sawdust and logging refuse, called slash, into ethanol fuel.

When fully operational, it will produce about 1.5 million gallons of ethanol per year. That's smaller than conventional corn-to-ethanol plants, but that's part of the beauty of it, Kramer and Litzen say.

"In our business model, you could build a much smaller plant that makes 5 to 10 million gallons a year and locate those closer to heavily populated areas, where you've got the feedstocks from paper mills or a landfill that has yard waste," Kramer said.

Wood-waste ethanol plants in the Rocky Mountain west can help transform fuel for forest fires into fuel for American vehicles, they say.

Kramer and Litzen say their technology can process switchgrass into ethanol, but their business plan is based on using wood waste.

The first alcohol that comes from the Upton plant will be blended with diesel for use in Rapid City School District buses, Kramer said.

They plan to use a byproduct fiber called lignin, left over after the cellulosic process, to fuel the boiler at their Upton plant. Corn ethanol plants typically burn natural gas or coal to produce the alcohol, Kramer said.

Kramer said the energy bill will only add to their drive.

"It's almost like the beginning of the last century, when the government came to the aid of the oil industry," he said. "The general consensus is they're going to do the same thing for renewable energy."

He said the bill's goal of 21 billion gallons of cellulosic ethanol in the year 2012 is realistic.

KL Process is looking at other sites for wood ethanol plants in the Black Hills and Colorado. "The phone's been ringing off the hook ever since the energy bill passed," Kramer said. People have been calling from all around the U.S., Canada and Europe, he said. "Everybody is betting on the next generation of ethanol, and we're going to be busy."

Contact Steve Miller at 394-8417 or steve.miller@rapidcityjournal.com