Archive for February, 2009

Oil Companies and Ethanol Plants: Slash, Burn and Buy

Posted on February 27, 2009. Filed under: Blender's Tax Credit, Field-to-Pump | Tags: , , , , |

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 Wednesday 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.

 

 

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US Ethanol Sector Faces Grim Prospects-USDA

Posted on February 27, 2009. Filed under: Blender's Tax Credit, Field-to-Pump | Tags: , , , , |

US Ethanol Sector Faces Grim Prospects-USDA

February 26, 2009

By K.T. Arasu

 

 

WASHINGTON, Feb 26 (Reuters) – Hard times have hit the once-robust U.S. ethanol sector amid the economic recession, with as much as 15 percent of production capacity likely standing idle, USDA chief economist Joseph Glauber said on Thursday.

 

It was a sobering assessment of the fledging industry that was once bursting with optimism and financial gains as the country issued mandates on using the renewable fuel to reduce dependence on crude oil.

 

“The U.S. ethanol industry remains under significant financial pressure as the result of current economic conditions …,” Glauber told the annual USDA Agricultural Outlook Forum in Arlington, Virginia.

 

He said slowing gasoline consumption and lower prices have reduced incentives for blending ethanol in recent months.

 

Crude oil futures have tumbled from a record high above $147 a barrel last summer to around $45 on Thursday as the surge in prices triggered the backlash of reduced consumption.

 

The Energy Information Administration, the U.S. government’s top energy forecasting agency, earlier this month cut its estimate for world oil demand in 2009 by 400,000 barrels per day, citing the slower global economy.

 

The EIA predicted that world oil demand this year would fall by 1.17 million bpd from 2008 to 84.70 million. That would be down from peak demand of 85.9 million bpd in 2007.

 

The state of the ethanol industry has been underscored by the second largest producer VeraSun Energy Corp (VSUNQ.OB: Quote, Profile, Research) filing for bankruptcy protection in October due to high corn prices and a lack of financing.

 

VeraSun has since reached an agreement to sell five production facilities to top U.S. refiner Valero Energy Corp (VLO.N: Quote, Profile, Research) for $280 million.

 

Glauber said excess ethanol production capacity was weighing on ethanol producers’ returns as more plant capacity becomes available.

 

He said the Renewable Fuels Association has put existing ethanol production capacity at 12.4 billion gallons, including current plants not operating, with another 2.1 billion under construction or expansion.

 

“Current indications suggest that 2.0 billion gallons or more of plant capacity has been idled,” he said.

Glauber said that as much as 15 percent of ethanol production capacity will be idle during the 2009/10 marketing year, based on the estimate of corn used to produce ethanol.

 

However, he said, rising mandates for ethanol use are expected to support corn demand and prices in the 2009/10 marketing year that begins Sept. 1.

 

He said mandated ethanol use rises from 10.5 billion gallons in 2009 to 12 billion in 2010. On a crop-year basis, that translates into about 11.5 billion gallons of ethanol demand in 2009/10, he said, adding that that would mean a 14-percent hike in corn used to produce the biofuel.

 

At a projected 4.1 billion bushels, ethanol use will account for 33 percent of expected corn use in 2009/10, up from a forecast of 30 percent the current marketing year. (Reporting by K.T. Arasu; editing by Jim Marshall)

 

 

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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UL Clarifies Its Position on Fuel Dispensers Using E15

Posted on February 21, 2009. Filed under: Field-to-Pump | Tags: , , , , , |

Underwriters Laboratories Announces Support For Authorities Having Jurisdiction Who Decide To Permit The Use Of Existing UL Listed Gasoline Dispensers With Automobile Fuel Containing Up To A Maximum Of 15% Ethanol

 

Northbrook, Ill., February 19, 2009 — Underwriters Laboratories (UL), a world leader in independent product safety testing and certification, announced today that it supports Authorities Having Jurisdiction (AHJs) who decide to permit legacy system dispensers, Listed to UL 87 and currently installed in the market, to be used with fuel blends containing a maximum ethanol content of 15 percent. UL stresses that existing fuel dispensers certified under UL 87 were for intended use with ethanol blends up to E10, which is the current legal limit for non-flex fuel vehicles in the United States under the federal Clean Air Act. However, data the company has gathered as part of the organization’s ongoing research to investigate the impact of using higher ethanol blends in fuel dispensing systems supports that existing dispensers can be used with ethanol blends up to 15 percent. AHJs are advised to consult with the dispenser manufacturer to confirm that the dispenser is compatible with the fuel to be dispensed.

 

UL researchers found that using equipment certified to UL 87 to dispense ethanol blends with a maximum ethanol content of 15 percent should not result in critical safety concerns. However, the company stressed that dispensers pumping this higher percentage of ethanol should be subject to regular inspection and preventative maintenance as specified by the dispenser manufacturer for the blend of fuel being dispensed because the potential for degradation of the metals and materials (e.g., plastics, elastomers and composites) used in a dispensing system increases as the percentage of ethanol increases.

 

“UL determined that there is no significant incremental risk of damage between E10 and fuels with a maximum of 15 percent ethanol. This conclusion was reached after careful examination of the effects of varying levels of ethanol on components,” said John Drengenberg, Consumer Affairs Manager for UL. “We will continue to evaluate test and field findings, as well as the scientific literature, as it becomes available and make this information available to AHJs.”

AHJs are the local regulatory and approval entities that make the final determination of the acceptance of fuel dispensing devices. UL makes its research findings available to the AHJs for their consideration.

 

Standard UL 87 is used by UL research and testing staff members to evaluate fuel dispenser systems and their component parts for use with motor fuels with ethanol blends up to E10. Under normal business conditions, E10 at the dispenser can vary from about seven to 13 percent ethanol. Subject 87A is used to evaluate dispensers and components to be used with ethanol fuel blends up to a maximum of E85.

 

Over the past 15 years the body of knowledge about ethanol has increased, compelling UL to invest more than $1 million to develop requirements to test and certify dispensing systems for ethanol fuel blends up to E85. UL operates as an independent entity with its sole focus on public safety. UL works with all participants as a neutral party to ensure the safest possible outcome for those who work with and rely on the products at issue.

 

“UL continues to support technological advancements, while protecting safety. That is why we have invested resources and effort that go far beyond any business benefit UL might gain from this work to support the ethanol industry’s desire to have safety certification requirements established for E85 fuel dispensers,” said Drengenberg.

 

 

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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Underwriters Laboratories Says Standard Gasoline Pumps Only Certified to Handle Up to 10% Ethanol

Posted on February 15, 2009. Filed under: Field-to-Pump | Tags: , , , , , |

Underwriters Laboratories Says Standard Gasoline Pumps Only Certified to Handle Up to 10% Ethanol

 

 

Green Car Congress

February 8, 2009

 

 

 

In January, Underwriters Laboratories issued a statement saying that gasoline pumps certified under the UL 87 standard are only covered for handling fuel with up to 10% ethanol. According to the American Coalition for Ethanol (ACE), the US’ largest ethanol advocacy organization, the fuel marketing community had understood UL 87 to cover the use of up to 15% ethanol in standard gasoline pumps.

 

 

The difference is critical for the potential use of intermediate ethanol blends (e.g., E15, E20). Ron Lamberty, ACE’s Vice President / Market Development sent a letter to August Schaefer, UL’s Senior Vice President & Chief Operating Officer expressing his group’s concern, saying: Recent statements by UL that have changed the meaning of the standard without any accompanying change in data, coupled with similar action by UL two-and-a-half years ago regarding E85, have caused many within the ethanol industry to question whether UL—an organization built on a reputation of precision and impartiality—has at very least treated ethanol issues with carelessness and at times appears to have an anti-ethanol bias.

 

In the letter, Lamberty wrote that, even though the UL 87 standard does not specifically mention E10 or E15, it refers to underlying standards that employ such clear phrases as “ethanol does not exceed 15 percent” and “approved for gasoline/ethanol blends up to 15 percent ethanol” and “gasoline with up to 15 percent ethanol.” Consistent with these E15 definitions is the language in the standard for E85 dispensing equipment, UL 87A, which states “current dispensing equipment listings are limited to fuels with a maximum 15 percent alcohol.”

 

Although intermediate blends of ethanol are not yet sanctioned by the US government, the state of Minnesota has enacted legislation calling for E20 (20% ethanol) by 2015 (earlier post).

 

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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U.S. Environmental Protection Agency Grants First-of-its-Kind Testing Exemption to Renergie

Posted on February 15, 2009. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

U.S. Environmental Protection Agency Grants First-of-its-Kind Testing Exemption to Renergie

__________________

 

 

Renergie to Test Hydrous E10, E20, E30 & E85 Ethanol Blends

in Non-Flex-Fuel Vehicles and Flex-Fuel Vehicles in Louisiana

 

 

 

 

 

 

Gainesville, FL (February 11, 2009) – The U.S. Environmental Protection Agency has granted a testing exemption to Renergie, Inc.  Under the test program, the first of its kind in the U.S., Renergie will use variable blending pumps, not splash blending, to precisely dispense hydrous ethanol blends of E10, E20, E30, and E85 to test vehicles for the purpose of testing for blend optimization with respect to fuel economy, engine emissions, and vehicle drivability. Sixty vehicles will be involved in the test program which will last for a period of 15 months.

 

 

Hydrous Ethanol

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.

 

 

Variable Blending Pump

In the U.S., the primary method for blending ethanol into gasoline is splash blending. The ethanol is “splashed” into the gasoline either in a tanker truck or sometimes into a storage tank of a retail station. Renergie believes the inaccuracy and manipulation of splash blending may be eliminated by precisely blending the ethanol and unleaded gasoline at the point of consumption, i.e., the point where the consumer puts E10, E20, E30 or E85 into his or her vehicle. A variable blending pump would ensure the consumer that E10 means the fuel entering the fuel tank of the consumer’s vehicle is 10 percent ethanol (rather than the current arbitrary range of 4 percent ethanol to at least 24% ethanol that the splash blending method provides) and 90% gasoline.

 

 

Team Approach

“On June 21, 2008, Governor Bobby Jindal signed into law the Advanced Biofuel Industry Development Initiative (“Act 382”), the most comprehensive and far-reaching state legislation in the nation enacted to develop a statewide advanced biofuel industry.  Act 382 is based upon the “Field-to-Pump” strategy developed by Renergie.  Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous ethanol pilot program,” said Meaghan M. Donovan, founder of Renergie, Inc. “We are excited and proud that Renergie, the Louisiana Department of Agriculture & Forestry, the Louisiana Department of Environmental Quality, and the U.S. Environmental Protection Agency are acting as a unified team to develop a network of small advanced biofuel manufacturing facilities and the necessary fueling infrastructure throughout Louisiana. Representative Jonathan W. Perry (R – District 47), Senator Nick Gautreaux (D – District 26), and Dr. Mike Strain, Commissioner of the Louisiana Department of Agriculture and Forestry, should be praised for their leadership on this issue. Renergie’s decentralized network of small advanced biofuel manufacturing facilities reduces Renergie’s feedstock supply risk, maximizes rural economic development, maximizes job creation in the state and does not burden local water supplies. The legislature and governor of the great State of Louisiana have chosen to lead the nation in moving ethanol beyond being just a blending component in gasoline. By blending fuel-grade ethanol with gasoline, via blending pumps at its gas stations, Renergie will offer the consumer a fuel that is renewable, competitively-priced, cleaner, and more efficient than unleaded gasoline in the form E10, E20, E30 and E85.”

 

 

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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Agriculture Secretary in Talks to Raise Ethanol Blend

Posted on February 8, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | Tags: , , , , |

Agriculture Secretary in Talks to Raise Ethanol Blend

Bloomberg Press

February 6, 2009

By Tina Seeley

The Agriculture Department is in discussions with the Environmental Protection Agency about raising the amount of ethanol blended into the U.S. gasoline supply, U.S. Agriculture Secretary Tom Vilsack said.

About 21 percent of the U.S. capacity for ethanol production is idle, according to ethanol-maker Archer Daniels Midland Co. VeraSun Energy Corp., the second-largest U.S. ethanol maker, filed for Chapter 11 bankruptcy protection in October as an industrywide expansion of production facilities outpaced demand.

“I do think it’s important for us to look for strategies to make sure the infrastructure of the ethanol industry is preserved, because it is a key component to this new energy future the president’s laid out,” Vilsack, a former Democratic governor of Iowa, said today in an interview with Bloomberg News in Washington.

Ethanol demand has fallen as gasoline use dropped since last summer. By increasing the blend, demand for ethanol will be boosted even as gasoline use falls. The U.S. recession exacerbated an ethanol supply glut as demand for transportation fuels dropped.

Ethanol futures prices in Chicago touched a five-week low this week. Denatured ethanol for March delivery rose 4.5 cents, or 2.9 percent, yesterday to $1.597 a gallon on the Chicago Board of Trade. Futures have fallen 23 percent in the past year.

“We have been talking to folks at EPA, as they look at the blend-rate issue,” Vilsack said. “That may be one way in the short term to create new opportunities.”

The EPA in November said it would require gasoline to contain a 10.2 percent blend of biofuels this year.

Vilsack said the discussions so far haven’t included “specific numbers. We’ve just begun the conversation.”

High Priority

“This is a very high priority for the ethanol industry so it would be a welcome development if they could secure a higher blend rate,” Mark McMinimy, an analyst with Stanford Group Co. in Washington, said in a telephone interview.

“I’m not sure how much difference it could make to profits margins in the short term,” he said.

Ethanol producers have faced declining margins from a competitive market, coupled with low oil prices and relatively high prices for corn, used to make ethanol, said McMinimy.

“That dynamic has to be changed,” he said.

Gasoline futures prices have dropped 43 percent in the last year on the New York Mercantile Exchange. Gasoline demand during the past four weeks was 2.4 percent below the same period last year.

Poet LLC, the largest ethanol producer, said yesterday it may buy shuttered distilleries owned by VeraSun.

No Change

Vilsack also dismissed the idea of changing the congressionally mandated renewable fuels standard, which requires 11.1 billion gallons of biofuels such as ethanol to be used in the U.S. this year.

“I don’t think we should be changing anything until we absolutely have to,” Vilsack. “We’ve laid the markers down there and I think we have to work hard to meet it.”

To contact the reporter on this story: Tina Seeley in Washington at tseeley@bloomberg.net.

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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Valero Bids for VeraSun Assets

Posted on February 8, 2009. Filed under: Blender's Tax Credit, Field-to-Pump | Tags: , , , , , |

Valero Bids for VeraSun Assets

The Wall Street Journal

February 6, 2009

By Lauren Etter

Oil-refiner Valero Energy Corp. on Friday entered an agreement to buy a group of ethanol plants for $280 million from ethanol producer VeraSun Energy Corp., subject to a bidding process in Verasun’s bankruptcy case.

This is the first foray into the ethanol business for Valero, one of the nation’s largest oil refiners.

VeraSun, Sioux Falls, S.D., filed for bankruptcy last year amid a volatile commodities market and falling ethanol prices. Now under bankruptcy protection, the company has put up most of its assets for sale to generate cash.

“Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of company stakeholders,” said Don Endres, VeraSun’s chief executive officer in a statement.

Bill Day, director of media relations at Valero says the timing is right to get into the ethanol business partly because of the availability of distressed assets.

“It’s a good time for us to be able to buy assets at a reasonable price,” Mr. Day said in an interview. “We can make an offer that’s a good deal for our shareholders.”

VeraSun has signed an agreement with Valero, San Antonio, Tex., to sell five production facilities and a sixth under development. The facilities are located throughout South Dakota, Iowa, Minnesota and Indiana. The purchase agreement is worth about $280 million, plus the value of inventory and certain prepaid expenses, the companies said in a joint statement issued Friday.

Any sale of assets would still have to go through an auction where an open bidding process would allow other companies to make their own offers. But, Mr. Day said that “We’re hopeful we will be able close the deal” within the second quarter of the year.

Oil companies are ethanol’s biggest customers, and traditionally the two industries have remained disconnected. Ethanol companies tend to be sprinkled across Midwestern farm towns, while oil companies tend to be located near the coasts.

Also the two industries have had tortured relations in the past, with oil companies reluctantly using ethanol after energy legislation mandated its use. Under government mandates, oil companies are required to blend billions of gallons of the corn-based fuel into their gasoline supply each year.

If the sale goes through, Mr. Day said that the company would be picking up the assets at about 25% of the estimated replacement value of a new plant.

 

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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New Study Tallies Corn Ethanol Costs

Posted on February 6, 2009. Filed under: Advanced Biofuel, Field-to-Pump | Tags: , , , , |

New Study Tallies Corn Ethanol Costs

By Kate Galbraith

The New York Times

February 5, 2009

 

In the latest installment of the debate over the emissions impact of corn-based ethanol, researchers from the University of Minnesota and other institutions found that corn ethanol is worse for health and the environment than regular gasoline, and far worse than cellulosic ethanol.

The study, published in the Proceedings of the National Academy of Sciences, looked at various types of fuels’ climate and health costs — defined as a combination of health costs from the emission of fine particulate matter, and climate costs from issues like mitigation, carbon capture and the damage from sea-level rise or crop loss.

The findings identified corn ethanol (corn is the main feedstock for ethanol produced in the United States) as more “costly” than cellulosic ethanol or even regular gasoline, though the range of cost estimates was wide and dependent on a large number of variables.

Last month, a University of Nebraska study found that ethanol produced significantly lower direct emissions than gasoline.

Jason Hill, a researcher with the University of Minnesota and one of the authors of the more recent study, said that the Nebraska study looked at fewer factors than did his study, and that the findings of the two were compatible.

Worth noting amid the back-and-forth: Cellulosic ethanol is far from being ready for commercial use, however.

 

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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Ethanol Slows Archer Daniels

Posted on February 4, 2009. Filed under: Advanced Biofuel, Field-to-Pump | Tags: , , , , |

 

Ethanol Slows Archer Daniels
by Miriam Marcus

http://www.forbes.com

February 3, 2009

 

 

 

 

 

Ethanol, once prized for its alternative energy prospects, is becoming a thorn in Archer Daniels Midland‘s side. The agricultural processor’s most recent quarter benefited from contracts that were inked when commodities prices were high, but the evaporating ethanol market is worrying investors.

On Tuesday, Archer Daniels Midland posted better-than-expected earnings in its second quarter despite softening prices of crops and commodities in the global market.

But a sharp profit fall in its corn processing division, attributed to weakness in the ethanol market, sent shares down early in the day before they rebounded to close at $27.58, up 8 cents, or 0.3%, in trading in New York.

Decatur, Ill.-based Archer, a diversified agricultural commodities manufacturer and processor, saw weakening global demand for its commodities and crop-based fuels like ethanol during its fiscal second quarter, even while food prices have remained historically high. The firm’s agricultural services division helped lift profits on heftier profit margins on transactions made during volatile commodity and freight market conditions.

Soft demand for ethanol, however, sent profits in its corn processing division tumbling to $29.0 million, from $275.0 million in the year-earlier quarter.

The results showed how one of the nation’s largest grain exporters and ethanol makers can turn a profit by playing several sides of the agribusiness game. It made money from higher shipping costs, for example, even as demand sank for the grains it was shipping.

The U.S. ethanol sector contracted toward the end of the year with demand falling in a weakening economy, a selloff in oil and gas prices, and the global credit crunch. (See “Rebuilding Global Markets.”) In July, crude oil hit a record high, peaking at over $147 per barrel and making alternatives like ethanol attractive. Since then, oil has tumbled below $40 a barrel as demand in the United States and other big consumer nations eased amid a global economic slowdown.

Archer Chief Executive Patricia Woertz said the near collapse in the market for ethanol said the market for ethanol reduced profits at the company’s broad network of new biofuels refineries. “The ethanol business is still a challenge,” Woertz told analysts during a conference call Tuesday morning. “While we did foresee the overbuilding of some [ethanol] supply a while ago, we did not foresee the depth of this economic crisis.”

In Nov., ethanol producer VeraSun Energy filed for bankruptcy amid the economic slowdown. (See “VeraSun Stalls Plant Opening; Could Have Been Worse.”) Similarly, agriculture and fertilizer stocks have been hit hard by the credit crisis on investor fears that the U.S. recession will reduce demand for raw materials like grain and oilseeds.

Shares of Archer have fallen 39.4% from its year-ago trading price of $45.50, and shares of its agricultural competitor Bunge Limited have lost 66.5% in the trailing 12 months, to $41.89, from $125.19, on Tuesday in New York.

Bunge Limited, which is expected to report quarterly earnings on Thursday, warned recently that its 2008 profit will widely miss analysts’ expectations.

For the three months ended Dec. 31, Archer posted a 23.7% jump in quarterly profits to $585.0 million, or 91 cents per share, ahead of analyst expectations for earnings per share of just 68 cents, compared with year-earlier earnings of $473.0 million, or 73 cents per share. Revenues increased 1.2% to $16.7 billion, from $16.5 billion.

The Associated Press and Reuters contributed to this article.

 

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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    About

    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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