Ethanol: Fact, Fiction, Reality: Natural Gas Find Benefits Ethanol Production

Professors at Penn State University are announcing the discovery of a significant natural gas reserve tucked in the Northern Appalachian mountain range. According to Terry Engelder, a professor of geosciences at PSU, the natural gas find could hold as much as 516 trillion cubic feet of natural gas. To put that into perspective, the United States uses approximately 30 trillion cubic feet of natural gas per year and the amount of proven natural gas reserves in the United States has been dropping over the past few years. This find, if realized, would be worth trillions of dollars to the United States' energy economy, according the Engelder.

What this means for the ethanol industry is that a major energy requirement to produce ethanol is now in greater abundance and will hopefully be available for a cheaper price. Natural gas prices are currently $15.1 per thousand cubic feet, up 61% from the same time 4 years ago. Since the use of natural gas in the production of ethanol, (used in the distillation process and in drying the DDGS), can account for approximately 2/3rds of the total energy and a large part of the cost to produce ethanol is used to purchase natural gas, it would be great news to the ethanol industry if gas prices could recede. To put things into perspective, it is estimated the 16% of the natural gas used by the state of Iowa is used by our ethanol plants. Although scientists are working hard to displace the need to use natural gas, and some ethanol plants have been built to work using coal instead of natural gas, coal power has notoriously negated much of the greenhouse gas emission benefits realized using ethanol and new technologies to displace the use of natural gas have not yet matured. Until that time comes, ethanol plants will rely on natural gas and moderating prices could have a large beneficial affect on the industry, especially in these times of tight economics.

Below is a picture of the Marcellus Shale, where the new natural gas field was found, from the United States Geological Survey USGS. The Highlighted area is the entire Appalatian area of interest to natural gas production, while the Marcellus Shale encapsulates the lower New York and upper Pennsylvania areas.