Ethanol Industry Takes LCFS Fight to High Court

The nation’s ethanol industry has decided to take its fight against the California Low Carbon Fuel Standard (LCFS) to United States Supreme Court.

rfagrowthThe Renewable Fuels Association (RFA) and Growth Energy today filed a joint petition with the U.S. Supreme Court for “certiorari to make a final determination relating to the constitutionally flawed LCFS.” The action follows a decision by the Ninth U.S. Circuit Court of Appeals in January to deny rehearing en banc in the litigation regarding the California law.

A joint release from the two ethanol groups stated, “California, through adoption of the LCFS, has violated the most basic, structural features of interstate federalism. LCFS not only discriminates against out-of-state commerce, but it seeks to regulate conduct in other States in direct contravention of our constitutional structure and at the direct expense of Midwestern farmers and ethanol producers.”

The January decision by a divided panel of the the Ninth Circuit Court reversed a previous District Court finding that the California LCFS violates the Commerce Clause of the U.S. Constitution and is therefore unconstitutional. The ethanol groups note that California officials admit the LCFS seeks to regulate greenhouse gas emissions occurring in other states “by rewarding and punishing industrial and agricultural activity taking place outside California” and in doing so systematically favors California, which they contend is unconstitutional.

E15 Comes to Cambridge, Nebraska

Anew E15 pump in Cambridge NebraskaAnew Travel Center in Cambridge, Nebraska is now offering E15 to consumers for use in 2001 and newer vehicles. E15 is currently available in 14 states.

“Anew Travel Center is pleased to announce the opening of our new fueling facility,” said Cliff Meeuwsen, member of Anew. “Through the installation of the Flex Fuel dispensers, we aim to promote the use of cleaner vehicles while also displacing the country’s dependence on foreign oil and creating employment positions that will benefit the local economy.”

The station will have ten pumps—five Flex Fuel dispensers that offer ethanol blends including E10, E15, E30 and E85, and five flexible fuel dispensers that offer biodiesel blends including B0, B2, B5 and B20. In doing so, Anew Travel Center also joins more than 3,000 retailers throughout the nation who have the infrastructure available to provide motorists with a choice of various ethanol blends.

“Seeing retail leaders like Anew, MAPCO Express, Murphy Oil and Minnoco offering E15 continues to validate that there is a viable market for higher ethanol blends. When given the choice, consumers will seek the fuel that costs less, is better for our environment and improves the performance of their vehicles. The momentum building around E15 is really quite impressive,” stated Tom Buis, CEO of Growth Energy whose association assisted Anew in the process of offering E15 at the pump.

UNICA Pleased With CARB Proposal

UNICAThe Brazilian sugarcane ethanol industry is pleased with the California Air Resources Board (CARB) proposal last week to revise Indirect Land Use Change (iLUC) numbers for biofuels.

Brazilian Sugarcane Industry Association UNICA applauded CARB for “once again declaring that sugarcane ethanol is one of the most environmentally friendly biofuels supplying today’s market.”

UNICA North America Representative Leticia Phillips notes that the CARB staff proposal to revise ILUC estimates under the state’s Low Carbon Fuel Standard shows the Brazilian sugarcane biofuel generates about half the indirect emissions that CARB originally suggested during its rulemaking process in 2009. “If implemented, these revised ILUC estimates will confirm what numerous other studies have shown: sugarcane ethanol is one of the most environmentally friendly biofuels supplying today’s market,” she said in a statement.

Phillips adds that UNICA looks forward to providing detailed comments to this CARB proposal as they have done in the past.

Analysis: Despite EPA Issues, Ethanol Profitable

While most of the news around ethanol seems to focus on its issues with the government, a new analysis shows that the green fuel is in one of its longest profitability runs ever. This analysis from the University of Illinois shows that despite more recent news about troubles with the Environmental Protection Agency (EPA) and its proposal to cut the amount of ethanol in the Nation’s fuel supply, things have been pretty positive for the ethanol industry lately.

There have been basically four sub-periods in terms of net profits: i) high profits from 2007 through mid-2008, ii) breakeven from mid-2008 through the end of 2011, iii) losses for 2012 through early 2013, and iv) high profits again from spring 2013 through the present. The most recent period is the longest run of uninterrupted profits since the series began in early 2007. During this one-year run, profits averaged $0.93 per bushel of corn processed and reached a new high of $2.55 per bushel in early December 2013. The picture presented here is certainly not one of an industry that has suffered because of recent policy proposals.
ethanolprofits1
The author cites several factors that could keep the recent run of profits from continuing for a longer period of time, including DDGS prices at unprecedented high levels, as well as documented “co-integrating” relationship between ethanol and corn prices, simply, if the ethanol price is too high relative to corn prices, then either the ethanol price must fall or the corn price must rise.

Rail Problems Impacting Ethanol Supplies

snow-trainOne impact of the long, cold winter across the nation has been weather-related rail disruptions that are taking a toll on ethanol supplies and production.

The record winter weather patterns that have caused repeated snowstorms have resulted in stalled trains, frozen controls and increased demand for rail cars. All that has made it difficult to move ethanol to the Northeast.

The Energy Information Administration reported last week that stocks of ethanol stood at 15.9, down 2.4% from the previous week, the lowest level of the year so far. Stocks are well below the 20-day supply mark for the second week in a row and on the East Coast stocks of ethanol fell to their lowest level on record last week, at 4.6 million barrels compared to 6.4 million this time last year.

“Naturally, limited regional mobility leads to limited regional supply which can impact prices, but market observers believe this is a temporary situation that will soon be corrected,” said Renewable Fuels Association Executive Vice President Christina Martin.

The backlog in transportation is causing ethanol plants to slow production somewhat. According to EIA data, ethanol production averaged 869,000 barrels per day (36.50 million gallons), down 25,000 barrels from the previous week and the lowest in eight weeks.

The backups have also been delaying grain shipments from last year’s record crop but rail company officials, including BNSF and CSX, say they are working hard to get everything back to normal.

DuPont Claims Win in Ethanol Enzyme Lawsuit

DuPont_logoDuPont is claiming victory in a lawsuit over a patent on an enzyme to help produce ethanol. Ethanol Producer Magazine reports the case between DuPont-owned Danisco and Novozymes has been ordered to be returned to the U.S. District Court for the Northern District of California.

A DuPont spokesperson noted that the ruling was a win for Danisco DuPont. DuPont acquired Genencor International, an ethanol enzyme company, in 2011. “A panel of three judges ruled that the trial court should not have dismissed as premature Danisco’s declaratory judgment lawsuit against Novozymes given the two companies’ extensive history of patent litigation and Patent Office disputes involving alpha amylase enzymes (genetically modified industrial enzymes used for converting corn and other plant material into ethanol),” the statement said. “In the lawsuit that is now revived, Danisco sought a declaration that (1) its RSL alpha amylase enzymes did not infringe Novozymes’ ‘573 patent; (2) that the Novozymes ‘573 patent was invalid, and (3) that Danisco’s ‘240 patent had priority over Novozymes’ ‘573 patent.”

Meanwhile, Novozymes officials say they now consider the case closed, and the “decision does not in any way change or limit Novozymes’ product offerings to customers and the decision does not affect Novozymes’ financial outlook.”

EPA “Add-Up” for RFS & Biodiesel Tax Credit

The government’s proposed change in how to figure biodiesel and ethanol use for purposes of the Renewable Fuel Standard (RFS) could end up being a boost for the green fuels. This analysis from the University of Illinois looks at how the EPA’s method of “adding-up” the market potential for E10 and E85 ethanol, biodiesel and other non-ethanol fuels changes how we should look at the RFS and Biodiesel Blenders Tax Credit.

In its proposed rule for the 2014 RFS, EPA announced a plan to waive a portion of the RFS from 2014 on, a notable break from previous proposals.

The EPA proposal maintains the hierarchy, but replaces the set targets of the Energy Independence and Security Act (EISA) with annual estimates of how much renewable fuel use is ‘expected’ (Figure 1). The Add-Up method sets the biomass-based diesel requirement at the higher of a base level of 1.28 billion gallons or expected use… Higher RIN prices would appear to lead to additional E85 consumption would then potentially lead to greater future mandates.
addup1
A blender’s tax credit, such as the $1.00 per gallon credit given to biodiesel blenders which expired at the end of 2013, gives an incentive to blenders to use more biofuel. Under the EPA’s previous method, the credit may simply make the mandate less costly to achieve… If the RFS was then easy to exceed or if obligated parties wanted extra RINs to carry into the next year, biodiesel use might rise but perhaps not very much. If extra biomass-based diesel was used beyond its own requirement, then it might displace ethanol used for advanced or overall requirements.

The analysis concludes that using the Add-Up method, the RFS renewable fuel requirements will respond to market conditions and other policies, not remain at set EISA targets.

Gas Station Offers Ethanol, Biodiesel and Your Mail

protecfuel1The folks in Raleigh, N.C. can now pick up their mail when the stop in to fill up on ethanol or biodiesel. The New Bern E85/B20 Crown Station, the first station in that city to offer both E85 and B20, held a grand opening for the new Village Post Office housed within its store.

“We’re pleased to have New Bern Station as a Chamber member,” said Chamber member, Richard Urquhart. “We welcome them as our newest Village Post Office to the Raleigh area and wish them much success going forward.”

“The USPS plans to use our E85 in its area flex-fuel vehicles. We hope that alternative fuel will become the future norm for commuters and state and local government agencies to help support domestic fuel initiatives and meet certain environmental targets,” said Girish Amin, owner, New Bern Crown Station. The USPS, in a 2011 Sustainability Report, demonstrates its commitment to targets; see “What we are doing” USPS environmental initiatives report.

Protec Fuel supplies the E85 for the station. Officials hope that one day they’ll be able to provide EPA-approved retrofits that can convert vehicles to use the high blends of ethanol.

Editorial from Father of Ethanol

merle-andersonThe man who is known as the “Father of Ethanol” in the United States is still busy advocating for the industry at the well-seasoned age of 93.

Merle Anderson, one of the founding members of the American Coalition for Ethanol (ACE), just recently penned an excellent editorial for the Grand Forks Herald about his favorite subject and his observations are just as sharp as ever when it comes to the fuel he has been promoting for decades. Here’s some excerpts his letter entitled “Government ‘myths’ limit ethanol’s full use” that he wrote with input from his friend and fellow ethanol advocate Orrie Swayze from Watertown, S.D.:

First, we must remember that Henry Ford favored E30 for his Model T. After that, what could go wrong, did go wrong as government teamed with oil, and — in a joint effort to keep ethanol out of gasoline markets — created misleading myths that E30 was illegal and would ruin engines…

Merle debunks several of those myths, including that higher ethanol blends void car warranties and that gas station pumps are unable to handle higher blends such as E30. “I really chuckle at that one, because standard gas station pumps were the only pumps available when E85 was introduced nearly 20 years ago, and they still are safely pumping E85.”

Merle concludes – My dream is every American and all of agriculture — including our sugar beet industry — would have access to an ethanol market that is not limited by EPA and big oil’s nonsense or the ethanol blend wall that has been in place since the first Model T was built.

Read Merle Anderson’s entire editorial here
.

CARB Stresses ILUC Update is Preliminary

carb-14-2California Air Resources Board (CARB) staff spent four hours on Tuesday afternoon detailing reviews made of Indirect Land Use Change (iLUC) models and analysis for the state’s Low Carbon Fuel Standard (LCFS), strongly stressing that their results are preliminary.

“This is a work in progress,” said Air Resources Engineer Anil Prabhu as he began his power point presentation detailing the history of the iLUC analysis used by the agency, recommendations by the Expert Work Group (EWG), and much technical scientific information. Staff also stressed repeatedly that CARB is seeking feedback from all stakeholders on the preliminary conclusions presented.

carb-workshopThe 84 slide presentation of details on how CARB arrived at the values they are proposing for corn ethanol, sugarcane ethanol, soy biodiesel, canola biodiesel and sorghum ethanol was interspersed with dozens of questions from stakeholders and scientists present or listening in on the webcast.

Among those challenging the CARB results several times was Steffen Mueller with the University of Illinois-Chicago and Genscape, a member of the original CARB EWG. “There’s a lot of basic information missing (here) to engage in a productive discussion,” Mueller said, noting that the Agro-Ecological Zone – Emissions Factor (AEZ-EF) model presented was from 2011 and wondering when they would be able to see the updates CARB made to the model. “There’s been a lot of republications since 2011,” he said, to which CARB staff responded it would be updated “probably within the next week or two.”

Much of CARB’s data was presented based on Purdue University’s GTAP (Global Trade Analysis Project) work, including some research done by agricultural economist Wally Tyner, who called in to set the record straight. “What’s been presented today is really CARB’s work and not Purdue’s work,” said Tyner, who mainly called to dispute the Yield Price Elasticity assumptions made in the CARB presentations, which he says is “basically incorrect.” Wally Tyner comments and CARB staff response

Tyner also noted that there “is a lot of uncertainty in emission factors” as well as a great deal in land use change, and that seemed to be the theme of the entire meeting with nearly a quarter of the power point presentation being devoted to “Evaluation of Uncertainty” and “Why Results Vary Between Studies.” While the CARB staff repeatedly reminded those present that they welcomed any new or updated data that could be supplied, it was overwhelmingly clear that there is no scientific consensus whatsoever on the topic of indirect land use change. Continue reading

Ethanol Exports Start 2014 Higher

Exports of U.S. ethanol started 2014 at the highest level seen in over two years.

rfa-annAccording to U.S. Census Bureau data, ethanol exports in January totaled 86 million gallons, which is the highest monthly volume since December 2011. “Exports were up a third from December 2013, while imports remained sparse, meaning the United States was a net ethanol exporter by the widest margin in over two years,” according to Renewable Fuels Association research analyst Ann Lewis, writing on the E-xchange blog.

Brazil was the top customer for U.S. ethanol, beating out Canada for the number one spot, importing nearly 23.9 million gallons, the largest monthly volume to Brazil in two years. Exports to Canada dropped 36% from December to 18.8 million gallons (mg). Rounding out the top destinations were the United Arab Emirates (12.4 mg), India (10.7 mg), the Philippines (5.5 mg), and Mexico (3.3 mg).

Meanwhile, exports of the ethanol co-product distillers dried grains (DDGs) were lower in January, down 9% to 903,827 metric tons (mt). Lewis notes that China was again the leading destination with 344,147 mt. “However, China’s market share scaled back to 38%, in contrast with its majority stake (56%) of U.S. DDGs exports averaged over the second half of 2013,” writes Lewis. Mexico (140,664 mt), South Korea (77,977 mt), Vietnam (48,514 mt), and Japan (44,505 mt) rounded out the top five DDGS markets in January.

POET-DSM Joins Advanced Ethanol Council

aeclogoPOET-DSM Advanced Biofuels is the newest member to join the Advanced Ethanol Council (AEC).

“As cellulosic ethanol becomes a growing force in fulfilling biofuel requirements in the U.S., it’s important for POET-DSM Advanced Biofuels to work with other industry leaders to help shape policies that ensure consumer understanding of – and access to – its environmental, economic and energy-security benefits,” said Steve Hartig, General Manager – Licensing for POET-DSM Advanced Biofuels.

The joint venture between ethanol production company POET and Royal DSM, a Netherlands-based bio science company, is nearing completion of a 25 million gallon per year cellulosic ethanol biorefinery called Project LIBERTY, located in Emmetsburg, Iowa. The technology developed for the facility is available for licensing to develop other low-carbon, cellulosic ethanol production plants.

“As a key player in the industry that has the proven know-how to scale up its advanced technology to commercial scale, POET-DSM is a strong, strategic addition to the Council’s ranks as cellulosic ethanol moves from the development stage to full-scale commercial production in 2014,” said Brooke Coleman, Executive Director of the AEC.

CARB Considers Small ILUC Change for Ethanol

carb-14-2The California Air Resources Board (CARB) today is proposing potential changes to indirect land use change (iLUC) penalties under the Low Carbon Fuel Standard (LCFS) which some scientists and the ethanol industry say are a start, but don’t go far enough.

Based on a review of materials made available by CARB prior to the workshop, Renewable Fuels Association (RFA) President and CEO Bob Dinneen said, “CARB appears to be taking a small step in the right direction, but the science shows a much larger reduction to the iLUC penalty for corn ethanol is warranted.”

RFA-logo-13Dinneen notes that a group of 14 well-known scientists, including five members of CARB’s own expert work group, sent a letter to CARB last week recommending that the penalty should be lowered by 50-80 percent, rather than the 20 percent CARB is proposing. “The larger issue here is that in the five years since the LCFS was adopted, there have been no indications that the policy has caused—or will cause—any kind of land use change,” said Dinneen. “Amazon deforestation has fallen to its lowest rate on record, U.S. cropland area continues to shrink, and U.S. forested area continues to increase. All of this suggests the iLUC hypothesis needs to be critically re-evaluated.”

Dinneen believes that California consumers will be negatively impacted if CARB maintains the iLUC penalty for corn ethanol. “Under CARB’s apparent proposal, grain ethanol—the lowest-cost renewable fuel used in the California market today—will ultimately be replaced with higher-priced imported fuel,” said Dinneen.

The CARB workshop on the proposed Indirect Land Use Change values and how they were determined by staff will be webcast today beginning at 1:00 pm Pacific time. During the webcasts, CARB will also be accepting feedback and questions sent via email to sierrarm@calepa.ca.gov.

Analysis: Export Market a Bright Spot for US Ethanol

Ethanol producers might be fretting about the government’s proposal to lower the amount of the green fuel to be mixed into the Nation’s fuel supply. But this analysis from the University of Illinois points out that those Renewable Fuel Standard (RFS) numbers don’t matter when it comes to ethanol going over the border and to foreign shores, a bright spot for the American industry.

An important point to note is that ethanol or other biofuels produced in the US and exported for consumption overseas do not count toward the blenders’ RFS obligations. The Renewable Identification Numbers (RINs) associated with exported biofuels are retired and no longer eligible for use towards RFS compliance. Thus, exports are not substituted for domestic consumption but rather represent additional demand. Ultimately, exports provide a path around, rather than through, the ethanol blend wall by allowing the domestic industry to produce greater volumes of ethanol than the blend wall limitation implies for domestic use.
ethanolexports
The analysis goes on to look at markets for American ethanol in Brazil, Canada, the European Union, Mexico and other foreign consumers and how it could take up the amount proposed to be lowered in the RFS.

Biodiesel, Ethanol Educator Wins Ag Teaching Award

junco1A high school chemistry teacher is honored, in part, for his work to teach his students about biodiesel. This article from The Grower says Gustavo Junco, an advanced-placement chemistry teacher at West Broward High School in Pembroke Pines in south Florida, taught his class how to power a go-kart with biodiesel made from corn and sunflower seed oil and picked up the 2014 Excellence in Teaching about Agriculture Award.

The award is sponsored by the Florida Agriculture in the Classroom, a Gaineville-based non-profit group that promotes agricultural education to students ranging from kingergarten to high school.

Junco has been teaching agro-eco0logy and advanced-placement chemistry to 10th, 11th and 12th graders at West Broward High for 10 years.

His chemistry students grow sunflowers in the school garden, then extract oil from the seeds that is then converted to biodiesel.

In addition, Junco’s honors chemistry class is turning sugarcane juice into cellulosic ethanol.

He’ll join three other Florida teachers going to the 2014 National Agriculture in the Classroom conference this summer in Hershey, Pa.