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Iowa's next economic frontier

 - Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.

Fifty thousand jobs.

That’s what is projected to be created nationally in the biorenewable chemicals industry within the next five years, BiochemFullReport_title_pageaccording to “Bio-Based Chemicals: The Iowa Opportunity”, a new report commissioned by the Cultivation Corridor with support from the Iowa Biotechnology Association released earlier this month.  What’s more, the paper argues a significant segment of those jobs could be created right here in Iowa. But they don’t have to be.   Back to that in a minute.

The paper was researched and written by Dr. Dermot Hayes, the Pioneer Hi-Bred International Chair in Agribusiness, professor of economics and professor of finance at Iowa State University; Dr. Brent Shanks, an Anson Marston Distinguished Professor in Engineering and the Steffenson Chair in Chemical and Biological Engineering at ISU; and Dr. Jill Euken, deputy director of the Bioeconomy Institute at ISU.

The report’s findings are striking.  Thanks to the rich supply of Iowa biomass suitable as feedstock for biorenewable chemical production, access to a foundational network of over 50 ethanol and biodiesel production facilities across the state, and nascent biorenewable chemical investment opportunities before us today, Iowa is better-positioned than most domestic competitors to capitalize on the next frontier of bioprocessing in the United States.

Despite Iowa’s obviously discernable advantages in the budding biochem space, however, the Hayes report suggests that the absence of a statewide economic development incentive tailored to address the unique needs of this budding industry stands as a serious impediment to the state’s potential to emerge as a center of gravity for biorenewable chemical investment and job creation in the coming years. The report reminds that the last bioeconomic boom Iowa saw- that of the ethanol industry - did not have to happen here and suggests that it was targeted state incentives which are directly attributable to the decision to choose Iowa over other Midwest states by more than one-third of the ethanol industry. The same dynamic, the report suggests, exists today relative to the biorenewable chemical industry. 

About nine months ago, I blogged about the tremendous opportunity seen in a coming transition from petroleum-based feedstocks to bio-based feedstocks for some of the world’s highest-value chemicals [Why Iowa needs to think like an oil company; May 27, 2015] and how important it was that Iowa leverage its virtually unmatched domestic competitive position to become the destination of choice for biochemical investment in the same way we became the preferred choice for biofuels investment.  I wrote the piece as the Iowa Legislature was debating a proposal to create an economic development tax credit to help entice the industry to choose Iowa, just as we did as a state more than a decade ago to entice biofuels investment. The measure failed [for a quick analysis of what happened, click here and scroll halfway down].

Part of the urgency I suggested we had as a state in 2015 to be a first mover was the fact that other states had begun talking about creating their own biorenewable chemical economic development legislation, and it behooved Iowa to be the first. With the legislature’s failure to act in 2015, the first mover window closed; Minnesota passed the nation’s first biochem legislation last year. Despite that, the 86th Iowa General Assembly has an opportunity before it in 2016 to enact what would be the country’s strongest economic development incentive to help grow the biorenewable chemical industry here, where it belongs.

What’s different this year than last? Thanks to the Hayes report, we’ve got the data to support the assertion that the biochemical industry holds exceptional promise for job creation in our state, much as the biofuels industry did and continues to do.  Among the report’s findings:

  • First-generation biofuels have been important economic drivers for the state of Iowa. Ethanol production alone in Iowa accounts for $2.23 billion per year in state GDP and supports more than 8,693 jobs. However, due to a new Renewable Fuel Standard which rolls back ethanol blend requirements to pre-2007 levels and ongoing feedstock limitations for biodiesel, alternative value-added bioproducts are critical to the future growth of the biomanufacturing industry in Iowa. 
  • Project opportunity exists today. At least five potential bio-based chemical production projects were identified through an industry interview process to as part of the report.  Representatives of each project indicated a biorenewable chemical production tax credit would be fundamental to the ultimate location decision in or outside Iowa.
  • Iowa has competitive advantages in several subfields of the emerging biorenewable chemicals industry. This advantage arises from
    • The availability of byproducts such as glycerin and distillers oils from first-generation biofuels facilities
    • The existence of several underutilized wet mills in Iowa, or close to Iowa
    • The fact that first-generation biofuels can themselves be upgraded into higher valued chemicals.
  • Iowa’s research and technological infrastructure in biorenewable chemicals and materials is second to none. The National Science Foundation Engineering Research Center for Biorenewable Chemicals (CBiRC) led by ISU is the only competitively awarded federal research center solely dedicated to the development of biobased chemicals. Key capital infrastructure needed for biobased chemical development exists at ISU through the BioCentury Research Farm and the Bioeconomy Institute and the University of Iowa through the Center for Biocatalysis and Bioprocessing (CBB). The collective capabilities of these entities for enabling biobased chemicals exceeds those available in any other states.
  • The global petrochemical industry developed in clusters of close proximity to feedstock sources: oil refineries. The bio-based chemicals industry will develop in a similar manner - the economics of agglomeration suggests that industrial biomanufacturing clusters will develop from established biomanufacturing sites rather than from new green field sites. Iowa has more deployed biomanufacturing capital assets than any other state. 

What now, you say?  Read the report [or at least the executive summary]. Contact your legislator. Let him or her know how important it is that we not let another year go by without enacting the biorenewable chemical tax credit.

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

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