Domestic Fuel

National Corn Growers Association president Garry Niemeyer, a farmer from Illinois, penned an editorial this week in an effort to let those still complaining about the Volumetric Ethanol Excise Tax Credit (VEETC) know that the game is over. Read that commentary below.

Back in August, the Green Scissors Project identified ways the federal government could shave $380 billion from the federal budget over five years. But their $380 billion in proposed cuts included a major error that accounts for more that 10 percent of their suggested cuts – $38.8 billion that they argued the Volumetric Ethanol Excise Tax Credit would otherwise cost between 2012 and 2016. They conveniently ignored the important fact that there will be no VEETC between those years. VEETC expires about a month from now, and corn growers and the ethanol industry have long agreed to let it expire and have since stopped fighting for its renewal.

It’s kind of like when one football team leaves the field and the other team scores a game-winning victory four plays later. Frankly, we left this game last quarter because there are other, smarter ways to support ethanol, especially in today’s deficit-prone political world. That was part of the reason we and the industry asked for a one-year extension in 2010 – to have time to seek alternatives. We won the game and left the field … not the guys who will pound their chests and claim victory in a few weeks.
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This month, Brazil has resumed exporting ethanol to the United States, at the same time the country is struggling to meet its own country’s demand for ethanol to fuel is flex fuel vehicles (FFVs). Ethanol producers in the country have expanded exponentially – there are more than 115 ethanol plants many of which have come online since 2005. However, despite massive investments by foreign companies into the country’s biofuels industry, nary a five new ethanol plants are expected to come online the remainder of this year.

Some may remember that last year due to a decreased sugarcane harvest caused by excessive rains, the country reduced its minimum ethanol requirements in the country’s fuel. Then this year, threat of another reduction circulated when once again the sugarcane harvest was lower than expected. In response, the government has cited ethanol shortages due to poor long-term strategic planning by the industry. The ethanol industry countered that the cause of problems lies in lack of uneven taxes, vague plans for future regulation and lack of investment incentives.

“As long as there is no clarity about the policy for fuels, there is a risk for investments,” said the president of Sao Paulo-based Datagro consultants, Plinio Nastari in a Reuters article.

Yet on the flip side of this bickering between the Brazilian government and Brazilian ethanol producers, the industry has once again begun exporting fuel to the U.S. over the past few months. According to brokers quoted in a recent Soyatech article, the ethanol industry has exported 1.9 million barrels to the U.S. as a result of fuel retailers needing to meet the requirements of the Renewable Fuels Standard.

Brazilian sugarcane ethanol has been considered an advanced biofuel as designated by the U.S. Environmental Protection Agency (EPA). Since there is a shortage of advanced biofuels being produced in the U.S., sugarcane ethanol has become a premium fuel for the obligated parties. Ironically, the exportation of ethanol was an abrupt change as earlier this year Brazil imported ethanol to meet its country’s mandates – the first time since 1994.
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The Chairman of Nestle, who just so happens to sit on the board of ExxonMobil, Peter Brabeck-Latmathe, lambasted global leaders for their support of “immoral” biofuel policies that are starving millions around the world earlier this week. In particular, he attacked the Obama administration for promoting corn-based ethanol and reserved no kind words for U.S. Agriculture Secretary Tom Vilsack who he claimed is making “absolutely flabbergasting” claims for America’s ability to produce food, feed and fiber.

This beat-down occurred during his speech at the Council on Foreign Relations (CFR) in New York and was published by The Independent. During his presentation he said, “Today, 35 per cent of US corn goes into biofuel. From an environmental point of view this is a nonsense, but more so when we are running out of food in the rest of the world.”

Brabeck-Latmathe continued, “It is absolutely immoral to push hundreds of millions of people into hunger and into extreme poverty because of such a policy, so I think – I insist – no food for fuel.”

The fuel versus food debate has been raging for several years. For each report that debunks the theory, another is published that places primary blame on rising food costs at the feet of America’s corn and ethanol industries. Yet, scores of economists have publicly acknowledged while there are dozens of factors that affect food prices, the current spike is being driven by speculators, a global increase in demand for protein and the unrest in the Middle East to name a few reasons.

National Corn Growers President Bart Schott responded to Brabeck-Letmathe’s comments. “It is scandalous, ludicrous and highly irresponsible for the chairman of a global conglomerate that tripled its profits last year to talk about higher corn prices forcing millions into starvation. Perhaps if Nestle is so concerned about food prices, its board will consider putting more of their $35.7 billion in 2010 profits back into poor communities. Just their profits alone represent more than half the entire farm value of the 2010 U.S. corn crop.”
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Friends of the Earth (FOE) has announced this year’s nominees for the organization’s “Biofool of the Year” award. Among the nominees are the publishers of Domestic Fuel, myself and my husband/partner Chuck Zimmerman.

The award was established by FOE “to recognize leaders that promote dirty biofuels” – especially corn ethanol – and was won last year by then House Agriculture Committee chairman Collin Peterson (D-MN). The first year it was Monsanto CEO Hugh Grant. This year’s nominees also include Senator Amy Klobuchar (D-Minn.), Senator Chuck Grassley (R-Iowa), General Wesley Clark, and Secretary Tom Vilsack. It’s a great honor to be included in such company.

Here is what FOE has to say about us:

This dynamic duo are a pair of bloggers who lead the group ZimmComm New Media and provide a big platform for the ethanol industry’s talking points. Each day, on a series of blogs – hosted by the Zimmermans (DomesticFuel, AgWired ) or by the corn ethanol industry itself (CornCommentary) – Cindy and Chuck critique anyone who may disagree with the ethanol industry’s line while practically cutting and pasting press releases from industry lobby groups. The Zimmermans are unabashedly pro-industry, with clients such as Growth Energy, the Renewable Fuels Association, the National Biodiesel Board and Syngenta. What’s more, many of their employees are previous employees of the biofuels industry lobby groups like Growth Energy. Now — Friends of the Earth has nothing against a pro-industry website (in principle), but the problem with the Zimmermans is that on the surface they pretend to be “reporters,” when in fact they act as industry hacks.

Just a couple points of clarification. First, we have no employees. We have freelance writers who contribute to our websites and other freelancers who do other work for us. One of our freelancers did work for Growth Energy, she now works for Protec Fuel and while she continues to do work for us in other areas, she does very little posting at this time. Another freelancer, Joanna Schroeder, worked for EPIC when we got to know her, but she now has her own company and does work for a variety of clients, including us. You can find our more about us and our company on the About page.

We support and believe in the use of biofuels for our country, as well as other forms of alternative energy – and even utilizing more of our country’s own oil reserves. We are diametrically opposed to organizations and individuals who criticize and attack the people who produce this nation’s food, fiber, AND fuel. If that makes us biofools, then we are proud to be!

Representatives of the renewable fuels industry were pleased to hear President Obama talking about energy independence during his State of the Union address last night, saying that we need to “break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015″ as well as mentioning wind and solar, nuclear, clean coal and natural gas, and even alluding to the promise of algae as an energy source. However, the goals that Obama laid out are very similar to the goals presidents of this country have been talking about for decades.

Yesterday’s Iowa Renewable Fuels Summit in Des Moines concluded with a piece that aired on “The Daily Show with Jon Stewart” in June 2010 about how the last eight presidents have gone on television and promised to move America towards a more energy independent future. The segment was filled with Stewart’s trademark humor, but it is sobering to think about how long this country has been touting energy independence and yet still be facing so many hurdles, skeptics and downright enemies who continue to impede that progress.

Stewart showed clips of all of the past eight presidents, from Nixon to Obama, talking about moving “beyond a petroleum-based economy,” first playing clips of both Obama and George W. Bush saying almost the exact same words. He follows up with Clinton, Bush 42, Reagan, Carter, Ford and Nixon making similar statements and talking about ideas like solar, natural gas, fuel cells and even “gasohol.”

Funny, but unfortunately, way too true. Take a look.

As several senators make one last push for a federal Renewable Electricity Standard (RES) to be enacted before the close of the 111th Congress, several states are considering scaling back their current Renewable Energy Portfolios (RPS). At the federal level, groups such as the bipartisan Governors’ Wind Energy Coalition cite an RES as a way to give the country an economic jolt and regain a leadership role in development and manufacturing. At the state level, organizations against the RES support moves to scale back renewable efforts claiming that the economic cost of moving to wind, solar and biomass will in fact cause more economic turmoil, not economic prosperity.

An increase in the debate regarding a federal RES has come from two sources. Last Monday the Governors’ Wind Energy Coalition sent a letter to Senate Democratic and Republican leaders saying, “A strong RES is the most economically-efficient way to advance clean domestic energy and immediately create jobs in renewable energy manufacturing, construction of new projects and associated transmission, and ongoing operation and maintenance of these facilities.”

The letter was addressed by Govs. Chet Culver (D-Iowa) and Don Carcieri (R-RI), who lead the Governors’ Wind Coalition and early this year released a report detailing wind opportunities throughout the country.

The letter continued, “We wish to work with you and with the Administration to help shape federal energy legislation this year. The economic stakes are high for our states, and we see a narrow window of opportunity for Congress to enact a long overdue reworking of federal laws governing renewable energy.”

The letter was followed up by a press conference yesterday held by several bi-partisan senators who introduced a Renewable Electricity Standard (RES) bill.
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Our country is quickly sliding down a slippery slope. Not too long ago, we were the leaders in renewable energy – wind, solar, biofuels. Today, not only have the major technological advancements come from overseas, our manufacturing facilities, entrepreneurs and investors are going, or have gone overseas as well.

Where are they going? Brazil. India. China. Why? Because these countries have the winning recipes for success: cohesive energy policy, long-term incentives and private investors. These are the exact three things we do not have in America.

We have other problems. We have states like California, that purport leadership in green policies and renewable energy, who make it nearly impossible to get permits for projects to meet its “green” initiatives.

Yesterday, Martifer Renewables Electricity dropped its plans to build a 107MW hybrid solar-powered biomass plant in California. The reason? After nearly 2 1/ 2 years, they have yet to obtain permits. Another company run out of California due to difficulty in obtaining permits, Blue Fire Ethanol – a next generation bioenergy company.

It may not be too late to head back up the hill but there are some things that must be done.
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Ethanol producers and corn farmers who were hoping for President Obama to make a strong show of support for the ethanol industry when he appeared at a POET plant in Missouri on Wednesday were probably a little disappointed. Yes, he made the appearance and said that “renewable, homegrown fuels are a key part of our strategy for a clean energy future” – but that was about it.

The entire speech, minus introductions, was only 10 minutes long and most of it was spent talking about the economy. About three minutes were spent on what the administration has done to promote renewable energy with the economic recovery act, the Biofuels Working Group and the Navy using biofuel in a new jet. However, there was no mention at all of the top priorities for the ethanol industry – getting the tax incentives renewed and the E15 waiver approved. Without those actions, the future of the ethanol industry is questionable.

The president only used the word ethanol five times, but preferred the more generic “biofuels” which was used nine times. Once, when he strayed from his prepared remarks, he used the word “biodiesel” apparently by mistake, saying “I want us to be first when it comes to biodiesel and the technologies that are being developed in places like POET.”

It is also notable that the president did not even mention the word corn, even though he was standing next to a big front end loader filled with it. The word agriculture was used only in reference to the U.S. Secretary and state director of agriculture present at the event. Farmers were only referenced in terms of the “tough time” they were having “getting by” when he was running for office.

The good news is that POET president Jeff Broin did get a chance to speak briefly with the president about the industry’s concerns. “We talked about the fact that cellulosic ethanol had the potential to create hundreds of thousands of jobs and that there were some policy issues that are very important to move that forward, the first being the fact that today the market is full,” said Broin. “Basically ten percent ethanol is what’s allowed in gasoline today and we need to move that wall and open up the market.” However, Broin says he only had a limited amount of time to talk with the president and was not able to address the ethanol tax incentive issue, but he did discuss it with Agriculture Secretary Tom Vilsack.

One can be hopeful that meeting real workers with real jobs at a real ethanol plant in a small rural community made an impression on the president and he makes the connection between that and the need to provide real support to keep the industry growing.

When discussing indirect land use it brings a popular saying to mind: If a tree falls in the forest and no one is around to hear it, does it still make a sound? Only in this situation the saying should be modified as follows: If a tree is cut down in a rainforest in Brazil to sell wood, should corn ethanol’s carbon footprint go up? Anyone with an ounce of commonsense would say no.

And here’s why: when a tree is cut down in Brazil, it is not to plant crops for biofuels, it is to sell the wood because the tree is of greater value as wood, then as part of the rainforest. Only then is the land converted to pasture and then to land for crops like soybeans. Sugarcane is rarely grown in the rainforest and Brazil doesn’t produce biofuels from corn. So what I just can’t seem to wrap my head around is what exactly does that tree have to do with corn ethanol?

So what has caused today’s diatribe on indirect land use? A new paper published this month in Bioscience Magazine titled, “Effects of US Maize Ethanol on Global Land Use and Greenhouse Gas Emissions: Estimating Market-mediated Responses.” The paper was authored by Thomas W. Hertel of Purdue University and five co-authors. In a nutshell, the authors argue that the greenhouse gas emission reductions from corn-based ethanol are canceled out when factoring in the increased carbon output from indirect land use change. Therefore, their contribution to California’s Low Carbon Fuel Standard is negligible, even when compared to conventional petroleum based fuels.

There are so many things wrong with this paper that I had a hard time deciding where to begin.
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It appears as if two things peaked in 2007…our economy and our thirst for driving. According to an article in McClatchy Newspapers, U.S. gasoline consumption peaked in 2007 and has not only not recovered, but never will – even after the recession ends. According to Steve Everly, the author of the article, there are several reasons why.

1) Federally mandated fuel economy increases.

2) The number of vehicles on the road will hit a plateau. Get this. There are 4-5 cars on the road for each person in the U.S. including children who can’t legally drive.

3) There will be enough alternative fuels to cover increased fuel needs (which up until 2007 grew each year since we discovered our love for driving using petroleum).

“We’re on a slow but inexorable path away from petroleum,” said James Williams, an analyst with WTRG Economics, an oil and gas consultancy. “This is a big deal.”

While this is good news for consumer pocketbooks, this is not such good news for oil companies who will lose billions of dollars each year from declining gas sales. According to the article, many oil companies are looking at adjusting their refinery capabilities, including the possibility of shutting some of them down. But this doesn’t mean petroleum will disappear. The Energy Information Administration predicts that by 2035, petroleum still will provide 88 percent of the fuel for cars and light trucks.

I’ll let you decide if this is good or bad news.

AAA has already made up its mind about increasing amount of ethanol allowed in gasoline to 15 percent, but they want to know what you think.

The headline for an article posted by the automotive organization last week reads “Bailout Blend: Bad for Your Engine?” and proceeds to bash ethanol as being bad for consumers.

“How would you feel about a fuel additive that could cost you more money and screw up your engine? If the ethanol industry has its way, that’s just what you might get,” they begin, calling an increase to E15 “a bailout for the ethanol industry that may come at the expense of drivers.”

At the end of the one-sided article, AAA asks for your opinion. “Do you think adding E15 to the nation’s fuel supply is a good idea? Log onto AAA.com/Poll and take our poll.” Not surprisingly, the poll is running two to one against E15. Maybe it’s because the article doesn’t say anything about the EPA findings that ethanol is better than conventional gasoline when it comes to greenhouse gas emissions, reducing them by at least 20 percent. AAA says, “Producing ethanol is an energy-intensive process that still results in greenhouse-gas emissions. It won’t save the planet as it still produces pollutants.” It may not save the planet, but it can help cut greenhouse gas emissions by cutting at least some of our gasoline use.

As far as engine issues and mileage concerns, Brazil runs up to 25% ethanol in its cars with no problems, and they consider energy independence to be more important than a few less miles to the gallon.

*post update*
If the link to the poll in the post doesn’t work, try the link in the AAA article. Apparently after you vote, you can’t go back to that link at all, so I can’t get the poll link to add to this post.

Yesterday I wrote about one of the major challenges facing leaders who will be participating in the Copenhagen Climate Conference – global warming. Today, I’m addressing a second major issue facing the leaders – stopping deforestation. There is a misnomer that the main driver of deforestation is the increased production of biofuels. While there is a correlation between biofuels and deforestation, it is minor compared to the real driver – the trees are worth more cut down than they are standing. Let me explain.

Some of the poorest people in the world reside in the regions in and around the Brazilian Amazon rainforest. To survive, they cut down the trees and sell them. Although there have been attempts to ‘block’ this wood from international markets, these efforts have not been successful. Once the trees are cut down, cattle farmers move in and once the land has been over-grazed and the cattle move on, farmers often begin growing soybeans. Another point of interest is that sugarcane does not grow well in the Amazonian region; however, laws have been passed that prohibit the expansion of sugarcane production on native vegetation.

According to The Breakthrough Institute, “The main drivers of Amazonian deforestation are socio-economic. Yet decades of environmental policy have failed to take this basic truth into account.” If we’re going to keep the rainforest intact, then the people who live in the region will need to be given new opportunities to generate wealth that are worth more then selling the trees.

During the climate talks next week, leaders will be attempting to create policies that will address the urban poverty drivers of deforestation. I was in Brazil last week and in prepartion for the meetings, the Brazilian Climate Alliance has prepared a report with recommendations to reduce/climate deforestation. The proposed policies will be released during the conference and the world will be watching.

The countdown to the Copenhagen Climate Change Conference is on as the talks begin in six days. The conference, December 7-18, 2009 is a meeting of the UN to hash out a successor to the Kyoto protocol that is set to expire in 2012. The aim is to prevent global warming, and similar talks date back to the 1992 Earth Summit in Rio.

While we haven’t focused much on Copenhagen on this site, alternative energy will play one of the biggest roles during the summit for its potential to curb worldwide greenhouse gas emissions. According to an article in the Guardian, “Climate scientists are convinced the world must stop the growth in greenhouse gas emissions and start making them fall very soon. To have a chance of keeping warming under the dangerous 2C mark, cuts of 25%-40% relative to 1990 levels are needed, rising to 80%-95% by 2050. So far, the offers on the table are way below these targets.”

What I find most interesting is that while there appears to be a scientific consensus on the existence of global warming and that it is caused by greenhouse gas emissions, mainly CO2, there are still many scientists who don’t agree. As such, the question must be asked, should we be moving forward so quickly both in the U.S. and around the world, on climate policies based on greenhouse gas emission reductions?

Now, before you shoot me and accuse me of being indifferent to the environment and human health issues, less pollution is always good and many economists predict that the next “Green Revolution” (the first one was in the 70s) will help our country rise above the recession. That said, I do believe we need to do something, I’m just not convinced the options on the table are the right ones.

Therefore, over the next week, I’m going to be offering three views on climate change as laid out in three books focusing on global warming. From there, it’s up to you to decide what direction worldwide leaders should be taking.

Oi from Brasil! I have spent the last three days learning about the ethanol industry in Brazil. I have been traveling with a group of 20 international journalists in the State of Sao Paulo, where 60 percent of the country’s sugarcane is grown and consequently where the majority of the ethanol is produced.

I’ll be writing a series of posts about my trip over the next week but I can sum up my experience in one sentence. Where there is a will, there’s a way. When the country of Brazil decided in the 1970s during the oil crisis that it would become energy independent, it did. Today, Brazil gets the majority of its energy, both renewable and fossil fuel based, within its boarders. In addition, the majority of the ethanol produced in the country stays in the country.

Also, unlike the U.S., Brazil produces most of its electricity needs from renewable sources as well. Today, more than 80 percent of its power comes from hydroelectricity, but this poses a problem during drought conditions and will be a bigger problem as water issues become more paramount. A solution? To sell the extra electricity from the sugar mills into the grid during the months the plants are operational, which happens to be during the dry time of the year. UNICA, the organization that represents the Brazilian sugarcane industry, predicts that sugarcane could supply 15 percent of the power by 2017.

While I don’t agree with all of Brazil’s polices and many in the country agree there have been some good and bad decisions, they offer the world demonstrable options and thus, a shorter learning curve to solid energy policies and technologies.

You can take a virtual tour via my Flickr account. Until tomorrow, Tchau.

Many states look to California to set the stage for environmental and energy reform. They passed the first greenhouse gas emissions legislation. They passed the Low Carbon Fuel Standard. But not so fast. They are bankrupt. They still have some of the worst air pollution in the country. They still have “brownouts” when it rains.

Let me give you an example of why California should not set the stage for energy reform. Just today, Biofuels Digest reported that BlueFire Ethanol, a waste -to -energy biofuels company primarily using wood waste, is relocating its second facility from California to Mississippi. Why? A $1 million a year tax hike plus after two years, difficulty getting the permits through. Oh, and did I mention that the DOE threatened to pull its $40 million funding if the project wasn’t sped up?

So BlueFire has sped up. In Fulton, Mississippi.

“We wanted to move quicker, and DOE said we needed to move quicker than we were able to in California,” said BlueFire CEO Arnie Klann in the Digest. “The Economic Development people in Mississippi, and in Itawamba county, welcomed us, and facilitated the project in every way. After going through a 20-month process with our Lancaster facility in California, we expect to be done with permitting by the end of the first quarter, after starting in July, and we have already located an off-take partner for our ethanol, upriver in the Memphis area.

While the plant relocation is great news for Mississippi, it’s sad news for California which will now lose nearly $8.3 million is tax revenue. And let’s face it. This is not the only biofuels project to flee California, nor will it be the last one. If our country is really commited to energy reform then it must not follow the ways of states like Califonia, but follow the lead of states like Mississippi that are welcoming biofuels projects with open arms.