Domestic Fuel

The ethanol industry has an unlikely ally in its opposition to the California Low Carbon Fuel Standard that bans the use of corn ethanol in that state. A diverse multi-state coalition that is primarily concerned with the rule’s impact on oil and gas is also opposed.

The Consumer Energy Alliance, a coalition of over 170 energy consumer groups and 300,000 individual members across the United States, is one of the plaintiffs opposing the California LCFS, which was just ruled unconstitutional by a district court judge.

“Not only is an LCFS unconstitutional, but it would also hurt the California economy, farmers, consumers and truckers by raising fuel prices sharply and burdening consumers,” said CEA Executive Vice President Michael Whatley. “And ironically, the policy will have the opposite of its intended effect by creating more greenhouse gases in the long run.”

The CEA’s main concern about the California LCFS is the potential for it to be used to prevent certain sources of petroleum from being converted into fuels such as gasoline, diesel fuel, kerosene and heating oil and that it could adopted nationwide, resulting in lost jobs and declining household revenue.

After the district court judge this week rejected a motion by the state to continue implementing the LCFS despite his ruling that it was unconstitutional, the California Air Resources Board (CARB) decided to appeal to a new court in the 9th Circuit in hopes of a different outcome.

“The decision by CARB to appeal the decision by the District Court is disappointing, but unfortunately not surprising. We look forward to a decision by the Ninth Circuit upholding the District Court and confirming the unconstitutional nature of California’s low carbon fuel standard,” said Whatley, urging CARB to “scrap this faulty program” instead of appealing the decision.

The idea of turning oil into salt may sound like something that should be done in a science lab but Dr. Gal Luft says it’s something that Congress can do with a simple piece of legislation.

Luft, who is executive director of the Institute for Analysis of Global Security, explained his analogy between oil and salt at the 6th Annual Iowa Renewable Fuels Summit in Des Moines on Tuesday.

“Salt used to be the most strategic commodity of all because it was the only way to cure food,” said Luft. “That changed with the invention of canning and refrigeration. Those two simple technologies essentially stripped salt of its strategic status.”

“Just like salt dominated food preservation, oil today dominates transportation,” he continued. “And just like salt’s strategic status was diminished through those simple inventions, oil’s strategic status can be diminished through the technology of flexible fuel vehicles.”

That’s why Luft strongly advocates the simplest solution to diminishing the stranglehold oil has on the transportation industry, and that is requiring all new vehicles sold in the United States to be capable of running on a variety of fuels. “Whether it is ethanol or methanol or butanol, whatever it is, let’s give people choices,” he said, noting that there is just such a bill pending in Congress called the Open Fuel Standard Act.

Luft and co-author Anne Korin wrote a book about the analogy between salt and oil and the importance of fuel choice, called “Turning Oil into Salt”, which was reviewed here on Domestic Fuel in 2009.

Listen to Luft’s address to the 6th annual Iowa Renewable Fuels Summit here: Gal Luft address

Listen to a brief interview with Gal Luft here: Gal Luft interview

Photos from 2012 Iowa Renewable Fuels Summit

GROWMARK and FS Energy have given a whole new meaning to energy efficiency with the wireless Energy Business System (wEBS) which has streamlined their fuel delivery system.

GROWMARK Information Management Solutions director Keith Milburn says wEBS was developed as a fuel billing solution that makes the record keeping process easier by providing instantaneous information such as fuel type, tank sizes, taxes and credits.

Milburn says they developed wEBS when the fuel business started to get more complicated a few years ago. “We no longer just handle gasoline and diesel,” he said. “We have high sulfur, low sulfur, bio or soy diesel, ethanol blends – and all the relevant taxes have made it very complicated given those combination of blends.”

“There’s two components of wEBS,” Milburn says. “There’s the back office or centralized data set and then the hand held on the truck level.” The back office includes not only customer information, but every tank that each delivery truck services. “The system identifies each tank with a bar code that tells who the customer is, what product types, relevant taxes, discounts, and if there have fuel contracted at a certain price,” Milburn explains. So all the delivery driver has to do is pump the fuel and within minutes the transaction is recorded and an email confirmation is sent to the customer.

Milburn says this “evolution in the energy business” was first introduced as a pilot program in January 2010 with two trucks and it has since grown to incorporate about 95 trucks that essentially function as mobile hot spots to communicate information. And he says the system is continuing to evolve with the technology.

Find out more about the wEBS system in this interview with Keith Milburn here: Keith Milburn Interview

The world is heading for an insecure and inefficient energy future unless there is a “bold change of policy direction” soon, warns a new report from the International Energy Agency (IEA).

The 2011 edition of the World Energy Outlook (WEO), released by IEA last week in London, said there is still time to act, but the window of opportunity is closing. “Growth, prosperity and rising population will inevitably push up energy needs over the coming decades. But we cannot continue to rely on insecure and environmentally unsustainable uses of energy,” said IEA Executive Director Maria van der Hoeven. “Governments need to introduce stronger measures to drive investment in efficient and low-carbon technologies.”

According the report, oil demand will rise 14% between 2010 and 2035, from 87 million barrels per day in 2010 to 99 million in 2035. All net increases in oil demand will come entirely from the transportation sector in emerging economies as economic growth pushes up demand for personal mobility and freight goods.

“This is a deeply disturbing picture that the IEA has painted for the world,” said Bliss Baker, spokesperson for the Global Renewable Fuels Alliance. “Such increases are unsustainable making it imperative that all countries quickly bring real crude oil alternatives to market.”

Baker says that according to the report, an amount equivalent to twice the current total oil production of all OPEC countries in the Middle East must be discovered and brought to market by 2035.
“This is a wakeup call to the world that we need to further promote biofuels to meet this ever growing energy demand,” he said.

The IEA also highlighted the potential for supply disruptions in the Middle East and North African countries as a potential threat to world oil supplies saying that “If, between 2011 and 2015, investment in the MENA region runs one-third lower than the $100 billion per year required…consumers could face a substantial near-term rise in the oil price to $150/barrel.”

As presidential candidate Rick Perry returned to Iowa today, the Iowa Renewable Fuels Association (IRFA) took the opportunity to question the Texas governor’s plan for energy tax incentives.

After the IRFA pointed out that Perry’s energy plan would end ethanol tax credits in less than two months, but allow oil tax subsidies to continue indefinitely, a Perry spokeswoman told Bloomberg News that Perry would “work with Congress to phase” out oil subsidies “over the next 20 years.”

“How in the world does Governor Perry justify 20 more years of tax subsidies for oil companies?” asked IRFA President Walt Wendland. “The renewable tax credits cease at the end of this year. But despite that some of the oil subsidies go back 100 years, now we’re told that Perry wants to give oil companies another 20 years of subsidies. Given this extreme position, Perry’s talk about not picking winners and losers and having a level playing field is simply hollow rhetoric.”

IRFA notes that, in addition to favoring tax benefits for oil, Gov. Perry opposes the federal renewable fuels standard (RFS) but his energy plan would leave intact the “federal petroleum mandate” – mandating that over 95 percent of vehicles on the road be filled with a fuel that is a minimum of 85 percent petroleum. Perry has proposed 18 specific policy recommendations in his energy plan to promote the production and use of oil and natural gas, “but not a single policy recommendation to promote the production and use of renewable fuels.”

“The Perry energy plan is not good for Iowa’s economy or America’s security,” says Wendland.

Governor Perry is in eastern Iowa tonight and then plans a major policy roll-out on government reform Tuesday morning.

Two reports released earlier this week concluded that commodity market speculation is largely to blame for increasing prices of food and energy. The reports were issued in advance of the October 18 meeting of the Commodities Futures and Trading Commission (CFTC) which placed limits on speculation in a variety of commodities including oil, corn, gold and natural gas.

One report came from the non-profit organization Better Markets, which concluded, “Research analyzing commodity markets for the last 27 years shows that Wall Street’s speculative trading through commodity index funds is causing market disruptions, interfering with price discovery, increasing the costs for businesses to hedge, and needlessly pushing prices higher for all Americans.”

A second report from economic analysis firm Cardno Entrix had similar findings, concluding that commodity prices are “likely higher than justified purely by fundamentals and the commodity markets have become more volatile as the volume of trading by index funds and other non-commercial traders has increased sharply.”

In examining the activity of speculators in the corn futures market in the context of supply and demand fundamentals, the Cardno Entrix report found that “speculation is a major factor behind the recent sharp increase in both the level and volatility of corn prices.”

At this week’s CFTC meeting, federal regulators decided to cap the volume of futures trading for 28 different agricultural commodities, energy and metals in the hopes of limiting the impact of speculative trading on consumer prices.

Texas Governor and Republican presidential hopeful Rick Perry donned a hard hat at a Pennsylvania steel plant on Friday to announce his “Energizing American Jobs and Security” plan that he says will create over a million jobs and “reduce dependence on hostile foreign oil.”

“We are standing atop the next American economic boom – energy – and the quickest way to give our economy a shot in the arm is to deploy American ingenuity to tap American energy. But we can only do that if environmental bureaucrats are told to stand down,” said Perry.

“I believe in an “all of the above” energy plan that encourages the development of all our conventional and renewable sources,” he said, calling for the elimination of all “subsidies and mandates that punish consumers and skew the energy marketplace, leveling the playing field for all energy industries.”

The Perry plan would expand energy exploration offshore and on federal and private lands across the country by executive order and basically eliminate the EPA. However, while it touts an “all of the above” approach, some ethanol leaders believe it would promote oil above alternatives.

“The Perry plan would leave America dependent on that single fuel – petroleum – with OPEC in charge of its price,” said Iowa Renewable Fuels Association President and CEO of Golden Grain Energy Walt Wendland. “The Perry plan would leave intact the federal petroleum mandate. The Perry plan would leave in place the fuel distribution monopoly of oil companies.”

Wendland continued. “But the most indefensible part of the Perry plan is that it would lock in tax subsidies for petroleum while eliminating them for all other competing fuels. That might make sense in Texas, but it’s a stupid policy for America. Governor Perry has said he doesn’t want the government to pick winner and losers. But the Perry energy plan does just that – and foreign oil is the winner.”

The Perry plan would “phase out direct subsidies and tax credits that distort the energy marketplace” but “preserve tax incentives for research and development.” IRFA notes that the tax credits for ethanol and biodiesel are set to expire at the end of the year while petroleum tax subsidies are in the tax code permanently with no scheduled expiration dates and some have existed since 1913.

Two international organizations are recommending reform of fossil-fuel subsidies to improve the economy and the environment.

An analysis by the International Energy Agency (IED) and the Organisation for Economic Co-operation and Development (OECD) found that governments and taxpayers spent about half a trillion dollars last year supporting the production and consumption of fossil fuels and that removing such subsidies would raise national revenues and reduce greenhouse-gas emissions.

OECD and IEA say fossil fuel subsidies “create wasteful use of energy, contribute to price volatility by blurring market signals, encourage fuel smuggling and lower competitiveness of renewables and energy efficient technologies.”

The G20 leaders in 2009 agreed to phase out subsidies that “encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change”. According to the IEA, since that agreement subsidies for fossil fuel globally have increased by $110 billion to $409 billion in 2010 and could reach $660 billion by 2020 despite the G20 countries commitment.

“As we strive to develop alternatives to oil we must recognize that alternative fuels are not competing on a level playing field,” said Bliss Baker, spokesperson for the Global Renewable Fuels Alliance. “These massive multi-billion dollar crude oil subsidies completely outweigh current biofuel incentives and are a serious obstacle to the development of cleaner greener alternatives. Oil has a huge competitive advantage financed by global taxpayers.”

Baker notes that the G20 will meet in France next month and the issue of oil subsidies is on the agenda. “It is time for the G20 to show leadership and reverse this practice of never-ending subsidies to big oil,” Baker said. “It is time to move beyond crude oil and into a world with sustainable alternatives such as biofuels and other renewable forms of energy.”

The Global Renewable Fuels Alliance (GRFA) is calling comments made this week by a Qatari government advisor about biofuels contributing to world hunger “self-serving.”

At a global grains summit in Turkey on Monday, Quatari food security program advisor Mahendra Shah was quoted as saying, “Biofuels will trigger an increase in agricultural prices. Biofuels will result in another 120 million people hungry, just because we’re growing biofuels.” He cited a study by the Organization of the Petroleum Exporting Countries Fund for International Development (OFID) which claims the use of crops for biofuels is forecast to raise food prices by 30 percent to 50 percent by 2050.

Noting that the report cited was funded by OPEC’s International Development arm, GRFA spokesperson, Bliss Baker said, “This so-called report from 2009 cannot withstand any level of academic scrutiny and is a self serving attempt to distract people from the real impact that energy prices are having on global commodities.”

“Qatar, a key OPEC member and promoter of this report, derives 85% of its export earnings and over 70% of its government revenues from crude oil. Qatar’s agenda is to promote crude oil and discredit alternatives like biofuels,” Baker added.

According to GRFA, there is evidence that demonstrates that the OFID report is wrong, including a 2011 study by the International Energy Agency that says “by 2050, biofuels could provide 27% of total transport fuel” and will “not compromise food security”. The GRFA recently published data showing a clear and direct link between crude oil prices and the UN FAO’s Food Price Index.

I felt like an academic when I read this week’s book, “The Powers That Be Global Energy For The Twenty-First Century And Beyond,” although author Scott L. Montgomery wanted the book to be “fun.” I sported my black geek glasses and curled up in a chair at a local coffee shop and attempted to give off the personae that I’m smart. Although I’m not sure anyone was fooled, I’m definitely smarter about our country’s energy options now than I was before I read the book.

This is an extremely in-depth look at what our energy landscape looks like today. It also reviews where we stand, as a world, with regard to resources and options as well as politics and policies that are driving the future. In addition, it looks at where we are headed.  As I look at our country, I’ve felt for a long-time that we are “energy illiterate” and need to become better students of energy education. While Montgomery agrees to some degree, he feels the problem lies more in lack of curriculum and the inability for people to learn about energy in a nonpartisan setting.

Montgomery writes, “Energy matters are critical to understand because they are fundamental to our way of life and because they are the subject of endless misconception, misrepresentation, and, as already noted, myth.”

Throughout the book, Montgomery takes an approach that many other authors have not and that’s the view that he doesn’t categorize energy as “dirty or clean” or necessarily “evil versus good.”  He explains that fossil fuels help build and transport renewable sources and also reminds us that every type of energy has an impact on the environment. Yes everyone, there is no “renewable” energy source that is developed, produced or transported without a fossil fuel.
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A CNN Money report this week offered some sobering statistics on the true cost of our addiction to oil.

According to the report, about 3,000 of the Army casualties reported in Iraq between 2003 and 2007 were protecting fuel convoys. That is one out of eight killed or wounded during that time period. The report notes, “Among the many incentives pushing the military to use less oil, reducing the number of casualties it takes to protect vulnerable fuel convoys is one of the most important.” The military used 5.5 billion gallons of fuel in 2010, or 3,555 for each active military member. That compares to less than 1,000 gallons for U.S. civilians. The military uses a full 80% of the energy consumed by the federal government.

That’s why initiatives like the one announced this week by the U.S. Departments of the Navy, Energy and Agriculture to develop more aviation and marine biofuels are so important. Thanks to Stephanie Dreyer of Growth Energy for the tip on the CNN Money report. Check out her blog post on “Measuring our oil addiction by more than just Dollars and Cents”, about our nation’s risky dependence on Middle East oil and the dangerous impact it has on the lives of our military.

I read an unusual book this week. “Energy, Convenient Solutions,” by Howard Johnson. The book was part Energy 101, part manifesto, part conspiracy theory. It began with a look at various forms of energy ranging from fossil-fuels to biofuels – to nuclear energy. From there, Johnson laid out his manifesto, per se, or his ideas on energy, our current state and what the future could or should look like. The end of the book reviewed factors that make it difficult to effect change as well as highlighted several “hate campaigns” that have been lobbied against big oil and nuclear energy.

Johnson says the real purpose of the book is to present many different ideas about the generation, transport and use of energy. “The study of these ideas and the efforts to make them into realities can result in excellent and viable solutions in years, instead of decades. Creative solutions are sure to be found that require few and inexpensive infrastructure changes and by using both new and existing technologies.”

Now, before I continue, some of you will accuse me of being in the pockets of Big Oil. I’m not. I’m simply reviewing the author’s book and the thoughts contained therein. What makes the diversity of energy books so compelling is the fact that each author has his or her own ideas, predictions and solutions.

Speaking of predictions, Johnson outlines a few in his book. First, he notes that the largest energy growth sector is expected to be in electricity and the largest growth product will be nuclear energy followed by geothermal. He believes there will be a decline in coal-fired power plants unless carbon sequestration technologies come a reality, and also believes wind and solar energy will require long-term substantial subsidies to compete, and even so, may never be cost competitive. In addition, he predicts hydropower will stay fairly stagnant due to environmental concerns and finally believes electric vehicles will dominate and vehicles fueled by liquids (such as gas or biofuels) will be phased out. Needless to say, like so many others, Johnson does not believe first generation biodiesel or ethanol is a solution but does have hope for things such as algae-based biofuels.
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Today U.S. Senators Jeff Merkley (D-OR), Tom Carper (D-DE), Tom Udall (D-NM) and Michael Bennet (D-CO) introduced the Oil Independence for a Stronger America Act today in an effort to eliminate dependence on foreign oil by 2030 and create a National Council on Energy Security that would be charged with providing recommendations to the President and Congress to ensure America’s energy goals are met. More specifically the act calls for more production and use of electric vehicles, increase in travel options (more public transportation including high-speed trains), infrastructure improvements, development of alternative transportation fuels and reduce the use of oil to heat buildings.

“America’s dependence on oil from the Middle East, Nigeria, and Venezuela makes us increasingly vulnerable to economic and national security risks,” said Merkley. “American entrepreneurs and workers have the ingenuity and grit necessary to break this addiction to foreign oil – the challenge is whether politicians in Washington are willing to choose American strength over vulnerability.”

With all of the proposed pieces of alternative energy legislation that have been introduced and voted on over the past few weeks, as an aside, I thought I would provide a bit of education on how a bill becomes a law. Remember, School House Rock?

Now that you know how the process works, let’s see what the industry is saying.

Michael McAdams, President of the Advanced Biofuels Association said, “This legislation authored by Senators Carper, Merkley and Bennet is precisely the way our nation must rethink, and how Washington must confront, our energy challenges. By resisting the past temptations of picking a winner, the bill instead offers a comprehensive approach that focuses on the future of all biofuels, including advanced drop-in, algae, and cellulosic fuels to deliver as many gallons to back out foreign oil as quickly as possible.”

He concluded, “Developing renewable energy alternatives is an inevitable part of our shared global future and America should help lead the way. This bill puts us on the road to doing just that by encouraging the development of a robust and thriving domestic advanced biofuels market.”

The Oil Independence for a Stronger America Act would reduce oil consumption in the U.S. by over 8 million barrels per day by 2030, enough to end the need for oil imports from beyond North America.

Woe is a country who can’t break its dependence on foreign oil. But how do you make such a bold move when our entire society is built upon its wares? And even more so, how do you break the chains when there are no other alternatives? This are some of the topics discussed in this week’s book, “Life Without Oil: Why We Must Shift To A New Energy Future,” by Steve Hallett with John Wright. Hallett is a professor in the department of Botany and Plant Pathology at Purdue and Wright is an energy and environmental journalist.

The premise of the book is that the world is running out of oil while at the same time depleting itself of its natural resources. These two issues can combine to cause destruction and complete collapse of a society. The book begins by highlighting some of the societies that have disappeared due to lack of resources whether it be water or trees or others. One of the most famous case studies he uses is that of Easter Island, now owned by Chile, and the irony that although the people knew their future was in jeopardy due to diminished resources, they used them all anyway. Will this be society today?

Hallett is not a fan of biofuels as a solution to our problems. He also believes renewable energy, such as wind or solar, will only become mainstream when it is the only option. He also doesn’t think we will be laughing 30, 40, 50 years from now about how peak oil and climate change were myths.

In terms of the future energy sources, Hallett believes it will be one in which nuclear and hydrogen play major roles.
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Reading books about the renewable energy industry shouldn’t be all about education. That’s why this week I took a “mini” vacation and read the novel “The H Factor,” by L.E. Indianer. This fast pace story closely follows the triumph of two college students attending Georgia Tech University who using hydrogen, create the energy silver bullet. But basking in their invention doesn’t last long – the creators’ lives are threatened by global interests who don’t want hydrogen to succeed.

The students created a patented, cylindrical contraption that cost effectively and efficiently converts water to hydrogen with no emissions. Rather than paying the $1 million plus for a real hydrogen car (the hydrogen fuel cell cars are less), the students’ discovery can be put on any car or truck for less than $10k. For all things oil, this game changer must be quashed at all costs.

Hydrogen is one of the most common and combustible elements known to man and many believe that someday technology will be able to manipulate it in a means that is could save the world. Great premise for a senior thesis deducted the two main characters, students Marc and Gerri who had this discussion to kick off their project.

“Anything that requires oil-based fuel today needs to be replaced by some other energy source, or a combination of sources. There’s no question about it, and H could be the starting point for us,” said Marc.

“Can you imagine not being dependent on foreign oil…oil that produces the billions of dollars that militant Islam is trying to use to destroy our country?” asked Gerri.

Sound familiar? This is the battle cry of the renewable energy industry.

Well needless to say, evil oil wants the world to be dependent on its products and the lengths the oil companies and foreign regime make for some high drama that hits very close to home. While this was a fun, fictional read, lets hope that Indianer is not a clairvoyant, at least in the sense that a silver bullet would be welcome, but not the war that comes with it.