EMMETSBURG - Each fall in corn country, big combines prowl through the fields, stripping the valuable kernels from ears and spitting out bits of cornstalk, leaves and empty cobs.

The residue, which used to lie on the ground and rot, has become a money crop for the next generation of biofuel. Poet LLC, the nation's leading ethanol producer, says it is determined to open a commercial-scale cellulosic ethanol plant in 2013 next to its existing corn-ethanol plant in this northern Iowa community.

The $250 million project could be the first such plant in the nation. Last month, the U.S. Energy Department conditionally committed to a $105 million loan guarantee for it.

"The technology is there - it is definitely to the point where we can build the best-in-class plant, and the trick is getting these plants up," said Brooke Coleman, executive director of the Advanced Ethanol Council, which represents many of the approximately dozen U.S. companies working to commercialize cellulosic ethanol.

Cellulosic ethanol is no different from corn ethanol except that it can be made from non-food material, including wood waste, garbage, wheat straw, prairie grass and the residue from corn called stover. At least 25 companies around the world, including Poet, have pilot or demonstration cellulosic ethanol plants, Coleman said.

Four years ago, the federal government predicted a rapid ramp-up in U.S. production to 250 million gallons of cellulosic biofuel by 2011. As recession hit and lenders got the jitters, not a single commercial cellulosic ethanol plant got built - and just 4.1 million gallons is projected to be produced this year.

Poet, based in Sioux Falls, S.D., says it hopes to break ground this fall on the 25 million-gallon-a-year cellulosic ethanol plant known as Project Liberty. The project already is causing profound changes in Emmetsburg, a town of 3,578 surrounded by corn and soybean fields.

What's happening here offers a glimpse at Poet's vision for its 26 other Midwestern corn-ethanol plants.

At each plant, the company says, a companion cellulosic plant eventually will be built. Ethanol from corn kernels won't go away. Instead, farmers would expand into biomass harvesting and earn more money from their cornfields. Harvesting the new money crop turns out to be not so simple. That's why Poet began working on its biomass supply three years before it expects the plant to open. "I didn't think it would be this hard," said Emmetsburg farmer Bruce Nelson, describing his work last fall and winter to bale and transport thousands of tons of stover to Poet's massive storage yard at the edge of town. The yard, with long lines of round bales stacked four high, was built by Poet last year for $3.5 million and occupies an area the size of 17 football fields. It can hold 40,000 bales of stover. Most are roughly 5 feet in diameter and 6 feet wide. One round bale can make 40 to 60 gallons of ethanol. Yet the yard holds only enough biomass to supply the plant for a few weeks. About 15 times that much residue will need to be gathered and trucked all year long from cornfields within 30 miles, Poet says. It is seeking residue from about one in four corn acres in that radius. Stover is collected like hay from fields in late fall after the harvest - a time when early snows can bury it. That worries some people working on cellulosic ethanol. "We felt it was too risky to bet your whole plant on," said Douglas Rivers, director of research and development for ICM, an ethanol company based in Colwich, Kan., that will test a range of crops at a pilot cellulosic plant being built in St. Joseph, Mo. Jim Sturdevant, who directs Poet's Project Liberty, said he isn't alarmed about the risk. "Even with some snow on the ground, the farmer can come along later and pick up ... corn-crop residue," he said. (EDITORS: BEGIN OPTIONAL TRIM) Many farmers didn't harvest stover in the past. It's used for cattle bedding and mixed with feed, but Emmetsburg and many other places in the Corn Belt didn't have a big market for it. To create one, Poet last year paid 85 local farmers to harvest 56,000 tons of it, and will expand collections this fall. Most bales were burned for energy at another Poet plant since they weren't needed for ethanol. After farmers collect stover, the bales are stored temporarily at the edge of fields. But problems happened when farmers tried to move the bales to the plant over the winter. "What we found is that the bales freeze to the ground," said Nelson, who with a friend launched a contract-baling business last year. Kyle Elbert, 20, who lives on a family farm south of Emmetsburg, entered the biomass business last year, buying specialized baling and loading equipment and contracting with local farmers. This fall he plans to buy another baling machine, hire two full-time employees and haul 10,000 stover bales to Poet. "It is time-consuming and not much fun," Elbert said of his long winter of loading, strapping down and hauling corn bales on flat-bed trucks. But he said he is making money.

The other big challenges for cellulosic ethanol have been technology and financing. The green parts of corn, unlike the starch in kernels, don't easily give up their two kinds of sugar for fermentation into alcohol. Acid, then enzymes are required to strip glucose and xylose from plant fiber. Then the sugars are fermented simultaneously with special yeasts, said Dave Bushong, a chemical engineer who directs Poet's research center and cellulosic pilot plant in Scotland, S.D.

"It is a new venture," he said of the push to commercial production. "We have done everything we can do to de-risk it. ... There are still challenges."

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