State's "Farm-to-Fuel" initiative lacks the political will to ensure fair and healthy competition in the marketing of ethanol blends.
By Brian J. Donovan
August 1, 2009
According to the U.S. Energy Information Administration, for the period from January 1, 2003 to January 1, 2009, the State of Florida consumed an average of approximately 23.1 million gallons of gasoline per day. This equates to an average of approximately 8.43 billion gallons of gasoline per year.
Beginning December 31, 2010, all gasoline sold or offered for sale in Florida by a terminal supplier, importer, blender, or wholesaler shall be blended gasoline. "Blended gasoline" means a mixture of 90 to 91 percent gasoline and 9 to 10 percent fuel ethanol, by volume, that meets the specifications as adopted by the Florida Department of Revenue. The fuel ethanol portion may be derived from any agricultural source.
For discussion purposes, let us assume Florida's average annual consumption of gasoline does not change. Beginning December 31, 2010, the State of Florida will require an annual supply of approximately 843 million gallons of fuel ethanol to meet its E10 mandate.
Ethanol Import Tariff
Ethanol imported into the United States is subject to two customs duties: an ad valorem tariff rate of 2.5 percent and a secondary tariff of 54 cents per gallon. The Ethanol Import Tariff of 1980 imposed the 54 cent-per-gallon tariff on imported ethanol. In many cases, this tariff negates lower production costs in other countries. For example, by some estimates, Brazilian ethanol production costs are roughly 50% lower than in the United States. A key motivation for the establishment of the tariff on imported ethanol was to offset the Blender’s Tax Credit incentive for ethanol-blended gasoline. Unless imports enter the United States duty-free, the tariff effectively negates the incentive for those imports.
Caribbean Basin Initiative
U.S. oil companies, due to a loophole in the Caribbean Basin Initiative (“CBI”), are currently allowed to import thousands of barrels of fuel ethanol every month without having to pay the 54-cent-per-gallon tariff.
The CBI was established in 1983 to promote a stable political and economic climate in the Caribbean region. As part of the initiative, duty-free status is granted to a large array of products from beneficiary countries, including fuel ethanol under certain conditions. If produced from at least 50% local feedstocks (e.g., ethanol produced from sugarcane grown in the CBI beneficiary countries), ethanol may be imported duty-free. If the local feedstock content is lower, limitations apply on the quantity of duty-free ethanol. Nevertheless, up to 7% of the U.S. market may be supplied duty-free by CBI ethanol containing no local feedstock. In this case, hydrous (“wet”) ethanol produced in other countries, historically Brazil or European countries, can be shipped to a dehydration plant in a CBI country for reprocessing. After the ethanol is dehydrated, it is imported duty-free into the United States. Currently, imports of dehydrated ethanol under the CBI are far below the 7% cap. CBI imports have the potential to increase significantly over the next few years, especially as the domestic market grows under the renewable fuels standard.
The issue is whether an oil company or refiner, or an affiliate of such oil company or refiner, that imports duty-free fuel ethanol from the Caribbean and subsequently blends the duty-free fuel ethanol with unblended gasoline in the State of Florida has an unfair competitive advantage in the marketing of motor fuel in the State of Florida.
Fair and Healthy Competition in the Marketing of Ethanol Blends
It was never the legislative intent of the U.S. Congress, nor the intent of the U.S. Environmental Protection Agency, to allow oil companies to be the sole beneficiaries of the blender’s tax credit. Section 6426 of the Internal Revenue Code creates a credit against the excise tax on taxable fuels. The excise tax credit is generally available to any person that blends alcohol or biodiesel with taxable fuel in a mixture. To qualify for the credit, a qualifying mixture must either be sold by the producer to a buyer for use by the buyer as a fuel or be used as a fuel in the trade or business of the producer.
Section 526.302 of the Florida Statutes clearly states the findings and intent of the Florida Legislature, “The Legislature finds that fair and healthy competition in the marketing of motor fuel provides maximum benefits to consumers in this state, and that certain marketing practices which impair such competition are contrary to the public interest. Predatory practices and, under certain conditions, discriminatory practices, are unfair trade practices and restraints which adversely affect motor fuel competition. It is the intent of the Legislature to encourage competition and promote the general welfare of citizens of this state by prohibiting such unfair practices.”
Section 526.203 of the Florida Statutes provides states:
“(2) FUEL STANDARD.--Beginning December 31, 2010, all gasoline sold or offered for sale in Florida by a terminal supplier, importer, blender, or wholesaler shall be blended gasoline.
(3) EXEMPTIONS.--The requirements of this act do not apply to the following:
(a) Fuel used in aircraft.
(b) Fuel sold for use in boats and similar watercraft.
(c) Fuel sold to a blender.”
Permitting oil companies to import relatively inexpensive duty-free foreign ethanol under the CBI and subsequently permitting only such oil companies and their affiliates to blend and receive the 45 cents-per-gallon blender’s tax credit impairs fair and healthy competition in the marketing of ethanol blends in the State of Florida. Independent ethanol producers in Florida clearly have the legal right, and must be assured the availability of unblended gasoline, to blend fuel ethanol and unblended gasoline to receive the 45 cents-per-gallon blender’s tax credit and be cost-competitive.
Florida: Leading Ethanol Producer or Leading Ethanol Importer?
Currently, not a single drop of fuel ethanol is produced in the State of Florida.
In November, 2007, Governor Charlie Crist led a five-day trade and economic development mission to São Paulo, Brazil. During the mission, coordinated by Enterprise Florida, Inc., Governor Crist was quoted as saying that he was determined to fight the U.S. tariff on ethanol, while making Florida a gateway for U.S. imports of the Brazilian biofuel.
As recently as January 30, 2009, the president of Gateway Florida, Brian C. Dean, traveled to the Dominican Republic and was quoted as saying that the State of Florida needs to find permanent suppliers of ethanol to cover a demand estimated at 786 million gallons starting next year, when it implements a norm calling for a 10% mix of that fuel in gasoline. Dean further stated, “Gateway Florida aims to get public policies implemented in Latin American and Caribbean countries to support the development of the ethanol and biofuels industry.”
Clearly, the ethanol import tariff should be repealed for the following reasons:
(a) Record prices for gasoline are increasing the costs of producing, transporting, and processing food products. Research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute 5.2 percent to retail food prices;
(b) Imported petroleum does not pay a tariff, yet clean, renewable ethanol from our own hemisphere is assessed a 54 cent-per-gallon tariff;
(c) Elimination of the ethanol import tariff would provide the U.S. with sufficient ethanol to move ethanol demand beyond being just a blending component in gasoline to a truer fuel alternative and create the required fueling infrastructure;
(d) The Energy Independence and Security Act of 2007 set a new RFS that starts at 9.0 billion gallons of renewable fuel in 2008 and rises to 36 billion gallons by 2022. Of the latter total, 21 billion gallons of renewable fuel in U.S. transportation fuel is required to be obtained from renewable fuel, other than ethanol derived from corn; and
(e) U.S. oil companies, due to a loophole in the CBI, are currently allowed to import thousands of barrels of ethanol every month without having to pay the 54 cents per gallon tariff.
Repeal of the 54 cent-per-gallon import tariff on foreign ethanol would create market competition by allowing U.S. blenders, not only oil companies, to purchase cheaper ethanol from foreign sources, which could help lower gas prices, increase the supply of ethanol to coastal markets, and ease the economic strain that is impacting the agriculture, food and beverage industries.
However, equally as clear:
(a) an oil company or refiner, or an affiliate of such oil company or refiner, that imports duty-free fuel ethanol from the Caribbean and subsequently blends the duty-free fuel ethanol with unblended gasoline in the State of Florida currently has an unfair competitive advantage in the marketing of motor fuel in the State of Florida; and
(b) an oil company or refiner, or an affiliate of such oil company or refiner, must not be allowed to have a monopoly on blending fuel ethanol with unblended gasoline when the fuel ethanol and unblended gasoline are blended in the State of Florida.
Currently, the sole beneficiaries of the duty-free import of fuel ethanol to Florida from the Dominican Republic, or any CBI nation, are the oil companies and refiners and their affiliates in Florida. These same oil companies and refiners and affiliates blend these duty-free ethanol imports with unblended gasoline in the State of Florida and capture the additional blender’s tax credit of 45 cents-per-gallon. As a result, the farmers/landowners and consumers never realize any benefit, rural economic development is ignored, and jobs are not created in Florida.
Rural Development and Job Creation
Beginning December 31, 2010, the State of Florida will need to import an annual supply of approximately 843 million gallons of fuel ethanol to meet its E10 mandate.
Let's calculate the Blender's Tax Credit:
(843 million gallons of imported ethanol per year)($0.45/gallon) = $379,350,000
This $379 million per year will go directly into the coffers of out-of-state oil companies. Not one cent of this $379 million per year will be made available for rural development and job creation in the State of Florida! I doubt this issue will be addressed at the 4th Annual Farm-to-Fuel Summit currently being held in Orlando.
The State of Florida has the resources to be the leading producer of advanced biofuel in the nation. At this point, the state merely lacks the political will to ensure fair and healthy competition in the marketing of ethanol blends.
Showing posts with label biofuel. Show all posts
Showing posts with label biofuel. Show all posts
Saturday, August 1, 2009
Independent Ethanol Producers in Florida Have the Legal Right to Receive Blender's Tax Credit
State's "Farm-to-Fuel" initiative lacks the political will to ensure fair and healthy competition in the marketing of ethanol blends.
By Brian J. Donovan
August 1, 2009
The issue is whether an independent ethanol producer that produces fuel ethanol in the State of Florida has a legal right to be a blender of fuel ethanol with unblended gasoline, and receive the $0.45 per gallon Blender's Tax Credit, when the fuel ethanol and unblended gasoline are blended in the State of Florida if such independent ethanol producer has been licensed or authorized by the Department of Revenue as a blender.
Relevant Federal Legislation
A. The American Jobs Creation Act of 2004
On October 22, 2004, President Bush signed into law the American Jobs Creation Act of 2004 (P.L. 108-357).
Effective January 1, 2005, the American Jobs Creation Act of 2004 established a new system for federal taxation of ethanol blends. The major changes are as follows:
• Eliminates the reduced rate of excise tax for gasohol blends containing 10%, 7.7%, and 5.7% ethanol, and instead, provides a 51 cents-per-gallon excise tax credit for each gallon of ethanol blended with gasoline. The new excise tax credit system is called the “Volumetric Ethanol Excise Tax Credit” (VEETC). In January, 2009, the excise tax credit was reduced to 45 cents-per-gallon for each gallon of ethanol blended with gasoline.
• Requires blenders to pay the full rate of tax (18.4 cents per gallon) on each gallon of a gasoline-ethanol mixture, but currently provides a 45 cents-per-gallon tax credit or refund for each gallon of ethanol used in the mixture.
• Allows blenders having excise tax liability to apply the excise tax credit against the tax imposed on the gasoline-ethanol mixture. For blenders having limited or no motor fuel excise tax liability, a refund may be claimed. IRS is required to provide refunds within 45 days, or if a claim is filed electronically, the refund must be paid within 20 days, or interest will accrue.
• Deposits all gasohol excise taxes into the Highway Trust Fund, and pays for the credit out of the General Fund.
B. Internal Revenue Code
Excise Tax. Section 4081 of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an excise tax on the removal of a taxable fuel from a refinery or terminal, entry of a taxable fuel into the United States, and sale of a taxable fuel, not previously taxed upon removal or entry. “Taxable fuel” for this purpose includes gasoline, diesel fuel and kerosene.
Excise Tax Credit. Section 6426 of the Code creates a credit against the excise tax on taxable fuels. The excise tax credit is generally available to any person that blends alcohol or biodiesel with taxable fuel in a mixture. To qualify for the credit, a qualifying mixture must either be sold by the producer to a buyer for use by the buyer as a fuel or be used as a fuel in the trade or business of the producer.
Relevant Florida Statutes
206.01 Definitions. - As used in this chapter:
(1) "Department" means the Department of Revenue.
(30) "Blender" means any person who blends any product with motor or diesel fuel and who has been licensed or authorized by the department as a blender.
286.29 Climate-friendly public business. - The Legislature recognizes the importance of leadership by state government in the area of energy efficiency and in reducing the greenhouse gas emissions of state government operations. The following shall pertain to all state agencies when conducting public business:
(5) All state agencies shall use ethanol and biodiesel blended fuels when available. State agencies administering central fueling operations for state-owned vehicles shall procure biofuels for fleet needs to the greatest extent practicable.
526.202 Legislative findings. - The Legislature finds it is vital to the public interest and to the state's economy to establish a market and the necessary infrastructure for renewable fuels in this state by requiring that all gasoline offered for sale in this state include a percentage of agriculturally derived, denatured ethanol. The Legislature further finds that the use of renewable fuel reduces greenhouse gas emissions and dependence on imports of foreign oil, improves the health and quality of life for Floridians, and stimulates economic development and the creation of a sustainable industry that combines agricultural production with state-of-the-art technology.
526.203 Renewable fuel standard. -
(1) DEFINITIONS. - As used in this act:
(a) "Blender," "importer," "terminal supplier," and "wholesaler" are defined as provided in s. 206.01.
(b) "Blended gasoline" means a mixture of 90 to 91 percent gasoline and 9 to 10 percent fuel ethanol, by volume, that meets the specifications as adopted by the department. The fuel ethanol portion may be derived from any agricultural source.
(c) "Fuel ethanol" means an anhydrous denatured alcohol produced by the conversion of carbohydrates that meets the specifications as adopted by the department.
(d) "Unblended gasoline" means gasoline that has not been blended with fuel ethanol and that meets the specifications as adopted by the department.
(2) FUEL STANDARD. - Beginning December 31, 2010, all gasoline sold or offered for sale in Florida by a terminal supplier, importer, blender, or wholesaler shall be blended gasoline.
(3) EXEMPTIONS. - The requirements of this act do not apply to the following:
(a) Fuel used in aircraft.
(b) Fuel sold for use in boats and similar watercraft.
(c) Fuel sold to a blender.
526.207 Studies and reports. -
(1) The Florida Energy and Climate Commission shall conduct a study to evaluate and recommend the life-cycle greenhouse gas emissions associated with all renewable fuels, including, but not limited to, biodiesel, renewable diesel, biobutanol, and ethanol derived from any source. In addition, the commission shall evaluate and recommend a requirement that all renewable fuels introduced into commerce in the state, as a result of the renewable fuel standard, shall reduce the life-cycle greenhouse gas emissions by an average percentage. The commission may also evaluate and recommend any benefits associated with the creation, banking, transfer, and sale of credits among fuel refiners, blenders, and importers.
(2) The Florida Energy and Climate Commission shall submit a report containing specific recommendations to the President of the Senate and the Speaker of the House of Representatives no later than December 31, 2010.
526.302 Legislative findings and intent. - The Legislature finds that fair and healthy competition in the marketing of motor fuel provides maximum benefits to consumers in this state, and that certain marketing practices which impair such competition are contrary to the public interest. Predatory practices and, under certain conditions, discriminatory practices, are unfair trade practices and restraints which adversely affect motor fuel competition. It is the intent of the Legislature to encourage competition and promote the general welfare of citizens of this state by prohibiting such unfair practices.
Market Reality
Currently, oil companies refuse to sell unblended gasoline to prospective independent ethanol producers in Florida. As a result, the sole beneficiaries of the 45 cents-per-gallon blender’s tax credit are the oil companies, blenders affiliated with oil companies, and oil company shareholders. The farmers/landowners, independent ethanol producers and consumers never realize any benefit from the blender’s tax credit; rural economic development is ignored; and U.S. jobs are not created.
Not a single drop of fuel ethanol is produced in the State of Florida. One reason for the lack of development of a fuel ethanol industry may be attributed to the fact that oil companies, or affiliates of oil companies, currently have a monopoly on blending fuel ethanol with unblended gasoline in Florida. This monopoly is apparently supported by the Florida Energy & Climate Commission (“FECC”) which recently rejected a proposal by an independent ethanol producer to use variable blending pumps in Florida.
If independent ethanol producers are able to be blenders of fuel ethanol and unblended gasoline, and thereby receive the 45 cents-per-gallon tax credit, small-capacity ethanol producers would be able to enter the market. The result would be fair and healthy competition in the marketing of ethanol blends, broad-based rural economic development and job creation for Floridians.
Independent ethanol producers in Florida clearly have the legal right, and must be assured the availability of unblended gasoline, to blend fuel ethanol and unblended gasoline to receive the 45 cents-per-gallon blender’s tax credit and be cost-competitive. The State of Florida has the resources to be the leading producer of advanced biofuel in the nation. At this point, the state merely lacks the political will to ensure fair and healthy competition in the marketing of ethanol blends.
By Brian J. Donovan
August 1, 2009
The issue is whether an independent ethanol producer that produces fuel ethanol in the State of Florida has a legal right to be a blender of fuel ethanol with unblended gasoline, and receive the $0.45 per gallon Blender's Tax Credit, when the fuel ethanol and unblended gasoline are blended in the State of Florida if such independent ethanol producer has been licensed or authorized by the Department of Revenue as a blender.
Relevant Federal Legislation
A. The American Jobs Creation Act of 2004
On October 22, 2004, President Bush signed into law the American Jobs Creation Act of 2004 (P.L. 108-357).
Effective January 1, 2005, the American Jobs Creation Act of 2004 established a new system for federal taxation of ethanol blends. The major changes are as follows:
• Eliminates the reduced rate of excise tax for gasohol blends containing 10%, 7.7%, and 5.7% ethanol, and instead, provides a 51 cents-per-gallon excise tax credit for each gallon of ethanol blended with gasoline. The new excise tax credit system is called the “Volumetric Ethanol Excise Tax Credit” (VEETC). In January, 2009, the excise tax credit was reduced to 45 cents-per-gallon for each gallon of ethanol blended with gasoline.
• Requires blenders to pay the full rate of tax (18.4 cents per gallon) on each gallon of a gasoline-ethanol mixture, but currently provides a 45 cents-per-gallon tax credit or refund for each gallon of ethanol used in the mixture.
• Allows blenders having excise tax liability to apply the excise tax credit against the tax imposed on the gasoline-ethanol mixture. For blenders having limited or no motor fuel excise tax liability, a refund may be claimed. IRS is required to provide refunds within 45 days, or if a claim is filed electronically, the refund must be paid within 20 days, or interest will accrue.
• Deposits all gasohol excise taxes into the Highway Trust Fund, and pays for the credit out of the General Fund.
B. Internal Revenue Code
Excise Tax. Section 4081 of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an excise tax on the removal of a taxable fuel from a refinery or terminal, entry of a taxable fuel into the United States, and sale of a taxable fuel, not previously taxed upon removal or entry. “Taxable fuel” for this purpose includes gasoline, diesel fuel and kerosene.
Excise Tax Credit. Section 6426 of the Code creates a credit against the excise tax on taxable fuels. The excise tax credit is generally available to any person that blends alcohol or biodiesel with taxable fuel in a mixture. To qualify for the credit, a qualifying mixture must either be sold by the producer to a buyer for use by the buyer as a fuel or be used as a fuel in the trade or business of the producer.
Relevant Florida Statutes
206.01 Definitions. - As used in this chapter:
(1) "Department" means the Department of Revenue.
(30) "Blender" means any person who blends any product with motor or diesel fuel and who has been licensed or authorized by the department as a blender.
286.29 Climate-friendly public business. - The Legislature recognizes the importance of leadership by state government in the area of energy efficiency and in reducing the greenhouse gas emissions of state government operations. The following shall pertain to all state agencies when conducting public business:
(5) All state agencies shall use ethanol and biodiesel blended fuels when available. State agencies administering central fueling operations for state-owned vehicles shall procure biofuels for fleet needs to the greatest extent practicable.
526.202 Legislative findings. - The Legislature finds it is vital to the public interest and to the state's economy to establish a market and the necessary infrastructure for renewable fuels in this state by requiring that all gasoline offered for sale in this state include a percentage of agriculturally derived, denatured ethanol. The Legislature further finds that the use of renewable fuel reduces greenhouse gas emissions and dependence on imports of foreign oil, improves the health and quality of life for Floridians, and stimulates economic development and the creation of a sustainable industry that combines agricultural production with state-of-the-art technology.
526.203 Renewable fuel standard. -
(1) DEFINITIONS. - As used in this act:
(a) "Blender," "importer," "terminal supplier," and "wholesaler" are defined as provided in s. 206.01.
(b) "Blended gasoline" means a mixture of 90 to 91 percent gasoline and 9 to 10 percent fuel ethanol, by volume, that meets the specifications as adopted by the department. The fuel ethanol portion may be derived from any agricultural source.
(c) "Fuel ethanol" means an anhydrous denatured alcohol produced by the conversion of carbohydrates that meets the specifications as adopted by the department.
(d) "Unblended gasoline" means gasoline that has not been blended with fuel ethanol and that meets the specifications as adopted by the department.
(2) FUEL STANDARD. - Beginning December 31, 2010, all gasoline sold or offered for sale in Florida by a terminal supplier, importer, blender, or wholesaler shall be blended gasoline.
(3) EXEMPTIONS. - The requirements of this act do not apply to the following:
(a) Fuel used in aircraft.
(b) Fuel sold for use in boats and similar watercraft.
(c) Fuel sold to a blender.
526.207 Studies and reports. -
(1) The Florida Energy and Climate Commission shall conduct a study to evaluate and recommend the life-cycle greenhouse gas emissions associated with all renewable fuels, including, but not limited to, biodiesel, renewable diesel, biobutanol, and ethanol derived from any source. In addition, the commission shall evaluate and recommend a requirement that all renewable fuels introduced into commerce in the state, as a result of the renewable fuel standard, shall reduce the life-cycle greenhouse gas emissions by an average percentage. The commission may also evaluate and recommend any benefits associated with the creation, banking, transfer, and sale of credits among fuel refiners, blenders, and importers.
(2) The Florida Energy and Climate Commission shall submit a report containing specific recommendations to the President of the Senate and the Speaker of the House of Representatives no later than December 31, 2010.
526.302 Legislative findings and intent. - The Legislature finds that fair and healthy competition in the marketing of motor fuel provides maximum benefits to consumers in this state, and that certain marketing practices which impair such competition are contrary to the public interest. Predatory practices and, under certain conditions, discriminatory practices, are unfair trade practices and restraints which adversely affect motor fuel competition. It is the intent of the Legislature to encourage competition and promote the general welfare of citizens of this state by prohibiting such unfair practices.
Market Reality
Currently, oil companies refuse to sell unblended gasoline to prospective independent ethanol producers in Florida. As a result, the sole beneficiaries of the 45 cents-per-gallon blender’s tax credit are the oil companies, blenders affiliated with oil companies, and oil company shareholders. The farmers/landowners, independent ethanol producers and consumers never realize any benefit from the blender’s tax credit; rural economic development is ignored; and U.S. jobs are not created.
Not a single drop of fuel ethanol is produced in the State of Florida. One reason for the lack of development of a fuel ethanol industry may be attributed to the fact that oil companies, or affiliates of oil companies, currently have a monopoly on blending fuel ethanol with unblended gasoline in Florida. This monopoly is apparently supported by the Florida Energy & Climate Commission (“FECC”) which recently rejected a proposal by an independent ethanol producer to use variable blending pumps in Florida.
If independent ethanol producers are able to be blenders of fuel ethanol and unblended gasoline, and thereby receive the 45 cents-per-gallon tax credit, small-capacity ethanol producers would be able to enter the market. The result would be fair and healthy competition in the marketing of ethanol blends, broad-based rural economic development and job creation for Floridians.
Independent ethanol producers in Florida clearly have the legal right, and must be assured the availability of unblended gasoline, to blend fuel ethanol and unblended gasoline to receive the 45 cents-per-gallon blender’s tax credit and be cost-competitive. The State of Florida has the resources to be the leading producer of advanced biofuel in the nation. At this point, the state merely lacks the political will to ensure fair and healthy competition in the marketing of ethanol blends.
Saturday, July 25, 2009
Oil Companies and Ethanol Plants: Slash, Burn and Buy
RenewableEnergyWorld.com
by David Blume
February 26, 2009
With all of the corporate bailouts and economic disasters our country is facing at present, it really is easy to welcome the wallet-relief provided by currently low transportation and heating fuel prices. As the saying goes, “Why look a gift horse in the mouth?” It isn’t comfortable to consider that the relatively calm waters international oil prices present could be covering an insidious undertow that is quietly dragging our renewable and alcohol fuel industry down to the OPEC equivalent of Davey Jones’s Locker where it will lay submerged until the big oil pumps finally do run dry.
In some places around the country today we are paying US $1.89 a gallon for gas (or even less). However, it is important to point out that with that short term windfall comes the ominous realization that nearly 25% of our Alcohol fuel producing industry will be going belly-up soon. That is correct. Many investor-backed as well as entrepreneurially driven Alcohol plants currently producing in the US may be bankrupted by the end of February 2009.
It is very likely that 40 of the nearly 200 alcohol fuel plants we have working now will be victims of what I refer to as big oil’s slash, burn and buy strategy to collapse, consume and control our fledgling alcohol fuel industry.
The obvious poster child for this tragedy is VeraSun. Declaring bankruptcy recently in a federal court in Delaware, VeraSun represents a considerable failure for the alcohol fuel industry. Having fallen from the vanguard of ethanol plants funded by venture capital, its collapse is having a rip-tide effect through the investment (and sadly) the farming community as well. Once a mighty force for alcohol expansion VeraSun is now reduced in value to pennies on the dollar. [Editor's note, for more on the takeover bid, read RenewableEnergyWorld.com's story, Ethanol Industry Eyes Valero's Bid for Verasun.]
How did this happen? What is the sleight of hand big oil is using to lull us to sleep at the wheel, while it methodically implements the conquest and enslavement of America’s independent and sustainable energy future?
Here’s the answer. Oil companies are using the commodities futures trading system to artificially drive up the price of corn while depressing the price of alcohol, essentially gaming the futures market. The impact of artificially high corn prices is that plants like VeraSun (that aren’t built and supported by farm-owners, but rather by capital investors) had to pay high prices to compete with big oil to buy corn and make fuel. Meanwhile, the futures price of alcohol was driven down by big oil’s fuel monopoly-easy since they buy over 99% of alcohol fuel produced.
Although VeraSun recently named the company that has offered to buy it out of bankruptcy and as I had predicted, it’s an oil company. Big oil recently spent a billion dollars conducting a fictitious food vs. fuel campaign, contributing to devaluation of US $6 billion dollars’ worth of alcohol plants by more than 90%. Big oil is now quietly spending a fraction of the $125 billion they made in profit last year to buy up alcohol fuel plants for pennies on the dollar.
It is sad that VeraSun and some other independent distillery companies face bankruptcy, but the real market losers are our farmers. While oil companies bought futures contracts for corn at $6 a bushel, farmers were subjected to a quadrupling of prices for oil-based crop inputs such as fertilizer.
With the federal court ruling in the VeraSun bankruptcy, a legal precedence is being set that now allows plant owners to reject contract commitments for grain and corn purchases they have made with working farmers. For the first time ever for any company, there may be an escape from paying for the futures contracts that are bought. The problem with this is that farmers have of course already borrowed money (based on futures pricing) to pay for higher input costs in producing the supposedly higher-priced corn. Unlike the plant owners, they won’t get to avoid their debts and as that crunch goes on.
I think that there is a real chance that big oil will buy up the alcohol plants, reject the futures contracts, bankrupt the farmers and then be able to buy their land.
If the oil companies gain control of even a quarter of the alcohol production infrastructure and land for the crops, there will be no end to the disruption they can cause in markets, they could even potentially bankrupt the rest of the industry. If you think that it’s a nightmare that big oil controls our energy, think what life would be like if it controlled our land and food, as well.
Oh no, I hear another bailout in the makings! Unfortunately, I think that the only way to avoid this catastrophic scenario is for us to provide alcohol fuel plants with a bail-out plan. However, as I have recommended for the auto industry bailout, there should be conditions. While a number of initiatives should be addressed to ensure the alcohol fuel industry’s long-term growth, implementing these bailout conditions in the short term will make the ethanol business more secure and less likely to need any future assistance:
•All alcohol fuel plants should be required to install the equipment necessary to handle non-corn energy crops.
•By 2010 plants should be required to diversify their crop inputs, limiting corn to 50% of the total. This would insulate them from further manipulation by oil companies and start the country, especially the Midwest, on the path of sustainable agriculture.
•By 2011 all plants should be required to run at least 90% on renewable fuel, not fossil fuels. Corn Plus has already converted its plant to run on biomass, reporting a 6:1 energy return compared to the usual 1.5:1 of coal-based alcohol fuel plants.
•The bailout should include loans to provide energy to alcohol fuel plants using biomass-fired combined-heat-and-electricity facilities. This would reduce alcohol price volatility, since alcohol production would largely be decoupled from the prices of oil, coal, and natural gas.
Even though I am an advocate for smaller alcohol fuel plants for many reasons (security, local economy strength, true energy independence among others), the larger plants need to be protected for the health of the industry and the United States. Without an effective alcohol industry to compete with big oil, the sky would be the limit on gasoline prices.
I have already gone on record predicting that we can expect gas prices to rocket by March 2009. I have also stated that there will be a concerted effort to blame the new administration for this occurrence. This will happen because oil companies and OPEC are afraid that President Obama will carry out his campaign promises to reduce oil imports and address climate change.
There is already a big oil campaign going on to portray the oil companies as back in control of energy prices that somehow got out of control last summer due to “speculators.” You might have caught the 60 Minutes Infomercial they ran for OPEC and the Saudi family recently, (wow take a guess at what that cost to purchase and produce).
Big oil is already floating articles that say that putting money into alternative fuels will be a waste of taxpayer dollars and will raise rather than lower the price of auto fuel. Expect this chorus to become a propaganda flood during the first 60 to 90 days of President Obama’s administration, with the aim of discouraging Congress from doing anything substantial to cut our oil use via any alternatives not controlled by big oil (oil shale, tar sands, coal-to-gas).
It will be in the oil companies’ best interests to avoid attention until after the first round of legislation from the new administration. Traditionally, new presidents can get almost anything passed in the first 60 days or so. The oil companies would prefer to not have the gun sights of legislators trained on them during this period. Once the first flush of legislation is introduced, it will be autumn before another major bill could be introduced to interfere with the oil companies. They will hope to have the ethanol industry and enough legislators bought up by then.
I urge citizens everywhere to contact their Congressional representatives, the Department of Justice, Antitrust Division and the Federal Trade Commission, Bureau of Competition to express their concern regarding the Valero acquisition of Verasun and to help mandate protectionary and regulatory programs for the formation of a truly independent renewable energy and fuel producers market. (Note: email is not always secure. Mark confidential information “Confidential” and send it via postal mail).
David Blume is the executive director of the International Institute for Ecological Agriculture, (I.I.E.A.). He is a globally renowned permaculture and alcohol fuel expert and is author of the Amazon best-selling book Alcohol Can Be A Gas (www.alcoholcanbeagas.com). Mr. Blume is a leading advocate for alcohol fuel and the role of the American farmer in developing a truly sustainable energy and food policy for the post-oil era.
by David Blume
February 26, 2009
With all of the corporate bailouts and economic disasters our country is facing at present, it really is easy to welcome the wallet-relief provided by currently low transportation and heating fuel prices. As the saying goes, “Why look a gift horse in the mouth?” It isn’t comfortable to consider that the relatively calm waters international oil prices present could be covering an insidious undertow that is quietly dragging our renewable and alcohol fuel industry down to the OPEC equivalent of Davey Jones’s Locker where it will lay submerged until the big oil pumps finally do run dry.
In some places around the country today we are paying US $1.89 a gallon for gas (or even less). However, it is important to point out that with that short term windfall comes the ominous realization that nearly 25% of our Alcohol fuel producing industry will be going belly-up soon. That is correct. Many investor-backed as well as entrepreneurially driven Alcohol plants currently producing in the US may be bankrupted by the end of February 2009.
It is very likely that 40 of the nearly 200 alcohol fuel plants we have working now will be victims of what I refer to as big oil’s slash, burn and buy strategy to collapse, consume and control our fledgling alcohol fuel industry.
The obvious poster child for this tragedy is VeraSun. Declaring bankruptcy recently in a federal court in Delaware, VeraSun represents a considerable failure for the alcohol fuel industry. Having fallen from the vanguard of ethanol plants funded by venture capital, its collapse is having a rip-tide effect through the investment (and sadly) the farming community as well. Once a mighty force for alcohol expansion VeraSun is now reduced in value to pennies on the dollar. [Editor's note, for more on the takeover bid, read RenewableEnergyWorld.com's story, Ethanol Industry Eyes Valero's Bid for Verasun.]
How did this happen? What is the sleight of hand big oil is using to lull us to sleep at the wheel, while it methodically implements the conquest and enslavement of America’s independent and sustainable energy future?
Here’s the answer. Oil companies are using the commodities futures trading system to artificially drive up the price of corn while depressing the price of alcohol, essentially gaming the futures market. The impact of artificially high corn prices is that plants like VeraSun (that aren’t built and supported by farm-owners, but rather by capital investors) had to pay high prices to compete with big oil to buy corn and make fuel. Meanwhile, the futures price of alcohol was driven down by big oil’s fuel monopoly-easy since they buy over 99% of alcohol fuel produced.
Although VeraSun recently named the company that has offered to buy it out of bankruptcy and as I had predicted, it’s an oil company. Big oil recently spent a billion dollars conducting a fictitious food vs. fuel campaign, contributing to devaluation of US $6 billion dollars’ worth of alcohol plants by more than 90%. Big oil is now quietly spending a fraction of the $125 billion they made in profit last year to buy up alcohol fuel plants for pennies on the dollar.
It is sad that VeraSun and some other independent distillery companies face bankruptcy, but the real market losers are our farmers. While oil companies bought futures contracts for corn at $6 a bushel, farmers were subjected to a quadrupling of prices for oil-based crop inputs such as fertilizer.
With the federal court ruling in the VeraSun bankruptcy, a legal precedence is being set that now allows plant owners to reject contract commitments for grain and corn purchases they have made with working farmers. For the first time ever for any company, there may be an escape from paying for the futures contracts that are bought. The problem with this is that farmers have of course already borrowed money (based on futures pricing) to pay for higher input costs in producing the supposedly higher-priced corn. Unlike the plant owners, they won’t get to avoid their debts and as that crunch goes on.
I think that there is a real chance that big oil will buy up the alcohol plants, reject the futures contracts, bankrupt the farmers and then be able to buy their land.
If the oil companies gain control of even a quarter of the alcohol production infrastructure and land for the crops, there will be no end to the disruption they can cause in markets, they could even potentially bankrupt the rest of the industry. If you think that it’s a nightmare that big oil controls our energy, think what life would be like if it controlled our land and food, as well.
Oh no, I hear another bailout in the makings! Unfortunately, I think that the only way to avoid this catastrophic scenario is for us to provide alcohol fuel plants with a bail-out plan. However, as I have recommended for the auto industry bailout, there should be conditions. While a number of initiatives should be addressed to ensure the alcohol fuel industry’s long-term growth, implementing these bailout conditions in the short term will make the ethanol business more secure and less likely to need any future assistance:
•All alcohol fuel plants should be required to install the equipment necessary to handle non-corn energy crops.
•By 2010 plants should be required to diversify their crop inputs, limiting corn to 50% of the total. This would insulate them from further manipulation by oil companies and start the country, especially the Midwest, on the path of sustainable agriculture.
•By 2011 all plants should be required to run at least 90% on renewable fuel, not fossil fuels. Corn Plus has already converted its plant to run on biomass, reporting a 6:1 energy return compared to the usual 1.5:1 of coal-based alcohol fuel plants.
•The bailout should include loans to provide energy to alcohol fuel plants using biomass-fired combined-heat-and-electricity facilities. This would reduce alcohol price volatility, since alcohol production would largely be decoupled from the prices of oil, coal, and natural gas.
Even though I am an advocate for smaller alcohol fuel plants for many reasons (security, local economy strength, true energy independence among others), the larger plants need to be protected for the health of the industry and the United States. Without an effective alcohol industry to compete with big oil, the sky would be the limit on gasoline prices.
I have already gone on record predicting that we can expect gas prices to rocket by March 2009. I have also stated that there will be a concerted effort to blame the new administration for this occurrence. This will happen because oil companies and OPEC are afraid that President Obama will carry out his campaign promises to reduce oil imports and address climate change.
There is already a big oil campaign going on to portray the oil companies as back in control of energy prices that somehow got out of control last summer due to “speculators.” You might have caught the 60 Minutes Infomercial they ran for OPEC and the Saudi family recently, (wow take a guess at what that cost to purchase and produce).
Big oil is already floating articles that say that putting money into alternative fuels will be a waste of taxpayer dollars and will raise rather than lower the price of auto fuel. Expect this chorus to become a propaganda flood during the first 60 to 90 days of President Obama’s administration, with the aim of discouraging Congress from doing anything substantial to cut our oil use via any alternatives not controlled by big oil (oil shale, tar sands, coal-to-gas).
It will be in the oil companies’ best interests to avoid attention until after the first round of legislation from the new administration. Traditionally, new presidents can get almost anything passed in the first 60 days or so. The oil companies would prefer to not have the gun sights of legislators trained on them during this period. Once the first flush of legislation is introduced, it will be autumn before another major bill could be introduced to interfere with the oil companies. They will hope to have the ethanol industry and enough legislators bought up by then.
I urge citizens everywhere to contact their Congressional representatives, the Department of Justice, Antitrust Division and the Federal Trade Commission, Bureau of Competition to express their concern regarding the Valero acquisition of Verasun and to help mandate protectionary and regulatory programs for the formation of a truly independent renewable energy and fuel producers market. (Note: email is not always secure. Mark confidential information “Confidential” and send it via postal mail).
David Blume is the executive director of the International Institute for Ecological Agriculture, (I.I.E.A.). He is a globally renowned permaculture and alcohol fuel expert and is author of the Amazon best-selling book Alcohol Can Be A Gas (www.alcoholcanbeagas.com). Mr. Blume is a leading advocate for alcohol fuel and the role of the American farmer in developing a truly sustainable energy and food policy for the post-oil era.
Wednesday, July 22, 2009
Big Oil Bets on Biofuels
By Jennifer Kho
Renewable Energy World
July 21, 2009
At first glance, it might look like oil companies are pulling out of renewables. At the end of June, BP closed its alternative-energy headquarters. The oil company also has cut its alternative-energy budget and closed several solar factories in Spain. And that's after Shell sold off most of its solar business at the end of 2007. But while solar might not have been the best fit for the petroleum industry, analysts say that oil companies might be better-positioned in renewable fuels - and are seeing some obvious signs of movement into the area.
One of the biggest is ExxonMobil's announcement last week that it will invest more than $600 million in algae-based biofuels, with more than $300 million going to Synthetic Genomics. Of course, oil companies have previously invested at the research level, such as when BP announced it would invest $500 million - over a decade - in a research consortium led by the University of California at Berkeley in 2007. But Michael Butler, CEO of investment bank Cascadia Capital, said that starting last fall, about when the economic downturn began, he began seeing more activity in the business of renewable fuels as well.
Some examples? U.S. oil company Valero Energy Corp. in March won court approval to buy seven ethanol plants - and one partially completed plant - from VeraSun Energy Corp. Earlier this month, Redmond, Wash.-based Prometheus Energy, which converts waste methane into liquid natural gas, said it raised $20 million from the Shell Technology Ventures Fund and Black River Asset Management, a subsidiary of the agricultural giant Cargill. And in February, Conoco opened an ethanol fuel-blending station in Kansas in partnership with ICM, Poet and Crescent Oil. Conoco and Tyson Foods in May suspended plans for a plant that would have made biodiesel from animal fat, but DTN Research analyst Rick Kment said Conoco is considering buying a biofuel plant on the East Coast.
One reason for these investments is that the recession - along with the hard times for the ethanol and biodiesel industry - has led to great deals for biofuel assets, Kment said. Valero was able to acquire VeraSun assets for a mere 30 percent of the estimated cost of building the plants, and similar opportunities may be available. In February, Archer Daniel Midlands told analysts that nearly 21 percent of U.S. ethanol production capacity had been shut down, meaning that plenty of defunct assets could be up for grabs.
Kment said he expects to see more examples of oil companies buying ethanol and biofuel plants to meet that standard. After all, the renewable fuel standard calls for 36 billion gallons of biofuel to be blended into transportation fuels by 2022, up from 9 billion gallons last year. At today's low prices, it makes sense for blenders to buy biofuel assets as a hedge against higher prices in the future, Kment said. "At this point, companies are looking at this as economical and a good investment," he said. "The value of these plants are at nickels or dimes on the dollar, so [oil companies] have an opportunity to lock up a portion of their blending needs of biofuels ... and hedge their overall cost in case the overall supply becomes tighter in the future."
Kment sees oil companies spending more money at the asset-acquisition level than at the startup stage. But even those smaller startup investments represent a significant trend at a time when many venture capitalists and private-equity investors are pulling back, Butler said. "They're filling a void in the marketplace," he said. "Oil companies have the [technological expertise] to get really deep into this technology. So they can afford to take these bets and take on some of this risk."
Many renewable-fuel technologies have turned out to be harder to fully commercialize than startups expect. (It took Prometheus Energy, for example, an extra 1-plus year to get up and running. The company was delisted from the London AIM exchange last year, before scoring its funding round.) But even though financial investors have been burned by the significant amount of capital and secure distribution channels that it takes to make biofuels successful, those same factors could give oil companies an edge, Butler said. In fact, several of his clients are currently in discussions with big oil and gas companies. "It's just a natural fit," he said. "Big companies bring the distribution and [scale], and startups bring the technology and the innovation."
In any case, all the investments signify that the petroleum industry "really looks at biofuels as a stable part of the industry," Kment said. "Whether they like it or appreciate it or not, they see it as being part of the [fuels] industry and one of the things needed to [do business] in the United States."
Butler agrees that it's a milestone for biofuels. "My gut [feeling] is that oil companies understand that, at some point, they've got to get into renewables," he said. "I'm not really sure they're going to develop the products in their own companies, so it probably makes more sense for them to go outside. If the technology ends up working, this could be very, very synergistic."
The trend of oil companies expanding from buying to also producing biofuels could significantly grow the industry, analysts said. Renewable fuels is certainly a better fit for oil companies than solar power, said Ron Pernick, a principal at research firm Clean Edge. "They didn't know [solar] manufacturing, didn't have the distribution channels for something like a solar panel - it didn't fit their gestalt or their DNA," he said.
Alternative fuels could make far more sense because they tie more closely to oil and gas companies' core business, he added. "Here is a business where a lot of biofuel tech companies have tried and failed, and maybe that wasn't the right fit for them," he said. "I think if anyone can crack this nut, it's probably the chemical and oil and gas guys."
Renewable Energy World
July 21, 2009
At first glance, it might look like oil companies are pulling out of renewables. At the end of June, BP closed its alternative-energy headquarters. The oil company also has cut its alternative-energy budget and closed several solar factories in Spain. And that's after Shell sold off most of its solar business at the end of 2007. But while solar might not have been the best fit for the petroleum industry, analysts say that oil companies might be better-positioned in renewable fuels - and are seeing some obvious signs of movement into the area.
One of the biggest is ExxonMobil's announcement last week that it will invest more than $600 million in algae-based biofuels, with more than $300 million going to Synthetic Genomics. Of course, oil companies have previously invested at the research level, such as when BP announced it would invest $500 million - over a decade - in a research consortium led by the University of California at Berkeley in 2007. But Michael Butler, CEO of investment bank Cascadia Capital, said that starting last fall, about when the economic downturn began, he began seeing more activity in the business of renewable fuels as well.
Some examples? U.S. oil company Valero Energy Corp. in March won court approval to buy seven ethanol plants - and one partially completed plant - from VeraSun Energy Corp. Earlier this month, Redmond, Wash.-based Prometheus Energy, which converts waste methane into liquid natural gas, said it raised $20 million from the Shell Technology Ventures Fund and Black River Asset Management, a subsidiary of the agricultural giant Cargill. And in February, Conoco opened an ethanol fuel-blending station in Kansas in partnership with ICM, Poet and Crescent Oil. Conoco and Tyson Foods in May suspended plans for a plant that would have made biodiesel from animal fat, but DTN Research analyst Rick Kment said Conoco is considering buying a biofuel plant on the East Coast.
One reason for these investments is that the recession - along with the hard times for the ethanol and biodiesel industry - has led to great deals for biofuel assets, Kment said. Valero was able to acquire VeraSun assets for a mere 30 percent of the estimated cost of building the plants, and similar opportunities may be available. In February, Archer Daniel Midlands told analysts that nearly 21 percent of U.S. ethanol production capacity had been shut down, meaning that plenty of defunct assets could be up for grabs.
Kment said he expects to see more examples of oil companies buying ethanol and biofuel plants to meet that standard. After all, the renewable fuel standard calls for 36 billion gallons of biofuel to be blended into transportation fuels by 2022, up from 9 billion gallons last year. At today's low prices, it makes sense for blenders to buy biofuel assets as a hedge against higher prices in the future, Kment said. "At this point, companies are looking at this as economical and a good investment," he said. "The value of these plants are at nickels or dimes on the dollar, so [oil companies] have an opportunity to lock up a portion of their blending needs of biofuels ... and hedge their overall cost in case the overall supply becomes tighter in the future."
Kment sees oil companies spending more money at the asset-acquisition level than at the startup stage. But even those smaller startup investments represent a significant trend at a time when many venture capitalists and private-equity investors are pulling back, Butler said. "They're filling a void in the marketplace," he said. "Oil companies have the [technological expertise] to get really deep into this technology. So they can afford to take these bets and take on some of this risk."
Many renewable-fuel technologies have turned out to be harder to fully commercialize than startups expect. (It took Prometheus Energy, for example, an extra 1-plus year to get up and running. The company was delisted from the London AIM exchange last year, before scoring its funding round.) But even though financial investors have been burned by the significant amount of capital and secure distribution channels that it takes to make biofuels successful, those same factors could give oil companies an edge, Butler said. In fact, several of his clients are currently in discussions with big oil and gas companies. "It's just a natural fit," he said. "Big companies bring the distribution and [scale], and startups bring the technology and the innovation."
In any case, all the investments signify that the petroleum industry "really looks at biofuels as a stable part of the industry," Kment said. "Whether they like it or appreciate it or not, they see it as being part of the [fuels] industry and one of the things needed to [do business] in the United States."
Butler agrees that it's a milestone for biofuels. "My gut [feeling] is that oil companies understand that, at some point, they've got to get into renewables," he said. "I'm not really sure they're going to develop the products in their own companies, so it probably makes more sense for them to go outside. If the technology ends up working, this could be very, very synergistic."
The trend of oil companies expanding from buying to also producing biofuels could significantly grow the industry, analysts said. Renewable fuels is certainly a better fit for oil companies than solar power, said Ron Pernick, a principal at research firm Clean Edge. "They didn't know [solar] manufacturing, didn't have the distribution channels for something like a solar panel - it didn't fit their gestalt or their DNA," he said.
Alternative fuels could make far more sense because they tie more closely to oil and gas companies' core business, he added. "Here is a business where a lot of biofuel tech companies have tried and failed, and maybe that wasn't the right fit for them," he said. "I think if anyone can crack this nut, it's probably the chemical and oil and gas guys."
Monday, July 20, 2009
US Renewable Energy Grant Rules Exclude Private Equity
By Yuliya Chernova
DOW JONES CLEAN TECHNOLOGY INSIGHT
July 20, 2009
A grant program introduced in the federal stimulus package passed earlier this year was intended to jump-start investment in renewable energy, but the rules of the program threaten to hobble it from the start by restricting private equity involvement in any projects the government backs.
The rules, published July 9, exclude from the program any projects with investors that have tax-exempt status. That was done because the grant program is intended to replace tax credits, which have become less widely used as taxable incomes have fallen. Tax-exempt investors wouldn't have been able to take advantage of tax credits so the intention is to bar them from the grant program too, according to industry participants.
However, most private equity firms receive backing from tax-exempt limited partners like endowments, pension funds and family trusts, excluding them from the program. Even if the tax-exempt entity holds just a 0.1% interest in the renewable energy project four tiers up the ownership structure, the entire project is disqualified, according to the rules published on the U.S. Treasury Department Web site and several attorneys and industry members. In a similar vein, if any of a project's ownership lands in the hands of a tax-exempt entity within five years of operation, the grant can be reclaimed by the government, according to the Treasury rules.
Projects backed by private equity can get around the ban by creating an extra layer of ownership, but this would force investors to pay more taxes.
The exclusion is "taking a huge piece of renewable energy off the table," said Greg Wetstone, vice president for government affairs at Terra-Gen Power LLC, a large solar, wind and geothermal project development company owned by private equity firm AcrLight Capital Partners.
Renewable energy industry groups estimate that this ban places more than $10 billion in new renewable energy development at risk, according to a letter seen by Clean Technology Insight that the groups sent to several members of the U.S. House of Representatives in June in response to their concerns about the program wording in the stimulus package. The groups sending the letter were the American Wind Energy Association, Geothermal Energy Association, Solar Energy Industries Association and Private Equity Council.
A Treasury official didn't respond to a request for comment.
When he announced the new guidelines, Energy Secretary Steven Chu said in a statement: "These payments will help spur major private sector investments in clean energy and create new jobs for America's workers. It is part of our broad effort to double our renewable energy capacity in the next few years and make sure that America leads the world in creating the new clean energy economy of the future."
But the letter from the industry groups counters that the ban included in the guidelines actually "has the effect of discouraging renewable energy investment by private equity funds."
The letter goes on to say: "it will be next to impossible to achieve the President's ambitious goal of doubling renewable energy production in the United States over the next three years. The participation of private equity is especially important in the current economic environment where renewable energy developers are having difficulty raising capital, development is being scaled back, it is difficult to borrow money, and there is a several billion dollar shortfall in the supply of tax equity."
Terra-Gen's Wetstone said that he and others in the industry are lobbying the government to change the rules before the Treasury starts taking applications Aug. 1. Wetstone declined to say whether Terra-Gen would apply for the grants if the rules don't change before the deadline.
The American Recovery and Reinvestment Act of 2009 authorized the Treasury to offer cash grants to renewable energy projects worth about 30% of their cost. The aim was to make up for the departure of tax-equity investors, a major source of capital for renewable energy in the past who backed projects and then used government tax credits to offset taxable income. At the same time, many in the industry looked to private equity as a new source of capital for projects that were being orphaned by banks.
As well as keeping the grants focused on tax-paying entities, the restriction in the program is also to ensure that entities eligible for another renewable energy incentive called Clean Renewable Energy Bonds don't also apply for the Treasury grants. Those issuing government-supported bonds are state, local and tribal governments, public power providers and electric cooperatives, according to the industry group letter.
Keith Martin, a partner at the law firm of Chadbourne & Parke LLP who works on renewable energy projects, described the restrictions on tax-exempt institutions as "like a nuclear bomb, when all that was needed was a fire cracker."
In order to circumvent the rules as they are, private equity firms would have to create "blocker" corporations that would be tax-paying entities. "Putting a blocker in the structure means the earnings from the project will be taxed at the blocker level at a 35% corporate tax rate," Martin said.
Some private equity firms intend to invest and apply for the Treasury grants even if the rules remain as they are.
"If there are transaction costs to be borne, so be it," said Neil Z. Auerbach, managing director at Hudson Clean Energy Partners, a clean technology focused private equity firm that holds controlling interests in two project-development companies, Recurrent Energy and Element Power. "I don't think there's any risk that the cost will outweigh the benefit. The benefit is huge," he said, adding "we are absolutely ready to operate within the system."
Even so, it's clear that projects that have private equity backers are at a disadvantage compared with those that don't. "Ironically, the stimulus [helped] the top tier of developers, but not the lower tiers that have had to turn to private equity funds to raise money," Martin said.
The issue hearkens to a broader discussion in the renewable energy world, according to Edwin Feo, partner at the law firm of Milbank Tweed Hadley & McCloy LLP, where he co-chairs the project finance and energy practice.
Feo said that all types of tax subsidies have unequal effect on industry members. So there's a school of thought, he said, that questions "why are we continuing to play the game of having subsidies through tax benefits that have these pernicious unequal effects versus direct pay subsidies that provide cash usable by anyone. That's the school of thought that's pushing feed in tariffs. And that's seeing traction at the state level."
DOW JONES CLEAN TECHNOLOGY INSIGHT
July 20, 2009
A grant program introduced in the federal stimulus package passed earlier this year was intended to jump-start investment in renewable energy, but the rules of the program threaten to hobble it from the start by restricting private equity involvement in any projects the government backs.
The rules, published July 9, exclude from the program any projects with investors that have tax-exempt status. That was done because the grant program is intended to replace tax credits, which have become less widely used as taxable incomes have fallen. Tax-exempt investors wouldn't have been able to take advantage of tax credits so the intention is to bar them from the grant program too, according to industry participants.
However, most private equity firms receive backing from tax-exempt limited partners like endowments, pension funds and family trusts, excluding them from the program. Even if the tax-exempt entity holds just a 0.1% interest in the renewable energy project four tiers up the ownership structure, the entire project is disqualified, according to the rules published on the U.S. Treasury Department Web site and several attorneys and industry members. In a similar vein, if any of a project's ownership lands in the hands of a tax-exempt entity within five years of operation, the grant can be reclaimed by the government, according to the Treasury rules.
Projects backed by private equity can get around the ban by creating an extra layer of ownership, but this would force investors to pay more taxes.
The exclusion is "taking a huge piece of renewable energy off the table," said Greg Wetstone, vice president for government affairs at Terra-Gen Power LLC, a large solar, wind and geothermal project development company owned by private equity firm AcrLight Capital Partners.
Renewable energy industry groups estimate that this ban places more than $10 billion in new renewable energy development at risk, according to a letter seen by Clean Technology Insight that the groups sent to several members of the U.S. House of Representatives in June in response to their concerns about the program wording in the stimulus package. The groups sending the letter were the American Wind Energy Association, Geothermal Energy Association, Solar Energy Industries Association and Private Equity Council.
A Treasury official didn't respond to a request for comment.
When he announced the new guidelines, Energy Secretary Steven Chu said in a statement: "These payments will help spur major private sector investments in clean energy and create new jobs for America's workers. It is part of our broad effort to double our renewable energy capacity in the next few years and make sure that America leads the world in creating the new clean energy economy of the future."
But the letter from the industry groups counters that the ban included in the guidelines actually "has the effect of discouraging renewable energy investment by private equity funds."
The letter goes on to say: "it will be next to impossible to achieve the President's ambitious goal of doubling renewable energy production in the United States over the next three years. The participation of private equity is especially important in the current economic environment where renewable energy developers are having difficulty raising capital, development is being scaled back, it is difficult to borrow money, and there is a several billion dollar shortfall in the supply of tax equity."
Terra-Gen's Wetstone said that he and others in the industry are lobbying the government to change the rules before the Treasury starts taking applications Aug. 1. Wetstone declined to say whether Terra-Gen would apply for the grants if the rules don't change before the deadline.
The American Recovery and Reinvestment Act of 2009 authorized the Treasury to offer cash grants to renewable energy projects worth about 30% of their cost. The aim was to make up for the departure of tax-equity investors, a major source of capital for renewable energy in the past who backed projects and then used government tax credits to offset taxable income. At the same time, many in the industry looked to private equity as a new source of capital for projects that were being orphaned by banks.
As well as keeping the grants focused on tax-paying entities, the restriction in the program is also to ensure that entities eligible for another renewable energy incentive called Clean Renewable Energy Bonds don't also apply for the Treasury grants. Those issuing government-supported bonds are state, local and tribal governments, public power providers and electric cooperatives, according to the industry group letter.
Keith Martin, a partner at the law firm of Chadbourne & Parke LLP who works on renewable energy projects, described the restrictions on tax-exempt institutions as "like a nuclear bomb, when all that was needed was a fire cracker."
In order to circumvent the rules as they are, private equity firms would have to create "blocker" corporations that would be tax-paying entities. "Putting a blocker in the structure means the earnings from the project will be taxed at the blocker level at a 35% corporate tax rate," Martin said.
Some private equity firms intend to invest and apply for the Treasury grants even if the rules remain as they are.
"If there are transaction costs to be borne, so be it," said Neil Z. Auerbach, managing director at Hudson Clean Energy Partners, a clean technology focused private equity firm that holds controlling interests in two project-development companies, Recurrent Energy and Element Power. "I don't think there's any risk that the cost will outweigh the benefit. The benefit is huge," he said, adding "we are absolutely ready to operate within the system."
Even so, it's clear that projects that have private equity backers are at a disadvantage compared with those that don't. "Ironically, the stimulus [helped] the top tier of developers, but not the lower tiers that have had to turn to private equity funds to raise money," Martin said.
The issue hearkens to a broader discussion in the renewable energy world, according to Edwin Feo, partner at the law firm of Milbank Tweed Hadley & McCloy LLP, where he co-chairs the project finance and energy practice.
Feo said that all types of tax subsidies have unequal effect on industry members. So there's a school of thought, he said, that questions "why are we continuing to play the game of having subsidies through tax benefits that have these pernicious unequal effects versus direct pay subsidies that provide cash usable by anyone. That's the school of thought that's pushing feed in tariffs. And that's seeing traction at the state level."
Saturday, July 18, 2009
Biofuel Fraud Case Could Leave the EPA Running on Fumes
Cello Energy is unlikely to produce 70 million gallons of cellulosic biofuel next year, which means that the EPA will not meet its 2010 target of 100 million gallons
By Brendan Borrell
Scientific American
Grassoline it ain't. After a jury ordered a leading cellulosic biofuel company to pony up millions for defrauding investors, the U.S. Environmental Protection Agency will likely come in 60 million gallons shy of its 100 million gallon target next year.
Late last month, a federal court in Mobile ordered Cello Energy of Bay Minette, Ala., to pay $10.4 million in punitive damages for fraudulently claiming it could produce cheap diesellike fuel from hay, wood pulp and other waste.
Cello's owner, Jack Boykin, allegedly built a sham facility and lured pulp producer Parsons & Whittemore Enterprises to invest $2.5 million in an ownership stake in 2007. In court, Parsons & Whitmore CEO George Landegger said he was unimpressed with the company's facilities, and a string of expert witnesses testified that fuel samples were derived from petroleum sources.
Neither Boykin nor his attorney, Forrest Latta, returned calls for comment, but in statements to the press following the trial, Latta has indicated that Cello's technology has "global potential." Another defendant, Khosla Ventures, a California firm that invested $12.5 million in Cello in 2007, was unavailable to comment.
Although it's no surprise that investors might be dazzled in the rush to hop on board the biofuels bandwagon, the EPA appears to have been duped as well.
Cellulosic biofuel technology is still in its infancy, and the agency and Congress required gasoline blenders to purchase and sell just 100 million gallons next year, less than 1 percent of the nation's proposed renewable fuel mandates. To encourage biofuel producers to meet that demand, the government would establish a credit scheme to set a floor on the wholesale price of $3.00 per gallon—about twice that of corn-based ethanol—if production fails to reach the 100 million gallon mark.
But David Woodburn, an analyst at ThinkEquity Partners in Chicago says that the agency had pinned its hopes on Cello and has not put in place the cellulosic biofuel credit system required to maintain that price point. "EPA was supposed to have prepared it in late June," he says, "In the EPA's eyes, they only need to implement that system if they see a shortfall coming.... Up to now on paper they've totally ignored this credit system."
As reported in earth2tech, Woodburn first realized the EPA would fall short of its target when it released its draft regulatory impact analysis in May. This document listed firms that were to make cellulosic biofuel, and most were on the hook to produce one million or two million gallons by the end of 2010. Cello Energy, however, claimed that its Bay Minette facility would pump out 20 million gallons. The agency also had Cello down for new plants that would produce another 50 million gallons. Woodburn says he grew skeptical of the company after calls and e-mails to the company for verification were never returned.
EPA spokeswoman Cathy Milbourn says Cello estimates were "derived based on commercialization plans from the company. They never gave us volume—only size of the facilities and planned timeline."
So, what's the chance that Cello can still meet its target? "It seemed extremely unlikely three weeks ago before this jury verdict," Woodburn says. "It seems extremely unlikely today. How can you create three additional plants and have them producing in 2010 when ground hasn't been broken yet?"
Woodburn adds that Cello also faces another hurdle, which is that it has no distribution agreements: in other words, no one has promised to buy their biofuel. In the best-case scenario, he says, the nation will produce 39 million gallons of cellulosic biofuel next year and blenders will be on the hook to pay the government a $600 million or more for biofuel credits through a program that still does not exist.
Alternatively, the EPA could lower the cellulosic biofuel target when it finalizes the contentious renewable fuel standards in the fall, a decision that would defeat the whole idea of the goal in the first place.
Milbourn says the EPA is "continuing to assess the viability of not only Cello, but also the various other technologies and companies in supplying cellulosic biofuel."
For George Huber, the University of Massachusetts Amherst chemical engineering professor who wrote Scientific American's July cover story about cellulosic biofuels, Cello is a lesson to be learned. "There are no magic processes for conversion of biomass into liquid fuels," he says, "If something sounds too good to be true, it probably is not true."
By Brendan Borrell
Scientific American
Grassoline it ain't. After a jury ordered a leading cellulosic biofuel company to pony up millions for defrauding investors, the U.S. Environmental Protection Agency will likely come in 60 million gallons shy of its 100 million gallon target next year.
Late last month, a federal court in Mobile ordered Cello Energy of Bay Minette, Ala., to pay $10.4 million in punitive damages for fraudulently claiming it could produce cheap diesellike fuel from hay, wood pulp and other waste.
Cello's owner, Jack Boykin, allegedly built a sham facility and lured pulp producer Parsons & Whittemore Enterprises to invest $2.5 million in an ownership stake in 2007. In court, Parsons & Whitmore CEO George Landegger said he was unimpressed with the company's facilities, and a string of expert witnesses testified that fuel samples were derived from petroleum sources.
Neither Boykin nor his attorney, Forrest Latta, returned calls for comment, but in statements to the press following the trial, Latta has indicated that Cello's technology has "global potential." Another defendant, Khosla Ventures, a California firm that invested $12.5 million in Cello in 2007, was unavailable to comment.
Although it's no surprise that investors might be dazzled in the rush to hop on board the biofuels bandwagon, the EPA appears to have been duped as well.
Cellulosic biofuel technology is still in its infancy, and the agency and Congress required gasoline blenders to purchase and sell just 100 million gallons next year, less than 1 percent of the nation's proposed renewable fuel mandates. To encourage biofuel producers to meet that demand, the government would establish a credit scheme to set a floor on the wholesale price of $3.00 per gallon—about twice that of corn-based ethanol—if production fails to reach the 100 million gallon mark.
But David Woodburn, an analyst at ThinkEquity Partners in Chicago says that the agency had pinned its hopes on Cello and has not put in place the cellulosic biofuel credit system required to maintain that price point. "EPA was supposed to have prepared it in late June," he says, "In the EPA's eyes, they only need to implement that system if they see a shortfall coming.... Up to now on paper they've totally ignored this credit system."
As reported in earth2tech, Woodburn first realized the EPA would fall short of its target when it released its draft regulatory impact analysis in May. This document listed firms that were to make cellulosic biofuel, and most were on the hook to produce one million or two million gallons by the end of 2010. Cello Energy, however, claimed that its Bay Minette facility would pump out 20 million gallons. The agency also had Cello down for new plants that would produce another 50 million gallons. Woodburn says he grew skeptical of the company after calls and e-mails to the company for verification were never returned.
EPA spokeswoman Cathy Milbourn says Cello estimates were "derived based on commercialization plans from the company. They never gave us volume—only size of the facilities and planned timeline."
So, what's the chance that Cello can still meet its target? "It seemed extremely unlikely three weeks ago before this jury verdict," Woodburn says. "It seems extremely unlikely today. How can you create three additional plants and have them producing in 2010 when ground hasn't been broken yet?"
Woodburn adds that Cello also faces another hurdle, which is that it has no distribution agreements: in other words, no one has promised to buy their biofuel. In the best-case scenario, he says, the nation will produce 39 million gallons of cellulosic biofuel next year and blenders will be on the hook to pay the government a $600 million or more for biofuel credits through a program that still does not exist.
Alternatively, the EPA could lower the cellulosic biofuel target when it finalizes the contentious renewable fuel standards in the fall, a decision that would defeat the whole idea of the goal in the first place.
Milbourn says the EPA is "continuing to assess the viability of not only Cello, but also the various other technologies and companies in supplying cellulosic biofuel."
For George Huber, the University of Massachusetts Amherst chemical engineering professor who wrote Scientific American's July cover story about cellulosic biofuels, Cello is a lesson to be learned. "There are no magic processes for conversion of biomass into liquid fuels," he says, "If something sounds too good to be true, it probably is not true."
Biofuel Development a Burning Priority for Obama Camp
By Greg Burns
Chicago Tribune
July 9, 2009
Even with new rules in the offing that would slap handcuffs on oil traders, a prospect that sent shares of Chicago-based CME Group tumbling, the feds are more eager than ever to promote oil-free gasohol. They especially love the stuff brewed from wood chips, corn cobs, switch grass and other forms of cellulose.
Yet cellulosic ethanol, as it's called, remains more of a promise than a reality. So far, no one has produced it on a mass commercial scale at a price that would rival ethanol made from corn or sugar cane.
For a shining moment, the fuel-from-sawdust movement attracted a fortune in private investment, before venture capital funds dried up across the globe. Now, however, at least a few of those bucks are being clawed back the hard way.
The wood chips hit the shredder in Alabama at the end of June, when a federal jury ordered a cellulosic energy company and its executives to pay $10.4 million in a fraud suit brought by an unhappy investor. It's a complex case focused on allegations of bad-faith business practices that involved Silicon Valley visionary Vinod Khosla, whose firm denied any wrongdoing.
But the case also highlighted a once-eager convert's loss of faith in cellulosic fuel.
"This was supposedly a breakthrough technology," said investor George Landegger, who runs the privately held pulp producer Parsons & Whittemore Inc. "This particular one is worthless."
Will any live up to the hype? The potential for scaling up beyond a lab or pilot program "has yet to be proven," he said.
For its part, Cello Energy LLC vowed to continue fighting the legal case and moving ahead with its plant startup.
"It would be wrong to read the lawsuit as any kind of scientific referendum on the ultimate success or failure of the cellulosic fuel process," the company said in a statement.
The fight between Landegger and Cello has a bigger dimension. Government officials were counting on the Alabama-based company to meet 50 percent of the bio-requirement under the nation's motor-fuel standards for next year.
That's not happening, said David Woodburn, research analyst at ThinkEquity LLC in Chicago.
Counting all the demonstration projects, pilot plants and one or two bigger ventures, then assuming that all perform at maximum advertised capacity, only 39 million gallons of a required 100 million will be produced in 2010, he calculates. That's a tiny fraction of the fuel used by U.S. cars and trucks in a year. In 2011, the requirement rises to 250 million, but production to no more than 82 million.
Federal officials may delay imposing the standards, and the production shortfall may in turn trigger further incentives for development.
Certainly, the government shows no sign of backing off. Announcing an additional $787 million for biofuel research and commercialization in May, Chu reportedly sounded an optimistic note: Corn-based ethanol was "a good start," he said, but "research will lead the way to give us much better options."
Landegger worries those research dollars could be wasted. By the time he severed ties with Cello, he said, "It was no longer a biofuel enterprise. It was a grant-requesting enterprise."
Chicago Tribune
July 9, 2009
Even with new rules in the offing that would slap handcuffs on oil traders, a prospect that sent shares of Chicago-based CME Group tumbling, the feds are more eager than ever to promote oil-free gasohol. They especially love the stuff brewed from wood chips, corn cobs, switch grass and other forms of cellulose.
Yet cellulosic ethanol, as it's called, remains more of a promise than a reality. So far, no one has produced it on a mass commercial scale at a price that would rival ethanol made from corn or sugar cane.
For a shining moment, the fuel-from-sawdust movement attracted a fortune in private investment, before venture capital funds dried up across the globe. Now, however, at least a few of those bucks are being clawed back the hard way.
The wood chips hit the shredder in Alabama at the end of June, when a federal jury ordered a cellulosic energy company and its executives to pay $10.4 million in a fraud suit brought by an unhappy investor. It's a complex case focused on allegations of bad-faith business practices that involved Silicon Valley visionary Vinod Khosla, whose firm denied any wrongdoing.
But the case also highlighted a once-eager convert's loss of faith in cellulosic fuel.
"This was supposedly a breakthrough technology," said investor George Landegger, who runs the privately held pulp producer Parsons & Whittemore Inc. "This particular one is worthless."
Will any live up to the hype? The potential for scaling up beyond a lab or pilot program "has yet to be proven," he said.
For its part, Cello Energy LLC vowed to continue fighting the legal case and moving ahead with its plant startup.
"It would be wrong to read the lawsuit as any kind of scientific referendum on the ultimate success or failure of the cellulosic fuel process," the company said in a statement.
The fight between Landegger and Cello has a bigger dimension. Government officials were counting on the Alabama-based company to meet 50 percent of the bio-requirement under the nation's motor-fuel standards for next year.
That's not happening, said David Woodburn, research analyst at ThinkEquity LLC in Chicago.
Counting all the demonstration projects, pilot plants and one or two bigger ventures, then assuming that all perform at maximum advertised capacity, only 39 million gallons of a required 100 million will be produced in 2010, he calculates. That's a tiny fraction of the fuel used by U.S. cars and trucks in a year. In 2011, the requirement rises to 250 million, but production to no more than 82 million.
Federal officials may delay imposing the standards, and the production shortfall may in turn trigger further incentives for development.
Certainly, the government shows no sign of backing off. Announcing an additional $787 million for biofuel research and commercialization in May, Chu reportedly sounded an optimistic note: Corn-based ethanol was "a good start," he said, but "research will lead the way to give us much better options."
Landegger worries those research dollars could be wasted. By the time he severed ties with Cello, he said, "It was no longer a biofuel enterprise. It was a grant-requesting enterprise."
Proposed Ethanol Pipeline to Extend into South Dakota
By DIRK LAMMERS
July 17, 2009
The nation's largest biofuels producer and a Tulsa-Okla.-based pipeline company are expanding the route of a proposed $3.5 billion dedicated ethanol pipeline into South Dakota, the companies said Friday.
Poet LLC and Magellan Midstream Partners LP are studying the feasibility of the 1,800-mile pipeline, which is dependent upon studies addressing technical issues and Congress revising the U.S. Department of Energy's loan guarantee program, the companies say.
If built, the route would begin in Davison County, S.D. -- further west than O'Brien County, Iowa, as originally planned -- and deliver the alternative fuel from plants in Iowa, South Dakota, Minnesota, Illinois, Indiana and Ohio to distribution terminals in the northeastern United States.
"With South Dakota being in the top five of ethanol producing states and having almost a billion gallons of production capacity, that just made sense," said Poet spokesman Nathan Schock.
Magellan has been working with the Association of Oil Pipe Lines for years on how to transport ethanol through a pipeline, said spokesman Bruce Heine.
Heine said the biggest challenge is stress corrosion cracking, in which ethanol tends to cause internal cracking of carbon steel pipe more so than gasoline or diesel.
Magellan thinks the solution will be a combination of potential additives to help protect the pipe and the use of different welding techniques.
"We believe the combination of these factors would allow us to reliably, safely and cost effectively transport ethanol from the Midwest to the East Coast," Heine said.
Poet, based in Sioux Falls S.D., is the nation's largest ethanol producer with more than 1.5 billion gallons of annual production from 26 ethanol plants.
Magellan Midstream Partners LP transports, stores and distributes refined petroleum products.
Schock said Poet is taking the lead on market analysis for the project, while Magellan is addressing technical and issues. The two are working together on legislative challenges.
A positive assessment would allow one or both partners to enter into an agreement to construct an ethanol pipeline, but any project would take several years to complete.
Schock said he hopes for a decision on whether to move forward by the end of year or early 2010.
July 17, 2009
The nation's largest biofuels producer and a Tulsa-Okla.-based pipeline company are expanding the route of a proposed $3.5 billion dedicated ethanol pipeline into South Dakota, the companies said Friday.
Poet LLC and Magellan Midstream Partners LP are studying the feasibility of the 1,800-mile pipeline, which is dependent upon studies addressing technical issues and Congress revising the U.S. Department of Energy's loan guarantee program, the companies say.
If built, the route would begin in Davison County, S.D. -- further west than O'Brien County, Iowa, as originally planned -- and deliver the alternative fuel from plants in Iowa, South Dakota, Minnesota, Illinois, Indiana and Ohio to distribution terminals in the northeastern United States.
"With South Dakota being in the top five of ethanol producing states and having almost a billion gallons of production capacity, that just made sense," said Poet spokesman Nathan Schock.
Magellan has been working with the Association of Oil Pipe Lines for years on how to transport ethanol through a pipeline, said spokesman Bruce Heine.
Heine said the biggest challenge is stress corrosion cracking, in which ethanol tends to cause internal cracking of carbon steel pipe more so than gasoline or diesel.
Magellan thinks the solution will be a combination of potential additives to help protect the pipe and the use of different welding techniques.
"We believe the combination of these factors would allow us to reliably, safely and cost effectively transport ethanol from the Midwest to the East Coast," Heine said.
Poet, based in Sioux Falls S.D., is the nation's largest ethanol producer with more than 1.5 billion gallons of annual production from 26 ethanol plants.
Magellan Midstream Partners LP transports, stores and distributes refined petroleum products.
Schock said Poet is taking the lead on market analysis for the project, while Magellan is addressing technical and issues. The two are working together on legislative challenges.
A positive assessment would allow one or both partners to enter into an agreement to construct an ethanol pipeline, but any project would take several years to complete.
Schock said he hopes for a decision on whether to move forward by the end of year or early 2010.
Friday, July 17, 2009
Energetic Debate: Senate Grapples with Clean Energy and Jobs
The Wall Street Journal
Environmental Capital Blog
July 16, 2009
Well, the Senate is still trying to sort out whether the clean-energy push is a good thing or a bad thing for job creation.
The basic thrust goes like this: Venture capitalists, such as John Doerr, and clean-tech corporate types, such as General Electric’s John Krenicki, warned that countries such as China are stealing a lead in the clean-energy race thanks to lagging U.S. policies, which will leave the U.S. at a disadvantage in the next big industry. Sen. Barbara Boxer agreed.
Mr. Doerr noted that only one of the top five wind-turbine companies in the U.S. is actually American (it’s GE). “That’s simply not acceptable,” he said.
So much talk about wind turbines exhausted the patience of Tennessee’s Lamar Alexander, who again called for a nuclear solution to America’s energy woes. “Is nuclear power renewable energy?” he asked Mr. Doerr.
“Well, it’s low-carbon energy,” the veteran venture capitalist replied. But nuclear power’s long lead times work against it, he added: “If we wait a decade, we’re out of the race.” Later, he said, referring to America’s place in the clean-energy race, “We barely got a dog in the fight, we’re barely in the game right now.”
Lingering behind all the exchanges was the fundamental tension: How can China be poised for clean-energy leadership when the country planning greenhouse-gas limits is the U.S.?
Julian Wong of the Center for American Progress cut to the chase: “We need to separate the rhetoric of the international climate process from what is actually happening on the ground.” And China, he stressed, is moving rapidly with both stimulus money and ambitious renewable-energy targets (not to mention a stiff dose of protectionism.)
Which would seem to lend credence to the idea that cleaning up the energy system is more important than setting goals for eventually reducing carbon emissions. For China, at least.
That might explain why 34 Nobel Prize winners today sent President Obama a letter asking him to live up to his campaign pledge to spend $15 billion promoting clean energy, a promise that has been gutted by the horse-trading in the Congressional fight over the climate bill.
Environmental Capital Blog
July 16, 2009
Well, the Senate is still trying to sort out whether the clean-energy push is a good thing or a bad thing for job creation.
The basic thrust goes like this: Venture capitalists, such as John Doerr, and clean-tech corporate types, such as General Electric’s John Krenicki, warned that countries such as China are stealing a lead in the clean-energy race thanks to lagging U.S. policies, which will leave the U.S. at a disadvantage in the next big industry. Sen. Barbara Boxer agreed.
Mr. Doerr noted that only one of the top five wind-turbine companies in the U.S. is actually American (it’s GE). “That’s simply not acceptable,” he said.
So much talk about wind turbines exhausted the patience of Tennessee’s Lamar Alexander, who again called for a nuclear solution to America’s energy woes. “Is nuclear power renewable energy?” he asked Mr. Doerr.
“Well, it’s low-carbon energy,” the veteran venture capitalist replied. But nuclear power’s long lead times work against it, he added: “If we wait a decade, we’re out of the race.” Later, he said, referring to America’s place in the clean-energy race, “We barely got a dog in the fight, we’re barely in the game right now.”
Lingering behind all the exchanges was the fundamental tension: How can China be poised for clean-energy leadership when the country planning greenhouse-gas limits is the U.S.?
Julian Wong of the Center for American Progress cut to the chase: “We need to separate the rhetoric of the international climate process from what is actually happening on the ground.” And China, he stressed, is moving rapidly with both stimulus money and ambitious renewable-energy targets (not to mention a stiff dose of protectionism.)
Which would seem to lend credence to the idea that cleaning up the energy system is more important than setting goals for eventually reducing carbon emissions. For China, at least.
That might explain why 34 Nobel Prize winners today sent President Obama a letter asking him to live up to his campaign pledge to spend $15 billion promoting clean energy, a promise that has been gutted by the horse-trading in the Congressional fight over the climate bill.
Tuesday, July 14, 2009
Florida Governor's Style is to Encourage Ethanol Imports Rather Than Local Production of Ethanol
Florida Governor to Lobby for Ethanol
By Inae Riveras
Reuters
November 6, 2007
SAO PAULO (Reuters) - Florida Gov. Charlie Crist said on Monday he will encourage Congress members to lobby for more ethanol use and a reduction in the 54-cent-a-gallon tariff on Brazilian imports of the biofuel.
The use of more cane-based ethanol is seen as a way to curb greenhouse gas emissions in the state, which is aiming to reduce them to 1990 levels by 2015.
"My style is to encourage (ethanol imports) and I have great friends in the Florida delegation in Washington, senator Mel Martinez, also senator Bill Nelson...I will encourage them to do exactly that," Crist told Brazilian and U.S. businessmen.
"We are a gateway (for ethanol to the United States) and we're all about reducing taxes," Crist said a meeting at Sao Paulo's Industry Federation (Fiesp).
As the tariff is in force at least until 2009, any possible change would take place beyond that.
Crist came to Brazil along with about 200 delegates on a mission to improve bilateral trade. Brazil is already Florida's leading partner, with two-way trade worth at around $11 billion per year.
Crist also will visit an ethanol mill in Sao Paulo and Brazil's state oil company Petrobras' headquarters.
Florida next year will discuss ways to reduce gas emissions. The adoption of a 10 percent mix of ethanol into gasoline is an option, said Michael Sole, Florida's secretary of Environmental Protection, who also attended the event.
He said a recommendation to the government should be made by October 2008.
"Florida will be a tremendous ethanol market, which is going to grow, and would be an important gateway," said Marcos Jank, president of Brazil's Sugar Cane Industry Union (Unica).
Florida demands 8.6 billion gallons of gasoline per year and currently does not produce any of the biofuel.
Logistics problems to get corn-based ethanol from the Midwest to Florida are seen as an advantage to Brazilian imports.
Brazil currently exports minimal amounts of ethanol to Florida, all through the Caribbean, where the Brazilian product is reprocessed and re-exported to the U.S. market exempt of the tariff, through the Caribbean Basin Initiative (CBI) trade pact.
Brazil and the United States signed a broad agreement to work together to advance biofuels technology, help spread ethanol production and set common standards for ethanol trade, when President George W. Bush visited the country in March.
The accord did not include changes in the tariff despite a direct appeal to Bush by Brazilian President Luiz Inacio Lula da Silva on the matter.
By Inae Riveras
Reuters
November 6, 2007
SAO PAULO (Reuters) - Florida Gov. Charlie Crist said on Monday he will encourage Congress members to lobby for more ethanol use and a reduction in the 54-cent-a-gallon tariff on Brazilian imports of the biofuel.
The use of more cane-based ethanol is seen as a way to curb greenhouse gas emissions in the state, which is aiming to reduce them to 1990 levels by 2015.
"My style is to encourage (ethanol imports) and I have great friends in the Florida delegation in Washington, senator Mel Martinez, also senator Bill Nelson...I will encourage them to do exactly that," Crist told Brazilian and U.S. businessmen.
"We are a gateway (for ethanol to the United States) and we're all about reducing taxes," Crist said a meeting at Sao Paulo's Industry Federation (Fiesp).
As the tariff is in force at least until 2009, any possible change would take place beyond that.
Crist came to Brazil along with about 200 delegates on a mission to improve bilateral trade. Brazil is already Florida's leading partner, with two-way trade worth at around $11 billion per year.
Crist also will visit an ethanol mill in Sao Paulo and Brazil's state oil company Petrobras' headquarters.
Florida next year will discuss ways to reduce gas emissions. The adoption of a 10 percent mix of ethanol into gasoline is an option, said Michael Sole, Florida's secretary of Environmental Protection, who also attended the event.
He said a recommendation to the government should be made by October 2008.
"Florida will be a tremendous ethanol market, which is going to grow, and would be an important gateway," said Marcos Jank, president of Brazil's Sugar Cane Industry Union (Unica).
Florida demands 8.6 billion gallons of gasoline per year and currently does not produce any of the biofuel.
Logistics problems to get corn-based ethanol from the Midwest to Florida are seen as an advantage to Brazilian imports.
Brazil currently exports minimal amounts of ethanol to Florida, all through the Caribbean, where the Brazilian product is reprocessed and re-exported to the U.S. market exempt of the tariff, through the Caribbean Basin Initiative (CBI) trade pact.
Brazil and the United States signed a broad agreement to work together to advance biofuels technology, help spread ethanol production and set common standards for ethanol trade, when President George W. Bush visited the country in March.
The accord did not include changes in the tariff despite a direct appeal to Bush by Brazilian President Luiz Inacio Lula da Silva on the matter.
Monday, July 13, 2009
Ethanol Production May Consume Too Much Water
By Cynthia Barnett
Florida Trend
July 1, 2009
From agricultural and energy company boardrooms to university laboratories, excitement is building over the potential for large-scale biofuel production in Florida. But a new study by forestry researchers at the University of Florida raises an important question: Does the state have enough water to supply thirsty energy crops?
Matthew Cohen, a professor in UF’s School of Forest Resources and Conservation, and post-doctoral researcher Jason Evans in the Department of Wildlife Ecology and Conservation analyzed energy and water impacts for four ethanol crops — corn, sugarcane, sweet sorghum and pine — in Florida and Georgia. Their study, published in Global Change Biology, found that all four yielded net energy; meaning they are viable for replacing fossil fuels. But it also concluded that ramping up production enough to meet U.S. Energy Independence and Security Act mandates for renewable fuels by 2022 “would have significant impacts on both land use and water resources.”
Estimated water requirements for sweet sorghum, the most water-efficient crop in the study, “would increase by almost 25% total freshwater withdrawals for all human uses reported in Florida and Georgia for 2000,” Cohen and Evans write. “Corn and sugarcane would require well over twice this water volume.” While pine is not irrigated, the study says large-scale pine biofuel production could have a critical impact on regional water supplies available for humans and nature because of accelerated evaporation.
Cohen says the message for Florida policy-makers is that “any debate about biofuels should be explicitly coupled with strategies for water and energy conservation.”
Florida Trend
July 1, 2009
From agricultural and energy company boardrooms to university laboratories, excitement is building over the potential for large-scale biofuel production in Florida. But a new study by forestry researchers at the University of Florida raises an important question: Does the state have enough water to supply thirsty energy crops?
Matthew Cohen, a professor in UF’s School of Forest Resources and Conservation, and post-doctoral researcher Jason Evans in the Department of Wildlife Ecology and Conservation analyzed energy and water impacts for four ethanol crops — corn, sugarcane, sweet sorghum and pine — in Florida and Georgia. Their study, published in Global Change Biology, found that all four yielded net energy; meaning they are viable for replacing fossil fuels. But it also concluded that ramping up production enough to meet U.S. Energy Independence and Security Act mandates for renewable fuels by 2022 “would have significant impacts on both land use and water resources.”
Estimated water requirements for sweet sorghum, the most water-efficient crop in the study, “would increase by almost 25% total freshwater withdrawals for all human uses reported in Florida and Georgia for 2000,” Cohen and Evans write. “Corn and sugarcane would require well over twice this water volume.” While pine is not irrigated, the study says large-scale pine biofuel production could have a critical impact on regional water supplies available for humans and nature because of accelerated evaporation.
Cohen says the message for Florida policy-makers is that “any debate about biofuels should be explicitly coupled with strategies for water and energy conservation.”
Florida Eyes Dominican Sugarcane for Clean Fuel Mandate
SANTO DOMINGO. - The State of Florida needs to find permanent suppliers of ethanol to cover a demand estimated at 786 million gallons starting next year, when it implements a norm calling for a 10% mix of that fuel in gasoline.
Florida Gateway president Brian C. Dean, interviewed by newspaper Listin Diario on the conference “Establishing a hemispherical biofuels market” dictated in Santo Domingo, said Florida has taken on the development and use of biofuels “very seriously.”
He said that state must look for an ethanol exporter in the region, for which Dominican Republic, with its experience in sugar cane and sufficient lands, could be a key ally to reach part of its objective.
Dean, invited to the country by the National Energy Commission (CNE), said Gateway Florida aims to get public policies implemented in Latin American and Caribbean countries to support the development of the ethanol and biofuels industry.
In the Dominican case, the executive said in addition to sugar cane, piñon jatropha, higuereta and other plants that have yielded good results could also be used to produce ethanol.
He added that within the Lula-Bush initiative and the biofuels development agreement, Dominican Republic is among the first four countries eligible for funding to develop clean energy projects.
Florida Gateway president Brian C. Dean, interviewed by newspaper Listin Diario on the conference “Establishing a hemispherical biofuels market” dictated in Santo Domingo, said Florida has taken on the development and use of biofuels “very seriously.”
He said that state must look for an ethanol exporter in the region, for which Dominican Republic, with its experience in sugar cane and sufficient lands, could be a key ally to reach part of its objective.
Dean, invited to the country by the National Energy Commission (CNE), said Gateway Florida aims to get public policies implemented in Latin American and Caribbean countries to support the development of the ethanol and biofuels industry.
In the Dominican case, the executive said in addition to sugar cane, piñon jatropha, higuereta and other plants that have yielded good results could also be used to produce ethanol.
He added that within the Lula-Bush initiative and the biofuels development agreement, Dominican Republic is among the first four countries eligible for funding to develop clean energy projects.
Thursday, July 9, 2009
The Cellulosic Ceiling
By Ryan C. Christiansen
Ethanol Producer Magazine
From the August 2009 Issue
The renewable fuel standard calls for 100 MMgy of cellulosic biofuel to be blended into the nation’s fuel in 2010, ramping up to 16 billion gallons per year in 2022. Will the U.S. produce enough to satisfy the mandate?
By 2022, the U.S. EPA expects the domestic biofuels industry to produce more than 32 billion gallons per year of renewable fuel. However, less than half of that fuel is expected to be corn-based ethanol. The majority, 16 billion gallons, will be cellulosic biofuel. The Energy Independence and Security Act of 2007 defines cellulosic biofuel as renewable fuel produced from any cellulose, hemicelluloses, or lignin that is derived from renewable biomass and has life-cycle greenhouse gas (GHG) emissions that are at least 60 percent less than the baseline life-cycle GHG emissions. The EPA predicts that, in the long run, those 16 billion gallons of cellulosic biofuel will be cellulosic ethanol. However, EISA’s definition for cellulosic biofuel leaves open the possibility that the mandate can be met by other fuels.
Federal Investments
The goal of ultimately producing billions of gallons of cellulosic biofuel has a hefty price tag. Between 2002 and 2008, the U.S. DOE’s Energy Efficiency and Renewable Energy Biomass Program, established to develop and demonstrate biomass feedstock and conversion technologies for integrated biorefineries and to ensure cellulosic ethanol can be produced cost-effectively by 2012, was allocated more than $800 million in federal funding. Since 2007, the DOE has announced more than $1 billion in multi-year investments in cellulosic biorefineries and since 2006 the USDA has invested almost $600 million to develop biofuel technology.
The bulk of the DOE’s investments began in February 2007 when it announced plans to invest $385 million in six biorefinery projects over four years for a total cellulosic ethanol production capacity of 131 MMgy. Combined with the industry cost share, the projects equated to more than $1.2 billion in investments. Projects identified for funding included an 11 MMgy Abengoa Bioenergy SA plant in Kansas, a 14 MMgy Alico Inc. plant in Florida, a 19 MMgy BlueFire Ethanol Fuels Inc. facility in California, a 30 MMgy Poet LLC plant in Iowa, an 18 MMgy Iogen Corp. plant in Idaho, and a 40 MMgy Range Fuels Inc. plant in Georgia.
In May 2007, the DOE announced it would provide up to $200 million over five years to support the development of small-scale cellulosic biorefineries. The first $114 million was allotted in January 2008 for four projects. The companies identified for funding included ICM Inc., Lignol Energy Corp., Pacific Ethanol Inc., and Stora Enso Oyj. The remaining $86 million was allotted to RSE Pulp & Chemical LLC, Mascoma Corp. and Ecofin LLC in April 2008. In July 2008, the DOE announced an additional $40 million investment for two more companies - Flambeau River Biofuels LLC for its project in Wisconsin and Verenium Corp. for its demonstration-scale facility in Louisiana. Seven of the nine plants were funded for cellulosic ethanol and two for cellulosic diesel.
On the research side, both the DOE and the USDA also provided funding to companies and universities. In March 2007, the DOE invested $23 million in five projects to develop highly efficient fermentative organisms to convert biomass material to ethanol; the companies and organizations identified for funding included Cargill Inc., Verenium, E. I. du Pont de Nemours and Co., Mascoma, and Purdue University. In June 2007, the DOE and USDA together awarded $8.3 million to 10 universities for biomass genomic research. During that month, the DOE also announced a $375 million investment in three new bioenergy research centers, including the DOE BioEnergy Science Center, the DOE Great Lakes Bioenergy Research Center, and the DOE Joint BioEnergy Institute.
To close out the year, the DOE awarded $7.7 million in December 2007 to four projects to demonstrate the thermochemical conversion process of biomass-to-biofuels. Then, in February 2008, the DOE invested $33.8 million in four projects to develop improved enzyme systems to convert cellulosic material into sugars suitable for the production of biofuels. The companies identified for funding included DSM Innovation Center Inc. (a partner with Abengoa), Genencor, a division of Danisco A/S, Novozymes A/S, and Verenium.
In March 2008, the DOE and USDA awarded $18 million to 18 universities and research institutes to develop biomass-based products, including biofuels.
To meet renewable fuel standard targets, the U.S. EPA says cellulosic ethanol plant startups must begin in earnest with a few small plants during 2010-'11 and must continue at an increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years.
SOURCE: U.S. EPA
Finally, in May 2009, the DOE announced that it would provide $786.5 million from the American Recovery and Reinvestment Act to accelerate advanced biofuels research and development and to provide additional funding for commercial-scale biorefinery demonstration projects. Of the total, $480 million will be distributed among 10 to 20 projects for pilot- or demonstration-scale integrated biorefineries that produce advanced biofuels, bioproducts, and heat and power in an integrated system, which must be operational within three years. In addition, $176.5 million will be used to increase the federal funding ceiling on two or more demonstration- or commercial-scale biorefinery projects that were selected and awarded funds within the past two years. Also, $110 million will be used to support new research. Finally, $20 million has been set aside for optimizing flexible fuel vehicle technology, evaluating the impact of higher ethanol blends on conventional vehicles, and upgrading refueling stations to be compatible with ethanol blends up to E85.
Scaling up
To meet renewable fuel standard targets, the EPA says cellulosic ethanol plant start-ups must begin in earnest with a few small plants during 2010-'11, increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years, beginning with 40 MMgy plants from 2010-'13, increasing to 80 MMgy during 2014-'17 and 100 MMgy and upwards during 2018 and beyond. The EPA projects that approximately two billion gallons per year of new plant construction will need to come online between 2018 and 2022. In total, approximately 180 plants will need to be completed by 2022.
However, with only a few months to go before petroleum blenders must begin to use cellulosic biofuels, there are no commercial-scale plants ready to deliver the fuel. Since the DOE’s initial February 2007 funding announcement, very little money has actually been distributed to selected projects. Two of the first six companies to be awarded DOE money - Alico and Iogen - have dropped their applications. Lignol announced in February that it was discontinuing its project as a result of instable energy prices, capital market uncertainty and general market malaise. Meanwhile, subsidiaries of Pacific Ethanol filed for bankruptcy in May.
Abengoa and Poet say they are on track to begin production, but not until 2011. Only Range Fuels, which received an additional $80 million loan guarantee from the USDA in January (the first-ever USDA loan guarantee for a commercial-scale cellulosic ethanol plant), expects to begin producing at near-commercial scale during 2010, with plans to complete the first phase of its planned 40 MMgy facility in Soperton, Ga., early next year.
According to Range Fuels CEO David Aldous, the plant is expected to be mechanically complete during the first quarter of 2010 and commissioning will begin soon thereafter. The plant will produce ethanol from wood chips, he says, and will be scaled up gradually from an initial 20 MMgy capacity. The EPA is predicting that Range Fuels will supply 10 million gallons of cellulosic ethanol toward the cellulosic biofuels mandate in 2010.
Aldous says Range Fuels’ technology is unique. “It is proprietary technology,” he says. “There are a lot of companies that are doing thermal front-end processes, whether they are pyrolysis or gasification, and there are a lot of other companies using different kinds of back-ends, converting the syngas into ethanol, (but) we use a proprietary catalyst on the back end and we use a proprietary technology on the front end.” Prior to leading Range Fuels, Aldous was executive vice president for strategy and portfolio at Royal Dutch Shell plc and also served as president of Shell Canada Products. He is also the former CEO for the Shell Group’s catalyst company, CRI/Criterion Inc.
Meeting the Mandate
To help meet the 100 MMgy cellulosic biofuels target for 2010, the EPA says there will be 24 pilot- or demonstration- scale plants and seven commercial- scale plants producing cellulosic ethanol or cellulosic diesel in 2010. However, ethanol will satisfy only 28 percent of the total cellulosic biofuels mandate. The EPA says the only companies that will produce more than one million gallons of cellulosic ethanol during 2010 are Verenium, Western Biomass Energy LLC, Fulcrum Bioenergy Inc., RSE, Southeast Renewable Fuels LLC, and Range Fuels.
The majority of the cellulosic biofuels volume (72 percent), the EPA says, is projected to come from cellulosic diesel. A small portion (3 million gallons) will be produced by Flambeau River Biofuels at its 6 MMgy plant in Park Falls, Wis., while the majority of all cellulosic biofuels that will be produced, the EPA says, will be cellulosic diesel from Cello Energy (pronounced “sell-oh”), which has a 20 MMgy plant in Bay Minette, Ala. The EPA says to expect 20 million gallons from the Bay Minette plant, as well as 16.67 million gallons from each of three future 50 MMgy plants, which are expected to be swiftly built—two in Alabama and one in Georgia—at locations to be determined.
Feedstock for Cello Energy’s operation can include plant biomass, waste wood, and other organic materials, as well as plastics and used tires. The company uses a catalytic depolymerization technology, the EPA says, to convert the feedstock into short-chain hydrocarbons that are polymerized to produce diesel fuel that meets ASTM standards at a cost between 50 cents and $1 per gallon. The process is reported to be 82 percent efficient and the only energy input is electricity. Allen Boykin, president of Cello Energy, told EPM that the catalyst used by the company is a proprietary catalyst that takes approximately 22 to 25 minutes to convert garbage into fuel oil using a continuous process.
Boykin says Cello Energy’s technology has been in the making for 12 to 15 years. His father, Dr. Jack Boykin, a chemical engineer who served as a Lieutenant in the U.S. Navy from 1961 to 1965, is CEO of Cello Energy and has been conducting the research. Allen says he became involved in 2002 to help bring the system to commercial-scale. Allen says bench-and pilot-scale testing was previously conducted in Prichard, Ala.
Imports to Meet Targets
The EPA admits that because cellulosic ethanol production technology is still developing, production plants will be considerably more complex and expensive to build than corn starch-based ethanol plants, thus requiring much more capital funding as well as design and construction resources. “Although technologies needed to convert cellulosic feedstocks into ethanol (and diesel) are becoming more and more understood, there are still a number of efficiency improvements that need to occur before cellulosic biofuel production can compete in today’s marketplace,” the EPA renewable fuel standard report says. “Additionally, because cellulosic biofuel production has not yet been proven on a commercial level, financing of these projects has primarily been through venture capital and similar funding mechanisms, as opposed to conventional bank loans.”
Alternatively, the EPA suggests that usage targets might be met using cellulosic biofuel that is produced internationally, for example, from feedstocks such as bagasse or straw.
Indeed, as much as 21 billion gallons per year of cellulosic biofuel might be produced outside the U.S. by 2017, the EPA says, the majority from bagasse, but also from forest products, and mostly from Brazil.
A recent report from Novozymes describes how Brazil might produce more than two billion gallons of cellulosic biofuel from bagasse by 2020, which would represent an additional $4 billion in export revenue for that country. Like in the U.S., the development of cellulosic biofuels in Brazil will depend on the industry’s ability to attract the needed investments and political support, Novozymes says.
Despite a slow start for cellulosic biofuels in the U.S., some in the industry are bullish about the future. “Advanced biofuel companies are ready to deploy their technology and begin meeting the requirements of the [RFS],” says Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial and Environmental Section. “Now that the rules of the program are finally moving forward and the Obama administration has demonstrated a firm commitment to the industry, companies are prepared to build the next generation of biorefineries.”
Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at rchristiansen@bbiinternational.com or (701) 373-8042.
Ethanol Producer Magazine
From the August 2009 Issue
The renewable fuel standard calls for 100 MMgy of cellulosic biofuel to be blended into the nation’s fuel in 2010, ramping up to 16 billion gallons per year in 2022. Will the U.S. produce enough to satisfy the mandate?
By 2022, the U.S. EPA expects the domestic biofuels industry to produce more than 32 billion gallons per year of renewable fuel. However, less than half of that fuel is expected to be corn-based ethanol. The majority, 16 billion gallons, will be cellulosic biofuel. The Energy Independence and Security Act of 2007 defines cellulosic biofuel as renewable fuel produced from any cellulose, hemicelluloses, or lignin that is derived from renewable biomass and has life-cycle greenhouse gas (GHG) emissions that are at least 60 percent less than the baseline life-cycle GHG emissions. The EPA predicts that, in the long run, those 16 billion gallons of cellulosic biofuel will be cellulosic ethanol. However, EISA’s definition for cellulosic biofuel leaves open the possibility that the mandate can be met by other fuels.
Federal Investments
The goal of ultimately producing billions of gallons of cellulosic biofuel has a hefty price tag. Between 2002 and 2008, the U.S. DOE’s Energy Efficiency and Renewable Energy Biomass Program, established to develop and demonstrate biomass feedstock and conversion technologies for integrated biorefineries and to ensure cellulosic ethanol can be produced cost-effectively by 2012, was allocated more than $800 million in federal funding. Since 2007, the DOE has announced more than $1 billion in multi-year investments in cellulosic biorefineries and since 2006 the USDA has invested almost $600 million to develop biofuel technology.
The bulk of the DOE’s investments began in February 2007 when it announced plans to invest $385 million in six biorefinery projects over four years for a total cellulosic ethanol production capacity of 131 MMgy. Combined with the industry cost share, the projects equated to more than $1.2 billion in investments. Projects identified for funding included an 11 MMgy Abengoa Bioenergy SA plant in Kansas, a 14 MMgy Alico Inc. plant in Florida, a 19 MMgy BlueFire Ethanol Fuels Inc. facility in California, a 30 MMgy Poet LLC plant in Iowa, an 18 MMgy Iogen Corp. plant in Idaho, and a 40 MMgy Range Fuels Inc. plant in Georgia.
In May 2007, the DOE announced it would provide up to $200 million over five years to support the development of small-scale cellulosic biorefineries. The first $114 million was allotted in January 2008 for four projects. The companies identified for funding included ICM Inc., Lignol Energy Corp., Pacific Ethanol Inc., and Stora Enso Oyj. The remaining $86 million was allotted to RSE Pulp & Chemical LLC, Mascoma Corp. and Ecofin LLC in April 2008. In July 2008, the DOE announced an additional $40 million investment for two more companies - Flambeau River Biofuels LLC for its project in Wisconsin and Verenium Corp. for its demonstration-scale facility in Louisiana. Seven of the nine plants were funded for cellulosic ethanol and two for cellulosic diesel.
On the research side, both the DOE and the USDA also provided funding to companies and universities. In March 2007, the DOE invested $23 million in five projects to develop highly efficient fermentative organisms to convert biomass material to ethanol; the companies and organizations identified for funding included Cargill Inc., Verenium, E. I. du Pont de Nemours and Co., Mascoma, and Purdue University. In June 2007, the DOE and USDA together awarded $8.3 million to 10 universities for biomass genomic research. During that month, the DOE also announced a $375 million investment in three new bioenergy research centers, including the DOE BioEnergy Science Center, the DOE Great Lakes Bioenergy Research Center, and the DOE Joint BioEnergy Institute.
To close out the year, the DOE awarded $7.7 million in December 2007 to four projects to demonstrate the thermochemical conversion process of biomass-to-biofuels. Then, in February 2008, the DOE invested $33.8 million in four projects to develop improved enzyme systems to convert cellulosic material into sugars suitable for the production of biofuels. The companies identified for funding included DSM Innovation Center Inc. (a partner with Abengoa), Genencor, a division of Danisco A/S, Novozymes A/S, and Verenium.
In March 2008, the DOE and USDA awarded $18 million to 18 universities and research institutes to develop biomass-based products, including biofuels.
To meet renewable fuel standard targets, the U.S. EPA says cellulosic ethanol plant startups must begin in earnest with a few small plants during 2010-'11 and must continue at an increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years.
SOURCE: U.S. EPA
Finally, in May 2009, the DOE announced that it would provide $786.5 million from the American Recovery and Reinvestment Act to accelerate advanced biofuels research and development and to provide additional funding for commercial-scale biorefinery demonstration projects. Of the total, $480 million will be distributed among 10 to 20 projects for pilot- or demonstration-scale integrated biorefineries that produce advanced biofuels, bioproducts, and heat and power in an integrated system, which must be operational within three years. In addition, $176.5 million will be used to increase the federal funding ceiling on two or more demonstration- or commercial-scale biorefinery projects that were selected and awarded funds within the past two years. Also, $110 million will be used to support new research. Finally, $20 million has been set aside for optimizing flexible fuel vehicle technology, evaluating the impact of higher ethanol blends on conventional vehicles, and upgrading refueling stations to be compatible with ethanol blends up to E85.
Scaling up
To meet renewable fuel standard targets, the EPA says cellulosic ethanol plant start-ups must begin in earnest with a few small plants during 2010-'11, increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years, beginning with 40 MMgy plants from 2010-'13, increasing to 80 MMgy during 2014-'17 and 100 MMgy and upwards during 2018 and beyond. The EPA projects that approximately two billion gallons per year of new plant construction will need to come online between 2018 and 2022. In total, approximately 180 plants will need to be completed by 2022.
However, with only a few months to go before petroleum blenders must begin to use cellulosic biofuels, there are no commercial-scale plants ready to deliver the fuel. Since the DOE’s initial February 2007 funding announcement, very little money has actually been distributed to selected projects. Two of the first six companies to be awarded DOE money - Alico and Iogen - have dropped their applications. Lignol announced in February that it was discontinuing its project as a result of instable energy prices, capital market uncertainty and general market malaise. Meanwhile, subsidiaries of Pacific Ethanol filed for bankruptcy in May.
Abengoa and Poet say they are on track to begin production, but not until 2011. Only Range Fuels, which received an additional $80 million loan guarantee from the USDA in January (the first-ever USDA loan guarantee for a commercial-scale cellulosic ethanol plant), expects to begin producing at near-commercial scale during 2010, with plans to complete the first phase of its planned 40 MMgy facility in Soperton, Ga., early next year.
According to Range Fuels CEO David Aldous, the plant is expected to be mechanically complete during the first quarter of 2010 and commissioning will begin soon thereafter. The plant will produce ethanol from wood chips, he says, and will be scaled up gradually from an initial 20 MMgy capacity. The EPA is predicting that Range Fuels will supply 10 million gallons of cellulosic ethanol toward the cellulosic biofuels mandate in 2010.
Aldous says Range Fuels’ technology is unique. “It is proprietary technology,” he says. “There are a lot of companies that are doing thermal front-end processes, whether they are pyrolysis or gasification, and there are a lot of other companies using different kinds of back-ends, converting the syngas into ethanol, (but) we use a proprietary catalyst on the back end and we use a proprietary technology on the front end.” Prior to leading Range Fuels, Aldous was executive vice president for strategy and portfolio at Royal Dutch Shell plc and also served as president of Shell Canada Products. He is also the former CEO for the Shell Group’s catalyst company, CRI/Criterion Inc.
Meeting the Mandate
To help meet the 100 MMgy cellulosic biofuels target for 2010, the EPA says there will be 24 pilot- or demonstration- scale plants and seven commercial- scale plants producing cellulosic ethanol or cellulosic diesel in 2010. However, ethanol will satisfy only 28 percent of the total cellulosic biofuels mandate. The EPA says the only companies that will produce more than one million gallons of cellulosic ethanol during 2010 are Verenium, Western Biomass Energy LLC, Fulcrum Bioenergy Inc., RSE, Southeast Renewable Fuels LLC, and Range Fuels.
The majority of the cellulosic biofuels volume (72 percent), the EPA says, is projected to come from cellulosic diesel. A small portion (3 million gallons) will be produced by Flambeau River Biofuels at its 6 MMgy plant in Park Falls, Wis., while the majority of all cellulosic biofuels that will be produced, the EPA says, will be cellulosic diesel from Cello Energy (pronounced “sell-oh”), which has a 20 MMgy plant in Bay Minette, Ala. The EPA says to expect 20 million gallons from the Bay Minette plant, as well as 16.67 million gallons from each of three future 50 MMgy plants, which are expected to be swiftly built—two in Alabama and one in Georgia—at locations to be determined.
Feedstock for Cello Energy’s operation can include plant biomass, waste wood, and other organic materials, as well as plastics and used tires. The company uses a catalytic depolymerization technology, the EPA says, to convert the feedstock into short-chain hydrocarbons that are polymerized to produce diesel fuel that meets ASTM standards at a cost between 50 cents and $1 per gallon. The process is reported to be 82 percent efficient and the only energy input is electricity. Allen Boykin, president of Cello Energy, told EPM that the catalyst used by the company is a proprietary catalyst that takes approximately 22 to 25 minutes to convert garbage into fuel oil using a continuous process.
Boykin says Cello Energy’s technology has been in the making for 12 to 15 years. His father, Dr. Jack Boykin, a chemical engineer who served as a Lieutenant in the U.S. Navy from 1961 to 1965, is CEO of Cello Energy and has been conducting the research. Allen says he became involved in 2002 to help bring the system to commercial-scale. Allen says bench-and pilot-scale testing was previously conducted in Prichard, Ala.
Imports to Meet Targets
The EPA admits that because cellulosic ethanol production technology is still developing, production plants will be considerably more complex and expensive to build than corn starch-based ethanol plants, thus requiring much more capital funding as well as design and construction resources. “Although technologies needed to convert cellulosic feedstocks into ethanol (and diesel) are becoming more and more understood, there are still a number of efficiency improvements that need to occur before cellulosic biofuel production can compete in today’s marketplace,” the EPA renewable fuel standard report says. “Additionally, because cellulosic biofuel production has not yet been proven on a commercial level, financing of these projects has primarily been through venture capital and similar funding mechanisms, as opposed to conventional bank loans.”
Alternatively, the EPA suggests that usage targets might be met using cellulosic biofuel that is produced internationally, for example, from feedstocks such as bagasse or straw.
Indeed, as much as 21 billion gallons per year of cellulosic biofuel might be produced outside the U.S. by 2017, the EPA says, the majority from bagasse, but also from forest products, and mostly from Brazil.
A recent report from Novozymes describes how Brazil might produce more than two billion gallons of cellulosic biofuel from bagasse by 2020, which would represent an additional $4 billion in export revenue for that country. Like in the U.S., the development of cellulosic biofuels in Brazil will depend on the industry’s ability to attract the needed investments and political support, Novozymes says.
Despite a slow start for cellulosic biofuels in the U.S., some in the industry are bullish about the future. “Advanced biofuel companies are ready to deploy their technology and begin meeting the requirements of the [RFS],” says Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial and Environmental Section. “Now that the rules of the program are finally moving forward and the Obama administration has demonstrated a firm commitment to the industry, companies are prepared to build the next generation of biorefineries.”
Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at rchristiansen@bbiinternational.com or (701) 373-8042.
Refiners Face Shakeout in Coming Years - Deloitte
By Erwin Seba
Reuters
Jul 9, 2009
U.S. refiners face a shakeout due to pending environmental regulations in the coming years that could shrink national refining capacity by up to 2 million barrels per day (bpd), according to a study issued on Thursday by financial consultant Deloitte.
"As the impact of the new regulations is realized over the next several years, up to 2 million bpd of crude processing capacity in this country may be eliminated," according to the study.
The Deloitte study follows similar research issued throughout the year that temporary reductions in U.S. refining capacity because of the recession would likely become permanent in the next 10 years as new vehicle efficiency standards and requirements for renewable fuels cut the need for motor fuels made from crude oil.
Refiners have temporarily shuttered refineries and individual processing units throughout the year as the economic downturn crushed demand for motor fuels.
Valero Energy Corp (VLO.N: Quote, Profile, Research, Stock Buzz) said on Thursday it had turned off the first units in a sequential plantwide shutdown that could last up to three months at its 235,000-bpd Aruba refinery, which supplies the U.S. market.
On Wednesday, the U.S. Energy Information Administration said U.S. refinery utilization was running at 86.8 percent of national capacity of 17.67 million bpd. [EIA/S]
Refiners that have invested heavily in the past decade to shift their plants to run cheaper heavy, sour crude oil grades will likely face new hurdles in rules to limit carbon emissions expected to take effect within 10 years.
"The added processing needed to turn this more challenging feedstock into clean fuels consumes more energy than refining light, sweet crude," the study said. "With the advent of caps on carbon emissions, what once looked like a cheap feedstock may now mean a costly carbon footprint."
Some refiners are already adapting to the new challenges their industry will face, according to the study.
"Valero and Sunoco Inc (SUN.N: Quote, Profile, Research, Stock Buzz) have recently announced significant acquisitions of ethanol manufacturing plants from distressed sellers," the study said.
Refiners are also seeking ways to produce biofuels in addition to adding ethanol facilities.
"The future of a refinery will depend on whether it is a low-cost operator, the sort of competition it faces, and whether its profits justify the cost to comply with regulatory changes," according to the study.
Reuters
Jul 9, 2009
U.S. refiners face a shakeout due to pending environmental regulations in the coming years that could shrink national refining capacity by up to 2 million barrels per day (bpd), according to a study issued on Thursday by financial consultant Deloitte.
"As the impact of the new regulations is realized over the next several years, up to 2 million bpd of crude processing capacity in this country may be eliminated," according to the study.
The Deloitte study follows similar research issued throughout the year that temporary reductions in U.S. refining capacity because of the recession would likely become permanent in the next 10 years as new vehicle efficiency standards and requirements for renewable fuels cut the need for motor fuels made from crude oil.
Refiners have temporarily shuttered refineries and individual processing units throughout the year as the economic downturn crushed demand for motor fuels.
Valero Energy Corp (VLO.N: Quote, Profile, Research, Stock Buzz) said on Thursday it had turned off the first units in a sequential plantwide shutdown that could last up to three months at its 235,000-bpd Aruba refinery, which supplies the U.S. market.
On Wednesday, the U.S. Energy Information Administration said U.S. refinery utilization was running at 86.8 percent of national capacity of 17.67 million bpd. [EIA/S]
Refiners that have invested heavily in the past decade to shift their plants to run cheaper heavy, sour crude oil grades will likely face new hurdles in rules to limit carbon emissions expected to take effect within 10 years.
"The added processing needed to turn this more challenging feedstock into clean fuels consumes more energy than refining light, sweet crude," the study said. "With the advent of caps on carbon emissions, what once looked like a cheap feedstock may now mean a costly carbon footprint."
Some refiners are already adapting to the new challenges their industry will face, according to the study.
"Valero and Sunoco Inc (SUN.N: Quote, Profile, Research, Stock Buzz) have recently announced significant acquisitions of ethanol manufacturing plants from distressed sellers," the study said.
Refiners are also seeking ways to produce biofuels in addition to adding ethanol facilities.
"The future of a refinery will depend on whether it is a low-cost operator, the sort of competition it faces, and whether its profits justify the cost to comply with regulatory changes," according to the study.
Friday, July 3, 2009
Don’t Sink Energy Independence by Crimping Biofuels
Don’t Sink Energy Independence by Crimping Biofuels
By Gal Luft
The Detroit News
April 20, 2009
This week, the California Air Resources Board, or CARB — the same agency that only five years ago gained notoriety for its role in “killing” the electric car — could be in a position to deliver another crippling blow to the United States’ effort to achieve energy independence.
As part of California’s strategy to reduce greenhouse gas emissions from transportation fuels, CARB is pushing for the enactment of a low-carbon fuel standard, or LCFS, that aims to regulate the emissions level of petroleum refiners, biofuels producers and others that produce or import the transportation fuels used in California. The credit or penalty would be assessed according to both the direct and indirect greenhouse gas emissions associated with each of the steps in the fuel’s life cycle, including production, transport and tailpipe emissions.
Such “cradle to grave” accounting sounds logical only if it allows all fuels to compete on an equal footing. But this is what the fuel standard in its current version fails to do.
At a time when the U.S. is charting its way out of its debilitating — and growing — oil dependence, CARB’s plan puts biofuels at a comparative disadvantage against petroleum. It does so by requiring that indirect greenhouse gas-emitting activities, such as deforestation and plowing up grasslands — which are often associated with increased use of biofuels — be considered, while failing to account for indirect carbon-emitting activities related to petroleum production. CARB’s explanation: “No other significant indirect effects that result in large greenhouse gas emissions have been identified.”
That statement may be true for roughly half of California’s oil, which is either drilled in the state or imported from Alaska, but certainly not for the half coming from distant places such as Saudi Arabia, Iraq or Colombia. Some of the direct carbon-intensive activities that CARB’s staff prefer to ignore are: pumping seawater into the wells of Saudi Arabia to increase reservoir pressure, transporting the crude to processing facilities where sulfur and other impurities are removed, and powering a tanker during a long voyage across two oceans.
But what makes their model truly discriminatory is the failure to account for the environmental impact of indirect activities, such as the military operations related to our oil use. The jets, tanks, ships and Humvees patrolling the Persian Gulf or used by the Special Forces protecting the oil pipelines in Colombia don’t run on vegetable oil, and the electricity powering military bases dedicated to protecting our access to oil is not made in wind farms. Ignoring those factors while speculating about the role of deforestation (much deforestation has nothing to do with biofuels but with the logging industry) is intellectually dishonest.
Recent studies have shown that the amount of fossil fuel needed to make gasoline is nearly twice the amount needed for corn ethanol production and more than 10 times that for cellulosic ethanol (made from switchgrass and other non-food plants). Further, there is a net reduction in greenhouse gas emissions as a result of using ethanol as fuel. The Argonne National Laboratory found that, on a per-gallon basis, even the most inefficient form of biofuel — corn ethanol — reduces greenhouse gas emissions by 18 percent to 29 percent compared with gasoline; sugar-cane ethanol reduces emissions by 56 percent, and cellulosic ethanol has an even greater benefit with a more than 80 percent reduction.
A 2009 report commissioned by the International Energy Agency reached similar conclusions. Despite these clear benefits to the environment, CARB is bent on singling out biofuels as enemies of the planet.
Putting aside the bureaucratic nightmare the state of California would have to endure in analyzing the carbon footprint of each step in the pathway for each gallon of fuel sold in the state, the indirect carbon accounting could have a chilling effect on new investment and the development of new technologies — all at a time when the nascent biofuels industry is already challenged by the economic downturn. This is all too unfortunate because scientific advancement is exactly what is needed to advance biofuels from corn to ultra-low carbon sources such as switchgrass, forestry residues, urban waste or algae.
The proposed standard is not simply a scientific or environmental issue. It is a matter of national security, which is threatened by our reliance on oil. With hundreds of billions of dollars leaving our economy annually to finance our oil dependence, it is also a matter of economic security.
It is often the case that as California goes, so goes the country. Gov. Arnold Schwarzenegger should realize that implementing the fuel standard as proposed would only cement oil’s virtual monopoly in the transportation sector and dial back the progress made toward energy independence.
Gal Luft, executive director of the Institute for the Analysis of Global Security and co-founder of the Set America Free Coalition, is a coauthor of “Energy Security Challenges for the 21st Century” and “Turning Oil into Salt: How Breaking the Oil Monopoly Can Make Us Prosper Again.” Originally published in the Los Angeles Times.
About Renergie
Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.
By Gal Luft
The Detroit News
April 20, 2009
This week, the California Air Resources Board, or CARB — the same agency that only five years ago gained notoriety for its role in “killing” the electric car — could be in a position to deliver another crippling blow to the United States’ effort to achieve energy independence.
As part of California’s strategy to reduce greenhouse gas emissions from transportation fuels, CARB is pushing for the enactment of a low-carbon fuel standard, or LCFS, that aims to regulate the emissions level of petroleum refiners, biofuels producers and others that produce or import the transportation fuels used in California. The credit or penalty would be assessed according to both the direct and indirect greenhouse gas emissions associated with each of the steps in the fuel’s life cycle, including production, transport and tailpipe emissions.
Such “cradle to grave” accounting sounds logical only if it allows all fuels to compete on an equal footing. But this is what the fuel standard in its current version fails to do.
At a time when the U.S. is charting its way out of its debilitating — and growing — oil dependence, CARB’s plan puts biofuels at a comparative disadvantage against petroleum. It does so by requiring that indirect greenhouse gas-emitting activities, such as deforestation and plowing up grasslands — which are often associated with increased use of biofuels — be considered, while failing to account for indirect carbon-emitting activities related to petroleum production. CARB’s explanation: “No other significant indirect effects that result in large greenhouse gas emissions have been identified.”
That statement may be true for roughly half of California’s oil, which is either drilled in the state or imported from Alaska, but certainly not for the half coming from distant places such as Saudi Arabia, Iraq or Colombia. Some of the direct carbon-intensive activities that CARB’s staff prefer to ignore are: pumping seawater into the wells of Saudi Arabia to increase reservoir pressure, transporting the crude to processing facilities where sulfur and other impurities are removed, and powering a tanker during a long voyage across two oceans.
But what makes their model truly discriminatory is the failure to account for the environmental impact of indirect activities, such as the military operations related to our oil use. The jets, tanks, ships and Humvees patrolling the Persian Gulf or used by the Special Forces protecting the oil pipelines in Colombia don’t run on vegetable oil, and the electricity powering military bases dedicated to protecting our access to oil is not made in wind farms. Ignoring those factors while speculating about the role of deforestation (much deforestation has nothing to do with biofuels but with the logging industry) is intellectually dishonest.
Recent studies have shown that the amount of fossil fuel needed to make gasoline is nearly twice the amount needed for corn ethanol production and more than 10 times that for cellulosic ethanol (made from switchgrass and other non-food plants). Further, there is a net reduction in greenhouse gas emissions as a result of using ethanol as fuel. The Argonne National Laboratory found that, on a per-gallon basis, even the most inefficient form of biofuel — corn ethanol — reduces greenhouse gas emissions by 18 percent to 29 percent compared with gasoline; sugar-cane ethanol reduces emissions by 56 percent, and cellulosic ethanol has an even greater benefit with a more than 80 percent reduction.
A 2009 report commissioned by the International Energy Agency reached similar conclusions. Despite these clear benefits to the environment, CARB is bent on singling out biofuels as enemies of the planet.
Putting aside the bureaucratic nightmare the state of California would have to endure in analyzing the carbon footprint of each step in the pathway for each gallon of fuel sold in the state, the indirect carbon accounting could have a chilling effect on new investment and the development of new technologies — all at a time when the nascent biofuels industry is already challenged by the economic downturn. This is all too unfortunate because scientific advancement is exactly what is needed to advance biofuels from corn to ultra-low carbon sources such as switchgrass, forestry residues, urban waste or algae.
The proposed standard is not simply a scientific or environmental issue. It is a matter of national security, which is threatened by our reliance on oil. With hundreds of billions of dollars leaving our economy annually to finance our oil dependence, it is also a matter of economic security.
It is often the case that as California goes, so goes the country. Gov. Arnold Schwarzenegger should realize that implementing the fuel standard as proposed would only cement oil’s virtual monopoly in the transportation sector and dial back the progress made toward energy independence.
Gal Luft, executive director of the Institute for the Analysis of Global Security and co-founder of the Set America Free Coalition, is a coauthor of “Energy Security Challenges for the 21st Century” and “Turning Oil into Salt: How Breaking the Oil Monopoly Can Make Us Prosper Again.” Originally published in the Los Angeles Times.
About Renergie
Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.
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