Archive for November, 2008

Biodiesel Tax Break Backfires

Posted on November 29, 2008. Filed under: Blender's Tax Credit, Hydrous Ethanol | Tags: , , , , |

The following article appeared in the November 29, 2008 issue of the Houston Chronicle.

 

Biodiesel tax break backfires

U.S. producers reap federal subsidy while selling most of the fuel overseas

By BRETT CLANTON
 
 

 

Federal subsidies to the U.S. biodiesel industry were supposed to help wean the nation from foreign oil, and a new law in 2009 will bolster the effort, but the money has fueled a controversial side business.

 

Domestic producers of the renewable fuel have been selling huge quantities of biodiesel in Europe and in other foreign markets, where prices are often better, and then receiving a $1-per-gallon tax credit from Uncle Sam.

 

Biodiesel, made in the U.S. mostly from soybean oil or recycled cooking oil from restaurants, is blended at low levels with petroleum diesel to reduce emissions and reliance on fossil fuels.

 

Today, American exports of biodiesel represent more than half of domestic output.

 

Biodiesel’s $1-per-gallon subsidy, known as the “blender’s tax credit,” is available to U.S. companies that blend biodiesel with petroleum diesel and was intended to boost biodiesel production and encourage diesel marketers to buy the fuel.

 

Exports have helped some biodiesel companies survive a difficult period in recent years, when high costs and a weak U.S. market forced firms to close plants.

 

But exporting has been criticized as an abuse of a federal subsidy that was presented to the American public as a down payment on a future in which the U.S. would rely less on fossil fuels. “This is a government boondoggle financed by the taxpayers,” said Tom Elam, an agricultural economist with FarmEcon in Carmel, Ind., who estimates biodiesel exports could be costing American taxpayers several hundred million dollars a year.

 

Texas has more installed biodiesel production capacity than any other state, and several companies along the Houston Ship Channel participate in the export business.

 

Industry cites benefits

The industry defends exports as a temporary but important practice that has created thousands of “green” jobs and helped build a domestic infrastructure to make the fuel.

 

In 2009, a new energy law will require blending of 500 million gallons of biodiesel into the nation’s fuel supply, growing to 1 billion gallons by 2012.

 

“It is reasonable to assume that the vast majority of U.S. production will be needed to meet domestic use requirements,” said Manning Feraci, vice president of federal affairs at the National Biodiesel Board, a trade group based in Jefferson City, Mo.

 

For now, however, the business of exporting the renewable fuel is still going strong.

 

Through August, the nation’s biodiesel exports hit 511 million gallons, with most of that going to European Union nations and small quantities heading to Mexico and Canada, according to Census Bureau data tracked by the U.S. Department of Agriculture. That’s 85 percent of the estimated 600 million gallons that American biodiesel producers will make this year—and that’s only for the first eight months.

 

In 2007, the U.S. exported 291 million gallons of biodiesel, and domestic producers made 490 million gallons, government figures show.

 

Critics say the data highlight how little oversight there is over biofuels programs despite huge federal spending on them. “It’s probably an indicator that our renewable energy strategy in the United States needs to be revisited,” said Texas Agriculture Commissioner Todd Staples, whose office oversees state biofuel initiatives.

 

But while the biodiesel industry acknowledges the fuel is going overseas, it contends government figures are not reliable and may overstate the issue.

 

Federal biodiesel export figures actually reflect exports of refined U.S. vegetable and animal oils, which mostly means biodiesel. Current export data also do not draw a distinction between domestically produced biodiesel and foreign-produced biodiesel that passes through U.S. ports.

 

Through August, the U.S. had imported 232 million gallons of biodiesel, Census figures show. Yet even if all the foreign fuel were included in the 511 million gallon export figure, domestic producers would still be sending about half their output abroad.

 

Like ethanol, biodiesel has been touted as a homegrown way to help reduce U.S. dependence on oil, cut tailpipe emissions and aid American farmers. Ethanol, which is blended with gasoline, also is subsidized, but almost all of it is consumed domestically.

 

The $1-per-gallon biodiesel tax credit was created under the 2004 American Jobs Act. The tax credit had been set to expire at the end of 2008, but recently received an extension for another year.

 

Vegetable oil costs

Today, the domestic biodiesel industry has more than 2 billion gallons of installed production capacity from more than 170 plants in 40 states. Texas has 686 million gallons of production capacity in 31 plants. More than half of that capacity is located along the Houston Ship Channel, said Jess Hewitt, president of the Biodiesel Coalition of Texas.

 

But many U.S. plants shut down temporarily this year after soaring vegetable oil prices made production too costly. Some of those that kept working relied on exports to stay afloat.

 

 

John Kellogg, spokesman for World Energy, a Boston-based biofuel marketing firm that exports biodiesel out of the Ship Channel, said he sees no conflict with sending U.S. subsidized fuel overseas. “Support from the federal government in the form of a tax credit is appropriate to allow biodiesel to become a global business and a global competitor,” he said.

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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The Monster That Ate Wall Street

Posted on November 25, 2008. Filed under: Field-to-Pump, Rural Development | Tags: , , , , |

The Monster That Ate Wall Street

 

How ‘credit default swaps’—an insurance against bad loans—turned from a smart bet into a killer.

Matthew Philips

NEWSWEEK

From the magazine issue dated Oct 6, 2008

 

They’re called “Off-Site Weekends”—rituals of the high-finance world in which teams of bankers gather someplace sunny to blow off steam and celebrate their successes as Masters of the Universe. Think yacht parties, bikini models, $1,000 bottles of Cristal. One 1994 trip by a group of JPMorgan bankers to the tony Boca Raton Resort & Club in Florida has become the stuff of Wall Street legend—though not for the raucous partying (although there was plenty of that, too). Holed up for most of the weekend in a conference room at the pink, Spanish-style resort, the JPMorgan bankers were trying to get their heads around a question as old as banking itself: how do you mitigate your risk when you loan money to someone? By the mid-’90s, JPMorgan’s books were loaded with tens of billions of dollars in loans to corporations and foreign governments, and by federal law it had to keep huge amounts of capital in reserve in case any of them went bad. But what if JPMorgan could create a device that would protect it if those loans defaulted, and free up that capital?

 

What the bankers hit on was a sort of insurance policy: a third party would assume the risk of the debt going sour, and in exchange would receive regular payments from the bank, similar to insurance premiums. JPMorgan would then get to remove the risk from its books and free up the reserves. The scheme was called a “credit default swap,” and it was a twist on something bankers had been doing for a while to hedge against fluctuations in interest rates and commodity prices. While the concept had been floating around the markets for a couple of years, JPMorgan was the first bank to make a big bet on credit default swaps. It built up a “swaps” desk in the mid-’90s and hired young math and science grads from schools like MIT and Cambridge to create a market for the complex instruments. Within a few years, the credit default swap (CDS) became the hot financial instrument, the safest way to parse out risk while maintaining a steady return. “I’ve known people who worked on the Manhattan Project,” says Mark Brickell, who at the time was a 40-year-old managing director at JPMorgan. “And for those of us on that trip, there was the same kind of feeling of being present at the creation of something incredibly important.”

 

Like Robert Oppenheimer and his team of nuclear physicists in the 1940s, Brickell and his JPMorgan colleagues didn’t realize they were creating a monster. Today, the economy is teetering and Wall Street is in ruins, thanks in no small part to the beast they unleashed 14 years ago. The country’s biggest insurance company, AIG, had to be bailed out by American taxpayers after it defaulted on $14 billion worth of credit default swaps it had made to investment banks, insurance companies and scores of other entities. So much of what’s gone wrong with the financial system in the past year can be traced back to credit default swaps, which ballooned into a $62 trillion market before ratcheting down to $55 trillion last week—nearly four times the value of all stocks traded on the New York Stock Exchange. There’s a reason Warren Buffett called these instruments “financial weapons of mass destruction.” Since credit default swaps are privately negotiated contracts between two parties and aren’t regulated by the government, there’s no central reporting mechanism to determine their value. That has clouded up the markets with billions of dollars’ worth of opaque “dark matter,” as some economists like to say. Like rogue nukes, they’ve proliferated around the world and now lie hiding, waiting to blow up the balance sheets of countless other financial institutions.

 

It didn’t start out that way. One of the earliest CDS deals came out of JPMorgan in December 1997, when the firm put into place the idea hatched in Boca Raton. It essentially took 300 different loans, totaling $9.7 billion, that had been made to a variety of big companies like Ford, Wal-Mart and IBM, and cut them up into pieces known as “tranches” (that’s French for “slices”). The bank then identified the riskiest 10 percent tranche and sold it to investors in what was called the Broad Index Securitized Trust Offering, or Bistro for short. The Bistro was put together by Terri Duhon, at the time a 25-year-old MIT graduate working on JPMorgan’s credit swaps desk in New York—a division that would eventually earn the name the Morgan Mafia for the number of former members who went on to senior positions at global banks and hedge funds. “We made it possible for banks to get their credit risk off their books and into nonfinancial institutions like insurance companies and pension funds,” says Duhon, who now heads her own derivatives consulting business in London.

 

Before long, credit default swaps were being used to encourage investors to buy into risky emerging markets such as Latin America and Russia by insuring the debt of developing countries. Later, after corporate blowouts like Enron and WorldCom, it became clear there was a big need for protection against company implosions, and credit default swaps proved just the tool. By then, the CDS market was more than doubling every year, surpassing $100 billion in 2000 and totaling $6.4 trillion by 2004.

 

And then came the housing boom. As the Federal Reserve cut interest rates and Americans started buying homes in record numbers, mortgage-backed securities became the hot new investment. Mortgages were pooled together, and sliced and diced into bonds that were bought by just about every financial institution imaginable: investment banks, commercial banks, hedge funds, pension funds. For many of those mortgage-backed securities, credit default swaps were taken out to protect against default. “These structures were such a great deal, everyone and their dog decided to jump in, which led to massive growth in the CDS market,” says Rohan Douglas, who ran Salomon Brothers and Citigroup’s global credit swaps research division through the 1990s.

 

Soon, companies like AIG weren’t just insuring houses. They were also insuring the mortgages on those houses by issuing credit default swaps. By the time AIG was bailed out, it held $440 billion of credit default swaps. AIG’s fatal flaw appears to have been applying traditional insurance methods to the CDS market. There is no correlation between traditional insurance events; if your neighbor gets into a car wreck, it doesn’t necessarily increase your risk of getting into one. But with bonds, it’s a different story: when one defaults, it starts a chain reaction that increases the risk of others going bust. Investors get skittish, worrying that the issues plaguing one big player will affect another. So they start to bail, the markets freak out and lenders pull back credit.

 

The problem was exacerbated by the fact that so many institutions were tethered to one another through these deals. For example, Lehman Brothers had itself made more than $700 billion worth of swaps, and many of them were backed by AIG. And when mortgage-backed securities started going bad, AIG had to make good on billions of dollars of credit default swaps. Soon it became clear it wasn’t going to be able to cover its losses. And since AIG’s stock was one of the components of the Dow Jones industrial average, the plunge in its share price pulled down the entire average, contributing to the panic.

 

The reason the federal government stepped in and bailed out AIG was that the insurer was something of a last backstop in the CDS market. While banks and hedge funds were playing both sides of the CDS business—buying and trading them and thus offsetting whatever losses they took—AIG was simply providing the swaps and holding onto them. Had it been allowed to default, everyone who’d bought a CDS contract from the company would have suffered huge losses in the value of the insurance contracts they hadpurchased, causing them their own credit problems.

 

Given the CDSs’ role in this mess, it’s likely that the federal government will start regulating them; New York state has already said it will begin doing so in January. “Sadly, they’ve been vilified,” says Duhon, who helped get the whole thing started with that Bistro deal a decade ago. “It’s like saying it’s the gun’s fault when someone gets shot.” But just as one might want to regulate street sales of AK-47s, there’s an argument to be made that credit default swaps can be dangerous in the wrong hands. “It made it a lot easier for some people to get into trouble,” says Darrell Duffie, an economist at Stanford. Although he believes credit default swaps have been “dramatically misused,” Duffie says he still believes they’re a very effective tool and shouldn’t be done away with entirely. Besides, he says, “if you outlaw them, then the financial engineers will just come up with something else that gets around the regulation.” As Wall Street and Washington wring their hands over how to prevent future financial crises, we can only hope they re-read Mary Shelley’s “Frankenstein.”

 

 

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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Urbanchuk: Ethanol Tax Credit an Economic Success

Posted on November 24, 2008. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

From the December 2008 Issue of Ethanol Producer Magazine:

 

Urbanchuk: Ethanol tax credit an economic success

by Susanne Retka Schill

For each dollar invested in America’s ethanol industry in the form of the federal excise tax credit, nearly $5 has been returned to federal, state and local government and the economy as a whole, according to an analysis by economic consulting firm LECG LLC director John Urbanchuk. According to the analysis, the tax provision has not only increased federal tax revenues, but also reduced imported oil expenditures and put more money into consumer pockets. “Economically, this incentive has been an unequivocal success,” Urbanchuk said.

Conducted by Urbanchuk on behalf of the Renewable Fuels Association, the analysis detailed the dollar impact of the America’s ethanol industry. ”[It has] generated an estimated $33.4 billion (in 2008 dollars) in tax revenue for the federal government and nearly $17 billion (in 2008 dollars) of additional tax revenue for state and local governments since 1978, reduced America’s tab for imported oil by $97.5 billion, helped reduce farm program payments by more than $3 billion annually since 2006, and put some $66 billion more into the pockets of Americans in the form of increased household income since its inception in 1978.”

According to Urbanchuk, the federal investment in America’s ethanol industry has been and will continue paying dividends for the American economy. “The federal tax incentive has spurred the kind of investment in rural America that has not been seen perhaps since the New Deal. The resulting benefits of this investment have yielded billions of dollars in new tax revenue, created hundreds of thousands of jobs, reduced America’s oil dependence by billions of barrels, and helped keep nearly $100 billion here at home rather than being spent for oil overseas,” he said.

The analysis included the following benefits of the federal tax incentive for ethanol blending and the resulting growth of the American ethanol industry since 1978:

 

·                     More than 53 billion gallons of ethanol have been produced, or about 1.2 percent of all the motor gasoline sold over this period. (In 2008, ethanol represented 7 percent of the nation’s gasoline supply.)

 

·                     A displacement of nearly 1.9 billion barrels of imported crude oil (the amount of crude required to produce the ethanol equivalent of 34.9 billion gallons of gasoline) valued at $97.5 billion (in 2008 dollars).

 

·                     An addition of $228 billion to the nation’s Gross Domestic Product by 2008.

 

·                     The creation of more than 210,000 jobs in all sectors of the economy, a conservative number since 2006; this calculation includes only those gallons produced above the mandated levels as established first in the Energy Policy Act of 2005 and revised in the Energy Independence and Security Act of 2007. If the industry as a whole is considered, the ethanol industry helped create 238,000 new jobs in 2007 as a result of the 6.5 billion gallons produced.

 

·                     The ethanol industry has paid for itself since the inception of the excise tax credit. An estimated $33.4 billion (in 2008 dollars) in tax revenue for the federal government and nearly $17 billion (in 2008 dollars) of additional tax revenue for state and local governments has been generated since 1978. The estimated cost of the ethanol tax credit over this same period was $30.4 billion (in 2008 dollars). Consequently, the ethanol industry generated a surplus of about $3 billion for the federal treasury alone over the past three decades.

 

·                     The excise tax credit has saved taxpayers money by reducing farm program outlays through higher corn prices. Recent research published by Iowa State University estimated that the U.S. federal government saved $3.45 billion in 2007 alone because it was not making loan deficiency payments, as it was in 2005 and 2006.


The full report is available online at www.lecg.com/etea08.

 

 

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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Problems Plague Flex-Fuel Fleet

Posted on November 22, 2008. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

Problems Plague Flex-Fuel Fleet
Most Vehicles Bought By Government Still Use Standard Gas

By Kimberly Kindy and Dan Keating
Washington Post Staff Writers
Sunday, November 23, 2008; A01

 

The federal government has invested billions of dollars over the past 16 years, building a fleet of 112,000 alternative-fuel vehicles to serve as a model for a national movement away from fossil fuels.

 

But the costly effort to put more workers into vehicles powered by ethanol and other fuel alternatives has been fraught with problems, many of them caused by buying vehicles before fuel stations were in place to support them, a Washington Post analysis of federal records shows. “I call it the ‘Field of Dreams’ plan. If you buy them, they will come,” said Wayne Corey, vehicle operations manager with the U.S. Postal Service. “It hasn’t happened.”

 

Under a mandate from Congress, federal agencies have gradually increased their fleets of alternative-fuel vehicles, a majority of them “flex-fuel,” capable of running on either gasoline or ethanol-based E85 fuel. But many of the vehicles were sent to locations hundreds of miles from any alternative fueling sites, the analysis shows.

 

As a result, more than 92 percent of the fuel used in the government’s alternative-fuel fleet continues to be standard gasoline. A new law — meant to align the vehicles with alternative-fuel stations — now requires agencies to seek waivers when their fleet is more than five miles or 15 minutes from an ethanol pump.

 

The latest generations of alternative vehicles have compounded the problem. Often, the vehicles have larger engines than the ones they replaced in the fleet. Consequently, the federal program — known as EPAct — has sometimes increased gasoline consumption and emission rates, the opposite of what was intended.

 

The EPAct program offers a cautionary tale as President-elect Barack Obama promises to kill dependence on foreign oil and revive the economy by retooling for the green revolution, experts say.

 

“This is an example of a law that has had a perversely different effect than what was originally intended,” said Jim Kliesch, a senior engineer with the Union of Concerned Scientists, a Washington-based environmental nonprofit organization.

 

The Postal Service illustrates the problem. It estimates that its 37,000 newer alternative-fuel delivery vans, which can run on high-grade ethanol, consumed 1.5 million additional gallons of gasoline last fiscal year because of the larger engines.

 

The vehicles that would allow the agency to meet federal mandates were available in six- and eight-cylinder models — not the four-cylinder variety it traditionally purchased. Alternative fuel was used less than 1 percent of the time in 2007-2008.

 

The Department of Energy, which oversees the program, declined interview requests. In a statement, officials defended their efforts. “The U.S. Government continues to promote diversification of alternative fuels and vehicles in order to reduce our dependence on oil and cut greenhouse gas emissions,” spokesman Jennifer Scoggins wrote. “We work with private industry partners to develop and grow infrastructure of alternative fuels. . . .”

 

Scoggins pointed to a two-year growth spurt of E85 stations, which dispense fuel that is 85 percent ethanol and 15 percent gasoline. Since 2006, ethanol stations have increased from 481 to 1,689 nationally, but most are in the Midwest. Station owners face a vexing challenge: how to compete with more than 160,000 gasoline stations located on nearly every street corner, especially as gas prices drop.

 

A New Challenge

In 1992, just after the Persian Gulf War, Congress passed the Energy Policy Act, hoping to harness the government’s buying power to spark a green vehicle revolution. Agencies were required to buy alternative-fuel vehicles for 75 percent of their light-duty fleets: cars, trucks and vans that weigh less than 8,500 pounds. The ultimate goal was to give automakers incentives to produce more fuel-efficient cars.

 

But EPAct had a huge loophole: Agencies were required to buy alternative-fuel vehicles but did not have to run them on alternative fuel.

 

“We started out with a plan to mandate use, but then we pulled back. There wasn’t the political support or will to do it,” said former representative Philip Sharp (D-Ind.), who sponsored EPAct and authored a bill that contributed to the expansion of flex-fuel cars.

 

Because alternative-fuel use was not mandated, large numbers of vehicles that could run on various fuels — propane, compressed natural gas and E85 — have popped up in places where none of those fuels are available.

 

The Post analysis shows that at least 2,341 flex-fuel vehicles were placed in seven states and Puerto Rico, which have no E85 stations.

 

Hawaii has the greatest share, with more than 1,000 flex-fuel vehicles purchased or leased by various agencies, mostly military. The U.S. Navy tops the list.

 

The Navy has more than 670 flex-fuel vehicles on three islands. Not one of the sedans, sport-utility vehicles or trucks has ever operated on E85.

 

“If an alternative-fuel vehicle is available, we are mandated to buy it. We have no choice,” said Steve Mortimer, a manager in Hawaii who helps set Navy policy on vehicles and equipment. “The [auto] manufacturers don’t have to supply the fuel. In Hawaii, we just have unleaded and diesel and a little bit of propane.”

 

Mortimer and other Navy officials have invited potential fueling suppliers for site visits to encourage interest in building E85 stations. But there are many obstacles.

 

No ethanol-production facility exists in Hawaii, so the fuel would have to be shipped by tanker, increasing the carbon footprint on E85, a fuel that is being criticized by some environmentalists because of pollution caused by many ethanol-production plants.

 

Big Cars

For years, federal agencies ignored EPAct. They fulfilled the 75 percent purchasing requirement only after 1999, when several environmental groups filed a lawsuit to force the buys.

 

When fleet managers searched for vehicles that would meet EPAct requirements, they found that the most affordable models were big flex-fuel sedans and SUVS. Automakers had bucked efforts to mass-produce alternative-fuel vehicles, believing that the fueling stations, including E85, should be in place before they made assembly-line changes.

 

To persuade automakers to ramp up production, Congress in 1988 struck a deal. For each flex-fuel vehicle produced, automakers would win lucrative credits to help them achieve fuel-efficiency mandates.

 

Under the system, a flex-fuel vehicle might achieve 16 mpg, for example, but with the credits they could claim an average of 24 mpg. The formula assumed the vehicles would run on alternative fuel half the time.

 

Manufacturers liked flex-fuel models, because they cost only about $50 more per vehicle to produce. To prevent corrosion from the alcohol-based fuel, they used a specially lined tank and stainless-steel fuel lines instead of aluminum.

 

Manufacturers started producing them in their best-selling models: large sedans and SUVS. For agencies, purchasing the large fuel-guzzling vehicles proved problematic.

 

“They were bigger, they ran on gas, and they weren’t fuel-efficient,” said Mark Gaffigan, director of natural resources and environment with the Government Accountability Office, which completed a program audit last month. “If they had just bought regular vehicles that were more fuel-efficient, they would be better off.”

 

(Last year, Congress moved to phase out the flex-fuel credits by 2020, because several studies verified that the larger vehicles had led to increased gasoline consumption and greenhouse gas emissions.)

 

Four years after granting the flex-fuel credits, Congress passed EPAct, giving automakers a guaranteed market. In 1992, Sen. J. Bennett Johnston (D-La.) said EPAct would “solve the chicken-and-the-egg proposition with respect to alternative fuels,” and President George H.W. Bush said it would “steadily increase U.S. energy security.”

 

Seven years later, a lawsuit filed by the Center for Biological Diversity, the Bluewater Network and the Sierra Club tried to force more progress by making agencies comply with the law. “We did not know there was no intent to run them on the alternative fuels or that the vehicles sometimes got lower gas mileage,” said Jay Tutchton, a lawyer who worked for Earthjustice, a law firm that represented the groups. “They could have done better, in many cases, if they’d stuck with smaller vehicles that ran on regular gasoline.”

 

Waivers Abound

Another shortcoming of EPAct was that it did not require fleet managers to track vehicle locations. The fleet grew, but no one knew how it was taking shape.

 

This discouraged private investment in fueling stations because industry needed better data. “I have to be able to justify it economically. I need a business plan that shows it’s worth the investment for my costs of getting the fuel there and putting in a station. The best data every time is where the federal fleet is located,” said Curtis Donaldson, president of Texas-based CleanFuel USA, which builds propane and E85 stations.

 

To remedy this, legislation passed in 2005 requires agencies to seek an exemption or waiver from the Energy Department for each flex-fuel vehicle it owns or leases that is more than five miles or 15 minutes from the closest ethanol station. (Agencies also can seek exemptions if E85 costs at least 15 percent more than standard gasoline. There were no such waiver requests this fiscal year.)

 

Sixty-one percent of the fleet — more than 67,000 vehicles — received waivers for 2008-2009, the second year data was reported.

 

Five percent of the exemptions are in the Washington region. In Maryland and Virginia, nearly 1,000 exemptions were granted, with vehicles from the Postal Service, Army, Navy and Department of Agriculture leading the way. Like many other East Coast areas where E85 stations are rare, most vehicles qualified because they are too far from a pump.

 

The waivers did offer a valuable tool: Zip code locations for each exempted vehicle that could be fed into an Energy Department database and shared with companies that build fuel stations. The data, however, do not identify the location of the other 39 percent of the flex-fuel fleet that also struggles to find E85, an important problem to solve since these vehicles run on the fuel 8 percent of the time.

 

It is also unclear whether vehicles granted waivers are truly too far away from the E85 stations to use them. The Post analysis, comparing locations of exempted vehicles with E85 fueling stations, shows that 13 percent of the vehicles are within five miles of publicly available ethanol pumps. In the District, four of the 54 exemptions are more than five miles from an E85 supplier, The Post found.

 

Some exempted vehicles are in the Midwest, where E85 stations are abundant, ethanol prices are lower than national averages, and traffic is comparatively light.

 

In Omaha, 43 exempted vehicles owned by the Army, Postal Service and Veterans Affairs are within five miles of Cubby’s food store, Fantasy’s Food-N-Fuel and Bucky’s Express — all with E85 pumps.

 

In Cedar Rapids, Iowa, 20 flex-fuel vehicles owned by the Postal Service, the General Services Administration and the Department of Homeland Security won exemptions, although they are within five miles of an ethanol pump.

 

And in Manhattan, Kan., the Army and the Departments of Agriculture and the Interior have 18 vehicles within five miles of one E85 station at the Farmers Cooperative Association. “We put the station in thinking that if government employees had the vehicles, they were supposed to use ethanol,” said Darin Marti, general manager of the Farmers Cooperative. “It’s not hard to find us. You can use a GPS unit, and it will take you right to us. And we have big signs along the highway.”

 

Energy Department officials said some agencies may have secured waivers because of other factors, including stations that do not accept a government credit card or that have unreliable E85 supplies. In urban areas such as Washington, exemptions were typically granted because traffic congestion made even a two- or three-mile drive costly and time-consuming.

 

The GAO said its analysis showed that future improvements will rely on better data. And it is time for government to reassess the original vision for the fleet, the agency said. “It can be a role model, a leader,” said Gaffigan of the GAO. “And it should.”

 

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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Obama Under Pressure Over Role of Ethanol in Energy Policy

Posted on November 22, 2008. Filed under: Blender's Tax Credit, Hydrous Ethanol | Tags: , , , , |

The following article appeared in the November 21, 2008 issue of U.S. News & World Report.

 

Obama Under Pressure Over Role of Ethanol in Energy Policy

Environmental Groups are Unhappy with his Support of Corn-Based Ethanol during the Campaign

By Kent Garber

Posted November 21, 2008

 

Environmentalists agree with President-elect Barack Obama on many points, but his policy on ethanol isn’t one of them.

 

In the ongoing debate over the future of the country’s energy policy, biofuels occupy a unique and precarious position: reviled in some quarters, championed in others. Ethanol producers have enjoyed meteoric rises in the amount of ethanol they can make and sell, but they also have been accused of harming the environment, prompting food riots abroad, and throwing away government money on unsustainable endeavors.

 

Environmentalists are asking Congress and the next administration for a far-reaching overhaul of the current biofuel policy.

 

They want sharp cutbacks on ethanol subsidies, tougher environmental regulations, more investment in advanced biofuels research, a new appreciation of scientific data, and acknowledgment of the ripple effects that biofuel production can have around the world. Some of these requests will conflict with energy policies likely to be set forth by Obama, who strongly supported ethanol subsidies when he was in the Senate.

 

This is not to say there is no room for compromise. Much of the desire to change the status quo rests upon the use of corn as the primary—virtually the only—source of commercially available ethanol. In the campaign, Obama and his advisers, while reiterating his support for corn-based ethanol, stressed that the future of biofuels lies not with corn but with nonfood alternatives like grasses, husks, and waste products. Those biofuel sources, they argued, are more energy-efficient and have a smaller impact on the environment and food prices. Congress said the same thing when it approved a giant tax credit for cellulosic ethanol earlier this year.

 

But since cellulosic ethanol has yet to reach large-scale commercial production, the present situation presents some difficult choices for the next administration. What should the government do about corn ethanol subsidies? What can it do to get advanced biofuels developed more quickly? And do the benefits of ethanol, corn or otherwise, outweigh the costs?

 

For environmentalists, the answer to the funding issue is straightforward: Cut the subsidies. According to the Energy Information Administration, ethanol receives more than three quarters of all federal subsidies for renewable fuels, a category that includes wind and solar power. Many see such expenditures as not only a waste but also as an insidious danger. “We don’t want to see any investments in what we consider to be false solutions, such as biofuels that can increase global warming pollution,” says Shawnee Hoover, legislative director for Friends of the Earth.

Such a move would save several billion dollars annually. But it also would likely undercut, if not cripple, an industry that already is struggling financially and employs thousands of people. One alternative, some in the industry say, would be to reduce the handouts for corn ethanol (one such reduction took place earlier this year) and instead help companies working on more advanced biofuels. “All we are asking is that policy be technology neutral—that lawmakers don’t advantage one party,” says Paul Woods, CEO of Algenol Biofuels, which has developed technology to produce ethanol from algae. “Right now, we have no support at all, which is ridiculous.”

 

Another dispute is playing out between environmentalists and the industry over the question of measuring the impact of biofuels on the environment. By law, biofuels have to be cleaner, in terms of greenhouse gas emissions, than gasoline. Last year, Congress instructed the Environmental Protection Agency to prepare guidelines to make sure that the rule was being followed. (The EPA’s response is due soon.)

 

But determining what counts or doesn’t count under such measurements isn’t an easy task. Because land is often cleared to grow crops for fuel, many say biofuel production “leads to substantial releases of soil- and plant-carbon” that should be counted as emissions, as several prominent environmental groups wrote in a letter to the EPA last month. Biofuel proponents disagree, arguing that current models are unreliable and immature. The outcome of this debate, both sides say, could have a profound impact on the future of biofuel policy in the United States.

 

Environmentalists are asking that Congress or the EPA put in place protections for water, soil, and wildlife habitat to guard against overzealous or reckless production. “You really need best-practice performance standards for all biofuels, which means looking not only at the impact on food prices but also at the impact on biodiversity,” says Carter Roberts, president of the World Wildlife Fund. “We’ve seen perverse outcomes with biofuels, like the destruction of some of our richest rain forests in the world.”

 

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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Ethanol Slump Blindsides U.S. Corn Growers

Posted on November 21, 2008. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

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Act 382 Creates the Advanced Biofuel Industry Development Initiative

Posted on November 19, 2008. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

Regular Session, 2008                                                              ACT No. 382

 

HOUSE BILL NO. 1270

BY REPRESENTATIVES PERRY, BOBBY BADON, BALDONE, BILLIOT, HENRY

BURNS, CHAMPAGNE, CHANEY, ELLINGTON, GISCLAIR, ELBERT

GUILLORY, HARDY, HAZEL, HOFFMANN, HOWARD, JOHNSON, LEBAS,

LITTLE, RICHARD, RICHMOND, GARY SMITH, JANE SMITH, AND ST.

GERMAIN AND SENATORS N. GAUTREAUX, LONG, RISER, THOMPSON,

AND WALSWORTH

 

 

FUELS: Creates the Advanced Biofuel Industry Development Initiative

 

AN ACT

 

To amend and reenact R.S. 39:364(A)(1) and to enact R.S. 39:364(A)(4) and Chapter 23-B of Title 3 of the Louisiana Revised Statutes of 1950, to be comprised of R.S. 3:3761 through 3763, relative to the development of a biofuel industry development initiative; to provide for pilot programs; to provide for state incentives; to provide for the purchase or lease of fleet vehicles; to provide for the purchase of biofuels; and to provide for related matters.

 

Be it enacted by the Legislature of Louisiana:

 

Section 1. Chapter 23-B of Title 3 of the Louisiana Revised Statutes of 1950, comprised of R.S. 3:3761 through 3763, is hereby enacted to read as follows:

 

CHAPTER 23-B. THE ADVANCED BIOFUEL INDUSTRY DEVELOPMENT

INITIATIVE

 

§3761. Legislative findings and definitions

 

A. The legislature hereby finds and declares that the development of an advanced biofuel industry in Louisiana is a matter of grave public necessity and is vital to the economy of Louisiana. The use of advanced biofuel will expand United States and Louisiana fuel supplies without increasing dependency on foreign oil. The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing: (1) increased value added to the feed stock crops which will benefit the producers and provide more revenue to the local community; (2) increased investments in plants and equipment which would stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed; (3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and (4) increased local and state revenues collected from plant operations would stimulate local and state tax revenues and provide funds for improvements to the community and to the region. Blending fuelgrade ethanol with gasoline at the gas station pump will offer the Louisiana consumer a fuel that is less expensive, cleaner, renewable, and more efficient than unleaded gasoline. Moreover, preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-toanhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, and a reduction in greenhouse gas emissions. Therefore, an advanced biofuel industry development initiative in Louisiana is vital to ensuring the broad-based rural economic development of Louisiana and is a matter of public policy.

 

B. The legislature finds and declares that the proper development of an advanced biofuel industry in Louisiana requires the following comprehensive “fieldto-pump” strategy:

(1) Feedstock other than corn:

(a) Derived solely from Louisiana harvested crops.

(b) Capable of an annual yield of at least six hundred gallons of ethanol per acre.

(c) Requiring no more than one-half of the water required to grow corn.

(d) Tolerant to high temperature and water logging.

(e) Resistant to drought and saline-alkaline soils.

(f) Capable of being grown in marginal soils, ranging from heavy clay to light sand.

(g) Requiring no more than one-third of the nitrogen required to grow corn thereby reducing the risk of contamination of the waters of the state.

(h) Requiring no more than one-half of the energy necessary to convert corn into ethanol.

(2) The distributed nature of a small advanced biofuel manufacturing facility network reduces feed stock supply risk, does not burden local water supplies, and provides for a more broad-based economic development. Each small advanced biofuel manufacturing facility shall operate in Louisiana.

(3) Advanced biofuel supply and demand shall be expanded beyond the ten percent blend market by blending fuel-grade anhydrous ethanol with gasoline at the gas station pump. Variable blending pumps, directly installed and operated at local gas stations by a qualified small advanced biofuel manufacturing facility, shall offer the consumer a less expensive substitute for unleaded gasoline in the form of E10, E20, E30, and E85.

 

C. As used in this Section, the following terms shall have the meanings hereinafter ascribed to them:

(1) “Advanced biofuel” means hydrous ethanol derived from sugar or starch (other than corn starch) or anhydrous ethanol derived from sugar or starch (other than corn starch).

(2) “Anhydrous ethanol” means an ethyl alcohol that has a purity of at least ninety-nine percent, exclusive of added denaturants, that meets all the requirements of the American Society of Testing and Materials (ASTM) D4806, the standard specification for ethanol used as motor fuel.

(3) “Hydrous ethanol” means an ethyl alcohol that is approximately ninetysix percent ethanol and four percent water.

 

(4) “Small advanced biofuel manufacturing facility” means an advanced biofuel manufacturing facility operating in Louisiana that produces no less than five million gallons of advanced biofuel per year and no more than fifteen million gallons of advanced biofuel 1 per year with feedstock other than corn derived solely from Louisiana harvested crops.

 

§3762. Pilot programs

 

A. The blending of fuels with advanced biofuel percentages between ten percent and eighty-five percent will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry (LDAF), office of agro-consumer services, division of weights and measures, will monitor the equipment used by a qualified small advanced biofuel manufacturing facility to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement. Since there are no ASTM standards for evaluating the quality of the product, the LDAF, office of agro-consumer services, division of weights and measures, will take fuel samples to ascertain that the correct blend ratios are being dispensed and follow the development of standards. Provided that no negative trends are observed during the trial period and fuel standards have been developed or work continues on developing them, the LDAF, office of agro-consumer services, division of weights and measures, will consider extending the evaluation period.

 

B. The use of hydrous ethanol blends of E10, E20, E30, and E85 in motor vehicles specifically selected by a qualified small advanced biofuel manufacturing facility for test purposes will be permitted on a trial basis until January 1, 2012. During this period the LDAF, office of agro-consumer services, division of weights and measures, will monitor the performance of the motor vehicles. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.

 

§3763. State incentives

 

A. The Louisiana commissioner of agriculture and forestry, conditioned upon the availability of funds, is authorized to award demonstration grants to persons who purchase advanced biofuel variable blending pumps which dispense E10, E20, E30, and E85. The demonstration grant shall be for the purpose of conducting research connected with the monitoring of the equipment used to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement. The grantee shall also develop guidelines for the installation and use of advanced biofuel variable blending pumps by complying with applicable National Type Evaluation Program (NTEP) and National Institute of Standards and Technology (NIST) requirements and ASTM standards.

 

B. The Louisiana commissioner of agriculture and forestry, conditioned upon the availability of funds, is authorized to award demonstration grants to persons who purchase vehicles which operate on advanced biofuels. A grant shall be for the purpose of conducting research connected with the fuel or the vehicle and not for the purchase of the vehicle itself, except that the money may be used for the purchase of the vehicle if all of the following conditions are satisfied:

(1) The Department of Agriculture and Forestry retains the title to the vehicle.

(2) The vehicle is used for continuing research.

(3) If the vehicle is sold or when the research related to the vehicle is completed, the proceeds of the sale of the vehicle shall be used for additional research.

 

C. An income tax credit of ten cents per gallon of advanced biofuel is available to qualified small advanced biofuel manufacturing facilities as defined in R.S. 3761(C)(4). The credit applies only to the first ten million gallons of advanced biofuel produced in a tax year and expires on December 31, 2012.

 

Section 2.   R.S. 39:364(A)(1) is hereby amended and reenacted and R.S. 39:364(A)(4) is hereby enacted to read as follows:

 

§364. Purchase or lease of fleet vehicles; use of alternative fuels; exceptions

 

A.(1) The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel which results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof which meet or exceed federal Clean Air Act standards, including but not limited to hybrid vehicles. Alternative fuels shall include compressed natural gas, liquefied petroleum gas, reformulated gasoline, methanol, ethanol, advanced biofuel, electricity, and any other fuels which meet or exceed federal Clean Air Act standards.

 

* * *

 

(4) A governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30, or E85 advanced biofuel directly from a qualified small advanced biofuel manufacturing facility at a price equal to fifteen percent less per gallon than the price of unleaded gasoline for use in any motor vehicle. The price of unleaded gasoline will be the prevailing average price for the locality on the date of purchase.

 

* * *

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan and Mr. Michael J. 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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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EPA Raises Renewable Fuel Requirement to 10.21% for 2009; 11.1B Gallons

Posted on November 19, 2008. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

19 November 2008 Issue of Green Car Congress:

EPA Raises Renewable Fuel Requirement to 10.21% for 2009; 11.1B Gallons

The US Environmental Protection Agency (EPA) raised the 2009 Renewable Fuel Standard to 10.21% to ensure that at least 11.1 billion gallons of renewable fuels be blended into transportation gasoline. This standard is used by obligated parties—refiners, importers and blenders (other than oxygen blenders)—to calculate their renewable volume obligation. The EPA expects the 11.1 billion gallons of renewable fuel required in 2009 ultimately to include approximately 0.5 billion gallons of biodiesel and renewable diesel.

The 2009 standard marks a 23.3% increase by volume of the 2008 RFS of 9 billion gallons, but a 31.6% increase by percentage volume from 7.76% in 2008. The larger relative increase is due to expectations of lower fuel consumption in 2009.

The EPA expects 138.47 billion gallons of gasoline blends will be sold in 2009 in the 48 contiguous states plus Hawaii, down from the 144.5 billion gallons EPA expected to be sold this year—a 4.2% decrease.

The 2009 RFS requirement is being issued under the auspices of the Renewable Fuel Standard established by The Energy Policy Act of 2005 (EPAct) (RFS1). This has been superceded legislatively by Renewable Fuel Standard requirements established by the Energy Independence and Security Act of 2007 (EISA) (RFS2).

Some of the major changes enacted in RFS2 include:

  • Expansion of the volume of renewable fuel (36 billion gallons by 2022).
  • Separation of the renewable fuel volume requirements into four categories: cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel.
  • Changes to the definition of renewable fuels and criteria (e.g. life cycle greenhouse gas (GHG) emission performance including such factors as indirect land use) for determining which if any of the four renewable fuel categories a given renewable fuel is eligible to meet.
  • Expansion of the fuel pool subject to the standards to include diesel and certain nonroad fuels and expansion of the obligated parties to include refiners, certain blenders, and importers of those fuels.
  • Inclusion of specific types of waivers and EPA-generated credits for cellulosic biofuel.

EPA is still developing a rulemaking that will outline its approach to all these changes to the RFS2 program. Until EPA issues final regulations to implement the changes, however, the changes required by EISA are generally not applicable, and the RFS1 regulations continue to apply.

One major exception to this is in the volume amount. The new statutory renewable fuel volume must be used under the RFS1 regulations to generate the standard for 2009. Under RFS1 volumes, the target for 2009 would have been 6.1 billion gallons. The RFS program in 2009 will continue to be applicable to producers and importers of gasoline only.

This leaves, for the moment, unanswered the question of how to implement the EISA requirement for use of 0.5 billion gallons of biomass-based diesel. The EPA says that it will propose an approach in its forthcoming Notice of Proposed Rulemaking for RFS2: The EPA plans to increase the 2010 biomass-based diesel requirement by 0.5 billion gallons and allow 2009 biodiesel and renewable diesel RINs to be used to meet this combined 2009/2010 requirement.

EPA outlines the full calculation to reach the 10.21% standard for 2009 in its notice published in the Federal Register.

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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EPA Creates Renewable Energy Remediation Site Map

Posted on November 19, 2008. Filed under: Field-to-Pump, Rural Development | Tags: , , , , , |

From the December 2008 Issue of Biomass Magazine:

EPA creates renewable energy remediation site map

by Kris Bevill

 

In an effort to promote new uses for contaminated lands throughout the United States, the U.S. EPA has created a comprehensive Web site detailing thousands of locations that could become renewable energy production sites. The interactive maps and related information can be found at http://www.epa.gov/renewablenergyland.

EPA Environmental Scientist Penelope McDaniel said response to the project has been extremely positive. The Web site received more than 20,000 hits in its first month, and the agency has fielded a number of inquiries from interested parties. “That’s the first step: getting the developers interested,” she said.

The Web site is the result of approximately three months of cooperative work between the EPA and the U.S. DOE National Renewable Energy Laboratory. The agencies began by compiling a database of abandoned mine lands; Resource Conservation and Recovery Act sites; and Superfund sites. Once the massive list was created, sites with workable acreage were extracted and then compared against a list of specific criteria to determine each site’s potential for renewable energy production.

Criteria for a site’s biomass potential included:

›Distance to electric transmission lines: 10 miles or less

›Property size of 50 acres or more

›Distance to graded roads: 50 miles or less

›Biopower: Cumulative biomass sources of at least 150,000 tons per year, including residues from crops, forests and mills; landfills; urban wood waste; and energy crops

›Dry-grind corn-based ethanol: Crop biomass residue of at least 100,000 tons per year

More than 9,500 sites were scrutinized for the EPA project, and nearly 9,000 of those sites were deemed “outstanding” for biopower potential. Interested parties are encouraged to visit the Web site or e-mail the EPA for more information at cleanenergy@epa.gov.

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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Biofuels Advance

Posted on November 19, 2008. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

From the December 2008 Issue of Biomass Magazine:

Biofuels Advance

Interest in biomass-based fuels has intensified since the Energy Bill was passed mandating the use of millions of gallons of advanced biofuels. At the Advanced Biofuels Workshop & Trade Show held recently in Minneapolis it was clear that the race to commercialization is on and all signs indicate progress is being made.
by Bryan Sims

 

Efforts are underway across the United States to develop innovative process technologies that may one day bridge the gap between first generation, or starch-based biofuels, and advanced biofuels. This sense of progress was evident at the 2008 Advanced Biofuels Workshop & Trade Show in Minneapolis in September.

Tom Bryan, vice president of communications for BBI International, opened the general session by highlighting the importance of the federal government’s support of the growth of advanced biofuels production and the concurrent development of novel technologies to guide that growth. The renewable fuels standard (RFS) in the Energy Independence & Security Act of 2007 requires the use of 600 million gallons of advanced biofuels in 2009. That’s just the beginning. The requirement steadily increases until it hits 21 billion gallons in 2022, guaranteeing a significant expansion and transformation within the existing biofuels industry.

Advanced biofuels in the legislation are defined as anything other than corn-starch-based ethanol that achieves a 50 percent greenhouse gas (GHG) emission reduction when compared with fossil fuels, whereas conventional biofuel, such as corn-based ethanol, must achieve a 20 percent GHG reduction. Cellulosic biofuels derived from nonfood-based feedstocks must achieve a 60 percent GHG reduction. The industry doesn’t anticipate having difficulty meeting the increased conventional biofuel standard, however the advanced biofuel category presents a new challenge for the industry, according to Bryan. “In my mind, this mandate is achievable,” he says. “There are so many research entities, scientists, start-up companies and others actively optimizing old technologies to adapt to meeting these mandates as well as those developing novel pathways for delivering cost-effective methods for producing advanced biofuels today.”

The federal government targets call for a new wave of more sustainable, efficient transportation fuels. According to Bryan, the transition from first-generation to second-generation biofuels won’t be easy, however, advanced biofuel technology developers can look to the success of the corn-based ethanol industry as a blueprint. “The existence of these biofuels is and will be a critical cornerstone for the development and commercialization of second-generation and advanced biofuels,” he said. “The race is definitely on to produce these advanced biofuels in order to meet the targets the federal government has laid out for the emerging advanced biofuels space.”

John Christianson, principal partner with Minnesota-based Christianson & Associates PLLP, provided an overview of biofuels tax laws and incentives that have been adopted over the past couple of years. His presentation touched on the Biomass Crop Assistance Program and the Rural Energy for America Program, incentives provided for in the 2008 Farm Bill. “The one takeaway I would say, is that the Farm Bill has many provisions, tax incentives, loan guarantees and so forth, that are all related to advanced biofuels,” Christianson said. “If you’re looking to develop an advanced biofuels project, carefully examine the provisions in the Farm Bill and see what’s applicable for you to gain the most benefit.”

While Christianson highlighted Farm Bill provisions, David Morris, vice president of the Institute for Local Self Reliance, talked about the Energy Bill. The impact of the new Energy Bill can’t be underestimated as it supports the evolution of advanced and cellulosic biofuels, he said. “Essentially, Congress is mandating a huge increase in the production of a product that doesn’t yet exist commercially and from a feedstock that doesn’t largely exist either,” Morris says. “That’s called courage.”

Like the United States, countries and societies all over the world are trying to determine what role biological resources should play in the energy, national security, environmental and economic scheme of things. Much of the expansion efforts depend on the policies that countries adopt to support this growth.

Unlike wind or solar, biomass has multiple uses such as in the textile, industrial, agricultural and construction industries. However, to grow a sustainable amount of biomass and support the growth of advanced biofuels, the United States must be mindful of the limited amount of biomass to harvest in limited land areas, according to Morris. “We’re going to have to develop policies that don’t divert the use of plant matter from a higher to a lower value use,” he said.

Morris said that the United States and other countries must marry agricultural and energy goals in order for public policies to work. He stressed that biofuels advocates and developers should embrace the public policies laid out as advanced biofuels will be a significant foundation for the development of electric-driven motor vehicles in the future. “There’s a symbiotic relationship that can be formed between the biofuels sector and the renewable energy sectors such as wind and solar energy, and there should be.”

Morris believes that electricity will become the dominant transportation fuel. “A motor-driven vehicle is much more fuel efficient than an engine-driven vehicle,” he said. An electrified vehicle is quiet and is nonpolluting inside of cities. Moreover, if we have millions of electrified vehicles on the road we will have sufficient electric storage capacity to overcome the Achilles’ heel of renewable energy, which is its intermittency.”

Every major vehicle manufacturer except Ford has announced it will be selling electric vehicles within three years. San Diego and San Francisco, among other U.S. cities, are developing citywide recharging stations to accommodate the use of electric vehicles. In addition, Congress is about to enact a $7,500 per vehicle tax credit for electric vehicles. “Compare that to the $50 per vehicle tax incentive that biofuels gets right now per year,” Morris says. “That’s enormous and that could very well happen as part of the 2007 Energy Bill.”

Bryan Sims is a Biomass Magazine staff writer. Reach him at bsims@bbiinternational.com or (701) 738-4950.

 

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.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, 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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    Renergie created “field-to-pump," a unique strategy to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies.

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