Hydrous Ethanol

Advanced Biofuels Deliver Substantially Greater Pollution Reductions Than Corn-Based Ethanol

Posted on February 4, 2010. Filed under: Advanced Biofuel, Hydrous Ethanol, Rural Development | Tags: , , , |

New Renewable Fuel Standard, Which Sets First Heat Trapping Emissions Requirements for Biofuels, Gets Favorable Review From UCS

EPA Analysis Demonstrated That Without Additional Support, Cleanest Biofuels Will Fail to Meet Targets
By Union of Concerned Scientists
February 3, 2010

The Environmental Protection Agency’s (EPA) new rules for the Renewable Fuel Standard, the nation’s primary biofuels program, got a favorable review from the Union of Concerned Scientists (UCS). The science group praised the agency for a transparent process that accurately accounted for biofuels’ lifecycle heat-trapping emissions by including so-called “indirect-land-use emissions.” The new rules reflect the fact that advanced and cellulosic biofuels deliver substantially greater pollution reductions than today’s biofuels, such as corn ethanol. 

“We now have a yardstick to measure the global warming pollution from different biofuels,” said Jeremy Martin, a senior scientist in UCS’s Clean Vehicles Program. “EPA should be congratulated for having an open process on this rule that involved scientists, farmers and the ethanol industry.”

Despite intense pressure from the corn ethanol industry to exclude emissions from indirect-land-use change, the EPA found that such emissions are a major source of heat-trapping pollution from corn ethanol and other food-based biofuels. This finding affirms the view of 200 scientists and economists with relevant expertise who sent a letter to the EPA in September 2009 arguing that “grappling with the technical uncertainty and developing a regulation based on the best available science is preferable to ignoring a major source of emissions.” The EPA also issued an analysis examining the scientific uncertainty involved in calculating emissions from indirect-land-use change and plans to ask the National Academy of Sciences to look at the issue.

Indirect-land-use-change emissions also have been the focus of recent analysis by the California Air Resources Board, as well as peer-review scientific articles, which concluded that using food crops to produce fuel increases worldwide demand for those crops, prompting farmers to clear previously untouched land to grow new crops. Clearing land, especially tropical forests, releases massive amounts of heat-trapping gases into the atmosphere.

The Renewable Fuel Standard, enacted in 2005, requires fuel suppliers to blend a higher percentage of renewable fuels, such as ethanol and biodiesel, into motor vehicle fuels over time. In 2007, Congress passed the “Energy Independence and Security Act,” which expanded the standard’s overall volume requirement from 7.5 million gallons by 2012 to 36 billion gallons by 2022, and significantly increased the requirement for low-carbon cellulosic biofuels. It also required the EPA to establish independent volume mandates for different fuel categories. Each category was to be defined by its lifecycle heat-trapping emissions compared with conventional gasoline. The categories include: renewable fuel (20 percent less emissions than gasoline), biomass-based diesel (50 percent less), advanced biofuels (50 percent less), and cellulosic biofuels (60 percent less).

Corn ethanol facilities that were operating or under construction in 2007 are exempt from meeting the emissions-reduction requirements. The EPA projects that new corn ethanol facilities coming on line in 2022 could meet the 20 percent heat-trapping emissions reduction threshold for renewable fuels. However, this analysis is based on projected increases in crop yields and improvements in ethanol production technology and is not an analysis of the performance of today’s corn ethanol facilities.  

UCS experts say cellulosic ethanol, derived from grass, wood chips and other waste material, is a better option. According to EPA analysis, ethanol made from corn residue, or stalks and cobs, could reduce emissions by more than 90 percent compared with gasoline, in part because it would not necessarily displace land used to grow food crops and therefore would not trigger significant indirect land use emissions. 

Cellulosic fuel production, however, has fallen short of the EPA target. The 2007 energy law required suppliers to produce 100 million gallons of cellulosic fuel in 2010. But current cellulosic ethanol production stands at only 6.5 million gallons. Therefore, the EPA announced today that it is waiving 93.5 million gallons of the 100 million gallon requirement.

“Achieving energy security and tackling climate change will require a big contribution from cellulosic fuels,” said Martin. “Just setting a goal isn’t good enough in this economy. We need investment policies that help this industry get off the ground.”

According to UCS, the most important thing federal legislators could do to meet the Renewable Fuel Standard’s goals would be to support investment in building commercial-scale cellulosic biofuel facilities across the country. An investment in this essential clean energy technology would jumpstart rural economies and expand the economic benefits of biofuels production.

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How Does a Cap-and-Trade Program Work?

Posted on February 3, 2010. Filed under: Advanced Biofuel, cap-and-trade, Hydrous Ethanol | Tags: , , |

U.S. Energy Information Administration
February 1, 2010

What is a cap-and-trade program and how does it work?
A cap-and-trade program is designed to reduce emissions of a pollutant by placing a limit (or cap) on the total amount of emissions. The cap is implemented through a system of allowances that can be traded to minimize costs to affected sources. Cap-and-trade programs for greenhouse gas emissions would increase the costs of using fossil fuels.

A cap-and-trade program is different from an emissions tax. An emissions tax is a fee on each unit of emissions released. A tax sets a price on emissions, which provides an incentive for emissions reduction, but allows the actual amount of reduction that occurs to vary.

A cap-and-trade program sets the quantity of emissions, letting the price of allowances be set in the marketplace. However, both programs ultimately place a value on emissions and provide incentives for emission reductions.

What Is a Cap-and-Trade Program?
A cap-and-trade program is an environmental policy tool designed to reduce emissions of a pollutant by placing a limit (or cap) on the total amount of emissions that can be released by sources covered by the program during a fixed time period.

The overall cap on emissions is implemented through a system of allowances. Each allowance represents the right to emit a specific amount of emissions, and each emissions source covered by the program must submit enough allowances to cover its actual emissions. These allowances, sometimes called permits, are initially allocated to affected sources or auctioned off by the agency implementing the program.

Allowances can be traded, which creates an incentive for those who can reduce emissions most cheaply to sell their allowances to those who face higher emission reduction costs. The incentive to trade allowances persists as long as one or more sources can reduce emissions by an additional unit at a lower cost than some other source faces to achieve its last unit of emissions reduction. Therefore, allowances will be traded until the marginal cost of emission reduction is equal across all covered sources. At this point, the pollution level required by the cap is achieved – theoretically at the lowest possible cost to society – regardless of how the allowances were initially allocated.

How Does a Cap-and-Trade Program Work?
Not all cap-and-trade programs are identical. Below is a list of four characteristics shared by all cap-and-trade programs, with some possible variations shown. These variations could affect how a particular program works.

1. A limit or cap on emissions of a pollutant is established.

Variations:
Who is required to limit their emissions. Is it all sources of emissions or just some sources of emissions?
What area the cap covers. Is it a region or State, the whole United States, or a group of nations?
When emission limits take effect. Will the cap be in place in the near term or at a later date?
Whether the cap will become tighter, meaning the total allowable level of emissions drops over time. If so, how quickly will this decrease happen?
When the cap is in place. Will it be in effect for a season – such as just for the summer months – or is it applied for the whole year?

2. An allowance must be surrendered for every unit (often a ton) of emissions generated.

Variations:
Who must submit allowances. While this depends on the specific cap-and-trade program, some examples include producers of the polluting substance, distributors of a product whose production or consumption generates emissions, States, or even nations.
How allowances are initially distributed. Allowances could be auctioned, distributed for free based on current or historical emissions, or given out using some combination of an auction and a free distribution. In an auction, allowances are sold to the highest bidders. Uses of auction revenue depend on the specific cap-and-trade program, and could include the distribution of a portion of the revenue to consumers.
Whether the program allows for the purchase of offsets in lieu of allowances. Offsets are certified reductions in emissions from sources that are not required by the cap-and-trade program to restrict their emissions.

3. Allowances can be traded.

Here’s an example of how the trade could work. Emitter ABC found it really easy and cheap to reduce its emissions below the level covered by its allowances, while Emitter XYZ had a tougher time. ABC was able to make larger reductions in its emissions and offered to sell its extra allowances to XYZ. This transaction was a good deal for XYZ because the cost of allowances it bought was lower than the cost of equipment needed to reduce its own emissions to a level that matched the number of allowances it held before buying more allowances from ABC.
 
Variations:
How much an allowance costs. In general, the allowance price depends on the options available to reduce emissions and the demand for allowances. If there are relatively low-cost options to reduce emissions, the price of allowances would be lower.
Whether emitters are allowed to save – or “bank” – allowances, either for their own future use or to sell to someone else later. Some proposals might also allow the current use of a future period’s allowances.

4. Actual emissions are measured and penalties are assessed if targets are missed.

Variation:
Depending on the program, these tasks could be the responsibility of one or more governmental agencies.

How Do Cap-and-Trade Programs Affect Our Use of Energy?
The burning of fossil fuels, including coal, oil, and natural gas, is the main source of carbon dioxide – the most important greenhouse gas produced by human activity – and a major source of other emissions. A cap-and-trade program for greenhouse gas emissions would increase the cost of using fossil fuels, making them less competitive with non-fossil energy resources and increasing the overall cost of energy to consumers. The cost of using coal, which has the highest carbon dioxide content and the lowest price per unit of energy among the fossil fuels, would be most affected by a cap-and-trade program for greenhouse gases.

Why Might a Cap-and-Trade Program Be Considered?
A cap-and-trade program allows emitters to have flexibility in their approach to reducing emissions. An alternative environmental policy might require each regulated source to use a specific emission control technology. With a cap-and-trade program, the overall cap on emissions is fixed, but the compliance approach by any individual source need not be specified. This flexibility allows parties to choose the least costly option and should reduce the cost of reaching the overall emissions cap.

The implementation of the U.S. cap-and-trade program for sulfur dioxide beginning in 1995 is an example of the benefits of flexibility in reducing environmental compliance costs in the energy sector. Allowances for sulfur dioxide emissions were actively traded as coal-fired electricity generating units covered by the program chose a variety of compliance strategies. These strategies included installing scrubbers, switching to lower sulfur coal, and buying allowances.

Where Has Cap-and-Trade Been Used?
Cap-and-trade programs have been used to limit several different types of emissions in State, U.S., and international contexts. 

As noted above, a cap-and-trade program limiting sulfur dioxide emissions has been operating in the United States since 1995. The European Union established its Emissions Trading System for greenhouse gas emissions in 2005. In 2009, the Regional Greenhouse Gas Initiative established an interstate cap-and-trade system for greenhouse gas emissions covering electric power plants in 10 northeastern States. Recently, there has been a lot of discussion about the Federal Government establishing a nationwide cap-and-trade program for greenhouse gas emissions.

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U.S. Department of Defense Addresses the Issue of Climate Change

Posted on February 2, 2010. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , , |

Excerpts from the U.S. DoD 2010 Quadrennial Defense Review
February 1, 2010

Climate change and energy are two key issues that will play a significant role in shaping the future security environment. Although they produce distinct types of challenges, climate change, energy security, and economic stability are inextricably linked. The actions that the Department takes now can prepare us to respond effectively to these challenges in the near term and in the future.

Climate change will affect DoD in two broad ways. First, climate change will shape the operating environment, roles, and missions that we undertake. The U.S. Global Change Research Program, composed of 13 federal agencies, reported in 2009 that climate-related changes are already being observed in every region of the world, including the United States and its coastal waters. Among these physical changes are increases in heavy downpours, rising temperature and sea level, rapidly retreating glaciers, thawing permafrost, lengthening growing seasons, lengthening ice-free seasons in the oceans and on lakes and rivers, earlier snowmelt, and alterations in river flows.

Assessments conducted by the intelligence community indicate that climate change could have significant geopolitical impacts around the world, contributing to poverty, environmental degradation, and the further weakening of fragile governments. Climate change will contribute to food and water scarcity, will increase the spread of disease, and may spur or exacerbate mass migration.

While climate change alone does not cause conflict, it may act as an accelerant of instability or conflict, placing a burden to respond on civilian institutions and militaries around the world. In addition, extreme weather events may lead to increased demands for defense support to civil authorities for humanitarian assistance or disaster response both within the United States and overseas. In some nations, the military is the only institution with the capacity to respond to a large-scale natural disaster. Proactive engagement with these countries can help build their capability to respond to such events. Working closely with relevant U.S. departments and agencies, DoD has undertaken environmental security cooperative initiatives with foreign militaries that represent a nonthreatening way of building trust, sharing best practices on installations management and operations, and developing response capacity.

Second, DoD will need to adjust to the impacts of climate change on our facilities and military capabilities. The Department already provides environmental stewardship at hundreds of DoD installations throughout the United States and around the world, working diligently to meet resource efficiency and sustainability goals as set by relevant laws and executive orders. Although the United States has significant capacity to adapt to climate change, it will pose challenges for civil society and DoD alike, particularly in light of the nation’s extensive coastal infrastructure. In 2008, the National Intelligence Council judged that more than 30 U.S. military installations were already facing elevated levels of risk from rising sea levels. DoD’s operational readiness hinges on continued access to land, air, and sea training and test space. Consequently, the Department must complete a comprehensive assessment of all installations to assess the potential impacts of climate change on its missions and adapt as required.

In this regard, DoD will work to foster efforts to assess, adapt to, and mitigate the impacts of climate change. Domestically, the Department will leverage the Strategic Environmental Research and Development Program, a joint effort among DoD, the Department of Energy, and the Environmental Protection Agency, to develop climate change assessment tools. Abroad, the Department will increase its investment in the Defense Environmental International Cooperation Program not only to promote cooperation on environmental security issues, but also to augment international adaptation efforts. The Department will also speed innovative energy and conservation technologies from laboratories to military end users. The Environmental Security and Technology Certification Program uses military installations as a test bed to demonstrate and create a market for innovative energy efficiency and renewable energy technologies coming out of the private sector and DoD and Department of Energy laboratories.

Finally, the Department is improving small-scale energy efficiency and renewable energy projects at military installations through our Energy Conservation Investment Program.

The effect of changing climate on the Department’s operating environment is evident in the maritime commons of the Arctic. The opening of the Arctic waters in the decades ahead which will permit seasonal commerce and transit presents a unique opportunity to work collaboratively in multilateral forums to promote a balanced approach to improving human and environmental security in the region. In that effort, DoD must work with the Coast Guard and the Department of Homeland Security to address gaps in Arctic communications, domain awareness, search and rescue, and environmental observation and forecasting capabilities to support both current and future planning and operations. To support cooperative engagement in the Arctic, DoD strongly supports accession to the United Nations Convention on the Law of the Sea.

As climate science advances, the Department will regularly reevaluate climate change risks and opportunities in order to develop policies and plans to manage its effects on the Department’s operating environment, missions, and facilities. Managing the national security effects of climate change will require DoD to work collaboratively, through a whole-of-government approach, with both traditional allies and new partners.

Energy security for the Department means having assured access to reliable supplies of energy and the ability to protect and deliver sufficient energy to meet operational needs. Energy efficiency can serve as a force multiplier, because it increases the range and endurance of forces in the field and can reduce the number of combat forces diverted to protect energy supply lines, which are vulnerable to both asymmetric and conventional attacks and disruptions. DoD must incorporate geostrategic and operational energy considerations into force planning, requirements development, and acquisition processes. To address these challenges, DoD will fully implement the statutory requirement for the energy efficiency Key Performance Parameter and fully burdened cost of fuel set forth in the 2009 National Defense Authorization Act. The Department will also investigate alternative concepts for improving operational energy use, including the creation of an innovation fund administered by the new Director of Operational Energy to enable components to compete for funding on projects that advance integrated energy solutions.

The Department is increasing its use of renewable energy supplies and reducing energy demand to improve operational effectiveness, reduce greenhouse gas emissions in support of U.S. climate change initiatives, and protect the Department from energy price fluctuations. The Military Departments have invested in noncarbon power sources such as solar, wind, geothermal, and biomass energy at domestic installations and in vehicles powered by alternative fuels, including hybrid power, electricity, hydrogen, and compressed national gas. Solving military challenges—through such innovations as more efficient generators, better batteries, lighter materials, and tactically deployed energy sources—has the potential to yield spin-off technologies that benefit the civilian community as well. DoD will partner with academia, other U.S. agencies, and international partners to research, develop, test, and evaluate new sustainable energy technologies.

Indeed, the following examples demonstrate the broad range of Service energy innovations. By 2016, the Air Force will be postured to cost-competitively acquire 50 percent of its domestic aviation fuel via an alternative fuel blend that is greener than conventional petroleum fuel. Further, Air Force testing and standard-setting in this arena paves the way for the much larger commercial aviation sector to follow. The Army is in the midst of a significant transformation of its fleet of 70,000 non-tactical vehicles (NTVs), including the current deployment of more than 500 hybrids and the acquisition of 4,000 low-speed electric vehicles at domestic installations to help cut fossil fuel usage. The Army is also exploring ways to exploit the opportunities for renewable power generation to support operational needs: for instance, the Rucksack Enhanced Portable Power System (REPPS). The Navy commissioned the USS Makin Island, its first electric-drive surface combatant, and tested an F/A-18 engine on camelina-based biofuel in 2009—two key steps toward the vision of deploying a “green” carrier strike group using biofuel and nuclear power by 2016. The Marine Corps has created an Expeditionary Energy Office to address operational energy risk, and its Energy Assessment Team has identified ways to achieve efficiencies in today’s highly energy-intensive operations in Afghanistan and Iraq in order to reduce logistics and related force protection requirements.

To address energy security while simultaneously enhancing mission assurance at domestic facilities, the Department is focusing on making them more resilient. U.S. forces at home and abroad rely on support from installations in the United States. DoD will conduct a coordinated energy assessment, prioritize critical assets, and promote investments in energy efficiency to ensure that critical installations are adequately prepared for prolonged outages caused by natural disasters, accidents, or attacks. At the same time, the Department will also take steps to balance energy production and transmission with the requirement to preserve the test and training ranges and the operating areas that are needed to maintain readiness.

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Brazil Temporarily Reduces Ethanol Content in Gasoline from 25% to 20%

Posted on January 14, 2010. Filed under: Advanced Biofuel, Hydrous Ethanol | Tags: , |

Brazil Temporarily Reduces Ethanol Content in Gasoline from 25% to 20%
Green Car Congress
January 13, 2010

The Brazilian government has rolled back the anhydrous ethanol blend level in gasoline from 25% to 20% for a period of 90 days, effective 1 February. The decision to roll back the blend level was announced following a meeting attended by executives from the Brazilian Sugarcane Industry Association (UNICA).

Blend reductions are not new in Brazil, UNICA said; the last reduction occurred in March of 2006, when the percentage fell from 25% to 20%. The blend level was raised to 23% in November of that year, and fully reinstated at 25% in July of 2007.

Under Brazilian federal law, the anhydrous ethanol content of all gasoline sold in the country must be between 20% and 25%. The blend range is set by an interagency board (Conselho Interministerial de Acucar e do Alcool, or CIMA). The 5% reduction in the blend is expected to result in an additional 100 million liters (26.4 million gallons) of hydrous ethanol available per month, or around 7% of the current monthly demand.

Hydrous ethanol is pure ethanol (E100) used in flex-fuel vehicles, which run on any mix of ethanol and gasoline. The blend reduction involves anhydrous ethanol, which is the type of ethanol that is mixed with gasoline. While hydrous ethanol contains about 5% water content, anhydrous ethanol is virtually water-free. Hydrous ethanol is the more popular fuel in Brazil.

“The government’s reasons for the temporary reduction are understandable, but the move must be limited to the 90-day period only. Because of high prices, consumers who own flex-fuel vehicles are already shifting from hydrous ethanol back to gasoline, so there is no risk of pumps going dry.

Dropping the blend requirement is unlikely to change the dynamics of the cane industry, which will continue to produce more ethanol and more sugar year after year. All that changed this year was the pace of that increase because of unseasonable rains that affected the harvest.”

—UNICA’s Technical Director, Antonio de Padua Rodrigues

Padua noted that the government should be praised for its open dialogue with the industry and for setting a timeframe for the measure, with reinstatement of the 25% blend happening as the sugarcane industry launches what will be the largest sugarcane harvest in Brazil’s history.

The Brazilian Sugarcane Industry Association (UNICA) represents the top producers of sugar and ethanol in the country’s South-Central region, especially the state of Sao Paulo, which accounts for about 50% of the country’s sugarcane harvest and 60% of total ethanol production. In 2008, Brazil produced an estimated 565 million metric tons of sugarcane, which yielded 31.3 million tons of sugar and 25.7 billion liters (6.8 billion gallons) of ethanol.

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Greenhouse Gases Threaten Public Health and the Environment

Posted on December 7, 2009. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , |

EPA: Science overwhelmingly shows greenhouse gas concentrations at unprecedented levels due to human activity

WASHINGTON – After a thorough examination of the scientific evidence and careful consideration of public comments, the U.S. Environmental Protection Agency (EPA) announced today that greenhouse gases (GHGs) threaten the public health and welfare of the American people. EPA also finds that GHG emissions from on-road vehicles contribute to that threat.

GHGs are the primary driver of climate change, which can lead to hotter, longer heat waves that threaten the health of the sick, poor or elderly; increases in ground-level ozone pollution linked to asthma and other respiratory illnesses; as well as other threats to the health and welfare of Americans.

These long-overdue findings cement 2009’s place in history as the year when the United States Government began addressing the challenge of greenhouse-gas pollution and seizing the opportunity of clean-energy reform,” said EPA Administrator Lisa P. Jackson. “Business leaders, security experts, government officials, concerned citizens and the United States Supreme Court have called for enduring, pragmatic solutions to reduce the greenhouse gas pollution that is causing climate change. This continues our work towards clean energy reform that will cut GHGs and reduce the dependence on foreign oil that threatens our national security and our economy.”

EPA’s final findings respond to the 2007 U.S. Supreme Court decision that GHGs fit within the Clean Air Act definition of air pollutants. The findingsdo not in and of themselves impose any emission reduction requirements but rather allow EPA to finalize the GHG standards proposed earlier this year for new light-duty vehicles as part of the joint rulemaking with the Department of Transportation.

On-road vehicles contribute more than 23 percent of total U.S. GHG emissions. EPA’s proposed GHG standards for light-duty vehicles, a subset of on-road vehicles, would reduce GHG emissions by nearly 950 million metric tons and conserve 1.8 billion barrels of oil over the lifetime of model year 2012-2016 vehicles.

EPA’s endangerment finding covers emissions of six key greenhouse gases – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride – that have been the subject of scrutiny and intense analysis for decades by scientists in the United States and around the world.

Scientific consensus shows that as a result of human activities, GHG concentrations in the atmosphere are at record high levels and data shows that the Earth has been warming over the past 100 years, with the steepest increase in warming in recent decades. The evidence of human-induced climate change goes beyond observed increases in average surface temperatures; it includes melting ice in the Arctic, melting glaciers around the world, increasing ocean temperatures, rising sea levels, acidification of the oceans due to excess carbon dioxide, changing precipitation patterns, and changing patterns of ecosystems and wildlife.

President Obama and Administrator Jackson have publicly stated that they support a legislative solution to the problem of climate change and Congress’ efforts to pass comprehensive climate legislation. However, climate change is threatening public health and welfare, and it is critical that EPA fulfill its obligation to respond to the 2007 U.S. Supreme Court ruling that determined that greenhouse gases fit within the Clean Air Act definition of air pollutants.

EPA issued the proposed findings in April 2009 and held a 60-day public comment period. The agency received more than 380,000 comments, which were carefully reviewed and considered during the development of the final findings.

Information on EPA’s findings: http://www.epa.gov/climatechange/endangerment.html

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Introduction to the Renergie Weblog

Posted on November 28, 2009. Filed under: Advanced Biofuel, Hydrous Ethanol | Tags: , , , , , |

Company Milestones
(1) Renergie drafted the legislation (“HB 1270”) for the creation of an advanced biofuel industry development initiative in Louisiana. 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. Louisiana is the first state to enact alternative transportation fuel legislation that moves fuel ethanol beyond being just a blending component in gasoline by including a mandatory variable blending pump pilot program and hydrous ethanol pilot program;

(2) On December 20, 2008, Renergie submitted a testing exemption application to the U.S. Environmental Protection Agency (“EPA”) for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. On-site blending pumps, in lieu of splash blending, are used for this test. On February 4, 2009, the U.S. EPA granted Renergie a tampering waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles in Louisiana. On February 24, 2009, the U.S. EPA granted Renergie a first-of-its-kind RVP waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana; and

(3) On October 18, 2007, Renergie submitted a grant application to the Florida Department of Environmental Protection (“DEP”), pursuant to the Renewable Energy Technologies Grant Program, for the purpose of funding the comprehensive development of a sweet sorghum-to-ethanol industry in Florida. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida DEP’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 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, the Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000.

As a means of introduction for first-time visitors, the following is a list of the currently most popular articles and links on the Renergie weblog.

https://renergie.wordpress.com/2010/07/12/bps-strategy-to-limit-liability-in-regard-to-its-gulf-oil-gusher/
BP’s Strategy to Limit Liability in Regard to Its Gulf Oil Gusher

https://renergie.wordpress.com/2010/05/25/bp-is-not-the-only-responsible-party/
BP is Not the Only Responsible Party

http://donovanlawgroup.wordpress.com/2010/05/09/bp-oil-spill-of-april-2010-why-class-action-lawsuits-may-not-be-in-the-best-interests-of-potential-plaintiffs/
BP Oil Spill of April, 2010: Why Class Action Lawsuits May Not be in the Best Interests of Potential Plaintiffs

http://donovanlawgroup.wordpress.com/2010/04/05/regional-greenhouse-gas-cap-and-trade-programs-may-be-the-solution/
Regional Greenhouse Gas Cap-and-Trade Programs May be the Solution

http://donovanlawgroup.wordpress.com/2010/03/22/the-u-n-approval-process-for-carbon-offsets/
The U.N. Approval Process for Carbon Offsets

http://donovanlawgroup.wordpress.com/2010/03/03/the-role-of-offsets-in-climate-change-legislation/
The Role of Offsets in Climate Change Legislation

http://www.greencarcongress.com/2009/12/perspective-why-carbon-emissions-should-not-have-been-the-focus-of-the-un-climate-change-summit-and-.html#more
Why Carbon Emissions Should Not Have Been the Focus of the U.N. Climate Change Summit and Why the 15th Conference of the Parties Should Have Focused on Technology Transfer

http://www.legis.state.la.us/billdata/streamdocument.asp?did=503204
Act 382

http://fieldtopump.wordpress.com/2009/09/05/our-nations-need-to-transition-to-hydrous-ethanol-as-the-primary-renewable-transportation-fuel/
Our Nation’s Need to Transition to Hydrous Ethanol as the Primary Renewable Transportation Fuel

http://fieldtopump.wordpress.com/2009/04/14/the-renergie-field-to-pump-strategy/
The Renergie “Field-to-Pump” Strategy

http://fieldtopump.wordpress.com/2009/09/05/floridas-port-to-pump-advanced-biofuel-initiative/
Florida’s “Port-to-Pump” Advanced Biofuel Initiative

http://blenderstaxcredit.wordpress.com/2009/09/05/independent-ethanol-producers-in-florida-have-the-legal-right-to-receive-blenders-tax-credit/
Independent Ethanol Producers in Florida Have the Legal Right to Receive Blender’s Tax Credit

https://renergie.wordpress.com/2009/03/24/why-the-ethanol-import-tariff-should-be-repealed-2/
Why the Ethanol Import Tariff Should be Repealed

https://renergie.wordpress.com/2009/09/05/independent-u-s-ethanol-producers-will-not-survive-as-price-takers/
Independent U.S. Ethanol Producers Will Not Survive as Price Takers

http://fieldtopump.wordpress.com/2009/04/17/louisiana-enacts-the-most-comprehensive-advanced-biofuel-legislation-in-the-nation/
Louisiana Enacts the Most Comprehensive Advanced Biofuel Legislation in the Nation

http://blenderstaxcredit.wordpress.com/2009/04/20/why-big-oil-should-not-be-allowed-to-monopolize-the-blender%E2%80%99s-tax-credit/
Why Big Oil Should Not be Allowed to Monopolize the Blender’s Tax Credit

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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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Act 382 Creates the Advanced Biofuel Industry Development Initiative

Posted on July 13, 2009. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

ACT No. 382

HOUSE BILL NO. 1270

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

BURNS, CHAMPAGNE, CHANEY, ELLINGTON, GISCLAIR, ELBERT

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

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

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

AND WALSWORTH

FUELS: Creates the Advanced Biofuel Industry Development Initiative

AN ACT

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

Be it enacted by the Legislature of Louisiana:

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

CHAPTER 23-B. THE ADVANCED BIOFUEL INDUSTRY DEVELOPMENT

INITIATIVE

§3761. Legislative findings and definitions

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

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

(1) Feedstock other than corn:

(a) Derived solely from Louisiana harvested crops.

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

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

(d) Tolerant to high temperature and water logging.

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

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

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

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

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

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

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

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

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

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

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

§3762. Pilot programs

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

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

§3763. State incentives

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

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

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

(2) The vehicle is used for continuing research.

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

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

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

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

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

* * *

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

* * *

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Why Big Oil Should Not be Allowed to Monopolize the Blender’s Tax Credit

Posted on May 31, 2009. Filed under: Blender's Tax Credit, Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

Why Big Oil Should Not be Allowed to Monopolize the Blender’s Tax Credit

By Brian J. Donovan

Renergie

May 31, 2009

 

 

The issue is whether state legislatures should allow oil companies, or affiliates of oil companies, to have a monopoly on blending fuel ethanol with unblended gasoline.

The American Jobs Creation Act of 2004 established the Volumetric Ethanol Excise Tax Credit (“VEETC”), also known as the “Blender’s Tax Credit.” Excise taxes on highway fuels have been a dedicated source of funding for the Federal Highway Trust Fund since its creation in 1956. The Federal Government levies a tax of 18.4 cents per gallon on domestic gasoline sales. The blender’s tax credit provides a credit against federal gasoline taxes that is worth 45 cents for every gallon of ethanol blended into the gasoline pool.

The excise tax credit is fully refundable. To receive a refund, a blender must first apply the excise tax credit against any excise tax liability for a particular taxable year. To the extent the blender has any excise tax credit remaining after applying the credit against its excise tax liability, the blender may request a refund of the excess credit or may apply the excess credit against its income tax liability.

It was never the legislative intent of the U.S. Congress, nor the intent of the U.S. Environmental Protection Agency, to allow oil companies to be the sole beneficiaries of the blender’s tax credit. Section 6426 of the Internal Revenue Code creates a credit against the excise tax on taxable fuels. The excise tax credit is generally available to any person that blends alcohol or biodiesel with taxable fuel in a mixture. To qualify for the credit, a qualifying mixture must either be sold by the producer to a buyer for use by the buyer as a fuel or be used as a fuel in the trade or business of the producer.

If U.S. ethanol producers are able to be blenders of fuel ethanol and unblended gasoline, and thereby receive the 45 cents-per-gallon tax credit, small-capacity ethanol producers would be able to enter the market. The result would be fair and healthy competition in the marketing of ethanol blends.

The benefits of allowing ethanol producers to blend and directly market ethanol blends to the consumer are the following:

(a) Rural economic development and job creation would be maximized. Increased investments in plants and equipment would stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed. On average, an ethanol plant supports 45 full-time jobs and nearly 700 jobs throughout the entire economy;

(b) The resulting increase in local and state tax revenues would provide funds for improvements to the community and to the region; and

(c) Federal and state renewable energy technology grants for ethanol would not be required. The blender’s tax credit and the market would reward the ethanol producer/blender.

In 2008, ExxonMobil reported the largest annual profit in U.S. history. ExxonMobil’s annual profit jumped 11%, or $5.2 billion, to $45.2 billion on the back of record oil prices. ExxonMobil returns most of its profit to shareholders, distributing about $40 billion in 2008 in the form of share buybacks and dividends. Chevron was also up more than $5 billion for the year, to $23.9 billion. A substantial portion of Chevron’s increase came in a fourth-quarter jump in its profits for refining and marketing of gasoline and other fuels.

Currently, oil companies are refusing to sell unblended gasoline to ethanol producers. The sole beneficiaries of the 45 cents-per-gallon blender’s tax credit are the oil companies, blenders affiliated with oil companies, and oil company shareholders. As a result, the farmers/landowners, ethanol producers and consumers never realize any benefit from the blender’s tax credit; rural economic development is ignored; and U.S. jobs are not created.

State legislatures should not permit 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. 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.

Rural development and job creation, not the maximization of oil company annual profits, should be the focus of our state legislatures.

 

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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Getting Ethanol Right

Posted on May 24, 2009. Filed under: Blender's Tax Credit, Field-to-Pump, Hydrous Ethanol | Tags: , , , , |

Getting Ethanol Right

The New York Times

Editorial

May 24, 2009

Representative Collin Peterson is furious that the Environmental Protection Agency is doing its job. The Minnesota Democrat says the agency is trying to kill off the biofuels industry — to the dismay of the corn farmers and ethanol producers he represents. He has vowed to vote against any bill, including climate change legislation, that might require the involvement of the E.P.A.

What inspired this tirade was an E.P.A. draft proposal showing how it intended to measure the greenhouse gas emissions from corn ethanol and other renewable fuels. The agency said it will not make any final rules until it completes further research, but its preliminary findings were not flattering to corn ethanol.

The E.P.A. was only doing what Congress ordered in the 2007 energy bill, which required a quadrupling of annual ethanol production to 36 billion gallons by 2022. In practical terms, this meant more traditional corn ethanol, until other more advanced forms of ethanol could make their way out of the labs. Scientists believe that various grasses and scrub trees that do not compete with food crops can someday be turned into fuel.

Congress hoped the ethanol mandate would produce a more climate-friendly fuel that could help reduce oil imports. But just to make sure, it stipulated that ethanol from any source be cleaner than conventional gasoline. It handed the job of measuring emissions to the E.P.A., and told it to consider the fuel’s entire life cycle.

This included counting the greenhouse gases released when forests or grasslands are plowed under and planted to make up for the crops used to make ethanol. When the E.P.A.’s scientists counted these indirect effects, corn ethanol emitted more greenhouse gases than gasoline over a 30-year period.

The E.P.A. says its analysis needs refinement, and in any case the 2007 bill grandfathers in existing corn ethanol plants or those under construction. That means there will not be any reduction in corn ethanol production; indeed, there could be more. Mr. Peterson and his farm bill colleagues are still steamed, because any adverse finding diminishes corn ethanol’s appeal.

Lisa Jackson, the E.P.A. administrator, can expect heavy pressure in the months ahead. The ethanol industry and its Congressional champions will argue that the science is unclear, that indirect effects cannot be measured accurately, and so on.

Ms. Jackson should stand her ground. Biofuels have an important role to play, and some will eventually be produced without pushing up food prices or increasing emissions. It is the E.P.A.’s duty to give the most unbiased accounting it can of their strengths and defects.

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan and Mr. Michael J. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  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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