Blender’s Tax Credit

Shell is Taking Aim at U.S. Ethanol Market

Posted on February 2, 2010. Filed under: Advanced Biofuel, Blender's Tax Credit | Tags: , , |

By Steve Gelsi
MarketWatch
February 1, 2010

While a weak sugar harvest this year in Brazil may put a damper on ethanol exports, Royal Dutch Shell is taking aim both at the U.S. and European markets in its new joint venture with sugar giant Cosan.

Royal Dutch Shell executive Mike Williams said the oil major hopes to increase output from its Cosan joint venture to more than a billion gallons of ethanol a year, from about 500 million gallons now.

The sugar-based fuel could then be shipped to the U.S. or Europe, Williams said.

The new joint venture announced Monday would also target 792 million gallons of ethanol to the domestic Brazilian market.

“Our intention is to grow this business into a worldwide opportunity,” Williams said, according to a report by Dow Jones Newswires.

The prospects of more Brazilian ethanol in the U.S. hit a sore point with lobbying groups that support domestic supplies, already suffering from slack demand for car fuels.

Any imports into the U.S. would face an import tariff of 54 cents a gallon. Taking the sting out the cost, however, is a blenders tax credit of 45 cents a gallon offered to distributors who mix gasoline with ethanol.

Christopher Thorne, a spokesman with pro-U.S. ethanol group Growth Energy, said Brazil has been pushing to get the country’s sugar-based ethanol reclassified as an advanced biofuel to help circumvent the existing tariff.

Sugar futures touched a 29-year high of 30.4 cents a pound on Monday, before falling back, on expectations of a weak harvest after heavy rains.

Plinio Nastari, president of Brazilian consultancy Datagro, told Reuters that fungal disease is expected to hurt sugar output.

“This is the perfect illustration of why it makes no sense to become dependent on any foreign source of energy — whether it’s Middle East oil or Brazilian sugarcane ethanol,” the group said. “Between high sugar prices and a sugarcane crop shortage, Brazil can’t meet its own ethanol needs — let alone the ethanol needs of the United States.”

The U.S. imported about 12 million gallons of Brazilian ethanol in November, according to the Renewable Fuels Association,

“Brazil is having a supply issue themselves, and may be ready to import U.S. ethanol despite the 25% tariff Brazil puts on imports of ethanol,” said Matt Hartwig, a spokesman for the Renewable Fuels Association.

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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

By ANN DAVIS and RUSSELL GOLD

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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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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Oil Companies and Ethanol Plants: Slash, Burn and Buy

Posted on July 9, 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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Tenn. Lawmakers Pass Biofuels Bill After Compromise

Posted on June 17, 2009. Filed under: Blender's Tax Credit | Tags: , , , , , |

Tenn. Lawmakers Pass Biofuels Bill After Compromise  

By George Orwel

DTN Ethanol Center

June 16, 2009

 

 

NEW YORK (DTN) — The Tennessee legislature passed legislation that compels refiners and other fuel suppliers in the state to make available to wholesalers unblended gasoline and gasoline blending stock so they can blend it themselves with ethanol.

The legislation was passed by Tennessee’s House of Representatives on June 9 and the state senate on June 12. The legislation awaits the signature of Gov. Phil Bredesen to become law, said Lee Harrell, a legislative aide for Speaker Pro Tempore of the Senate Jamie Woodson.

The bill also forces refiners and suppliers to make available to wholesalers diesel that is suitable for blending with biodiesel.

The passage of the bill came after Tennessee state lawmakers last month worked out a compromise between Valero Energy Corp and Tennessee fuel wholesalers over the bill.

Valero had threatened to shut down its 195,000 bpd refinery in Memphis if lawmakers advanced the bill into law. The refinery employs about 310 people, according the company’s Web site, and so a shutdown of the plant would mean job losses.

Valero appealed to Bredesen to intervene, arguing the proposal to require the refinery to allow “our wholesale customers to blend ethanol into gasoline made at the refinery” would require capital expenditures of between $130 million and $150 million.

“Coupled with the current economic downturn, this makes no economic sense for the refinery, and the expenditure would cause Valero to seriously consider closing the plant,” company spokesman Bill Day told DTN at the time.

Day added that in order to make gasoline on demand for wholesalers to do their own blending, the Memphis refinery would need to have separate storage and pipeline systems for ethanol-blended fuels and conventional unblended fuels.

Soon after, Tennessee House Speaker Kent Williams brought together representatives from both Valero and the wholesalers to work out a compromise. Both sides reached a deal that allowed the bill to proceed into law.

Emily LeRoy, a spokeswoman for Tennessee Fuel and Convenience Store Association, which represents wholesalers, told DTN that the compromise offered Valero some leeway, but the refiner would still have to provide unblended gasoline and diesel to wholesalers.

The version of the bill passed by the state’s congress, a copy of which was made available to DTN, protects refiners and suppliers from any liability in lawsuits arising from downstream blending.

That’s what Valero got out of the compromise, LeRoy said Tuesday.

The legislation also provides a fine of $5,000 per day for noncompliance, and gives the state commissioner of agriculture the authority to inspect refinery premises to ensure compliance. Refiners are also required to keep business records and to make them available to inspectors charged with enforcing the law.

 

 

 

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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Four Ways to Solve the Energy Crisis

Posted on June 15, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | Tags: , , |

Four ways to solve the energy crisis

By TIM HEFFERNAN
ESQUIRE

 Seattle Post-Intelligencer

 May 18, 2009

 

You hear it all the time: We’ve got to reduce our dependence on foreign oil; it’s a matter of homeland security. Fine. Nobody’s arguing. But the solutions that get offered — drilling in ANWR, mandating better automobile fuel efficiency, pushing ethanol — don’t really solve anything. They’re politically impossible, or too expensive, or contrary to free-market forces. They’re losers.

Energy-independence advocate Gal Luft looks for winners. The former lieutenant colonel in the Israel Defense Forces and counterterrorism expert fervently believes that the only way to make America safe is to make it energy independent. And so as executive director of the Institute for the Analysis of Global Security and cofounder of the Set America Free Coalition, he has set out to do just that.

Luft advises Congress and security companies. He briefs industrial and environmental groups. Yet what separates him from other energy specialists are his pragmatic solutions. He doesn’t peddle pie-in-the-sky political strategies. He’s a realist. He has a single goal: freeing America from the grip of foreign oil. And he wants to do it now. Here are four steps he says we can — and should — take today.

1. Make gasoline-only cars illegal

“Every gas-powered car has an average street life of seventeen years, which means that the minute you leave the lot, you’re signing up for two decades of foreign-oil dependence. The easiest way to change this is to mandate that every vehicle sold in the U. S. is flex-fuel compatible so that it can run on just about any blend of hydrocarbon-based fuels — gasoline, ethanol, methanol, etc. The technology already exists, and the process is cheap, about a hundred dollars per vehicle. Detroit will cry about ‘government interference,’ but in fact the mandate would open a vast new free market in alternative-fuel development.”

2. Kill the Iowa caucuses

“Here’s the first thing every presidential candidate who visits Iowa is asked: ‘Where do you stand on ethanol?’ Why is this a problem? Because the ethanol lobby has managed to place huge tariffs on ethanol produced abroad while freezing out the development of other alternative fuels at home. It portrays itself as this sort of savior, the domestic solution to our reliance on foreign oil, but it really just protects a tiny number of Midwestern corn farmers. Anyone who thinks otherwise, bear in mind: Even if every single kernel of corn grown in America were converted to ethanol, it would still only replace about 12 percent of America’s gasoline requirement.”

3. Think of the world in terms of sugarcane

“America hasn’t been very good about making friends in the Middle East lately, but there are still a few countries in Latin America, Africa, and Southeast Asia that like us. And many of them, such as Panama, Kenya, and Thailand, grow sugarcane, from which you can make ethanol at half the cost of making it from corn. We should direct foreign aid throughout the agricultural sector in these countries to increase their efficiency and create jobs. That will make them happy, and it’ll improve our national security. They’ll be our friends forever. Unlike the OPEC nations.”

4. Revolutionize waste

“Sixty-five percent of our garbage is biomass: food, paper, scrap wood. All of it could be converted to methanol. The process has been around for two hundred years. And it’s twice as efficient as cellulosic ethanol, supposedly the next big thing in alternative fuels. Then there’s coal — America has a quarter of the world’s reserve, but we use it mainly to feed power plants, which is a dirty and inefficient use. Instead, coal can be converted to clean-burning methanol for the equivalent of one dollar per gallon. Last, look to recyclables, like black liquor, a toxic by-product of the paper industry. Right now, paper mills inefficiently recycle it themselves. But black liquor can be converted to methanol. Do so and we’d generate nine billion gallons of methanol a year — almost twice the ethanol we now make from corn.”

Actually getting this done

“These are only four of many common-sense opportunities throughout the economy, but we’re not taking advantage of them, because there isn’t a sustainable market for alternative fuels. Yet. Which brings us back to step one: flex-fuel technology. Get that and the other three will take care of themselves. There will be stiff opposition from the oil, corn, and auto lobbies. There always is. But let’s hope that Washington can step up for a change. Because once you take politics out of the energy policy, you get very different — and much better — results.”

Reprinted with Permission of Hearst Communications, Inc. Originally Published: Four Ways to Solve the Energy Crisis

 

 

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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We’ll Never Pump Enough Oil

Posted on June 15, 2009. Filed under: Blender's Tax Credit, Field-to-Pump | Tags: , , , , |

We’ll never pump enough oil

BY GAL LUFT
Miami Herald

June 13, 2009

 

This week America transitioned from analog to digital television broadcasts, ushering what could be described as an open standard for television. This means that consumers will have a choice between buying a digital set or signing up to cable or satellite service and keeping their old antenna by installing a signal-dumbing converter box which allows them to get analog signal.

Without the converter, an analog TV began showing snow on the screen starting as of Friday morning. Regardless of whether the shift is a good idea or not — it probably is as it allows better spectrum usage — it is sad commentary of our priorities as a society. Strategic as Congress may imagine television is in our lives, it is not nearly as important as transportation.

Yet, the same Congress that mandated consumer choice in television reception modes denies us choice in transportation fuels: our cars, trucks, ships and planes can run on nothing but petroleum.

Such choice at the pump is neither more difficult nor more costly to achieve than choice at the screen. In Brazil, more than 80 percent of the new cars are flex fuel vehicles capable of running on any combination of gasoline and alcohols like ethanol and methanol. To make a new car flex fuel costs an automaker an extra $100 or less.

All that is needed is a chip and corrosion resistant fuel line. To convert our television, Congress has already allocated nearly $2 billion in taxpayer money to provide $80 worth of coupons per household to subsidize conversion boxes. Brazilians may not have as sophisticated television system but they can choose among fuels.

Last year, when oil prices were at their three-digit level more alcohol was sold in Brazil than gasoline, and the Brazilian economy was hardly touched by the oil crisis. At the same time, with no such fuel choice Americans shelled out hundreds of billions of dollars for foreign oil, a monumental loss of national wealth that popped the mortgage bubble and brought the United States to the brink of economic collapse.

Brazil’s success story hasn’t escaped the eyes of our leaders. President Obama pledged numerous times to pass a law that would mandate flex-fuel engines in all automobiles in order to break oil’s virtual monopoly over transporation fuel. Secretary of Interior Ken Salazar, while still in the Senate, was the lead sponsor of legislation that would have ensured new cars sold in the United States offer fuel flexibility. Energy Secretary Steven Chu has also spoken on the merits of this policy. But judging from its recent actions Congress is not on board. What seems to be the signature energy legislation of the 111th Congress, the American Clean Energy and Security Act, (also known as the Waxman-Markey cap-and-trade bill) does almost nothing to break oil’s monopoly in transportation fuels and provide Americans the kind of choice they have in choosing a television set, a cup of coffee or any other consumer product.

A provision that could have made a difference, an Open Fuel Standard to ensure 50 percent of new cars are flexible-fuel capable of running on any blend of alcohol and gasoline was watered down to meaninglessness by the House Energy and Commerce Committee. Such a standard which could enable consumers to choose a fuel alternative at the pump next time gasoline prices rise to $5 a gallon was rejected by Chairman Henry Waxman due to pressure by the automakers.

The same distressed GM and Ford that, time after time, appeared before Congress asking for taxpayer money and promising that they would make 50 percent of their cars flex-fuel vehicles by 2012, ordered their lobbyists to scuttle any legislation that would require them to do just that.

Oil prices are rising, and pain will again be felt at the pump. Saudi Arabia’s oil minister Ali Naimi has recently predicted $150-a-barrel oil within three years.

Yet, as if nothing was learned from the previous oil shock of last summer, we continue to roll onto our roads 10 million new cars annually that can run on nothing but petroleum each with an average street life of 16 years. We are in for a shock, and when it comes we’ll again be able to view Americans’ vulnerability contrasted with Brazilians’ resiliency.

Only this time, we’ll be watching on our digital sets.

Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS). He is co-author of Energy Security Challenges for the 21st Century (2009).

 

 

 

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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President Obama Voices Support for Biofuels Development and Continued Viability of Existing Ethanol Industry

Posted on June 15, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | Tags: , , |

President Obama Voices Support for Biofuels Development and Continued Viability of Existing Ethanol Industry

GBC Asked to Contribute to Implementation of Presidential Biofuels Directive

 

 

WASHINGTON, June 1 /PRNewswire/ — In his effort to develop a national biofuels strategy to reduce America’s dependence on imported oil, President Barack Obama invited the Governors’ Biofuels Coalition to partner with key members of his Administration to achieve his vision for energy independence.

In a May 27, 2009, letter to Coalition Chair Gov. John Hoeven of North Dakota and Vice Chair Gov. Chet Culver of Iowa, President Obama praised the organization for its leadership in biofuels policy and public education. The President asked the Coalition to join him in implementing his Presidential Biofuels Directive, which was issued earlier this month. The directive outlined the President’s vision for biofuels development and his expectations for key cabinet and administration officials to lead the Administration’s biofuels initiatives. The President noted that the Coalition’s February 2009 recommendations helped form key points of the directive, and led to the President’s request for the Coalition to work with “members of my cabinet to implement the directive.”

In the letter, President Obama notes that his Administration is committed to the rapid development of cellulosic ethanol. “But this transition will be successful only if the first-generation biofuels industry remains viable in the near-term, and if we remove long-standing artificial barriers to market expansion…,” the letter states.

“We cannot achieve the promise of cellulosic biofuels if we do not continue to support and develop the first-generation corn ethanol industry and the infrastructure needed to distribute and deliver biofuels today and in the future,” said Governor Hoeven. “This is an endorsement for our continued commitment to the ethanol industry we have today, while moving forward with the development of emerging cellulosic biofuels technologies.”

“While the President’s acknowledgement of the Coalition’s leadership is certainly gratifying, we understand that there is both a great responsibility and a great challenge in helping the President implement his biofuels directive,” said Governor Culver. “The Coalition is up to the task. We are very honored, and look forward to working with the Administration to achieve the President’s vision for a transition from petroleum-derived transportation fuels to a sustainable, low carbon energy future.”

The President also noted the important economic development role that biofuels can play. “It is my hope that the Presidential Biofuels Directive will lead to new jobs, new businesses and reduce dependence on foreign oil,” he wrote.

“The governors in the Coalition have seen the profound and positive impact that first-generation biofuels are having on our state and local economies,” Governor Hoeven added. “They are the foundation for an even more robust and sustainable domestic energy industry that will enhance our nation’s economy and energy security.”

President Obama’s Letter to the Coalition can be viewed at:

 http://www.governorsbiofuelscoalition.org/

The Coalition’s Letter and Recommendations to President Obama can be viewed at: www.governorsbiofuelscoalition.org/assets/files/GBC_ObamaLetter1.pdf

For fifteen years, the Governors’ Biofuels Coalition has provided national leadership on biofuels issues. The Coalition’s policy activities address all biofuels, including ethanol, biodiesel, advanced biofuels, co-products, and technologies yet to come. For more information, visit www.GovernorsBiofuelsCoalition.org.


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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Shell’s Cellulosic ‘First’ Is More of a Second

Posted on June 14, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | Tags: , , , |

Shell’s Cellulosic ‘First’ Is More of a Second

By Ian Austen

The New York Times

June 13, 2009

 

Much fanfare attended the arrival in Ottawa earlier this week of Luis Scoffone, Royal Dutch Shell’s vice president of biofuels. Mr. Scuffone flew in from England and descended, along with John Baird, Canada’s transport minister, on a large Shell station at Merivale Road — an undistinguished avenue of strip malls and big box stores.

It was here, at a single pump, Shell said in a news release, where customers could become “the first in the world to fill their tanks with gasoline containing advanced biofuel made from wheat straw.”

That was news to MacEwen Petroleum, however — a small regional service station chain based in Maxville, Ontario.

MacEwen apparently beat the multinational giant to the punch almost five years ago at a station in downtown Ottawa. And it did so, it seems, using ethanol from Iogen, a cellulosic ethanol maker also based in Ottawa, which recently became half-owned by Shell.

The attraction of cellulosic ethanol is that it’s made from agricultural and forestry waste materials rather than crops grown to produce fuel. That, its promoters hope, will allow it to escape the food-versus-fuel debate which has plagued ethanol made from corn and other crops.

Iogen, which also is supplying the ethanol for Shell’s month-long promotion, uses enzymes to break down wheat straw and make about 60,000 liters of ethanol a month at its demonstration plant in Ottawa.

In an interview following the Shell news conference, Brian Foody, Iogen’s president and chief executive, acknowledged that some of the production not needed by Iogen in the past for testing has gone into the pool of ethanol used for gasoline blending.

“There have been molecules from our plant that have made their way into cars,” Mr. Foody said.

 

Gas stationIan Austen/The New York Times MacEwen Petroleum, a small service station operator in Ottawa, said it was selling cellulosic ethanol five years ago. It also said it has been approached by Iogen about supplying ethanol for a MacEwen pump that sells an 85 percent ethanol blend, pictured above.

 

But executives at MacEwen, which was once a major Iogen customer, said they were a bit surprised, and somewhat amused, by the claims from Iogen and Shell.

When Ottawa hosted the 2004 Grey Cup, the Canadian Football League’s championship, MacEwen and Iogen offered a week long, cellulosic ethanol promotion at a busy station near an expressway in downtown Ottawa.

MacEwen was an early promoter in Canada of ethanol-blended gasoline. Marcel Labelle, the company’s vice president of sales and supply said “we were particularly careful about putting only their product in” the gasoline sold at that station’s ethanol blend pumps during the week preceding the football game.

The effort was publicized in a news release, and official Grey Cup vehicles, which were fueled at the MacEwen station, bore photos of wheat straw, the Iogen logo and the slogan: “Fueled with low CO2 cellulose ethanol.”

Outside of that promotion, Mr. Labelle said that MacEwen regularly purchased most of Iogen’s production during 2004 and 2005 and blended it, at varying levels, into gasoline.

“When we were doing this, the major oil companies wouldn’t touch ethanol,” Mr. Labelle said. “It was taking refined product out of their system. They’ve been caught out. And I’m sure Shell doesn’t want to be embarrassed.”

Kirsten Smart, a spokeswoman at Royal Dutch Shell in London, qualified the company’s earlier claim in an e-mail message on Friday:

“We believe this is the first customer offering where over a month long period consumers can knowingly purchase gasoline with a 10 percent blend of cellulosic ethanol, and the first time it has been actively marketed.”

Phil von Finckenstein, a spokesman for Iogen, said in telephone conversation and by e-mail that MacEwen only offered “a low-level blend” in 2004, not the 10 percent cellulosic mix now on sale at Shell. He added that the pumps were primarily for Grey Cup vehicles. “The public was happenstance if they got the fuel,” Mr. Finckenstein said.

Mr. Labelle, after consulting company records, agreed that early customers may have received slightly less than 10 percent cellulosic ethanol because there initially was some residual gasoline blended with corn ethanol in the station’s storage tanks.

But that gas station is replenished more than once a week, Mr. Labelle said. So many motorists received gasoline only blended with cellulosic ethanol.

Iogen, Mr. Labelle said, has approached MacEwen about supplying ethanol for a pump at the downtown station that sells an 85 percent ethanol blend, which is used mostly by federal government vehicles. If something comes of those talks, Mr. Labelle said he expected the cellulose marketing machinery to kick in again.

“Once they are done with us,” he said, “they’ll issue another press release.”

 

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 June 9, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | 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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    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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