By JEFF BEACH
Red Trail Energy is partnering with Indigo Ag, which provides software and monitoring tools to calculate a carbon intensity score. While some farmers may need to adopt more climate-friendly practices, some may need to just provide documentation of the way they already farm.
“We’re really just in the discovery phase on how all this is going to work,” Red Trail CEO Jodi Johnson told the North Dakota Monitor.
Corn growers and the ethanol industry are learning how to navigate the emerging low-carbon fuel market that offers premium prices for sustainable practices.
For an ethanol plant to tap into a low-carbon market, it must lower its carbon intensity score. One way Red Trail was able to do that was investing about $35 million in a carbon capture and sequestration system.
Carbon is captured from the fermentation process of turning corn into ethanol, compressed and then sent by a pipeline to an underground storage area.
Red Trail, at Richardton in southwest North Dakota, has the advantage of being in an area with the right geology for underground storage. It began capturing carbon in 2022, the first ethanol plant in the nation to do so.
The partnership with Indigo Ag is another step in lowering that score.
For ethanol plants, corn production is assigned a standard carbon intensity, or CI score, that contributes to the overall score of the ethanol plant. But by documenting sustainable farming practices, the CI score of the corn and the ethanol plant can be lowered, making the ethanol produced from that corn more valuable.
Chris Malone of Indigo Ag said there are two key steps for farmers to take advantage of the low-carbon trend in the industry.
The first is strategic — understanding that there is value in producing corn with a smaller carbon footprint.
The second is operational — actually participating in a program that may reward the low-carbon efforts.
Malone said some of the most significant ways to lower the CI score are reducing tillage and using cover crops. Both those practices facilitate naturally storing carbon in the soil.
Another area is changing how much or what type of fertilizer is used, with some fertilizer produced with the help of renewable energy.
Farmers typically use some sort of record-keeping software. That data can be shared with Indigo Ag, which also will use satellite imagery to monitor farm practices.
“It’s a relatively light ask of the farmer,” Malone said.
Johnson said farmers on Red Trail’s board of directors advocated for the program.
Johnson didn’t have an estimate for what kind of premium Red Trail might be able to offer. Red Trail will begin contracting with farmers in June for corn being grown this year and to be delivered to the ethanol plant in 2025.
A tax credit, the Clean Fuel Production Credit, also known as the 45Z, begins in 2025.
However, Red Trail already earns a tax credit, the 45Q, for its carbon storage and is not able to collect both.
Johnson said the real value to Red Trail in the program is selling into the low-carbon fuel market.
States with a Low-Carbon Fuel Standard include California, Oregon and Washington. Canada now has a national standard, creating a premium price for low-carbon fuel.
Johnson said Oregon has been a good market for Red Trail, but regulations that vary from state to state are a challenge.
She said Red Trail is still probably two years away from tapping into the California market.
David Ripplinger is an associate professor at North Dakota State University who specializes in renewable energy.
“It’s almost like the next chapter is starting to be written,” Ripplinger said.
There are other companies similar to Indigo Ag that an agribusiness may partner with on calculating a carbon score.
He advised having an attorney review the contract to make sure farmers understand they know what they are promising.
As far as changing practices, some are less of a commitment than others. Trying cover crops on some acres one year is much different than committing to a no-till system that requires different machinery and soil-health benefits that may take years to develop.
Johnson said Red Trail hopes about a third of the corn it needs will come from growers enrolled in the program. She said Red Trail buys from a wide area, with about half the corn coming from within a 100-mile radius of Richardton. It also brings in corn from South Dakota, Montana and eastern North Dakota.
Red Trail is looking at other ways to lower its carbon score including a project to generate its own electricity.
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