Domestic Fuel

The Renewable Fuels Association (RFA) has sent another letter to the Environmental Protection Agency (EPA) regarding what they call errors in the calculations of biofuels’ carbon intensity under the Renewable Fuels Standard (RFS2). In the August 4th letter, RFA writes, “according to [EPA’s] own analysis, EPA grossly overestimated potential emissions from land use change (LUC) attributable to the [greenhouse gas] lifecycle of corn ethanol and other biofuels.”

The result of correcting this error, says RFA, is that it would greatly increase the greenhouse gas reduction benefits offered by ethanol under EPA’s calculations.

“Correcting this miscalculation reduces net LUC emissions (international and domestic) assigned to corn ethanol by 62% from 28.4 grams of CO2-equivalent/mega joule (g/MJ) to 10.8 g/MJ. Such a reduction in LUC emissions means overall lifecycle GHG emissions for 2022 average corn ethanol would be 38% less than baseline gasoline emissions, rather than the 21% estimate finalized by EPA.”

Regardless of RFA’s analysis, they still maintain that the inclusion of LUC impacts, particularly international impacts over which the U.S. has no control, is flawed policy and that EPA misinterpreted the intent of Congress when it passed the RFS.

In a recent blog post discussing their letter to EPA, Geoff Cooper, RFA’s Vice President of Research and Analysis, writes, “Despite the fact that real-world data and events have disputed the ILUC theory at every turn, EPA’s final rule for the RFS2 institutes a net LUC penalty (domestic and international) against corn ethanol of 30 kg CO2e/mmBTU (or 28.4 g CO2e/mega joule). This represents nearly 40% of the total GHG intensity of corn ethanol as estimated by EPA. When LUC emissions are excluded, EPA found corn ethanol from a natural gas dry mill reduces GHG emissions by 50% compared to gasoline. With LUC emissions, that benefit falls to around a 20% reduction.”

RFA says that this overestimation occurred as a result of the questionable methodological choice EPA made to isolate the LUC impacts of individual biofuels by increasing their production one at a time and holding all other biofuels at constant levels. More appropriately, the RFA notes, if EPA felt compelled by the statute to penalize biofuels for ILUC, it should have based those penalties on modeling that simultaneously increased production for all biofuels in accordance with the RFS requirements.

RFA notes that these problems are endemic of larger concerns regarding attempts to limit emissions from vehicles by unfairly penalizing biofuels.

You can read RFA’s letter to the EPA here and read Cooper’s comments regarding this issue here.

In a follow-up to a story written last week, New York has officially passed air quality legislation that includes a provision to ensure that only Bioheat, a blend of heating oil and biodiesel, is used with the city. The unanimous vote, 45-0, ensures that starting October 2012, all home heating and oil will contain at least 2 percent biodiesel.

The National Biodiesel Board applauded the passage of the new legislation and Shelby Neal, the organization’s state regulatory director issued the following statement.

“New York City has our heartfelt congratulations on once again demonstrating that the city is a leader in renewable energy. Already the largest municipal user of biodiesel in transportation applications, the city has now taken a progressive step towards cleaner emissions from heating the homes and buildings there.

“The biodiesel is likely to be made from many sustainable, renewable resources, including recycled cooking oil. In a city with more than 8 million people and 20 thousand restaurants within its limits, this Bioheat requirement is a golden opportunity to recycle the city’s used cooking oil into cleaner burning fuel. New York City uses more than 1 billion gallons of heating oil a year, so 2 percent biodiesel represents a 20 million gallon market for biodiesel.

“This move to Bioheat will also support green jobs and domestic energy security, and we hope New York City’s progressive actions will encourage other cities serious about greening efforts to follow suit.”

One of the country’s most touted, and failed, ethanol concepts may be sold. Last year, Hereford Biofuels, the first commercial scale plant in the country intended to operate using methane from cattle operations, went belly-up. Construction was halted when owner, Panda Energy, an energy firm based in Dallas, Texas, sold the plant to creditors earlier this year for a reported $25 million.

The reported suitor is Murphy Oil Corporation, an international oil and gas company based in El Dorado, Arkansas. Their plans to increase their stake in the biofuels market comes on the heels of a July 22, 2010 announcement that the company will be exiting the refinery business as early as first quarter of 2011. The move was approved by the Board of Directors and now their refineries in Meraux, Louisiana; Superior, Wisconsin; and Milford Haven, Wales along with the retail system in the United Kingdom are now up for sale.

In a company statement made earlier this month by President and CEO David Wood, “Murphy’s Upstream and U.S. Retail businesses have demonstrated marked growth and financial performance over the last several years. By exiting the refining business, we can fully focus our attention and resources on continuing that growth, developing a premier international upstream business and a top quartile U.S. retail franchise.”

Dyadic International has confirmed that the final resolution of the consolidated stockholder class action lawsuit, Miller v. Dyadic International, Inc. et. al, has been approved and the lawsuit dismissed with prejudice. Dyadic is a biofuels company that is focused on developing technologies to produce cellulosic ethanol from corn stover and wheat straw.

The lawsuit was originally filed in October of 2007 and asserted class action claims against its Asian subsidiaries based on allegations of misstatements and omissions by Dyadic and certain of its current and former officers and directors arising out of alleged improprieties. The company created a cash reserve in connection with the class action lawsuit that will adequately cover the cost of resolving the matter.

“We are pleased to put this matter behind us so we can continue focusing on growing our business through the ongoing sale of enzymes and the monetization of our C1 platform technology through potential licensing arrangements and other collaborations,” concluded Mark Emalfarb, President and Chief Executive Officer of Dyadic.

One year ago at the American Coalition for Ethanol (ACE) conference in Milwaukee, the BYO Ethanol campaign was launched as a joint effort between corn-producing states, ACE, and the Renewable Fuels Association with the goal of installing more blender pumps nationwide. Today that effort is more important than ever as the industry is face to face with the 10 percent blend wall. ACE members heard more about that this week during the 23rd annual Ethanol Conference and Trade Show in Kansas City as ACE Vice President for Market Development Ron Lamberty gave a little update to the membership on that effort and the importance of getting blender pumps out there.

“They’re something we just have to have if we’re ever going to get to the point where customers can choose to use gasoline or ethanol in whatever blends they want,” Lamberty said. He adds that blender pumps could become very important for marketers, if EPA approves some mixed level of blending ethanol for gasoline, such as 15 percent only for certain vehicles. “If they have a blender pump, they can use any combination,” he said.

There are many incentives in place for retailers to install blender pumps, such as tax credits and help from programs like BYO Ethanol. “Right now, a lot of people are wanting to pay a part of that bill for them, so it’s a great time for petroleum marketers to put in a blender pump,” said Lamberty.

Listen to an interview with Ron Lamberty here: ACE Conference Ron Lamberty

ACE Conference Photos

The president of the American Coalition for Ethanol is a great representative of this grassroots organization that was formed in 1988 – a family farmer from South Dakota who believes in the ability of agriculture to help serve the nation’s energy needs.

“We have to keep reminding ourselves how fast we’ve grown in a relatively short time and answered the call of this country for a cleaner fuel for the environment, a fuel that would make us less dependent on some areas of the world that aren’t really our friends,” Herseth said in an interview at the 23rd annual Ethanol Conference and Trade Show in Kansas City on Wednesday.

Herseth is also a former state legislator and the father of Rep. Stephanie Herseth Sandlin (D-SD), who is a strong champion for biofuels on Capitol Hill, so he knows a thing or two about politics and he’s frustrated with the current inability to grow the industry further due to the 10 percent blend wall and with distractions like indirect land use change. “We should actually get beyond that and say we don’t want to discuss this with you because you have no science to back it up,” he said.

He would rather focus on the positive impact ethanol has had on rural communities and land values. “I’m also a livestock producer, some of the livestock organizations haven’t been so happy with it,” said Herseth. “I’m a cow-calf operator yet I would never let that get in the way of supporting ethanol for what it’s done. I think it’s been terrific.”

Listen to or download my interview with Lars Herseth here: ACE Conference Lars Herseth

Check out some photos from ACE here on Flickr.

Although the biodiesel industry has struggled for the past few months, in areas with state mandates the biodiesel industry is thriving. Today, Northeast Biodiesel LLC, in partnership with Co-op Power, broke ground on a 3.5 million gallon biodiesel plant to be located in Greenfield, Mass. that is expected to be operational in January 2011. The plant will use various feedstocks to produce biodiesel and home heating oil including recycled vegetable oil and other raw materials.

Once completed, the $2.5 million dollar facility, supported by more than 20 investors, will employ 13 full-time staff as well as support a myriad of indirect jobs including those contracted to pick up the recycled oil from local businesses.

According to the company’s website, their biodiesel will have a lifecycle greenhouse gas emission reduction of 80 percent as compared to diesel and gasoline emissions.

In an article in Biodiesel Magazine, Lynn Benander, chief executive officer of Co-op Power and board chairwoman for Northeast Biodiesel LLC, said of the project, “I know we’re going against the grain right now given the state of the industry without the producer tax credit. Northeast Biodiesel is a community-owned recycled oil biodiesel plant that will bring significant benefits back to our community – environmental, economic and social.”

The Food and Agricultural Organization of the United Nations (FAO) has recently released a new report that champions jatropha as a promising biodiesel crop especially for global rural farmers. The report, “Jatropha: A Smallholder Bioenergy Crop, the Potential for Pro-Poor Development,” set out to examine the potential for jatropha as a sustainable biodiesel crop and has been in development since 2008.

The authors write, “As developing countries face increasing local demand for energy in rural areas, they also must deal with both economic and environmental pressure on agricultural lands in general. The possibility of growing energy crops such as Jatropha curcas L. has the potential to enable some smallholder farmers, producers and processors to cope with these pressures.”

The report says jatropha is a promising crop in part because it can grow on marginal lands, in drought conditions and animals do not graze on the crop. It also holds the promise of high oil output. The report also notes some of the feedstock’s drawbacks which include the fact that no consistently high yielding varieties have been developed and because the plant is toxic to both humans and animals, it can not be used for livestock feed, a major added value to most biofuel feedstock production.

Jatropha  originated in Central America and is making headway in Africa and parts of Asia for biodiesel development. Experts predict that by 2015, Indonesia will be the largest jatropha producer in Asia, Ghana & Madagascar in Africa and Brazil in Latin America.

While the report ultimately favors the crop, it does caution that depending on how programs are developed, there could be significant environmental damage that would outweigh the positive environmental attributes of biodiesel.

The report does not study the possible future of jatropha in the U.S., although at this time there are a few studies underway. In addition, it is not recognized as a biodiesel feedstock under current Renewable Fuels Legislation (RFS2).

Ord, Nebraska has a new blender pump. Country Partners Cooperative joined forces with Growth Energy to install the community’s first blender pump that now offers flex-fuel drivers E20 and E30. Driver’s can fill up with these higher ethanol blends at 424 North 14th Street, on the corner of Highway 70 and Highway 11.

“We took advantage of Growth Energy’s funding to install a blender pump. We needed to upgrade our pumps and we believe that ethanol is a huge part of our sales and our community, ” said Scott Haller, Petroleum Manager for Country Partners Cooperative. “We are a farmer based cooperative so we wanted to get in the structure of burning something we are producing. We have seen a lot more FFV’s out there so it’s great to give the consumer a choice at the pump.”

Consumers were able to begin purchasing the higher ethanol blends on July 10 and opening day sales were more than 1,300 gallons.

Todd Sneller, the Administrator for the Nebraska Ethanol Board, said of Nebraska’s newest blender pump, “The expansion of blender pumps in Nebraska offers consumers additional fuel choices at the pump. The increased use of higher ethanol fuel blends helps to retain energy dollars in the Nebraska economy and support the investment in ethanol plants. The Nebraska Ethanol Board applauds this partnership and continues to encourage fuel marketers to offer additional ethanol fuel choices at locations across the state.”

Attendance at the 23rd annual Ethanol Conference and Trade Show this week is considerably smaller than it was when the American Coalition for Ethanol meeting was held here in Kansas City just a few years ago – but the issues facing the industry have never been bigger.

As everyone knows, two major policy-driven challenges face the industry – expiration of the ethanol blenders tax credit (VEETC) and associated tariff on imports at the end of this year, and the need to allow higher blends of ethanol in gasoline to get over the “blend wall” and meet the Renewable Fuels Standard. ACE executive vice president Brian Jennings says the industry realizes that extension of the 45 cent VEETC for another five years is unlikely at this point. “So, members of Congress are looking at alternatives,” Jennings said, including a House Ways and Means Committee plan for a one year extension of VEETC at a reduced level of 36 cents a gallon that would also extend the tariff for a year. “Optimistically, I look at that as our floor and we’ll try to improve upon that as the process moves its way through Congress.” However, he notes that there are only 20 days left on the Congressional calendar starting when the lawmakers return from Labor Day recess until they break for the elections in October – not much time to accomplish much.

As to increasing the blend rate for ethanol in gasoline to 15 percent, Jennings says they are hoping that the EPA will at least approve an interim increase to E12, which the agency can do under current rules without any further testing or special waivers.

Listen to an interview with Brian Jennings here: ACE Conference Brian Jennings

Producing a significant amount of ethanol strictly from corn cobs is possible but would require a specific set of circumstances to be economically feasible, according to a new report from Purdue University researchers.

In the report “The Economics of Harvesting Corn Cobs for Energy,” Matthew Erickson and Wallace Tyner found that factors such as corn yield, farm size, harvesting equipment rental costs and increases in harvest times greatly affected the price per ton, but that government incentives for a possible cob-based advanced biofuel would offset collection costs enough to make it an attractive fuel source. In assessing the economics of cob harvesting the researchers focused on three main factors – the decrease in harvest work rate cob harvesting necessitates, the expense of cob wagon rental and the percentages of cob in residue.

The overall conclusion they made is that corn cobs are more expensive to harvest for energy than originally thought, “maybe too expensive to be used for energy production unless the public is willing to further support development.”

Corn growers say it might be worth the price for the nation that wants to continue lessening its dependence on fossil fuels. “As we explore innovative ways to use corn, our most abundant feedstock, to produce renewable energy, we have to remain flexible and dedicated,” said National Corn Growers Association Ethanol Committee Chair Jon Holzfaster. “Currently, our society places an extremely high priority on developing alternative fuel sources. New cob-based biofuel continues our tradition of working towards the goals of the RFS2, keeping our resources at home and developing new jobs in the U.S.”

Read the entire report here.

It’s August in the nation’s capitol and the climate is hazy, hot and humid with a chance of afternoon thundershowers, which Renewable Fuels Association president and CEO Bob Dinneen says kind of describes what is happening on Capitol Hill these days as well – especially the hazy and stormy part.

In this edition of “The Ethanol Report,” Dinneen discusses the situation with regard to the ethanol industry’s priority issues – tax incentives and E15.

Despite the few legislative days left on the Congressional calendar, Dinneen says he remains hopeful that the blenders tax credit for ethanol will be extended in some form for some length of time before it expires at the end of the year. However, he remains very frustrated with delays in getting E15 or at least E12 approved in the interim by EPA. “EPA continues to be one of the most dysfunctional agencies in the federal government,” Dinneen says. “One wishes that the agency had been as diligent in studying the blow out preventers that BP was using in the Gulf of Mexico.”

Listen to or download the Ethanol Report podcast here. Ethanol Report on Washington Issues

Subscribe to this twice monthly podcast in iTunes by following this link.

Growth Energy has joined forces with Edwards Oil to offer E85 at a Quik Mart Convenience Store in Florence, Ala.

Jonathan Edwards, President of Edwards Oil said, “We appreciate Growth Energy’s assistance in helping us to fund this infrastructure. Alabama has not seen much investment or sales demand for E85, we are hoping to have a role in changing that.” Edwards Oil Company owns and operates 41 Quik Mart Convenience Stores, 14 of which are located in Northwest Alabama.

“We congratulate and commend Quik Mart Convenience Stores and the people of the Shoals for making the second station possible. E85 has increased dramatically across the state,” said Mark Bentley, Executive Director of the Alabama Clean Fuels Coalition. “In 2006, there were no public stations pumping E85 in the state. Last year, considering both public and private stations, E85 displaced over 700,000 gallons of traditional gasoline in the state of Alabama. There are now 13 public stations making E85 available to the general public.”

Edwards Oil has become part of Growth Energy’s 2010 E85 and Blender Pump Program where funds have been allocated to assist with mid and high level blends of ethanol infrastructure.

Senator Tom Harkin (D-IA) and a group of bipartisan senators met with EPA Administrator Lisa Jackson and Department of Energy (DOE) Deputy Secretary Daniel Poneman this week to discuss delays in the approval of E15 ethanol blend for vehicles, as well as other key issues related to the ethanol industry.

Harkin says they talked with the officials about the importance of moving to E15, the need to mandate the manufacturing of flexible fuel vehicles and the installation of pumps that provide for high ethanol fuels and loan guarantees for biofuel pipelines. “We all agree that we must reduce our dependence on foreign oil, and that this will require a multi-pronged strategy, including more efficient use of transportation fuels and expanded use of alternatives to petroleum-based fuels,” Harkin said in a statement. “We also recognized that biofuels have already significantly displaced petroleum based fuels in the transportation fuels markets, reducing our reliance on oil imported from overseas. And we all agreed that biofuels have the potential to make much larger contributions.”

Harkin says he was pleased to hear in today’s meeting that DOE is also evaluating E20 in its battery of vehicle tests. “This may well provide the basis for EPA approval of E20 as well as E15 for use in all gasoline-fueled vehicles early next year,” he said. However, Harkin noted that he remains frustrated that testing is not yet complete on E15 and that the deadline has been extended twice. “This process seems so much more difficult that it was when E10 was approved. While I had hoped that E15 would be available by now to consumers, Secretary Jackson and Deputy Secretary Poneman were very helpful in fully explaining the rationale for the protracted timeline, and I am looking forward to hearing EPA’s decision on E15 soon,” said Harkin.

The sugarcane harvest in Brazil is running ahead of schedule and the U.S. corn crop is progressing well, according to the latest reports.

The cane crush in Brazil so far this year is running about 20 percent ahead of last year, which is not necessarily good news according to the Brazilian Sugarcane Industry Association’s (UNICA). Technical Director Antonio de Padua Rodrigues says the additional crushing observed so far can be attributed to the early start of the current harvest. Drier weather this year compare to last year has increased the harvesting pace, but it also may reduce the biomass potential of the cane yet to be harvested.

About half of the Brazil harvest is going to ethanol and half to sugar. UNICA reports that sugar production totaled 2.50 million tons in the first half of July, 25.75% higher than in 2009 during the same two-week period. Ethanol production also increased by 25.28% over the same period, reaching 1.86 billion liters.

Ethanol exports from Brazil are down this year, but domestic use is strong, according to Rodrigues. “The demand for ethanol fuel is rising, as flex-fuel vehicle sales remain high. Moreover, domestic ethanol consumption for other purposes will set new records during this harvest, mainly because of higher demand for the ethanol as a raw material for chemicals production.”

Meanwhile, here in the U.S., ethanol production was up 14,000 barrels per day in May, according to the Energy Information Administration (EIA), at more than 846,000 barrels. Ethanol demand, as calculated by the Renewable Fuels Association, also reached an all time high at 847,000 b/d in May, up from 713,000 b/d a year ago.

On the import/export side, EIA reports that U.S. ethanol imports were up slightly from April at 1.6 million gallons, but exports were down dramatically – from 40.8 million gallons to just over 17 million. As of May, the U.S. has exported a total of 141.4 million gallons this year, but RFA notes that export figures represent the sum of “Ethyl alcohol and other spirits, denatured, of any strength” and “Undenatured ethyl alcohol of an alcoholic strength by volume of 80 percent vol. or higher.” As such, the figures likely include ethyl alcohol exports for non-fuel industrial purposes, so RFA ethanol demand calculations are for domestic use only, providing a comparison to domestic ethanol production.

The U.S. corn crop continues to look good and some farmers are expecting to start harvest earlier than normal. According to the latest USDA report, 93% of the crop is silking, compare to 86% on average, over 30 percent in the dough stage and 7% dented, both ahead of normal. Despite the heat, the condition of the crop is holding steady at more than 70 percent good to excellent.