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Cap-and-trade legislation 'lethal' to beet industry, says American Crystal exec

If "cap-and-trade" legislation were to move forward as currently framed, it would be the death knell to the "world-class efficient" sugar beet industry in the Red River Valley, and much of the rest of the country, a top executive of American Crystal Sugar Co. said this week.

David Berg, American Crystal's president and chief executive for nearly three years, summed up the effect of the House version of climate control legislation and expanded on issues he alluded to at December's annual company meeting.

Beet processing plants that farmers own in the Red River Valley are entirely vulnerable, even though American farmers in general are exempted from carbon credit requirements, Berg told academics and agribusiness officials gathered for a North Dakota State University-organized climate change conference.

Some 20 speakers addressed aspects of climate change at the conference, "Alternative Policies on Climate Change and Their Implications on U.S. Agricultural Economy." But they didn't always agree on the impact of pending legislation or regulation. Berg said if beet producers pay for carbon credits, the industry will become a "historical anachronism" within two or three decades.

"Without the sugar beet factory, the beet has no value at all," Berg said, and later added, "and without burning fossil fuel, you're not going to convert beets into sugar."

The House version of the bill passed, while the Senate version has yet to be voted on.

Berg said each of Crystal's five factories has a $500 million replacement value.

"You might say that the factory is an extension of the farm," Berg said, noting that the entire beet sugar industry in the past several years has converted to farmer-owned co-ops.

"Everything we do in that factory requires a significant amount of energy," Berg said, listing the pieces of the process required to convert sugar beets to crystalline sugar - diffusing, juice purifying, evaporating, crystallizing and drying.

The beet industry's carbon use efficiency has improved significantly in the past 20 years, but largely as a cost-saving measure - not for environmental reasons. In 1990, Crystal calculated that it created 1.55 tons of carbon dioxide-equivalent for every ton of sugar produced. Now, that efficiency is closer to one-to-one.

"Given the right amount of time and investment, we have made important strides," Berg said.

Still, because Crystal produces a third of the beets in the United States, it produces about a third of the nation's beet sugar carbon. If the beet sugar industry disappears, the U.S. cane industry would be hard-pressed to replace it and Americans would still use sugar but buy it from foreign producers, he said.

About two-thirds of the world's supply comes from cane sugar, and because the byproducts are used to fire some of the plants, to "a partial extent, they're off the hook" in climate control legislation.

But the sugar beet industry "in total is in jeopardy," he said.

Beets include 17 to 18 percent sugar, 7 to 10 percent fiber, and the rest is water. Beets in this region historically have been stored using frigid December-January temperatures. This has tended to increase use of the fixed costs of factories - up to 285 days in some years, compared to an average of 150 to 180 days for many U.S. competitors. But it also means variable costs go up because the factories are processing frozen beets.

Berg said the co-ops use coal or natural gas to fire plants, but that natural gas is often not feasible. It might be feasible in the Fargo-Moorhead area, where companies move natural gas to heat homes. But it's not available in communities such as Drayton, N.D., where natural gas pipelines haven't been placed.

Crystal has experimented with burning its biomass-fired boilers, but he thinks "at best, it'll be a supplement." Wind-powered electrical power isn't consistent enough for the process.

"Like it or not, we're more or less married to fossil fuel," Berg said.