Study Shows Impact of Removing Ethanol Tariff

Brazil is eliminating its tariff on ethanol imports and wants the United States to do the same, but a recent study shows Brazil has far more to gain in that deal.

IHS GlobalThe study, prepared by IHS Global Insight, determined that eliminating import tariffs and increasing the tax on domestic ethanol would have severe economic consequences for both American ethanol producers and corn farmers. Dropping the current import tariff on ethanol would create a negative ripple effect, causing corn prices to drop by 30 cents per bushel and eliminating as many as 160,000 full and part-time jobs.

According to the study, if the tariff were allowed to expire at the end of this year, imports would immediately begin to rise until they reach a high of just over 1.6 billion gallons in 2012/13 and 2013/14, and then gradually decline to around 1.4 billion gallons in 2018/19. Currently, imports range between 200 and 600 million gallons per year. The report estimates that domestic ethanol production would drop by more than 600 million gallons in the first year, dragging corn prices down in the process. More importantly, the study shows that eliminating the import tariff would result in foreign ethanol replacing domestically produced ethanol – but not foreign oil.

A significant drop in ethanol production would have a detrimental impact on states where the ethanol industry has been rebounding, like Nebraska. Todd Sneller, administrator of the Nebraska Ethanol Board, said that increased production and plant reopenings confirm the viability of the ethanol industry and its positive impact on the state. “The ethanol industry has created thousands of good-paying jobs in Nebraska,” Sneller said. “Elimination of the ethanol tariff and biofuel incentives would be a misguided policy considering the significant economic impact generated by this domestic industry. The current policies help create jobs, they keep a domestic industry more competitive and they reduce fuel costs for consumers.”

Another study, done by the University of Missouri’s Community Policy Analysis Center, found that Nebraska was one of six states that would see the largest declines in economic activity due to removal of the ethanol import tariff. The others were Iowa, Illinois, Minnesota, Indiana and South Dakota. The decline in economic activity was calculated at $9.2 billion in the first year, $26.4 billion in the second year, and $36.7 billion in the third year.

Ethanol Company Posts a Profit

Blue Fire EthanolInvestors in California’s BlueFire Ethanol should be pleased to see that the company posted a profit in 2009.

The company, which is focused on the production of ethanol and other biofuels from non-food cellulosic wastes, reported 2009 revenue of $4,318,213 – which amounts to a four cent profit per share. According to BlueFire CEO Arnold Klann, “Through BlueFire’s continued progress on developing its two planned cellulosic ethanol plants, BlueFire was able to recoup development costs previously expensed dating back to 2007. Late in 2008, BlueFire sought guidance from the SEC on the correct treatment of these reimbursements. It was determined that these reimbursements should be treated as revenue, as the costs were expensed in prior periods and expenses related to the grant are not directly identifiable due to the composition of the reimbursements. These reimbursements along with sugar sales and consulting fees resulted in a $0.04 per share profit.”

Last year BlueFire began to develop relationships with key industry partners such as Solazyme, which has been testing sugars produced through BlueFire’s patented process, for compatibility with its renewable oil process to produce the bio-oil cost effectively and at scale.

BlueFire is one of four companies awarded funding from the U.S. Department of Energy under the Energy Policy Act of 2005 to construct cellulosic biorefinery production facilities. The two plants in development are located in in Lancaster, CA and Fulton, MS.

Brazil Eliminates Tariff on Ethanol Imports

In a bid to get the United States to eliminate tariffs on imported ethanol, the Brazilian government has announced it will reduce their tax on ethanol imports to zero from the current 20 percent through the end of next year. The Brazilian Chamber of Foreign Trade (CAMEX) announced the temporary reduction Monday and it is expected to go into effect before the end of the week.

UNICAThe Brazilian Sugarcane Industry Association (UNICA) called the action a major step forward in building a global biofuels marketplace. “UNICA believes that free trade is a two way street and Brazil, as the largest producer of cane ethanol and largest exporter of ethanol in the world, with 60% of the global market, will lead by example and eliminate barriers to renewable, clean fuels. We hope this move will encourage other countries around the world to develop open, free markets for clean, efficient renewable fuels such as ethanol,” said UNICA President & CEO Marcos Jank.

“The question now is whether the U.S., as the world’s number-one ethanol producer, will follow suit,” said UNICA’s Chief Representative for North America, Joel Valasco.

Not if the U.S. ethanol industry has anything to say about it. The Renewable Fuels Association (RFA) reaction to the announcement is that Brazil’s action “undermines its claims for wanting a global trade in ethanol. Vacillating regulations regarding Brazil’s trade policy as well its domestic consumption of ethanol make it impossible for foreign ethanol producers to even consider exporting product into Brazilian markets.” According to RFA, the U.S. tariff on imported ethanol “serves to protect American taxpayers from further subsidizing foreign ethanol industries already benefiting from generous government support in their own countries” and should be continued.

Growth Energy
had a similar response to the action. “We would not support reducing the U.S. import tariff, despite whatever Brazil is temporarily doing, because Brazilian ethanol already enjoys generous subsidies from the Brazilian government and to provide them access to additional subsidies from the U.S. government makes no sense,” said Growth Energy CEO Tom Buis. “If we want to import something from Brazil it should be the same resolve to become energy independent. Brazil wisely saw the importance of supporting and incentivizing their domestic ethanol industry and now they are energy exporters while the U.S. continues to rely heavily on foreign oil. The U.S. would do well to follow their example and promote American ethanol producers rather than giving tax breaks to foreign ethanol and increasing our dependence on foreign energy.”

BIO to Congress: Fund $25M for Cellulosic Production

Today, the Biotechnology Industry Organization (BIO) released a letter to House and Senate appropriators asking them to fund the Section 942 of the Energy Policy Act of 2005 labeled as Production Incentives for Cellulosic Biofuels to the tune of $25 million for 2011. Known as a reverse auction program, BIO is encouraging this action as a way to assist pioneer cellulosic biofuels producers in the U.S. in an affordable manner.

“The reverse auction program rewards pioneering cellulosic biofuel producers who can provide the most cost effective product,” explained Brent Erickson, executive vice president for BIO’s Industrial and Environmental Section. “This program, if closely coordinated with other federal programs, can stimulate the private investment needed to build large-scale biorefineries to meet the energy production and greenhouse gas reduction goals of the United States.”

BIO cites several Congressmen and Senators who have supported this request, in particular Representative Bruce Braley (D-Iowa) and Senators Tom Harkin (D-Iowa), Richard Lugar (R-Ind), Evan Bayh (D-Ind) and Edward Kaufman (D-Del.).

The official bio report, “U.S. Economic Impact of Advanced Biofuels Production,” yielded several key findings:

  • • Direct job creation from advanced biofuels production could reach 29,000 by 2012, rising to 94,000 by 2016 and 190,000 by 2022.
    • Investments in advanced biofuels processing plants alone would reach $3.2 billion in 2012, rising to $8.5 billion in 2016, and $12.2 billion by 2022.
    • Direct economic output from the advanced biofuels industry, including capital investment, research and development, technology royalties, processing operations, feedstock production and biofuels distribution, is estimated to rise to $5.5 billion in 2012, reaching $17.4 billion in 2016, and $37 billion by 2022.

“Advanced biofuels are a key to creating new jobs and revitalizing the U.S. economy. Development of the advanced biofuels industry could produce hundreds of thousands of new green jobs and contributing more than $140 billion in economic growth by 2030. Rapidly increasing U.S. production of advanced biofuels is also a sound way to significantly reduce U.S. reliance on imported petroleum and carbon emissions associated with climate change,” concluded Erickson.

You can download the full report here.

Process Optimization Seminar Success

Nearly 60 ethanol plant managers attended the second Process Optimization Seminar held in Indianapolis this week. The interactive seminar is a team effort of Fremont Industries, Fermentis, Novozymes and Phibro Ethanol Performance Group.

“All four of us companies got together and realized a need to provide training for plants,” said Steve Rust with Fremont. “So we decided to provide this for them where each of us share our expertise on how we can help plants optimize their process.”

Their first seminar was held last year in Minneapolis and Rust says they will be having another one later this year in Kansas City. “We try to move them around the country,” Rust says. Because the seminars are very interactive, the number of participants is limited to about 60. The seminar is targeted at all levels of ethanol plant management, including operations, technical, lab and general managers.

The Kansas City seminar will be held September 1-2 and registration will be open on July 1.

Listen to my interview with Steve here:

New Fuel Economy Standards May Benefit Ethanol

Today the Environmental Protection Agency (EPA) and the Department of Energy (DOE) signed a joint final rule that establishes greenhouse gas emission standards and corporate fuel economy standards for light duty vehicles for model years 2012-2016. This National Fuel Efficiency Policy requires passenger cars and light trucks to get an overall average of 35.5 miles per gallon (mpg) by 2016 while cars are expected to average 39 mpg and trucks will be required to get 30 mpg. According to the current administration, this measure is expected to save 1.8 billion barrels of oil over the life of the program.

However, we could actually reduce oil imports and emissions even more under this program by using ethanol.

Ricardo’s EBDI engine technology

Let me explain. The easiest way to gain the improved fuel economy is through “engine downsizing,” in other words, using smaller engines. But the new smaller engine technologies will not mean less power, like in the past. According to Ethanol Boosting Systems, their technology enables gasoline engines to “reach their full potential” by utilizing performance enhancing properties of ethanol in conjunction with advances in direct injection (DI) and turbocharging.

Here is how their system works: The EBS approach uses controlled direct ethanol injection to add a very significant vaporization-enhanced On-Demand Octane BoostTM that essentially removes the knock limit on engine performance. The elimination of the knock constraint has been proven by systematic engine dynamometer tests. This allows a small gasoline engine to provide the same or higher torque as compared to a conventional engine of much larger size. Continue reading

New Fuel Economy Regulations Set

The the U.S. Department of Transportation’s National Highway Traffic Safety Administration and the U.S. Environmental Protection Agency and unveiled new fuel economy rules today that will begin phasing in in 2012. According to EPA, the rules could potentially save the average buyer of a 2016 model year car $3,000 over the life of the vehicle and, nationally, will conserve about 1.8 billion barrels of oil and reduce nearly a billion tons of greenhouse gas emissions over the lives of the vehicles covered.

“This is a significant step towards cleaner air and energy efficiency, and an important example of how our economic and environmental priorities go hand-in-hand,” said EPA Administrator Lisa P. Jackson. “By working together with industry and capitalizing on our capacity for innovation, we’ve developed a clean cars program that is a win for automakers and drivers, a win for innovators and entrepreneurs, and a win for our planet.”

Automobile manufacturers are expected to meet these standards by more widespread adoption of conventional technologies that are already in commercial use, such as more efficient engines, transmissions, tires, aerodynamics, and materials, as well as improvements in air conditioning systems. EPA and NHTSA also expect that some manufacturers may choose to pursue more advanced fuel-saving technologies like hybrid vehicles, clean diesel engines, plug-in hybrid electric vehicles, and electric vehicles. The new regulation allows automakers to get credits for building flexiblie fuel vehicles until 2015, but after that, it must show the alternative fuel is being used to get credits.

“America needs a roadmap to reduced dependence on foreign oil and greenhouse gases, and only the federal government can play this role,” The Alliance of Automobile Manufacturers President and CEO Dave McCurdy said, “The national program announced today makes sense for consumers, for government policymakers and for automakers.”

NHTSA predicts that passenger cars will have to average 33.3 mpg in 2012, a figure that rises to 37.8 mpg in 2016, light trucks, including SUVS, pickups and vans, will be required to average 25.4 mpg in 2012 and 28.8 mpg by 2016.

High School Students Win Eco-Marathon With Ethanol

Photo Credit: DiscoverySeveral high school students from Durand High School in Wisconsin, took first place in the national Shell Eco-Marathon, with their ethanol entry. The challenge was to build a car with the best fuel economy and the Wisconsin team was the only team to enter a vehicle fueled by ethanol. After a snafu with another vehicle that ran into their car, they were able to achieve 345 miles per gallon using ethanol. Their original goal was to go more than 700 mpg which was squashed after their brakes and alignment on their car was thrown off due to the crash.

“There’s a track we have to do 10 laps on and that’s a total of 6 miles. They measured the fuel before the event and after,” student Ted Wayne said in an interview with WEAU-TV.

The students competed against other high school teams as well as college teams and many of these groups has a larger budget. however, it didn’t stop these dedicated students from winning. The three students who traveled to the event in Texas all plan to attend UW-Stout next year and are already planning on starting a club that will compete in future challenges. Ultimately, the team said their goal is to beat Purdue.

UK Report on Food Crisis Vindicates Ethanol

A new report commissioned by the UK’s Department for Environment, Food and Rural Affairs (DEFRA) has concluded that drought and high oil prices, not biofuels, were behind the so-called food crisis of 2007/2008.

defra“Available evidence suggests that biofuels had a relatively small contribution to the 2008 spike in agricultural commodity prices,” the report noted. “Studies which have found a large biofuel impact across agricultural commodities have often considered too few variables, relied on statistical associations or made unrealistic or inconsistent assumptions.”

The Global Renewable Fuels Alliance (GRFA) welcomed the report’s findings. “This food crisis event in 2008 allowed critics of ethanol to make an easy scapegoat of the industry during a period of unprecedented expansion in ethanol production,” said GRFA spokesperson Bliss Baker. “This is a lesson for us all about the dangerous impact of rising oil prices and the willingness to look to an easy answer, not necessarily the right answer.”

The report found that speculators responding to rapidly declining global wheat stocks caused by ongoing drought originally triggered the crisis, which was exacerbated by countries imposing export restrictions on grains that drove prices even higher. The simultaneous spike in crude oil prices to record levels put upward price pressure on all commodities making the food crisis a truly global event. “The primary impact of high oil prices on agricultural commodities seems still to be through the supply-side, via increased costs of production, rather than the emerging demand-side channel of biofuels,” the report noted. “Fuel and fertiliser account for over half of operating costs of crop farms but many commentators have ignored oil’s ongoing importance as an input into agricultural production.”

Going forward, the report is very optimistic about the world’s ability to respond to both demand for biofuels and the need for additional cropland citing vast amounts of under utilized agricultural reserves around the world.

Read the full report here.

Gilbarco Expands Pump Warranty for E15

Gilbarco Veeder-Root, a company that provides fueling and retail management systems for convenience stores, hypermarkets and service stations, announced today that they have upgraded the warranty on their standard fuel dispensers to cover use of ethanol content up to E15. Gilbarco is the first supplier in the industry to announce this change for fuel dispensers that are under warranty in the field. These dispensers are currently Underwriters Laboratories (UL) approved for ethanol up to E10 under the UL 87 standard.

“We are pleased to lead the market with the expansion of our current warranty from E10 to E15, ensuring that our customers are covered if the current E10 standard is broadened to E15,” said Richard Browne, Vice-President Marketing, North America at Gilbarco Veeder-Root. “Our standard fuel dispenser models, currently UL listed to 10% ethanol, will now carry a warranty for up to 15% ethanol. This change is retroactive to Gilbarco® dispensers manufactured or commissioned in North America since April 1, 2008. Models include the Gilbarco Encore® and Legacy® series dispensers, as well as the Gasboy® Atlas® product line.”

“Our customers can be confident that Gilbarco and Gasboy will honor warranty claims and otherwise support the dispensers they have recently purchased or are considering, should the blending standards change to E15,” Browne said.

Gilbarco Veeder-Root is the industry’s leader in alternative fuels dispensing technology with a full range of flexible fuel solutions. Earlier this month, the company obtained UL and National Conference on Weights and Measures approval for 19 Gilbarco Encore flexible fuel dispenser models for use with blends up to E25.

More Corn Acres for Food and Fuel

More corn acreage is in the forecast for this year, according to the USDA Prospective Plantings report out today, and there is still plenty more in storage.

USDAAccording to the forecast, farmers intend to plant 88.8 million acres of corn in 2010, three percent more than both last year and 2008. Meanwhile, the Grain Stocks report shows corn stocks as of the beginning of this month were up 11 percent compared to last year at 7.69 billion bushels.

Matt Hartwig with the Renewable Fuels Association says the numbers show that farmers are producing plenty of corn for both food and fuel. “Corn in storage at this point in the year is at its highest level since 1987, a year in which an all-time record surplus of corn was recorded,” Hartwig notes. “The amount of corn currently stored on farms (4.6 billion bushels) is larger than the amount of corn that is expected to be processed into ethanol in 2009/10 (4.2 billion bushels).” Hartwig also points out that the total amount of corn in storage right now (7.7 billion bushels) “is larger than the total amounts of corn harvested annually as recently as the early 1990s.”

Early reaction to the prospective plantings report is that corn acreage will likely be higher than forecast. While the report estimates corn acreage will increase by 300,000 or more in Illinois, Kansas, Missouri and Ohio, a decrease of 200,000 acres is forecast for Iowa. However, corn growers in Iowa say they definitely expect to see their acres increase when it’s all said and done. Northeast Iowa farmer Tim Burrack, chairman of the Iowa Corn Promotion Board, says the survey was done a few weeks ago when the weather still looked pretty bleak, but that has turned around dramatically. “In our area, I am amazed at how quickly winter left and spring came,” Burrack said during a telephone press conference Wednesday morning. Field work has been underway since Friday and he says they should be ready to plant as soon as the soil warms up.

In southwest Iowa, grower Kevin Ross says the corn that was left unharvested over winter also probably had an impact on the acreage estimate, but the combines are running now and getting the last of that corn out of the fields so they will be ready to plant. Ross says more corn means more ethanol, which means it is even more important for the EPA to approve E15 blends for gasoline. “With the huge stocks being carried out and this extra increase in acres, plus the bushel per acre increase last year, it’s really critical to the success and livelihood of corn farmers to get this corn crop marketed,” he said. “For me and farmers all across the US, E15 being approved by EPA is really very important and I sure as heck hope they see that it’s a good way to go … we need that market.”

Weather in the corn belt this week is nearly ideal for field preparation and soil warming so farmers are hopeful they will not see the planting delays they have experienced the past two years.

Free RFS2 Workshop Announced

For those who are interested in learning more about how RFS2 will be affecting your biofuels business, there is an RFS2 Workshop being held in Des Moines, Iowa at the Sheraton West Des Moines Hotel on April 6th. The workshop is being hosted by the Renewable Fuels Association, the Iowa Renewable Fuels Association, Growth Energy and the National Biodiesel Board. The event is free for members of these organizations. Nonmembers can attend for a nominal fee.

This RFS2 Workshop will cover all aspects of the re-registration process for ethanol and biodiesel producers. EPA personnel will be on hand to walk you through the process of updating your CDX account, give you details regarding the requirements of the independent engineering study, and offer helpful tips and hints for mastering the EMTS program for RINS. In addition, they will review how the pathways to plant expansions and technology updates will affect your plant.

It is suggested that participants in the CDX and EMTS breakout sessions bring their laptops to follow along with the presenters as they walk you through the electronic forms. For agenda details and a registration form, please click here. For further questions, please contact Jim Redding.

Ethanol Bob Tweeting President’s Energy Speech

Renewable Fuels Association president and CEO Bob Dinneen is on location at the site of President Obama’s speech this morning on energy initiatives for the United States. The event is being held in a hanger at Andrews Air Force Base with the backdrop of a Navy Green Hornet jet that will fly on biofuels on Earth Day.

The president is expected to announce new energy policies that rely heavily on domestic production of traditional energy sources, including opening up new off-shore oil drilling. However, Dinneen says, “Relying on 20th century energy sources to address 21st century challenges will not solve the problem. America’s energy policy must be focused on renewable sources that have great potential for innovation and improvement. Renewable fuels, such as ethanol produced from a variety of feedstocks, hold great promise to reduce our need for imported oil, address climate change concerns, and create enduring economic opportunity. Oil and other fossil fuels are finite resources. While we cannot ignore their contributions, neither can we ignore the reality that reliance on them is simply unsustainable.”

Follow Dinneen’s Twitter updates from the president’s address at www.twitter.com/ethanolbob.

Post Update:

According to the Navy:

Air Test and Evaluation Squadron VX-23 will be testing the full envelope of the ‘Green Hornet’ with a drop in replacement biofuel made from the camelina plant in an effort to certify alternative fuels for naval aviation use.

The ‘Green Hornet’ flight is an important step in the certification and ultimate operational use of biofuels by the Navy and Marine Corps.

Green Activists Continue Ethanol Smear Campaign

Another anti-biofuels report has been released, this time from the National Wildlife Federation (NWF) who is arguing that an immediate benefit would ensue if current biofuels policies were repealed and replaced with policies that would take the world’s most productive cropland out of production. Maybe more alarming is that while the report attempts to discredit the most promising biofuels technologies, it gives fossil fuels along with other dirty energy sources a get out of jail card. This report has spurred the biofuels industry to respond.

“Most disappointing about the continuous barrage of attacks by environmental activists is that we share many of the same goals,” said Matt Hartwig, Director of Public Affairs at the Renewable Fuels Association. “Ethanol producers remain steadfastly committed to developing new technologies that improve efficiencies and expand the basket of feedstocks from which ethanol is made. Unfortunately, many in the environmental movement choose to rely on disproven theories and partnerships with the oil lobby to mislead and misrepresent what American ethanol production is all about. Simply put, second and third generations of ethanol technology will not exist without a successful first generation.” Continue reading

Petroleum Industry Files Suit Over Renewable Fuel Standard

The petroleum industry has filed a legal challenge over the expanded Renewable Fuel Standard (RFS2), which was just finalized by the Environmental Protection Agency.

Both the American Petroleum Institute (API) and the the National Petrochemical & Refiners Association (NPRA) filed the lawsuit Monday with the U.S. Court of Appeals for the District of Columbia challenging the EPA rule, officially published in the Federal Register on Friday.

Both organizations issued similar statements regarding the legal action, which focus on the retroactive provisions of the rule. “We believe this rule unlawful and unfair, and we filed a petition for review in the U.S. Court of Appeals for the District of Columbia to challenge the legality of EPA’s actions,” said the API statement. “EPA made the rule effective on July 1, 2010 while setting unreasonable mandates on refiners that reach back to 2009 for bio-based diesel and to January 1 for the other advanced biofuels.”

“The petition NPRA filed today does not challenge the overall RFS2 program and does not call into question the important role renewable fuels play in our nation’s transportation fuel mix,” NPRA President Charles T. Drevna said. “Simply put, the fact that EPA failed to meet its statutory obligations under current energy law does not give the Agency license to impose retroactively additional compliance burdens on obligated parties. At the least, such action calls into serious question the fundamental fairness of EPA’s RFS2 rulemaking process.”