Two Georgia companies have developed methods to use one of the state's most abundant resources-timber-to turn the complex carbohydrates of wood and wood waste into a usable fuel. Range Fuels and C2Biofuels are pioneering the concept.

Range Fuels, with a proposed plant in Soperton, Georgia, uses a two-step thermo-chemical gasification process. Atlanta-based C2Biofuels uses an enzyme to break the complex carbohydrates into 2 simple sugars and then uses a fermentation process (similar to old-fashioned moon shining) to make ethanol.

The recent, drastic changes in energy costs are obvious to anyone who has not spent the last year in total isolation. In response, energy policy is rapidly changing in the country. In 2007, Congress mandated that alternative sources of fuel must be used to replace petroleum-derived fuels by 2025. In response, innovative solutions are being proposed and explored.

Given Georgia's vast timber resources and the University of Georgia's recent receipt of a $20 million grant from the U.S. Department of Energy, the state is poised to lead the nation in cellulosic ethanol production.

"We're in a really high risk situation with the climbing rate of crude oil production," says Roger Reisert, CEO of C2Biofuels. "It's urgent we move forward."

To help forest landowners, the U.S. Forest Service has developed a short-rotation management system in which pines for biomass can be cheaply produced between more widely-spaced rows of traditionally planted pines. The Forest Service management system is designed to allow for an annual harvest of a biofuel, while still preserving the forests for traditional timber growth.

Some experts remain skeptical.

The Southeast's forestry industry had a 60-year bubble with the pulp and paper industry, said Marshall Thomas of F&W Forest Services, a consultancy based in Albany, Ga. As that industry moves abroad, he said, landowners are simply looking for a new buyer of their wood waste.

"Subsidized industries are dangerous because they can alter the market in a way that cannot be sustained," says Thomas. "You don't want to bring in a low subsidized industry to replace pulp and paper."

However Reisert says that his company's method is beneficial for both the landowner and the new and developing energy sources. Reisert said that wood for fuel can provide long term supply contracts for timber owners at stable prices, allowing the landowners to continue to grow trees for profit. Also, his company's process of converting wood waste into fuel is so efficient that the company will have excess energy to sell to the grid for public consumption, he said, and will keep the company's own plants at net zero energy usage.

With the emergence of new markets, Georgia's timber industry and the infant biofuels industry need to be ready to address new business opportunities as well as legal challenges.

Intellectual property law can be used to protect the new technologies in biofuels. Timber supply contracts will need to be drafted with an eye toward addressing fluctuations in supply caused based on weather, insects or diseases. The contracts also should address ownership of carbon credits created by the growing trees.

Businesses wishing to construct biodiesel plants will have to clear a number of hurdles and navigate unique legal challenges. These include: the method of ownership; the identification and procurement of the necessary permits; clauses dealing with the specifics of the design, engineering and construction of a biodiesel plant; contract provisions to ensure the correct feed stocks are received. Business and timber owners will need to find lawyers who specialize in the emerging field of sustainability law to provide quality help with these issues.

Facility financing also presents both challenges and opportunities. The industry is subsidized and therefore both public and private sources of financing are available. The nature and amounts of subsidies are constantly changing, so careful attention should be given to their availability and the criteria for obtaining them.

Outside consultants in the financial and legal professions will be needed to advise on debt and equity financing and available public grants, especially in providing assurances to creditors and investors that these emerging markets are creditworthy and profitable. It is advisable to ask such professionals not only ensure compliance at the federal, state and local level, but to ensure that the company is taking advantage of all available tax credits and other incentives.

Additional compliance requirements are emerging. Legal professionals can assist in ensuring companies and individuals meet registration and reporting requirements with state government and the federal Environmental Protection Agency. These requirements must also be kept up-to-date.

This is especially important in regards to the government's currently mandated "Renewable Fuel Standard." The structure, deadlines, and requirements should be carefully monitored, both to remain in compliance and to take advantage of opportunities presented by the system.

Moreover, the new industry needs to proceed with caution and respect for the environmental impact on the forests. Although short rotation trees can be planted around wetlands to control erosion, filter stormwater runoff, and preserve habitat; shorter harvest times can significantly impact erosion and water quality in many areas.

Landowners who implement new processes will want to consult with environmental experts to ensure that they are not opening themselves up to government enforcement actions. One such expert, Thomas, cautions that failure to do so could be traumatic to Georgia's ecosystem.

"If we go to short-rotation forestry, it's really going to change the nature and the landscape of forests in the South," says Thomas. "The risk is that they force a change in the landscape so that we wind up with the south looking the way it did in the 1930s."

New problems demand innovative solutions. The use of an abundant to provide for our future energy needs is spawning an exciting new industry with potential benefits to emerging businesses, existing timber owners, and the public. Careful consideration of the financial, legal and environmental uses involved will help those who participate in the development of the biofuels industry in Georgia to accomplish their business and sustainability goals.

Stephen E. O'Day, a partner at Smith, Gambrell & Russell, has more than 29 years of legal experience, and expertise in environmental litigation, consultation and leads. He leads the firm's Sustainability Practice Group. Mr. O'Day works with clients on environmental regulations, environmental issues in transactions and contracts, administrative proceedings and litigation.

Jessica Lee Reece is an associate in the Sustainability Practice Group at Smith, Gambrell & Russell. Her practice specializes in environmental and natural resources law. She counsels clients on environmental issues in transactions, contracts, regulatory compliance, and litigation.

Smith, Gambrell & Russell's Sustainability Practice Group offers an interdisciplinary approach to provide clients with a "one-stop-shop" for all of their sustainability needs. The Group includes experts in environmental law, land use, real estate, timber, construction, corporate law, mergers and acquisitions, corporate finance, intellectual property, tax law.

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The Future of Biomass