Domestic Fuel

U.S. ethanol producers continue to set new production records.

According to the Energy Information Administration (EIA), American ethanol facilities produced 728,000 barrels per day in July 2009. That is up 114,000 barrels from a year ago. EIA also reports fuel ethanol imports of 42.4 million gallons in July.

Ethanol demand, as calculated by the Renewable Fuels Association, continues to outpace production. According to RFA calculations, demand was 748,000 b/d in July, up from 635,000 b/d a year ago.

The Renewable Fuels Association (RFA) announced the officers and Board of Directors who will lead the association and the ethanol industry in 2010 during its annual meeting last week in Washington, DC.

Chris Standlee, Executive Vice President of Abengoa Bioenergy, was reelected Chairman of the Board for a third term. Chris was first elected chair in October 2007. Joining Standlee in reelection as an officer is long time RFA member and ethanol industry veteran Nate Kimpel. Kimpel, General Manager of New Energy Corporation in South Bend, Indiana, will continue to serve as RFA Treasurer. Bob Dinneen was also reelected as President of the association, a post he has held since 2001.

Two new officers will join Chris and Nate. Chuck Woodside, Chief Executive Officer of KAAPA Ethanol in Minden, Nebraska, was elected Vice Chairman of the RFA. Dave Nelson, President of Global Ethanol, will fill the role Woodside previously held as Secretary. Global Ethanol operates facilities in Lakota, Iowa and Riga, Michigan.

The Renewable Fuels Foundation (RFF), the education arm of the RFA, also announced its leadership for 2010. They are Chairman Mike Jerke with Quad County Corn Processors; Vice Chairman Bob Sather of Ace Ethanol; Treasurer Mick Henderson o9f Commonwealth Agri-Energy; and Secretary Steve Gardner with East Kansas Agri-Energy.

Ethanol organizations received a Government Accounting Office report on biofuels this week with mixed reviews.

On the plus side, the GAO report indicated that using indirect land use change to evaluate the lifecycle greenhouse gas emissions for biofuels under the Renewable Fuel Standard may be difficult due to uncertainty in how that can accurately be measured. According to the report, “Many researchers told GAO there is general agreement on the approach for measuring the direct effects of biofuels production on lifecycle greenhouse gas emissions but disagreement about how to estimate the indirect effects on global land use change, which EPA is required to assess in determining RFS compliance. In particular, researchers disagree about what nonagricultural lands will be converted to sustain world food production to replace land used to grow biofuels crops.”

That pleased Growth Energy CEO Tom Buis. “On the unsettled science of International Indirect Land Use Change, the GAO has come down firmly on our side of the debate: there is no scientific consensus on ILUC,” Buis said in a statement. “As we’ve said all along, ILUC is a concept and a theory – it is not proven, and there is no agreement in the scientific community that if it exists, how it can be accurately measured. We agree completely with GAO’s assessment that the proposal to incorporate ILUC into RFS would greatly complicate the agency’s ability to complete writing this rule.”

On the downside, the report suggests elimination of the 45 cent per gallon blenders tax credit for mixing ethanol with gasoline. The GAO report says the Volumetric Ethanol Excise Tax Credit (VEETC) “may no longer be needed to stimulate conventional corn ethanol production because the domestic industry has matured, its processing is well understood, and its capacity is already near the effective RFS limit of 15 billion gallons per year for conventional ethanol.”

The Renewable Fuels Association disagrees. “The tax incentive has been instrumental in helping to build a renewable fuels industry in this country. It should remain,” the organization responded in a statement. “As long as petroleum and fossil fuel companies that dominate the energy market continue to receive preferential tax treatment and hidden subsidies, incentives are needed to develop renewable alternatives such as ethanol.”

Read the full GAO report here.

According to the Alexandria Times, about thirty gallons of ethanol was spilled on a concrete pade at the Norfolk Southern Corporation’s “transloading” facility this morning and the facility failed to notify the Alexandria Fire Department about the spill.

City Manager Jim Hartmann called the incident a “failure to communicate,” a comment epitomizing the company’s relationship with the city. Norfolk Southern opened the facility in April of 2008 after a communication void among city officials and staff resulted in the corporation’s settlement on the West End despite the potential dangers involved with transferring the explosive chemical.

“I firmly request that Norfolk Southern establish a protocol in which the Alexandria Fire Department’s Emergency 911 Communications is immediately notified of all ethanol- and transloading-related incidents that occur within the City of Alexandria,” Hartmann stated in the letter to David Lawson, Norfolk Southern’s vice president of industrial products.

Ethanol fires require a special alcohol-resistant foam that relies on long-chain molecules known as polymers to smother the flames. Industry officials say the special foam costs about 30 percent more than the standard product, at around $90 to $115 for a five-gallon container.

Murphy Oil Corporation, an international oil and gas company that conducts business through various operating subsidiaries, has purchased an idled ethanol plant in Hankinson, North Dakota.

The 110 million gallon per year corn-based ethanol plant was bought for $92 million. Additionally, an estimated $15 million in working capital will be invested into the facility.

Murphy Oil Corporation’s President and Chief Executive Officer, David M. Wood, said, “We are adding this capability to supplement our growing North American fuels business. “It also marks our initial entry into the manufacture of bio-fuels. Given the current ethanol mandates and our subsequent blending needs, having more of a presence in the supply chain better balances our business.”

He also added, “This plant is favorably located near the feedstock supply and has accessible rail service for carrying the finished product. We should see first production shortly.”

Murphy USA Marketing Co. (Murphy Oil USA, Inc.), a subsidiary of Murphy Oil, operates retail gasoline stations under the Murphy USA® brand across 20 states in the U.S. These retail fueling facilities are primarily in the parking areas of Wal-Mart Supercenters.

Back in May, the EPA put out its proposal for the new Renewable Fuels Standard… aka RFS-2… that got a lot of people talking about what is in the new standard.

Some of the biggest backers of some of the greenest fuels, ethanol and biodiesel, are worried RFS-2 will actually keep these mainstays of the renewables out of the program designed to promote those very same green energy sources.

During this edition of the Domestic Fuel Cast, we get comments from National Biodiesel Board CEO Joe Jobe and Renewable Fuels Association president and CEO Bob Dinneen about the comments they have just submitted to the EPA.

The biggest sticking point is the Indirect Land Use issue, which could charge American renewable fuels makers, especially biodiesel producers, with greenhouse gas emissions for something going on in another part of the world. Plus, Jobe and Dinneen say there are some issues with the baseline numbers and assumptions the EPA is using.

They believe that the RFS-2 can be corrected before it becomes law… if the EPA reads the thousands of comments the two organizations have submitted and heed what is being called common sense advice.

It’s a fascinating discussion, and you can hear more of it here: DFCast-10-02-09.mp3

You can also subscribe to the DomesticFuel Cast here.

In a 40 page letter submitted to the Environmental Protection Agency (EPA), UNICA, the organization representing the Brazilian sugarcane industry, noted that even accounting for theoretical Indirect Land Use Changes, sugarcane ethanol reduces greenhouse gas emissions (GHGs) by up to 85 percent. In addition, the organization cites that sugarcane ethanol is a viable way to help the U.S. meet the advanced biofuels requirements of RFS2 (Renewable Fuels Standard).

“We emphatically demonstrated, with verifiable scientific evidence, that Brazilian ethanol is certainly an appropriate alternative for meeting the advanced biofuel requirements of RFS2,” says UNICA’s Chief Representative for North America, Joel Velasco.

The implementation of RFS2 is more than a year delayed and court actions could be taken if the EPA doesn’t take action quickly. One area of concern has been the question of whether the ethanol industry will, or can, meet the cellulosic ethanol requirements. To alleviate this issue, UNICA has suggested modifying the rules to include advanced biofuels such as sugarcane, rather than drowning cellulosic ethanol via the action of waiving that portion of the mandate.

According to EPA calculations, Brazilian cane ethanol reduces GHG emissions by 44 percent considering a 2005 gasoline baseline. That would classify sugarcane ethanol as an advanced biofuel. Nevertheless, under suggested revisions, UNICA points out that sugarcane ethanol would reduce GHG emissions by 82 percent or more.

“We are confident that EPA will make an independent, scientific determination that sugarcane ethanol qualifies as an advanced biofuel under RFS2,” concludes Velasco.