More Industry Reaction

ACE The ethanol industry could hardly be more pleased with the president’s call for increased use of the fuel in his State of the Union address.

In a news release, the American Coalition for Ethanol praised the president “for setting visionary goals for ethanol in his State of the Union address and the bipartisan leaders in Congress who are working to implement long-term plans for the increased production and use of homegrown renewable fuels.”

“President Bush’s call to increase the use of renewable and alternative fuels, including ethanol, to 35 billion gallons by 2017 sends a very powerful signal that an ambitious yet attainable Renewable Fuels Standard goal is the ideal strategy to strengthen energy security and independence in the U.S.,” said Brian Jennings, ACE Executive Vice President. “An RFS level of 35 billion gallons by 2017 is consistent with ACE’s call for an RFS of 60 billion gallons by 2030, and we are pleased that this and other important aspects of ACE’s legislative plan have already been included in S. 23, the Biofuels Security Act introduced in the 110th Congress by Senators Harkin and Lugar.”

Indy Sets Pace For Domestic Fuel

Indy Car Series With its switch to 100 percent fuel-grade ethanol for the 2007 season, the Indy Car Series is already leading in the country’s race to reducing dependence on foreign oil, as called for by President Bush in his State of the Union address.

“The IndyCar Series shares the President’s commitment to energy security,” said Brian Barnhart, president and chief operating officer of the Indy Racing League, in a news release. “We accept the challenge of making these goals a reality.”E

“The partnership between the IndyCar Series and the ethanol industry exemplifies the spirit of energy independence, American ingenuity and innovation,” said Tom Slunecka, executive director of the Ethanol Promotion and Information Council.

The series will hold its first Open Test of the season at Daytona International Speedway Jan. 31-Feb. 1, 2007 where for the first time all IndyCar Series cars will run on the 100 percent fuel-grade ethanol. The 17-race IndyCar Series season opens March 24, 2007 under the lights at Homestead-Miami Speedway.

Domestic Fuel Industry Reaction

Some biofuel organizations were reacting to the president’s State of the Union address even before it was given.RFA

A statement from Renewable Fuels Association president Bob Dinneen was emailed to the media over two hours before the speech.

“Recognizing the potential of our nation’s ethanol industry, President Bush used the unique forum of the State of the Union Address to elevate the significance of ethanol and renewable fuels to our nation’s energy future by calling for 35 billion gallons of alternative fuel use by 2017,” said Dinneen. “With consistent and focused policies, this is an eminently achievable goal. It will stimulate new investment in cellulosic ethanol technologies and drive market opportunities for ethanol beyond existing blend levels. It is a goal that makes sense for America.”

RFA will hold a telephone press conference Wednesday morning to address the president’s remarks with reporters.

NBB

The National Biodiesel Board issued a release immediately following the address.

“We are glad to see that the President’s Twenty in Ten plan includes strong steps toward renewable energy, energy conservation and diversification, and carbon reduction,” said Joe Jobe, CEO of the National Biodiesel Board. “We hope Congress will work with the Administration in a bipartisan way to enact this kind of bold new energy policy for the good of all Americans.”

President Calls For Increasing Alternative Fuel Supply

2007As anticipated, President George W. Bush devoted a significant portion of his 2007 State of the Union address Tuesday evening to energy.

“For too long our nation has been dependent on foreign oil,” said President Bush. “It’s in our vital interest to diversify America’s energy supply. The way forward is through technology.”

The audience applauded seven times during the four minutes devoted to energy issues in the president’s address, including once when he mentioned biodiesel and once for ethanol.

“We need to press on with battery research for plug-in and hybrid vehicles and expand the use of clean diesel vehicles and biodiesel fuel. (applause) We must continue investing in new methods of producing ethanol (applause) using everything from wood chips to grasses to agricultural wastes.”

The president called on Congress to reduce gasoline use in the United States by 20 percent in the next decade.

“To reach this goal we must increase the supply of alternative fuels by setting a mandatory fuel standard to require 35 billion gallons of renewable and alternative fuels in 2017 – and that is nearly five times the current target.” That statement was met by a standing ovation led by a jubilant Senator Chuck Grassley from the number one ethanol producing state of Iowa.

Bush noted that achieving these goals will dramatically reduce dependence on foreign oil but not eliminate it, so he also asked that Congress to double the current capacity of the strategic petroleum reserve.

And while he briefly mentioned confronting the “serious challenge of global climate change,” the president did not specifically ask Americans to make lifestyle changes to conserve fuel as news sources anticipated prior to the address.

In the Democratic response to the President’s address, Senator Jim Webb of Virginia began by saying that energy independence was one area where the Democrats agreed with the administration and that they looked forward to working with him on that issue.

Listen to the energy portion of the President’s address: Listen To MP3 President Bush
(4 min MP3)

Corn Growers, Farm Aid Team Up for Renewable Energy Workshops

Farm AidThe American Corn Growers Association has received some grants from Farm Aid to put on a series of workshops across the country on producing and using ethanol, biodiesel, and wind energy. The Farm Aid money has been given to the Corn Growers to put on the workshops in more than half a dozen states on a variety of subjects:

* Overview of Bio-Diesel Production, Acceptance and Utilization,
* Overview of Pre-Feasibility Study Guide for Farmer-Owned Ethanol Plants,
* Wind Energy – New Potentials for Rural Communities,
* Overview of Federal Programs Available for Renewable Energy Production, and
* How Renewable Energy Production Can Be an Essential Component to Better Farm Policy.

“Our goal is to ensure we improve our continuing endeavor to communicate, educate and advocate the opportunities, challenges and possibilities for energy production on U.S. family farms,” said ACGA President Keith Bolin. “This will include issues relating to bio-diesel, ethanol, bio-mass, wind and other farm based energy producing possibilities.”

“Farm Aid is proud to support so many creative efforts around the country to expand opportunities for family farmers,” said Farm Aid President Willie Nelson. “We’re all working together to support good food from family farms.”

Stay tuned for dates and locations.

Analyst Says Grain and Livestock Markets Affected by Biofuels Boom

Bill Holbrook, owner of Holbrook Consulting, says grain markets are responding to the rapid growth in the ethanol and biodiesel markets. But what will it mean to longer-term grain and livestock prices? In my interview with him, Holbrook says right now, livestock producers are expecting tighter margins, but long-term feed prices are more likely to be affected by weather and the amount of acres being put into production.

Listen to it here: Listen To MP3 Bill Holbrook
(6:25 min MP3)

High Crude Oil Prices Boost Alternative Fuels’ Price Competitiveness

The Energy Management Institute has released a report that shows alternative fuels are much more cost effective… by nearly 30 percent… than they were just three years ago. The New York-based institute touts itself as higher learning for energy professionals such as oil companies, utilities, and transportation fleets. It found that biodiesel was 29.2% more cost effective than a few years ago while ethanol was 17.4 %. Natural gas (41.4%), electricity (36%), and propane (21.3%) helped alternatives to oil average a 29% cost effectiveness increase.

EMI

“We crunched a lot of data for this one,” said J. Scott Susich, Editor of EMI’s Alternative Fuels Index publication. “It’s not enough to look at prices from three years ago and compare them to recent values. We looked at the relationship between the cost of each fuel and the amount of energy one could buy on a BTU equivalent basis, and compared those values to their gasoline and diesel counterparts in each market. Next we had to look at the trends of those relationships to determine whether the results were atypical or part of a sustained pattern. In each case the data showed a continuing trend toward competitiveness,” Susich continued.

Now, whether alternative fuels can continue their cost-competitive march remains to be seen. EMI’s numbers are based on crude oil prices more than doubling during the time period studied to hit nearly $75 a barrel. Today’s oil prices are seen closer to $53 a barrel.

More Biofuels Education Needed

Despite the tremendous growth in ethanol and biodiesel production over the past year, consumers still lack a basic understanding of biofuels benefits and availability.

That’s the findings of a just-released consumer survey commissioned by Pavilion Technologies and conducted by Harris Interactive.Pav Tech

Despite a surge in production and government support, only a fraction of adult drivers in the United States (5%) currently use biofuels such as an ethanol-blend fuel or biodiesel. Education and availability prove to be stumbling blocks on the road to making ethanol a market staple.

The survey found that not only do drivers lack awareness about biofuels, many are misinformed on the subject. Forty-four percent of drivers agreed that they do not understand the difference between biofuels and conventional gasoline. One in four drivers who do not use a biofuel (25%) indicated that they do not know what it is. The overall survey results suggest that many consumers are not aware that ethanol is cheaper and better for the environment than traditional gasoline and that many cars on the road today can run on ethanol blends without modification.

Other findings of the study:

Fifty-seven percent of drivers are not sure whether biofuels are more, less, or equally as expensive as traditional gasoline or diesel fuel.

Fifty-seven percent of drivers who do not use a biofuel say it is because they do not think their car can run on it.

Nearly half (47%) of drivers who do not use biofuels say they do not know where to buy them.

Of drivers who currently do not use biofuels, the overwhelming majority (95%) indicated that they could be encouraged to make the switch.

A full copy of research findings, images, and ethanol industry resources is available on-line at the Pavilloin Technologies website. Findings will also be revealed in a webcast, available for viewing at the same location on February 1.

According to their website, Pavilion is the leading supplier of control software solutions to the U.S. ethanol industry.

Missouri Sees Sharp Increase in Biofuels Investors

Another indicator of the viability of ethanol and biodiesel might be the increasing numbers of investors in the alternative fuels. In Missouri, for example, the Secretary of State’s office reports the number of the number of biofuels investments filed with the state increased from just five in 2005 to 15 last year. In this Associated Press story, government requirements are seen as the driving reason for the increase.

Federal clean air requirements have people seeking cleaner-burning additives for fuel such as ethanol and biodiesel. At the same time, ethanol’s main competitor – MTBE – has been phased out because it contaminates water supplies faster than other fuels as it dissolves in water rather than separating like oil.

Plus, states and the federal government have set benchmarks for using more alternative fuels. A federal 2005 energy law, championed by former Sen. Jim Talent, R-Mo., required the United States to use 7.5 billion gallons of renewable fuels such as ethanol and biodiesel by 2012. A Missouri law will require a 10 percent ethanol blend in most gasoline, effective next January, as long as its price doesn’t exceed traditional fuel.

On top of all that, there is a mix of state and federal subsidies for ethanol and biodiesel refineries and state tax credits for farmers who supply the agricultural products that are turned into fuel. This year’s state budget has almost $14 million of biofuels incentives – more than double the amount from two years ago.

While Missouri does have its own burgeoning ethanol and biodiesel industries, most of the companies that sought permission with the Secretary of State’s office to solicit Missouri investors were from out of state.

Ethanol Offsets Increased Gas Use

APIAmerica used more gasoline in 2006, but that increase was entirely offset by ethanol.

According to the American Petroleum Institute’s December 2006 statistics report, gasoline deliveries in 2006 increased a modest 0.8 percent from 2005 to 9.2 million barrels, or 386 million gallons, per day.

The year’s higher volume of gasoline deliveries was, in effect, met entirely by a substantial jump in the blending of ethanol into gasoline. Ethanol use in gasoline rose by more than 1 billion gallons, or nearly 35 percent, to an estimated 5.4 billion gallons in 2006. More than 40 percent of all gasoline consumed in the U.S. now includes ethanol.

That was good news to the Renewable Fuels Association. President Bob Dinneen commented, “The fact ethanol blends are making up for the entire growth in gasoline consumption means our nation is having to import less oil than would otherwise be needed.”

Smells Like Money

Poop PetrolThis week’s Associated Press Centerpiece report focuses on ethanol plants powered by manure and other waste material.

Ranchers have long been fond of saying cattle manure smells like money.

Now, folks in the business of making ethanol are smelling dollars too – in the methane gas emitted by manure at large cattle feedlots and dairies.

The article looks at several companies that are addressing the “criticism that making ethanol uses too much natural gas or coal to produce” by using more environmentally-friendly sources of energy.

Among those highlighted are Kansas-based E3 BioFuels, Texas-based Panda Ethanol and Bion Environmental Technologies.

Higher Corn and Lower Gas Prices Cut Ethanol Profits

Financial analysts are predicting dire times for the ethanol boom now that higher corn prices and lower gas prices are putting the squeeze on industry profits.

A Reuters UK article quotes from a Credit Suisse report that predicts a lower completion rate for planned ethanol plant projects.

“Back in July 2006, a new plant would have commanded returns in the 35-40 percent range using $2.50/bushel corn and $2.50 per gallon ethanol,” Credit Suisse said.

“More recent prices of $2 per gallon ethanol and $3.50/bushel corn generate implied returns of only 5-13 percent,” the report added.

Reuters also quotes a Goldman Sachs report, “Continued high levels of corn prices and low margins would make it more profitable for an integrated producer to actually sell the corn into the corn market rather than to turn it into ethanol at a lower profit.”

The Wall Street Journal reports that publicly-traded ethanol companies will be among those most impacted by lower oil prices.

As oil’s price falls, alternative-energy sources become less attractive because they usually are more expensive to produce than traditional sources. Ethanol producers could be hurt as rising corn prices send their cost of production higher, and as crude and gasoline prices fall.

Ethanol prices have been dropping sharply in the past few weeks. Dow Jones reports that national rack ethanol prices as of Monday averaged around $2.179, according to ethanolmarkets.com, compared to an average price of $2.4366 as of Jan. 10.

Shares of some ethanol producers such as Vera Sun, Aventine and Archer Daniels Midland fell earlier this month but, “the stock prices have rebounded in hopes for positive comments about renewable fuels in President Bush’s State of the Union address Tuesday.”

The Dow Jones article adds that even with the tighter margins ethanol producers can hold out for now.

Dan Basse, president of AgResource, said in a research note that “most ethanol plants contract their product sales for two to four months at a time, so corn prices will have to reach levels that produce at least a 10% margin loss“ before curtailing production.

Another analyst says “the ethanol plants least likely to have problems with the corn price hike and energy price dip are the farmer-owned co-operatives.”

ND Ethanol Plant to Run on Borrowed Steam

An ethanol plant under construction in North Dakota will be first plant in the country to use steam from a nearby power plant to generate heat instead of having its own boilers.

Blue Flint Ethanol, a joint venture between Great River Energy and Headwaters Incorporated, is in the process of building a 50 million gallon per year dry mill ethanol plant in Underwood, North Dakota – which is about halfway between Bismark and Minot.
Bush Union 06
According to the plant’s website, the Blue Flint Ethanol facility is unique in the industry. Most ethanol plants are built with a natural gas-fueled boiler to provide heat for drying. As natural gas prices have increased in recent years, coal-fueled plants have become more common. However, Blue Flint does not have a boiler. Instead, waste heat from the adjacent Coal Creek power plant is redirected to Blue Flint to supply all the heat that a boiler would provide. The result is one of the industry’s most energy efficient, environmentally friendly facilities.

The photo of the plant under construction shows the U-shaped pipes that will carry the steam from the power plant to the ethanol plant.

In an article in the Minot Daily News, general manager Jeff Zueger says, “We’re taking steam and using it directly in the ethanol conversion process. So this is pretty unique.”

Blue Flint Ethanol takes its name from the blue flint corn grown by Indian tribes that once lived in the area near the plant site. They plan to “use corn harvested in the same area as feedstock for its ethanol production, turning an ancient grain into modern automotive fuel.”

Making Ethanol From Barley

Barley Barley is another crop that has the potential to be part of the next generation of ethanol.

North Dakota’s Farm and Ranch Guide reports that it was a topic at last week’s 2007 Dakota Grains Conference in Bismarck.

Dr. Kevin Hicks, Agricultural Research Service, new hulless varieties and processing technologies such as pearling may make barley a desired crop for ethanol plants. he Eastern Regional Research Center in Wyndmoore, Penn., is involved in a five-year project researching how barley can be used in the biofuels industry.

“Two years into the research project, we’ve already made exciting discoveries to help launch barley to the ethanol industry,” Hicks told producers and others gathered for the 2007 Dakota Grains Conference in Bismarck last week.

The major problem with using barley for ethanol is the hull, said Louis Arnold, president of the North Dakota Barley Council. Arnold, who is a leading barley producer in North Dakota, said the council helped build the ethanol plant in Walhalla. In the beginning, the plant used barley, but it didn’t work out. “It (the hard shell of the barley) ate the pipes up,” he added.

Some of the new barley varieties being released have “looser hulls” and Arnold believes these new varieties will be able to play a big part in ethanol if the hull can be easily separated.

Read more here.

Who is E85 Inc.?

E85 Inc. is a name that has been popping up in cities from New Jersey to New Mexico - a company that reportedly “plans to build a billion-dollar string of ethanol plants.”

The Seattle Times did some research to find out who is behind the company and what they hope to accomplish.

Mark Dassel, E85′s senior vice president, says there’s no real mystery — he and a skeleton staff have simply been too busy to answer inquiries: “This is a 7-day-a-week, 24-hour-a-day job.”

Skimping on details, he lays out an exceedingly ambitious agenda: E85 plans to quickly put up 10 ethanol plants costing about $150 million each. Together these will produce more than 1 billion gallons of ethanol annually; the company will buy an additional 1 to 2 billion gallons from other plants, he says.

Dassel contends E85′s rapid, cookie-cutter approach means “we’re going to be the low-cost producer” when a shakeout comes.

E85 Inc. is also planning plants in Michican, Ohio and North Carolina.