Domestic Fuel

One of the great things about the Advanced Biofuels Leadership Conference is the diverse group of biofuels stakeholders with diverse points of view. Case in point, Shell Oil’s presence at the gathering, and the company’s Downstream Policy & Advocacy Manager, North America, John Reese, who makes the contention that it’s not the oil companies who are creating the E15 blend wall.

“We are really maxing out on the ability to blend ethanol into gasoline,” he says because the automakers don’t approve above E10 blends for about 95 percent of the cars and trucks on the roads now. “EPA did approve the use of E15 for 2001 and newer vehicles, but the issue is the automobile manufacturers don’t support that.”

Groups such as the Renewable Fuels Association contend differently, and even Secretary of Agriculture Tom Vilsack told me that those 2001 and newer non-flex fuel vehicles should be able to use E15 without any modifications to those vehicles. But John says we should believe those who have built and tested the vehicles. And while that’s coming from a big oil company, he says Shell supports biofuels because, frankly, the company has a stake in the success of the green energy market.

“We have a joint venture to produce ethanol, and we have interests in cellulosic biofuels going forward, so we’re really looking to find solutions to this.”

Listen to my entire interview with John here: John Reese, Shell

The U.S. Energy Information Administration (EIA) has released its April Short-Term Energy and Summer Fuels Outlook. Some report highlights include the prediction that the price for West Texas Intermediate crude oil will average $94 a barrel this year, the same as last year. The international benchmark Brent crude oi is forecast to be $4 less than last year at $108 per barrel.  According to EIA Administration Administrator Adam Sieminski, there will be continued strong economic growth in the emerging economies, particularly China, could put upward pressure on oil prices, though this would be offset somewhat by Europe’s weak economy.

A colder than expected March led to increases in residential, commercial and industrial consumption for natural gas leading to a 260 million cubic feet per day increase in the 2013 estimate of total average U.S. gas consumption from last month’s forecast. “Unusually cold temperatures in March led to larger-than-expected withdrawals of natural gas from storage,” explained Sieminski. ” The 94 billion cubic feet of gas pulled out of storage for the week ending March 29 was the largest net withdrawal for this time of year since EIA began its weekly storage data collection in 2002.”

An expected increase in natural gas prices this year contributes to a drop in natural gas use for U.S. electric power generation, and an increase in output at coal-fired power plants according to the report. Coal’s share of U.S. electricity generation is forecast to rise to nearly 40 percent in 2013 from just over 37 percent last year, but still be less than coal’s 42 percent share in 2011. The report forecasts the rising cost of natural gas is expected to reduce its share of U.S. electricity generation to 28 percent this year from just over 30 percent last year, but this is higher than its nearly 25 percent share in 2011.

“U.S. drivers are expected to pay less for gasoline this summer, on average down 6 cents per gallon from last summer, due in large part to slightly lower crude oil prices that account for 65 percent of the pump price,” said Sieminski. With more fuel-efficient cars and trucks on the highways and expected gasoline prices below last year’s level, Americans will have lower motor fuel expenses this year.”

“For diesel fuel, the average pump price is expected to be down 1 penny this summer to $3.94 a gallon. Production of distillate fuel, which includes diesel, is forecast to be 70,000 barrels per day higher,”added Sieminski.

A highly respected oil economist believes the solution to the current Renewable Identification Numbers (RINs) price issue is more sales of E85 (85% ethanol).

Economist Phil Verleger has weighed in on the RINS situation in the latest edition of Notes at the Margin, his weekly email report about news impacting the petroleum industry. “The obvious solution to the RIN price problem involves no EPA intervention and no regulatory action,” Verleger wrote. “It simply calls for boosting E85 sales.”

Verleger explains that because refiners will be required by EPA this year to have 9/10s of a RIN for every 10 gallons of gasoline, and each gallon of E85 generates 0.85 RINs, a sale of 10 gallons of E85 produces a surplus of nearly 7.6 RINS which they can sell. “My point is that when the price of RINS gets high enough, that the price of E85 on a per BTU basis will be less than the price of gasoline,” said Verleger in a phone interview with Domestic Fuel. “At some point companies will almost be willing to give away E85 to get the RINS.”

According to Verleger, the RINS issue has been created by the resistance of some refiners to the RFS. “The oil industry doesn’t like to sell less oil,” he said. They want to get the program changed so that “they can sell more gasoline and not have to use as much ethanol.”

Listen to interview with Verleger here: Economist Phil Verleger

Big Oil lobbed another attack today against the biofuels industry. Brian Jennings, executive vice president of the American Coalition for Ethanol (ACE) responded by saying the Renewable Fuel Standard (RFS) is not about the oil industry’s comfort; it is about providing cleaner American-made alternatives to consumers.

“The RFS costs taxpayers nothing and is doing exactly what Congress intended; saving consumers money at the pump and providing them access to new affordable blends such as E15. The RFS is also disrupting the lucrative choke-hold oil companies have on the market. As a result, Big Oil is desperate to repeal the RFS this year.”

Jennings continued, “With respect to Renewable Identification Numbers (RINs), every time a refiner blends a gallon of ethanol with gasoline, they get a RIN for free. When they purchase more ethanol than the annual RFS obligation, RINs are a reward and provide value to them. The fact there are 2.5 billion excess RINs available for use in 2013 is proof that over-compliance has been commonplace with oil companies. Refiners only have to buy RINs if they refuse to follow the law, and that’s what this is about – they have had more than six years to evolve and comply with the law, but have refused to adapt and change.”

“Most refiners are trying to keep an oversupply of RINs on hand, to be sure that they are able to control the marketplace. The current Big Oil hue and cry isn’t about ethanol supply; it is fear of actual competition,” concluded Jennings.

The Renewable Fuels Association (RFA) is requesting a multi-agency investigation into what they are calling the “discriminatory and unlawful conduct” on the part of the oil industry.

In a letter sent today to the Environmental Protection Agency (EPA), the Federal Trade Commission (FTC), the Department of Energy (DoE) and the Department of Agriculture (USDA), RFA requested the agencies investigate the oil industry’s conduct that is “impeding the delivery of renewable fuels to the American marketplace.”

The focus of the letter is a recounting of recent events at Zarco 66, the first marketer in the United States to offer E15.

RFA says that when Zarco 66 began offering E15 last year, ConocoPhillips “threatened to terminate Zarco 66’s franchise agreement and charge Zarco 66 hundreds of thousands of dollars in penalties unless Zarco 66 started offering “premium” gasoline—gasoline that would replace the ethanol housed in one of Zarco 66’s fueling tanks, and a gasoline that is likely to result in far fewer sales than the ethanol blends that would be available if Zarco 66 maintained the current ethanol contents.”

“For franchisees like Zarco 66, the message that the oil industry is delivering is loud and clear: Stop selling renewable fuels, or face the consequences,” said RFA president and CEO Bob Dinneen in the letter, requesting that the aforementioned agencies “investigate and put an end to the oil industry’s highly discriminatory and unlawful conduct—conduct that is impeding the delivery of renewable fuels to the American marketplace. Otherwise, Zarco 66 will simply represent the first casualty in the oil industry’s war against the marketing and delivery of cheaper, more sustainable renewable fuels.”

Read more from RFA here.

According to President Obama, America is poised to take control of our energy future, but this could be compromised due to the arbitrary cuts caused by the so-called “sequestration” now taking place. During his speech last Friday at Argonne National Laboratory in Chicago, Illinois, the President pointed out the cuts would affect the federal research projects, “at a time when the country is poised to take control of our energy future.”

“After years of talking about it, we’re finally poised to take control of our energy future. We produce more oil than we have in 15 years. We import less oil than we have in 20 years. We’ve doubled the amount of renewable energy that we generate from sources like wind and solar — with tens of thousands of good jobs to show for it.  We’re producing more natural gas than we ever have before — with hundreds of thousands of good jobs to show for it.  We supported the first new nuclear power plant in America since the 1970s. And we’re sending less carbon pollution into the environment than we have in nearly 20 years.”

While focusing much of his speech on his proposed actions to replace the cuts, he also discussed his proposal to create an Energy Security Trust that would use revenues generated by oil and gas development on federal lands to support new research and technologies that will shift cars and trucks to non-oil fuels. With gas prices high during the past month, Obama urged Congress to adopt his approach.

The renewable energy industry responded to the President’s remarks as well as his proposed Energy Security Trust.
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The Iowa Renewable Fuels Association (IRFA) and the American Coalition for Ethanol (ACE) along with a full house, celebrated a “Century of Subsidies” for Big Oil today with a miniature version of the Capitol cake and ice cream. The cake was created by Charm City Cakes especially for the event that highlighted the fact that oil industry has received certain subsidies since 1913 – 100 years.

“Today’s ‘Century of Subsidies’ birthday party was not about saying every tax subsidy the oil companies get is bad,” said Rick Schwarck, President of the IRFA and CEO of Absolute Energy, an ethanol plant near St. Ansgar, Iowa. “Today’s ‘Century of Subsidies’ birthday party was a reminder to policy makers that Big Oil has benefited from taxpayer support for 100 years – and not just with tax subsidies, but mandates and loan guarantees and other policies.”

“So when the debate heats up over the Renewable Fuel Standard (RFS) and other renewable fuels policy, the debate should be a full, fair and factual discussion that takes an honest, hard look at how federal policy has been tilted in favor of Big Oil for a century,” continued Schwarck. American consumers deserve a level playing field that does not hold back homegrown, low-cost renewable fuels options.”

U.S. Senator Chuck Grassley (R-Iowa), who was voting on budget issues during the event submitted a statement in response to one hundred continuous years of oil subsidies. “America needs ‘all of the above’ for its energy policy, including domestic oil and gas, renewable energy, conservation, and emission-free nuclear. Oil, gas and nuclear all receive longstanding federal support. Any changes to support for renewables should be made within a broad-based energy policy discussion. Targeting renewables outside of a comprehensive debate doesn’t make any sense when it comes to good policy, and it’s intellectually dishonest if the effort is driven by competition that receives federal support.”

U.S. Senator Tom Harkin (D-Iowa) added, “This issue comes down to one thing: supporting renewable energy and our country’s energy security, all while creating good, middle class jobs that sustain a green economy in states like Iowa. That is why keeping the Renewable Fuel Standard in place is so critical. I salute ACE and the Iowa Renewable Fuels Association for recognizing these contributions and continuing their support at a time when it is needed the most.”

On Tuesday and Wednesday, nearly 70 ethanol advocates from around the country met with Congress to discuss the Renewable Fuel Standard (RFS), E15 and other ethanol related topics as part of ACE’s Biofuels Beltway March. The point of the press event was to show the need to counterbalance the “Century of Subsidies” and other policies that favor petroleum, in part by protecting the federal RFS. The RFS cracks open the petroleum monopoly to give consumers non-petroleum choices at the pump. Consumers benefit from market access to lower cost renewable fuels like E15 and E85.

Listen to the Century of Subsidies press event here: Celebration of a Century of Subsidies

View the ACE Biofuels Beltway March 2013 Photo Album.

The Iowa Renewable Fuels Association (IRFA) is teaming up with the American Coalition for Ethanol (ACE) during their annual Biofuels Beltway March fly-in in Washington, D.C. to hold a celebration for Big Oil. Monte Shaw, executive director of IRFA, said they decided it would be a great time to hold a birthday party to celebrate the oldest, continuous oil subsidy, specific to the oil industry, that was enacted in 1913.

“And it dawned on us a few months ago that this is in fact the 100th birthday for oil subsidies and this calls for a party, and I think people can assume our tongues are firmly planted in our cheeks when we say we’re going to celebrate that fact,” said Shaw.

The “Century of Subsidies” Birthday Party will feature a thematic birthday cake sculpture from Charm City Cakes, made famous by its Food Network reality television show Ace of Cakes and take place at 430 Dirksen Senate Office Building (Washington, DC) on Thursday, March 14, 2013 from 2:30 pm to 3:30 pm. On hand will be Senators Chuck Grassley (Iowa) and Amy Klobuchar (Minn) and Senator Tom Harkin (Iowa) has also been invited.

The ethanol blenders tax credit, that Shaw explained actually went to Big Oil if they blended ethanol, expired at the end of 2011. “So little old ethanol somehow manages to get by without it but the 100 year old oil industry, the most profitable industry in the history of the world, still needs that taxpayer crush to get by at least that’s the way they tell it,” said Shaw.

Shaw explained there are several oil subsidies with the oldest federal subsidy going back to 1913. However, he said, to be fair they are not going to make the case that they all should go away. “What we’re saying is, they’re there. And we’re sick and tired of members of Congress who don’t know any better or don’t want to know any better, saying, oh, why do you need the RFS?  Why do you this, why do you need that? Can’t you just compete on a level playing field?”

“When the fact of the matter is, our competition has had 100 years of subsidization. They’ve had nearly 40 years of a petroleum mandate written into federal law that says unless you drive a flex-fuel vehicle, you will purchase gasoline with a minimum amount of petroleum (85% percent of petroleum). The playing field is overwhelmingly tilted to the oil industry and that has got to be a part of all discussions around the RFS,” said Shaw.

Learn more about the “Century of Subsidies” in my interview with Monte: Century of Subsidies

This Valentines Day, spread some cheer by telling Big Oil just how much we heart them – NOT! On this love filled holiday, Fuels America sent out a Valentine Day video, “We Love Oil” to show that although love is in the air this week, America is suffering from a broken heart caused by oil.

How do you love oil? “I love how when the oil companies are making more profits than any other industry in history, ever, they still get billions in subsidies ever year. I mean, that’s awesome.”

Awesome indeed. This video must be watched and go viral!

Fuels America says it is time to end America’s love affair with this finite and expensive fuel source that has led to higher gas prices, and climate change-inducing weather that makes us the wrong kind of hot.

So what are you waiting for? Tweet this out already @FuelsAmerica.

As always, the Global Perspectives and Washington Insiders panels at the National Ethanol Conference were as entertaining as ever. The panels routinely feature representatives from other organizations that may not share the same viewpoint of the Renewable Fuels Association (RFA), allowing the opportunity for some interesting dialogue.

Global Renewable Fuels Alliance spokesperson Bliss Baker served as the moderator/referee for the global panel which featured RFA CEO Bob Dinneen; Canadian Renewable Fuels Association president Scott Thurlow; Rob Vierhout, Secretary General of ePURE; UNICA CEO Elizabeth Farina; and Poul Ruben Andersen with Novozymes A/S.

Noting the panel placement of Canadian Thurlow between Dinneen and Vierhout, Baker commented, “Some of you may be familiar with Canada’s tradition of peacekeeping,” he said. “Scott may have to assume that role of peacekeeper when we talk about our first issue” which was Europe’s trade challenge to U.S. ethanol imports. “I find it a little bizarre that we are in this spat that we are in today, attacking one another,” Baker said, throwing the floor open to Veirhout to explain “what were you thinking?”

Listen to the panel here: NEC 13 Global Panel

This year’s Washington Insiders panel included (L to R) – Marty Durbin, Executive Vice President, American Petroleum Institute; Shane Karr, Vice President, Federal Government Affairs, Alliance of Automobile Manufacturers; Louis Finkel, Executive Vice President, Government Affairs, Grocery Manufacturers Association; and James Massie, Principal, The Alpine Group (the “insider’s insider”).

Interesting exchange on the panel came between Dinneen and GMA’s Finkel regarding the impact of the Renewable Fuel Standard. Challenging Finkel’s claim that the production of corn ethanol under the RFS has had a “significant” impact on food costs, Dinneen asked if he would say that oil prices also have a significant impact on the price of food. “I don’t think it has a significant impact,” Finkel replied. “I think it has an impact on the cost of transporting our food.”

“You’re a good advocate for your industry,” Dinneen responded.

Listen to the whole panel here: NEC 13 Insiders Panel

2013 National Ethanol Conference Photo Album

2013 NEC Golf Tournament Photo Album

Yesterday the American Petroleum Institute (API) announced a new TV advertising campaign. According to API’s Senior Manager, Cindy Schild, the ad is designed to highlight the importance of the nation’s refining industry. She said a strong energy future for our nation depends in part on our ability to refine and distribute the fuels we need – and that sound decisions on the Renewable Fuels Standard, transportation infrastructure such as the Keystone XL pipeline, and refinery regulations could contribute to a more robust, competitive refinery sector that would continue to support America’s economy and strengthen its national security.

In response, Tom Buis, CEO of Growth Energy, responded by saying, “The lengths to which Big Oil will go to protect their absolute lock on fuels market are astounding. While they often pay lip service to the importance of renewable fuel for our country’s energy needs, at every turn they work to undermine them. Biofuels have helped reduce our dependence on foreign oil and created a robust domestic renewable fuels industry.” Buis will be speaking during the Iowa Renewable Fuels Summit and Expo on January 30, 2013.

“Just the other day, API discussed how the RFS was broken, citing the blend wall as the primary challenge in a workable RFS. However, when it comes to the blend wall, Big Oil need only look in the mirror to see who is maintaining the status quo by protecting it,” Buis continued. “This is their entire play – if blend wall can’t be broken, the RFS won’t work. But Big Oil is maintaining the blend wall by erecting every possible barrier to bring increased blends of renewable fuel to the marketplace. While they opine for a free market, they are singlehandedly denying consumers a choice and savings at the pump by preventing a lower cost, high performance alternatives, such as E15.
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U.S. Representative Mike Pompeo (R-Kan) has introduced a bill dubbed the “Energy Freedom and Economic Prosperity Act.” The bill eliminates tax credits for new industries attempting to compete with petroleum while maintaining billions in taxpayer subsidies for Big Oil. Furthermore, the bill would immediately eliminate every tax credit for alternatives to petroleum, including cellulosic ethanol, biodiesel and wind. Yet the bill only eliminates two petroleum tax credits (marginal well incentives and enhanced oil recovery credits) that only go into effect when crude oil prices are well below current levels.  Ironically, despite the immediate elimination of all things alternative, the oil tax subsidies would not be eliminated until the end of 2014.

“Rep. Pompeo’s bill ought to be named the ‘Petroleum Monopoly and Big Oil Prosperity Act,’” said  Monte Shaw, executive director of the Iowa Renewable Fuels Association (IRFA). It’s hard to take seriously the Congressman’s comment that we can’t afford ‘taxpayer-backed subsidies to companies that don’t need them’ when his bill does not eliminate a single oil subsidy currently in use. Rather the bill leaves intact oil subsidies that date back literally 100 years for the most profitable industry in the history of the world. If the question is, ‘When can Big Oil stand on its own two feet without a taxpayer crutch?’ then Rep. Pompeo’s answer is apparently ‘not yet.’”

If the bill were to be passed as is, the petroleum tax subsidies that currently cost taxpayers billions each year including:

• Percentage depletion allowance
• Intangible drilling costs expensing
• Deduction for tertiary injectants
• Exception from passive loss limitations for oil and gas
• Oil and gas excess percentage over cost depletion

“This bill simply tilts government policy even further in favor of petroleum,” continued Shaw.
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The ethanol industry is categorizing the latest attack on the Renewable Fuel Standard (RFS) by the American Petroleum Institute (API) as more of the same.

In response to API’s call this morning to eliminate the RFS “because it is not working well and because it will force higher concentrations of ethanol in gasoline that could harm vehicles,” Growth Energy CEO Tom Buis said, “This is a classic example of the fox guarding the chicken coop. Really? Special interests will stop at nothing to discredit the success of renewable fuels created right here at home to ensure their lock on the fuels market goes unchecked.”

Bob Dinneen, President and CEO of the Renewable Fuels Association, referred to the API position as the classic “dog bites man” journalism example. “API wants to repeal a highly successful program that has reduced gasoline imports and stimulated investment in renewable energy resources. API doesn’t like the RFS because it has taken ten percent of their barrel and reduced consumer costs. Americans like and support the RFS for exactly those reasons.”

Iowa Renewable Fuels Association Executive Director Monte Shaw was equally blunt. “The reason API is so concerned now is that E15 is poised to become widely available. Without the RFS, Big Oil can continue to hide behind its Century of Subsidies and the federal petroleum mandate to ignore lower cost ethanol blends like E15.”

Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section, says the oil industry continues its efforts to undermine the success of the RFS. “Since the inception of the RFS, API has used every regulatory and legal ploy available to delay and block implementation of the law. Since these efforts appear to have failed, they are now mounting a public relations effort to convince lawmakers to repeal the RFS. Congress should see right through this effort.”

Presidential candidate Mitt Romney is rolling out his energy plan with the goal to “achieve North American energy independence by 2020 and establish America as an energy superpower in the 21st century.”

With a strong emphasis on opening up and developing more domestic sources for petroleum, the Romney plan does include a small mention of renewable sources and one line that is very welcome to ethanol supporters: Support increased market penetration and competition among energy sources by maintaining the RFS and eliminating regulatory barriers to a diversification of the electrical grid, fuel system, or vehicle fleet.

“We applaud Governor Romney’s commitment to domestic renewable fuels and his recognition of the importance of the RFS,” said Renewable Fuels Association President and CEO Bob Dinneen. “By working to remove barriers to market access for renewable fuels, as Governor Romney suggests, America can help spur an economic recovery while securing our energy future. We look forward to hearing more details of Governor Romney’s energy ideas as the campaign continues.”

Romney’s plan also calls for ensuring “that policies for expanding energy development apply broadly to energy sources,from oil and gas exploration, to coal mining, to the siting of wind, solar, hydroelectric, and other renewable energy facilities.” The candidate will be making a speech about his energy policy in New Mexico today.

According to a recent ORC International survey, 81 percent of Americans are concerned about “increased drought” and other extreme weather conditions. Conducted on behalf of the Civil Society Institute (CSI), the poll results showed that concerns about drought, of which the many states have been severely affected, go hand in hand with worries about water shortages.

Three out of four Americans think that, “with all the current concern about severe drought and the risk of water shortages, America needs to start focusing more on alternative energy sources, such as wind and solar, that require less water.”

Other key findings include worry over shortages of safe drinking water due to drought and “the diversion of water for energy production” is the No. 1 overall concern in 10 drought-stricken states including, Arizona, California, Colorado, Florida, Georgia, Missouri  Nevada, New Mexico, South Carolina, and Texas. Nationwide, 64 percent of respondents are “very concerned” about the prospect of  “possible shortages of safe drinking water” due to drought and diversion for energy production.

On average, 85 percent of Americans believe availability of ample clean water should be a top national priority for the country. In addition, 89 percent of respondents said that want an energy/water “road map” for the country. People believe that, “U.S. energy planning and decision making must be made with full knowledge and understanding about the availability of water regionally and locally, and the impact this water use from specific energy choices has on their economies, including agricultural production.”

“We now understand all too well the harsh realities of the current drought and its relationship to changes in the climate from global warming. America’s ‘all of the above’ non-solution for electricity generation is a dead-end path – one requiring vast amounts of water for coal-fired power plants, nuclear reactors and the fracking extraction of natural gas,” said Pam Solo, president, Civil Society Institute.
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