Archive for September, 2009

Study Concludes That Use of Cellulosic Feedstocks to Meet US Biofuel Requirements Will Still Likely Result in Expansion of the Gulf Dead Zone

Posted on September 11, 2009. Filed under: Cellulosic | Tags: , , , |

Study Concludes That Use of Cellulosic Feedstocks to Meet US Biofuel Requirements Will Still Likely Result in Expansion of the Gulf Dead Zone

Green Car Congress

10 September 2009

Nitrate output within the MARB (colored bars, lefthand y-axis) and mean areal extent of hypoxia in the NGOM with “No Buffer” and “50% Buffer” (gray scale bars, righthand y-axis). Nitrate output columns represent mean values and the 80% credible intervals from modeling. Credit: ACS, Costello et. al. Click to enlarge.

A study by researchers at Carnegie Mellon University and the University of Pittsburgh found that while moving from corn to cellulosics to meet the biofuel goals specified by the Energy Independence and Security Act of 2007 (EISA 2007) for ethanol production may result in a 20% decrease (based on mean values) in NO3 (nitrate) output from the Mississippi and Atchafalaya River Basin (MARB) relative to corn, this will still result in increased nitrate loadings, contributing to the expansion of the hypoxic “Dead Zone” in the Northern Gulf of Mexico (NGOM). (Earlier post.)

The findings suggest that an aggressive nutrient management strategy will be needed to reach the goal of a 5,000 km2 areal extent of hypoxia set forth by the Mississippi River/Gulf of Mexico Watershed Nutrient Task Force even in the absence of biofuels, given current production to meet food, feed, and other industrial needs. Their paper was published online 13 August in the ACS journal Environmental Science & Technology.

Nitrogen and phosphorus from agricultural fertilizer have been found to promote excess growth of algae in water bodies—a problem that’s common across North America and in many areas of the world. In some cases, decomposition of algae consumes much of the oxygen in the water. Fertilizer applied to cornfields in the central US—including states such as Illinois, Iowa, Nebraska and Wisconsin—is the primary source of nitrogen pollution in the Mississippi River system, which drains into the Gulf of Mexico.

Each summer, the export of nitrogen from the MARB creates a large NGOM “Dead Zone”—a region of oxygen-deprived waters that are unable to support aquatic life. Marine species either die or flee the hypoxic zone, so the spread of hypoxia reduces the available habitat for marine species which are important for the ecosystem as well as commercial and recreational fishing in the Gulf.

A 2008 study by Simon Donner of the University of British Columbia and Chris Kucharik of the University of Wisconsin concluded that ramping up the production of corn ethanol to meet the targets set by the new US Renewable Fuel Standard (RFS) would worsen pollution in the Gulf of Mexico, increasing the growing hypoxic region. (Earlier post.)

In the current study, Christine Costello, W. Michael Griffin and H. Scott Matthews of CMU and Amy E. Landis of the University of Pittsburgh took a system-wide approach in considering the NO3 output and the relative areal extent of hypoxia in the NGOM due to the introduction of additional crops for biofuel production. They stochastically estimated nitrate loading to the NGOM and used these results to approximate the areal extent of hypoxia for scenarios that meet the EISA 2007 biofuel goals for 2015 and 2022. Crops for ethanol include corn, corn stover, and switchgrass; all biodiesel was assumed to be from soybeans.

The 2007 Energy Independence and Security Act (EISA) calls for the production of 36 billion gallons (Bgal) of biofuels by 2022 of which 15 Bgal is corn ethanol and 21 Bgal is “advanced biofuel”. Advanced biofuels are assumed to be 20 Bgal of ethanol that is derived from switchgrass or stover and one Bgal of biodiesel derived from soybeans. Achieving these goals may result in a significant increase in demand for agricultural products. Simultaneously as populations increase so will demand for food/feed products. A pressing question to answer is how will an increase in agricultural activity impact nutrient loading to the NGOM and ultimately the size of the hypoxic zone.

—Costello et al. 2009

The team modeled in two scenarios for the use of vegetative buffer strips (VBS) to reduce run-off: one at a 100% level and one at a 50% level. The authors note that 100% interception of runoff by buffers from agricultural fields is unlikely; they included this idealized scenario to illustrate the need for aggressive nutrient management within the MARB.

They found that NO3 output for corn-derived ethanol will be higher on average than output for switchgrass- or stover-derived ethanol. While use of cellulosics result in lower NO3output on a per unit basis compared to corn (e.g., one gallon ethanol or one acre), the decrease is insufficient to reduce the hypoxic zone below the EPA’s 5000 km2 target.



In summary, the results of modeling hypoxic area indicates that meeting the biofuel goals set forth by EISA will likely increase the occurrence of hypoxia in the NGOM, regardless of the selection of crops. This work also suggests that aggressive nutrient management is needed even in the absence of energy crops or stover use. There are a number of options to consider for mitigating nitrogen loading from agricultural activities, including wetland construction, vegetative buffers, tillage management, and precision fertilizer application.

…The results presented here suggest that only when all of the nitrogen runoff associated with the production of corn, soy, and switchgrass is reduced will the EPA goal be met. This is an oversimplification since the approximation of the areal extent of the hypoxic zone includes unmitigated output from all other N sources within the MARB, i.e., other agricultural crops, wastewater treatment facilities, etc. Any aggressive management strategy aimed at reducing nutrient sources within the MARB will likely target these other sources as well.

…The presented results demonstrate that using cellulosic crops for biofuel production will decrease TN [total nitrogen] loading to the NGOM relative to corn but overall TN loading will still increase as the goals of the EISA are met, adding to the need for aggressive nitrogen mitigation strategies.

—Costello et al. 2009


  • Christine Costello, W. Michael Griffin, Amy E. Landis and H. Scott Matthew (2009) Impact of Biofuel Crop Production on the Formation of Hypoxia in the Gulf of Mexico. Environ. Sci. Technol., Article ASAP doi: 10.1021/es9011433
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Next-Generation Biofuels: Field of Dreams, or Feasible?

Posted on September 7, 2009. Filed under: Advanced Biofuel | Tags: , , , |

By Keith Johnson

The Wall Street Journal

August 12, 2009

The U.S. pinned a big part of its hopes for future transport fuel on cellulosic ethanol, something that doesn’t even exist commercially today.

How feasible is the idea of producing 90 billion gallons of ethanol per year in 2030—enough to displace well over one-third of U.S. gasoline consumption—and keep it affordable? That’s what Sandia National Laboratories set out to answer.

The upshot? There are no theoretical barriers, but a host of practical ones, the laboratory found in a study soon to be published in Bioresource Technology.

Basically, cellulosic ethanol can’t compete with gasoline unless oil stays above $90 a barrel. Even then, the industry has a lot of work to do in order to produce large volumes and do so affordably.

The good news is that vastly increasing cellulosic ethanol production would be good for the environment, saving the equivalent of 25% of today’s emissions from gasoline, or the equivalent emissions from 87 coal-fired power plants.

To make 75 billion gallons of cellulosic ethanol a year (on top of the 15 billion gallons of corn ethanol, which will still be around) two things are paramount: Producers have to get better at squeezing more juice out of the same amount of biomass, and they have to make sure they’ll have all those plants available in the first place.

Improving yields is particulary crucial—the Sandia study generously figures average cellulosic ethanol yields will surpass anything that’s been demonstrated today, which “assumes significant technical advances over time.” Without such progress, the industry won’t ever be able to produce anything like 75 billion gallons.

But to do so affordably depends on the cost of oil, the cost of capital, and the cost of the agricultural feedstocks in the first place. The report concludes that, to be feasible, such a large-scale target means cellulosic ethanol producers must be insulated from volatile or falling oil prices; must have cheap and abundant feedstocks; and must have “manageable” capital costs. That should keep Washington busy.

Here are some of Sandia’s recommendations: “Potential policy options that warrant further investigation include well-planned market incentives and carbon pricing as well as federal investment in research and development and commercialization, especially when oil prices are low.”

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Biofuel Fraud Case Could Leave the EPA Running on Fumes

Posted on September 7, 2009. Filed under: Advanced Biofuel | Tags: , , , , , |

Cello Energy is unlikely to produce 70 million gallons of cellulosic biofuel next year, which means that the EPA will not meet its 2010 target of 100 million gallons
By Brendan Borrell
Scientific American

Grassoline it ain’t. After a jury ordered a leading cellulosic biofuel company to pony up millions for defrauding investors, the U.S. Environmental Protection Agency will likely come in 60 million gallons shy of its 100 million gallon target next year.

Late last month, a federal court in Mobile ordered Cello Energy of Bay Minette, Ala., to pay $10.4 million in punitive damages for fraudulently claiming it could produce cheap diesellike fuel from hay, wood pulp and other waste.

Cello’s owner, Jack Boykin, allegedly built a sham facility and lured pulp producer Parsons & Whittemore Enterprises to invest $2.5 million in an ownership stake in 2007. In court, Parsons & Whitmore CEO George Landegger said he was unimpressed with the company’s facilities, and a string of expert witnesses testified that fuel samples were derived from petroleum sources.

Neither Boykin nor his attorney, Forrest Latta, returned calls for comment, but in statements to the press following the trial, Latta has indicated that Cello’s technology has “global potential.” Another defendant, Khosla Ventures, a California firm that invested $12.5 million in Cello in 2007, was unavailable to comment.

Although it’s no surprise that investors might be dazzled in the rush to hop on board the biofuels bandwagon, the EPA appears to have been duped as well.

Cellulosic biofuel technology is still in its infancy, and the agency and Congress required gasoline blenders to purchase and sell just 100 million gallons next year, less than 1 percent of the nation’s proposed renewable fuel mandates. To encourage biofuel producers to meet that demand, the government would establish a credit scheme to set a floor on the wholesale price of $3.00 per gallon—about twice that of corn-based ethanol—if production fails to reach the 100 million gallon mark.

But David Woodburn, an analyst at ThinkEquity Partners in Chicago says that the agency had pinned its hopes on Cello and has not put in place the cellulosic biofuel credit system required to maintain that price point. “EPA was supposed to have prepared it in late June,” he says, “In the EPA’s eyes, they only need to implement that system if they see a shortfall coming…. Up to now on paper they’ve totally ignored this credit system.”

As reported in earth2tech, Woodburn first realized the EPA would fall short of its target when it released its draft regulatory impact analysis in May. This document listed firms that were to make cellulosic biofuel, and most were on the hook to produce one million or two million gallons by the end of 2010. Cello Energy, however, claimed that its Bay Minette facility would pump out 20 million gallons. The agency also had Cello down for new plants that would produce another 50 million gallons. Woodburn says he grew skeptical of the company after calls and e-mails to the company for verification were never returned.

EPA spokeswoman Cathy Milbourn says Cello estimates were “derived based on commercialization plans from the company. They never gave us volume—only size of the facilities and planned timeline.”

So, what’s the chance that Cello can still meet its target? “It seemed extremely unlikely three weeks ago before this jury verdict,” Woodburn says. “It seems extremely unlikely today. How can you create three additional plants and have them producing in 2010 when ground hasn’t been broken yet?”

Woodburn adds that Cello also faces another hurdle, which is that it has no distribution agreements: in other words, no one has promised to buy their biofuel. In the best-case scenario, he says, the nation will produce 39 million gallons of cellulosic biofuel next year and blenders will be on the hook to pay the government a $600 million or more for biofuel credits through a program that still does not exist.

Alternatively, the EPA could lower the cellulosic biofuel target when it finalizes the contentious renewable fuel standards in the fall, a decision that would defeat the whole idea of the goal in the first place.

Milbourn says the EPA is “continuing to assess the viability of not only Cello, but also the various other technologies and companies in supplying cellulosic biofuel.”

For George Huber, the University of Massachusetts Amherst chemical engineering professor who wrote Scientific American’s July cover story about cellulosic biofuels, Cello is a lesson to be learned. “There are no magic processes for conversion of biomass into liquid fuels,” he says, “If something sounds too good to be true, it probably is not true.”

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U.S. Biofuel Boom Running on Empty

Posted on September 6, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit | Tags: , , , , , , |

U.S. Biofuel Boom Running on Empty


The Wall Street Journal

August 27, 2009

The biofuels revolution that promised to reduce America’s dependence on foreign oil is fizzling out.

Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.

The global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of two of the three main biofuel sectors — biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, is also in financial trouble, although longstanding government support will likely protect it.

[Turmoil in Biofuels Threatens Green Energy Revolution]

Earlier this year, GreenHunter Energy Inc., operator of the nation’s largest biodiesel refinery, stopped production and in June said it may have to sell its Houston plant, only a year after politicians presided over its opening. Dozens of other new biodiesel plants, which make a diesel substitute from vegetable oils and animal fats, have stopped operating because biodiesel production is no longer economical.

Producers of next-generation biofuels — those using nonfood renewable materials such as grasses, cornstalks and sugarcane stalks — are finding it tough to attract investment and ramp up production to an industrial scale. The sector suffered a major setback this summer after a federal jury ruled that Cello Energy of Alabama, a plant-fiber-based biofuel producer, had defrauded investors. Backed by venture capitalist Vinod Khosla, Cello was expected to supply 70% of the 100.7 million gallons of cellulosic biofuels that the Environmental Protection Agency planned to blend into the U.S. fuel supply next year. The alleged fraud will almost certainly prevent the EPA from meeting its targets next year, energy analysts say.

The wave of biodiesel failures and Cello’s inability to produce even a fraction of what it expected have spooked private investors, which could further delay technology breakthroughs and derail the government’s green energy objectives.

“If your investors are losing money in first-generation biofuels, I guarantee you they’ll be more reluctant to put money into more biofuels, including next-generation fuels,” says Tom Murray, global head of energy for German bank WestLB, one of the leading lenders to ethanol and biodiesel makers.

Domestically produced biofuels were supposed to be an answer to reducing America’s reliance on foreign oil. In 2007, Congress set targets for the U.S. to blend 36 billion gallons of biofuels a year into the U.S. fuel supply in 2022, from 11.1 billion gallons in 2009. That would increase biofuels’ share of the liquid-fuel mix to roughly 16% from 5%, based on U.S. Energy Information Administration fuel-demand projections.

Corn ethanol, which has been supported by government blending mandates and other subsidies for years, has come under fire for driving up the price of corn and other basic foodstuffs. While it will continue to be produced, corn ethanol’s dominant role in filling the biofuels’ blending mandate was set to shrink through 2022. Cellulosic ethanol, derived from the inedible portions of plants, and other advanced fuels were expected to surpass corn ethanol to fill close to half of all biofuel mandates in that time.

But the industry is already falling behind the targets. The EPA, which implements the congressional blending mandates, still hasn’t issued any regulations to allow biodiesel blending, though they were supposed to start in January. The mandate to blend next-generation fuels, which kicks in next year, is unlikely to be met because of a lack of enough viable production.

“I don’t believe there’s a man, woman or child who believes the industry can hit” the EPA’s 2010 biofuel blending targets, says Bill Wicker, spokesman for Sen. Jeff Bingaman of New Mexico, chairman of the Senate Energy Committee.

The business models for most biofuel companies were predicated on a much higher price of crude oil, making biofuels more attractive. A government-guaranteed market was also central to business plans.

But once blending mandates were postponed, oil prices plunged and the recession crushed fuel demand, many biodiesel companies started operating in the red. Even ethanol producers, which have enjoyed government subsidies and growing federal requirements to blend it into gasoline, have been operating at a loss over the past year. Numerous established producers have filed for Chapter 11 bankruptcy-court protection.

Critics of the biofuels boom say government support helped create the mess in the first place. In 2007, biofuels including ethanol received $3.25 billion in subsidies and support — more than nuclear, solar or any other energy source, according to the Energy Information Administration. With new stimulus funding, this figure is expected to jump. New Energy Finance Ltd., an alternative-energy research firm, estimates that blending mandates alone would provide over $33 billion in tax credits to the biofuels industry from 2009 through 2013.

Not all biofuels may be worth the investment because they divert land from food crops, are expensive to produce and may be eclipsed by the electric car. One fact cited against biofuels: If the entire U.S. supply of vegetable oils and animal fats were diverted to make biodiesel, production still would amount to at most 7% of U.S. diesel demand.

Producers and investors now are pushing for swift and aggressive government help. Biodiesel makers are lobbying to kick-start the delayed blending mandates immediately and extend biodiesel tax credits, which expire in December.

On Aug. 7 more than two dozen U.S. senators wrote to President Barack Obama to warn that “numerous bankruptcies loom” in the biodiesel sector. “If this situation is not addressed immediately, the domestic biodiesel industry expects to lose 29,000 jobs in 2009 alone,” the senators wrote, using estimates by the National Biodiesel Board.

Mr. Obama, who supported biofuels throughout his campaign, is working to roll out grants and loan guarantees for bio-refineries and green fuel projects, said Heather Zichal, a White House energy adviser. The pace of the disbursements should speed up this fall, administration officials say.

Obama officials defended the delay in biodiesel mandates. The EPA in May proposed rules that penalize soy-based diesel under the blending mandates, because deforestation from soybean cultivation is thought to offset the fuel’s environmental benefits. Obama officials say the EPA must perform a thorough environmental review before it can issue rules. The amount of biodiesel that was to have been blended in 2009 will be added to the amount required for 2010, so that no volume is lost, they add.

Any state help might be too late for GreenHunter Energy. In 2007, the company, led by energy exploration executive Gary Evans, acquired a Houston refinery that processed used motor oil and chemicals and retrofit it to make 105 million gallons of biodiesel a year from all manner of feedstocks, from soybean oil and beef tallow to, potentially, inedible plant matter. GreenHunter’s business model hinged on selling to a government-guaranteed buyer: GreenHunter has the capacity to make 20% of the 500 million gallons of biodiesel that Congress wanted to be blended into the 2009 fuel supply.

Until the mandate kicked in, GreenHunter and other biodiesel makers counted on exporting their output to Europe, a much bigger user of diesel.

GreenHunter opened in June 2008 as oil prices skyrocketed. By then, soybean oil prices were soaring, too, pinching refiners that had banked on using soy. Mr. Evans switched to inedible animal fats.

For about a month, when oil hovered above $120 a barrel and traditional diesel ran over $4 a gallon, GreenHunter says profit margins on turning animal fat into diesel rose as high as $1.25 a gallon. It wasn’t sustainable. The price of animal fat soared too, cutting margins again.

As the EPA continued to delay the blending mandates, the global downturn obliterated demand for regular diesel. Prices cratered. GreenHunter’s plant took a direct hit from Hurricane Ike in September. By the time the plant reopened in late November, the price of diesel had dropped by more than half, and GreenHunter was losing money on every gallon of fuel.

The European Union dealt the final blow this spring when it slapped a tariff on U.S. biodiesel, killing what had been the industry’s main sales outlet.

GreenHunter has since stopped producing biodiesel. The American Stock Exchange informed GreenHunter in May that the company was out of compliance with some listing requirements; the firm has submitted a plan to remain listed. Its stock has sunk to about $2 a share from a high of $24.75 in May 2008.

Bio-refinery carcasses are everywhere. GreenHunter’s lender, West LB, arranged $2 billion in ethanol and biodiesel loans, selling them to various investors beginning around 2006. Today, half of the $2 billion in loans have defaulted or are being restructured, according to people familiar with the portfolio. Publicly traded Nova Biosource Fuels Inc. filed for Chapter 11 bankruptcy reorganization in March.

Imperium Renewables, a biodiesel maker in Washington, is trying to hang on as a storage depot, its founder says. Evolution Fuels, an outfit that used to sell a biodiesel brand licensed by country singer Willie Nelson, has stopped production and said in a securities filing it may not be able to continue as a going concern. The company didn’t return calls for comment.

[Turmoil in Biofuels Threatens Green Energy Revolution]

Some senators have introduced a bill to extend biodiesel tax credits. A provision passed in the House grandfathers soy-based biodiesel into the blending mandates for five years.

Second-generation biofuels have had their own setbacks.

When seeking investors for Cello Energy in 2007, Jack Boykin, an entrepreneur with a background in biochemistry, said Cello had made diesel economically in a four-million-gallon-a-year pilot plant from grass, hay and used tires. What’s more, he told investors he had successfully used the fuel in trucks, according to testimony in a federal court case in Mobile, Ala. He said he had invested $25 million of his own money. An Auburn University agronomy professor advising the Bush administration on green energy endorsed his technology.

Alabama paper-and-pulp executive George Landegger and Mr. Khosla, the venture capitalist, separately invested millions in seed money into Cello and had plans to invest or lend more.

A lawsuit disputing the ownership stakes of investors produced Mr. Boykin’s revelation, in a 2008 deposition, that he had never used inedible plant material such as wood chips or grass in his pilot plant, despite claims otherwise. Construction of his full-scale facility in rural Alabama moved forward anyway.

This year, Khosla representatives took samples of diesel produced at the new Cello plant and sent them off for testing. The results showed no evidence of plant-based fuel: Carbon in the diesel was at least 50,000 years old, marking it as traditional fossil fuel.

The EPA wasn’t told about the test, and continued to rely on Mr. Boykin’s original claims when it asserted in the Federal Register in May that Cello could produce 70% of the cellulosic fuel targets set by Congress that are due to take effect next year.

The jury returned a $10.4 million civil fraud and breach-of-contract verdict against the Alabama entrepreneur in favor of Mr. Landegger, one of the investors. Work on the plant has been suspended. Several weeks after the verdict was delivered, Mr. Boykin presented evidence that he had tested fuel from the plant and it did contain cellulosic material. He is seeking a new trial.

Mr. Boykin declined to comment, but his lawyer, Forest Latta, said his client denies committing fraud. The carbon testing, he said, reflected only an early stage quality-control test during startup trials. It would be premature to conclude, Mr. Latta said in an email, that Cello’s fuel-making process is a failure. “This is a first-of-its-kind plant in which there remain some mechanical issues still being ironed out,” he wrote.

Margo Oge, director of the EPA’s office on transportation and air quality, says the agency is “looking into the whole case of Cello.” Mr. Khosla declined to discuss Cello, but said he doubts the 2010 cellulosic fuel mandates can be met. “All projects, even traditional well-established technologies, are being delayed because of the financial crisis,” he said in an interview.

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The Cellulosic Ceiling

Posted on September 5, 2009. Filed under: Advanced Biofuel | Tags: , , , , , , |

By Ryan C. Christiansen
Ethanol Producer Magazine
From the August 2009 Issue

The renewable fuel standard calls for 100 MMgy of cellulosic biofuel to be blended into the nation’s fuel in 2010, ramping up to 16 billion gallons per year in 2022. Will the U.S. produce enough to satisfy the mandate?

By 2022, the U.S. EPA expects the domestic biofuels industry to produce more than 32 billion gallons per year of renewable fuel. However, less than half of that fuel is expected to be corn-based ethanol. The majority, 16 billion gallons, will be cellulosic biofuel. The Energy Independence and Security Act of 2007 defines cellulosic biofuel as renewable fuel produced from any cellulose, hemicelluloses, or lignin that is derived from renewable biomass and has life-cycle greenhouse gas (GHG) emissions that are at least 60 percent less than the baseline life-cycle GHG emissions. The EPA predicts that, in the long run, those 16 billion gallons of cellulosic biofuel will be cellulosic ethanol. However, EISA’s definition for cellulosic biofuel leaves open the possibility that the mandate can be met by other fuels.

Federal Investments
The goal of ultimately producing billions of gallons of cellulosic biofuel has a hefty price tag. Between 2002 and 2008, the U.S. DOE’s Energy Efficiency and Renewable Energy Biomass Program, established to develop and demonstrate biomass feedstock and conversion technologies for integrated biorefineries and to ensure cellulosic ethanol can be produced cost-effectively by 2012, was allocated more than $800 million in federal funding. Since 2007, the DOE has announced more than $1 billion in multi-year investments in cellulosic biorefineries and since 2006 the USDA has invested almost $600 million to develop biofuel technology.

The bulk of the DOE’s investments began in February 2007 when it announced plans to invest $385 million in six biorefinery projects over four years for a total cellulosic ethanol production capacity of 131 MMgy. Combined with the industry cost share, the projects equated to more than $1.2 billion in investments. Projects identified for funding included an 11 MMgy Abengoa Bioenergy SA plant in Kansas, a 14 MMgy Alico Inc. plant in Florida, a 19 MMgy BlueFire Ethanol Fuels Inc. facility in California, a 30 MMgy Poet LLC plant in Iowa, an 18 MMgy Iogen Corp. plant in Idaho, and a 40 MMgy Range Fuels Inc. plant in Georgia.

In May 2007, the DOE announced it would provide up to $200 million over five years to support the development of small-scale cellulosic biorefineries. The first $114 million was allotted in January 2008 for four projects. The companies identified for funding included ICM Inc., Lignol Energy Corp., Pacific Ethanol Inc., and Stora Enso Oyj. The remaining $86 million was allotted to RSE Pulp & Chemical LLC, Mascoma Corp. and Ecofin LLC in April 2008. In July 2008, the DOE announced an additional $40 million investment for two more companies – Flambeau River Biofuels LLC for its project in Wisconsin and Verenium Corp. for its demonstration-scale facility in Louisiana. Seven of the nine plants were funded for cellulosic ethanol and two for cellulosic diesel.

On the research side, both the DOE and the USDA also provided funding to companies and universities. In March 2007, the DOE invested $23 million in five projects to develop highly efficient fermentative organisms to convert biomass material to ethanol; the companies and organizations identified for funding included Cargill Inc., Verenium, E. I. du Pont de Nemours and Co., Mascoma, and Purdue University. In June 2007, the DOE and USDA together awarded $8.3 million to 10 universities for biomass genomic research. During that month, the DOE also announced a $375 million investment in three new bioenergy research centers, including the DOE BioEnergy Science Center, the DOE Great Lakes Bioenergy Research Center, and the DOE Joint BioEnergy Institute.

To close out the year, the DOE awarded $7.7 million in December 2007 to four projects to demonstrate the thermochemical conversion process of biomass-to-biofuels. Then, in February 2008, the DOE invested $33.8 million in four projects to develop improved enzyme systems to convert cellulosic material into sugars suitable for the production of biofuels. The companies identified for funding included DSM Innovation Center Inc. (a partner with Abengoa), Genencor, a division of Danisco A/S, Novozymes A/S, and Verenium.

In March 2008, the DOE and USDA awarded $18 million to 18 universities and research institutes to develop biomass-based products, including biofuels.

To meet renewable fuel standard targets, the U.S. EPA says cellulosic ethanol plant startups must begin in earnest with a few small plants during 2010-’11 and must continue at an increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years.

Finally, in May 2009, the DOE announced that it would provide $786.5 million from the American Recovery and Reinvestment Act to accelerate advanced biofuels research and development and to provide additional funding for commercial-scale biorefinery demonstration projects. Of the total, $480 million will be distributed among 10 to 20 projects for pilot- or demonstration-scale integrated biorefineries that produce advanced biofuels, bioproducts, and heat and power in an integrated system, which must be operational within three years. In addition, $176.5 million will be used to increase the federal funding ceiling on two or more demonstration- or commercial-scale biorefinery projects that were selected and awarded funds within the past two years. Also, $110 million will be used to support new research. Finally, $20 million has been set aside for optimizing flexible fuel vehicle technology, evaluating the impact of higher ethanol blends on conventional vehicles, and upgrading refueling stations to be compatible with ethanol blends up to E85.

Scaling up
To meet renewable fuel standard targets, the EPA says cellulosic ethanol plant start-ups must begin in earnest with a few small plants during 2010-’11, increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years, beginning with 40 MMgy plants from 2010-’13, increasing to 80 MMgy during 2014-’17 and 100 MMgy and upwards during 2018 and beyond. The EPA projects that approximately two billion gallons per year of new plant construction will need to come online between 2018 and 2022. In total, approximately 180 plants will need to be completed by 2022.

However, with only a few months to go before petroleum blenders must begin to use cellulosic biofuels, there are no commercial-scale plants ready to deliver the fuel. Since the DOE’s initial February 2007 funding announcement, very little money has actually been distributed to selected projects. Two of the first six companies to be awarded DOE money – Alico and Iogen – have dropped their applications. Lignol announced in February that it was discontinuing its project as a result of instable energy prices, capital market uncertainty and general market malaise. Meanwhile, subsidiaries of Pacific Ethanol filed for bankruptcy in May.

Abengoa and Poet say they are on track to begin production, but not until 2011. Only Range Fuels, which received an additional $80 million loan guarantee from the USDA in January (the first-ever USDA loan guarantee for a commercial-scale cellulosic ethanol plant), expects to begin producing at near-commercial scale during 2010, with plans to complete the first phase of its planned 40 MMgy facility in Soperton, Ga., early next year.

According to Range Fuels CEO David Aldous, the plant is expected to be mechanically complete during the first quarter of 2010 and commissioning will begin soon thereafter. The plant will produce ethanol from wood chips, he says, and will be scaled up gradually from an initial 20 MMgy capacity. The EPA is predicting that Range Fuels will supply 10 million gallons of cellulosic ethanol toward the cellulosic biofuels mandate in 2010.

Aldous says Range Fuels’ technology is unique. “It is proprietary technology,” he says. “There are a lot of companies that are doing thermal front-end processes, whether they are pyrolysis or gasification, and there are a lot of other companies using different kinds of back-ends, converting the syngas into ethanol, (but) we use a proprietary catalyst on the back end and we use a proprietary technology on the front end.” Prior to leading Range Fuels, Aldous was executive vice president for strategy and portfolio at Royal Dutch Shell plc and also served as president of Shell Canada Products. He is also the former CEO for the Shell Group’s catalyst company, CRI/Criterion Inc.

Meeting the Mandate
To help meet the 100 MMgy cellulosic biofuels target for 2010, the EPA says there will be 24 pilot- or demonstration- scale plants and seven commercial- scale plants producing cellulosic ethanol or cellulosic diesel in 2010. However, ethanol will satisfy only 28 percent of the total cellulosic biofuels mandate. The EPA says the only companies that will produce more than one million gallons of cellulosic ethanol during 2010 are Verenium, Western Biomass Energy LLC, Fulcrum Bioenergy Inc., RSE, Southeast Renewable Fuels LLC, and Range Fuels.

The majority of the cellulosic biofuels volume (72 percent), the EPA says, is projected to come from cellulosic diesel. A small portion (3 million gallons) will be produced by Flambeau River Biofuels at its 6 MMgy plant in Park Falls, Wis., while the majority of all cellulosic biofuels that will be produced, the EPA says, will be cellulosic diesel from Cello Energy (pronounced “sell-oh”), which has a 20 MMgy plant in Bay Minette, Ala. The EPA says to expect 20 million gallons from the Bay Minette plant, as well as 16.67 million gallons from each of three future 50 MMgy plants, which are expected to be swiftly built—two in Alabama and one in Georgia—at locations to be determined.

Feedstock for Cello Energy’s operation can include plant biomass, waste wood, and other organic materials, as well as plastics and used tires. The company uses a catalytic depolymerization technology, the EPA says, to convert the feedstock into short-chain hydrocarbons that are polymerized to produce diesel fuel that meets ASTM standards at a cost between 50 cents and $1 per gallon. The process is reported to be 82 percent efficient and the only energy input is electricity. Allen Boykin, president of Cello Energy, told EPM that the catalyst used by the company is a proprietary catalyst that takes approximately 22 to 25 minutes to convert garbage into fuel oil using a continuous process.

Boykin says Cello Energy’s technology has been in the making for 12 to 15 years. His father, Dr. Jack Boykin, a chemical engineer who served as a Lieutenant in the U.S. Navy from 1961 to 1965, is CEO of Cello Energy and has been conducting the research. Allen says he became involved in 2002 to help bring the system to commercial-scale. Allen says bench-and pilot-scale testing was previously conducted in Prichard, Ala.

Imports to Meet Targets
The EPA admits that because cellulosic ethanol production technology is still developing, production plants will be considerably more complex and expensive to build than corn starch-based ethanol plants, thus requiring much more capital funding as well as design and construction resources. “Although technologies needed to convert cellulosic feedstocks into ethanol (and diesel) are becoming more and more understood, there are still a number of efficiency improvements that need to occur before cellulosic biofuel production can compete in today’s marketplace,” the EPA renewable fuel standard report says. “Additionally, because cellulosic biofuel production has not yet been proven on a commercial level, financing of these projects has primarily been through venture capital and similar funding mechanisms, as opposed to conventional bank loans.”

Alternatively, the EPA suggests that usage targets might be met using cellulosic biofuel that is produced internationally, for example, from feedstocks such as bagasse or straw.

Indeed, as much as 21 billion gallons per year of cellulosic biofuel might be produced outside the U.S. by 2017, the EPA says, the majority from bagasse, but also from forest products, and mostly from Brazil.

A recent report from Novozymes describes how Brazil might produce more than two billion gallons of cellulosic biofuel from bagasse by 2020, which would represent an additional $4 billion in export revenue for that country. Like in the U.S., the development of cellulosic biofuels in Brazil will depend on the industry’s ability to attract the needed investments and political support, Novozymes says.

Despite a slow start for cellulosic biofuels in the U.S., some in the industry are bullish about the future. “Advanced biofuel companies are ready to deploy their technology and begin meeting the requirements of the [RFS],” says Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial and Environmental Section. “Now that the rules of the program are finally moving forward and the Obama administration has demonstrated a firm commitment to the industry, companies are prepared to build the next generation of biorefineries.”

Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at or (701) 373-8042.

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Independent U.S. Ethanol Producers Will Not Survive as Price Takers

Posted on September 5, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Hydrous Ethanol | Tags: , , , , , , |

Chicago Board of Trade Dictates Price of Corn and Oil Companies Control Price of Ethanol
By Brian J. Donovan
July 28, 2009

The issue is whether the proper development of an advanced biofuel industry in the United States is feasible when: (a) independent ethanol producers in the U.S. are at the mercy of volatile commodities markets for feedstock; and (b) the price of ethanol is controlled by the oil companies.

Commodity Market Volatility
The corn-to-ethanol business is highly dependent on corn prices. The price paid for corn is determined by taking the Chicago Board of Trade futures price minus the basis, which is the difference between the local cash price and the futures price. The more corn-to-ethanol contributes to our nation’s energy supplies, the more it drives up corn feedstock prices and consequently its own cost. While increased ethanol production is partially responsible for the increase in corn prices, the main driving factors in the run-up in corn prices are: rising demand for processed foods and meat in emerging markets such as China and India, droughts and adverse weather around the world, a decrease in the responsiveness of consumers to price increases, export restrictions by many exporting countries to reduce domestic food price inflation, the declining value of the dollar, skyrocketing oil prices, and commodity market speculation. It is important to note that excessive speculation is not necessarily driving corn prices above fundamental values. Speculation can only be considered “excessive” relative to the level of hedging activity in the market.

The government’s announcement that it would resurvey corn acreage in several U.S. states launched a rally in Chicago Board of Trade corn on July 23, 2009, giving life to a market that appeared to be sinking toward $3 a bushel. September corn ended up 19 cents to $3.27 a bushel and December corn ended up 19 1/2 cents to $3.38 3/4 a bushel. Traders see the market moving toward the $3.50-$3.75 a bushel range in the December contract. Ethanol futures were also higher. August ethanol ended up $0.065 to $1.597 a gallon and September ethanol ended up $0.064 to $1.555.

Dr. David J. Peters, Assistant Professor of Sociology – College of Agriculture and Life Sciences at Iowa State University, has developed a calculator to determine the long-term economic viability of proposed ethanol plants. Dr. Peters was surprised to learn how sensitive the bottom line is to small changes in corn and ethanol prices. According to Dr. Peters, a typical 100 MGY corn ethanol plant built in 2005 (financing 60 percent of its capital costs at 8 percent interest per annum for 10 years, with debt and depreciation costs of $0.20 per gallon of ethanol produced, and labor and taxes at a cost of $0.06 per gallon) will lose money in the current market:

At $3.25 corn, the ethanol break even price is $1.76 per gallon.
At $3.50 corn, the ethanol break even price is $1.82 per gallon.
At $3.75 corn, the ethanol break even price is $1.88 per gallon.
At $4.00 corn, the ethanol break even price is $1.94 per gallon.

Oil Company Monopoly
U.S. oil companies are using ethanol merely as a blending component in gasoline (in the form of E10) rather than a true alternative transportation fuel (in the form of E85). The major obstacle to widespread ethanol usage continues to be the lack of fueling infrastructure. Only 2,175 of the 161,768 retail gasoline stations in the United States (1.3%) offer E85. These E85 fueling stations are located primarily in the Midwest. According to the U.S. Department of Energy, each 2% increment of U.S. market share growth for E85 represents approximately 3 billion gallons per year of additional ethanol demand.

While alleging an oversupply of corn ethanol, U.S. oil companies, due to a loophole in the Caribbean Basin Initiative, are currently allowed to import thousands of barrels of advanced biofuel (“non-corn ethanol”) every month without having to pay the 54-cent-per-gallon tariff.

Oil companies, or affiliates of oil companies, currently have a monopoly on blending fuel ethanol with unblended gasoline. Many states, e.g., Florida, allow only oil companies and their affiliates to blend and receive the 45 cents-per-gallon blender’s tax credit. This monopoly impairs fair and healthy competition in the marketing of ethanol blends. Independent U.S. ethanol producers have the legal right, and must be assured the availability of unblended gasoline, to blend fuel ethanol and unblended gasoline to receive the blender’s tax credit and be cost-competitive.

In short, independent U.S. ethanol producers do not have bargaining power on either end of the supply chain. Corn ethanol producers are price takers. A comprehensive advanced biofuel industry development initiative is required to disrupt the status quo and establish fair and healthy competition in the marketing of advanced biofuel blends in our nation.

The Louisiana Solution
Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous advanced biofuel pilot program. On June 21, 2008, Louisiana Governor Bobby Jindal signed into law the Advanced Biofuel Industry Development Initiative (“Act 382”). Act 382, the most comprehensive and far-reaching state legislation in the U.S. enacted to develop a statewide advanced biofuel industry, is based upon the “Field-to-Pump” strategy.

It is the cost of the feedstock which ultimately determines the economic feasibility of an ethanol processing facility. “Field-to-Pump” does not allow an advanced biofuel producer to fall victim to rising feedstock costs. Non-corn feedstock is acquired under the terms of an agreement analogous to an oil & gas lease. It is not purchased as a commodity. A link exists between the cost of feedstock and ethanol market conditions. Farmers/landowners receive a lease payment for their acreage and a royalty payment based on a percentage of the gross revenue generated from the sale of advanced biofuel. “Field-to-Pump” marks the first time that farmers/landowners share risk-free in the profits realized from the sale of value-added products made from their crops.

Smaller is better. “Field-to-Pump” establishes the first commercially viable large-scale decentralized network of small advanced biofuel manufacturing facilities (“SABMFs”) in the United States capable of operating 210 days out of the year. Each SABMF has a production capacity of 5 MGY. As with most industrial processes, large ethanol plants typically enjoy better process efficiencies and economies of scale when compared to smaller plants. However, large ethanol plants face greater supply risk than smaller plants. Each SABMF utilizes feedstock from acreage adjacent to the facility. The distributed nature of a SABMF network reduces feedstock supply risk, does not burden local water supplies and provides broad-based economic development. The sweet sorghum bagasse is used for the production of steam. Vinasse, the left over liquid after alcohol is removed, contains nutrients such as nitrogen, potash, phosphate, sucrose, and yeast. The vinasse is applied to the sweet sorghum acreage as a fertilizer.

Act 382 focuses on growing ethanol demand beyond the 10% blend market. Each SABMF produces advanced biofuel, transports the advanced biofuel by tanker trucks to its storage tanks at its local gas stations and, via blending pumps, blends the advanced biofuel with unblended gasoline to offer its customers a choice of E10, E20, E30 and E85. Each SABMF captures the blender’s tax credit of 45-cents-per-gallon to guarantee sufficient royalty payments to its farmers/landowners and be cost-competitive. 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. The inaccuracy and manipulation of splash blending may be eliminated by precisely blending the advanced biofuel and unblended 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 ensures 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. Moreover, a recent study, co-sponsored by the U.S. Department of Energy and the American Coalition for Ethanol, found E20 and E30 ethanol blends outperform unleaded gasoline in fuel economy tests for certain motor vehicles.

Hydrous advanced biofuel, which eliminates the need for the costly hydrous-to-anhydrous dehydration processing step, results in an energy savings of 35% during processing, a 4% product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions. On February 24, 2009, the U.S. EPA granted a first-of-its-kind waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. Under the test program, variable blending pumps, not splash blending, will be used 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. The Louisiana Department of Agriculture & Forestry Division of Weights and Measures will conduct the vehicle drivability phase of the test program. Fuel economy and engine emissions testing will be conducted by Louisiana State University in Baton Rouge, Louisiana. Sixty vehicles will be involved in the test program which will last for a period of 15 months.

Louisiana Act 382 ensures: (a) ethanol producers in the U.S. are no longer at the mercy of volatile commodities markets for feedstock; (b) farmers/landowners share risk-free in the profits realized from the sale of value-added products made from their crops (c) the price of ethanol is no longer controlled by the oil companies; (d) feedstock supply risk, the burden on local water supplies, and the amount of energy necessary to process advanced biofuel are minimized; and (e) rural development and job creation are maximized. Furthermore, due to the advantages of producing advanced biofuel from sweet sorghum juice, the use of sweet sorghum bagasse for the production of steam in the SABMF, and the energy savings of processing hydrous advanced biofuel, the Louisiana solution reduces field-to-wheel lifecycle GHG emissions by 100%.

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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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