THE NEW FUEL FRONTIER: BIOMASS CONTRACTING

Article Written By: L. Paul Goeringer, Dr. H.L. Goodwin, and Dr. Michael Popp

In the 2006 State of the Union address, former President George W. Bush announced a plan to fund research into the production of ethanol from sources other than corn, including switchgrass, wood chips, and stalks from food crops. Most ethanol is derived from corn, but corn alone cannot supply enough ethanol to fully meet the United States' energy needs. New techniques are able to produce ethanol from plant cellulose, which is found in the cellular walls of all forms of plant life. There are many sources of suitable cellulose for ethanol production collectively called "biomass.

This article will discuss considerations in drafting a biomass production contract for farmers or cellulosic ethanol producers. Section II(A)(1) will discuss basic contract law principles in the context of the biomass industry. Section II(A)(2) will provide an overview of the Uniform Commercial Code (UCC) provisions which may apply to biomass. Section II(B) will analyze terms which would typically be included in a biomass production contract. Section II(C) will explain the consequences of possible financial distress or bankruptcy of the cellulosic ethanol producer. Although not exhaustive, this article will provide an overview of the common risks and issues that could arise in contracting for the sale of biomass.

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