Osage Bio Energy Fuels Up With $300M for Barley Ethanol

As global food prices rise and food riots rock the developing world, grain-based biofuels are coming under heavy fire. But a new grain-based ethanol startup has just secured $300 million for barley-based fuel and it claims its methods won’t impact food supplies — one, because the company will produce locally, and two, because barley is a less energy-intensive crop than corn. Glen Allen, Va.-based Osage Bio Energy received the large private equity commitment from First Reserve Corp. and will use it to build four biorefineries.

Osage Bio Energy was founded in 2007 to pursue barley-based ethanol under parent company Osage Inc., which distributes some 100 million gallons of ethanol annually in the Southeast. There are nearly five million acres of fallow farmland in the Mid-Atlantic and Southeast every winter, Osage estimates, and barley, as a winter crop that requires less fertilization than corn, could be grown locally on these millions of acres and used in their nearby biorefineries.

The startup also says its barley-based ethanol qualifies as an “advanced biofuel” under the Renewable Fuel Standard as part of the Energy Independence and Security Act of 2007. These requirements stipulate that an “advanced biofuel” not be derived from corn, that it use a renewable feedstock and reduce greenhouse gases by 50 percent.

But there are plenty of problems with barley as a biofuel feedstock. The USDA has been looking at its potential, but argues that barley’s abrasive hull, its high viscosity in fermentation, and its low-starch content make ethanol production costs prohibitively high. The USDA also says the byproduct from distilling barley isn’t suitable for livestock.

We’re awaiting comment from Osage so that we can better understand their plan to overcome these barriers. The company says that its biorefineries will also produce a protein co-product that it can feed to cattle, poultry and swine, a potential additional revenue source. Given that this food shortage is already claiming lives, we certainly hope that all future grain-based biofuels are thoroughly vetted.