Domestic Fuel

Former National Security Advisor Robert C. McFarlane will speak at the 6th Annual Iowa Renewable Fuels Summit on January 24. McFarlane’s address is titled, “Foreign Oil: Breaking Our Addiction Through Consumer Fuel Choice.” The Summit is sponsored by the Iowa Renewable Fuels Association (IRFA).

Prior to serving as President Reagan’s National Security Advisor, McFarlane was appointed as the President’s Special Representative in the Middle East. After numerous years of public service, he founded Global Energy Investors, LLC, and co-founded the United States Energy Security Council. The Council’s mission is focused on diminishing the inordinate strategic importance of oil, which stems from its virtual monopoly over transportation fuel.

“We’re privileged to have Mr. McFarlane join the Summit program to underscore the hazardous results of the oil monopoly on the U.S. economy,” said Lucy Norton, IRFA Managing Director. “His message of consumer fuel choice will make clear how flex-fuel vehicles and renewable fuels can play a significant role in reducing our country’s dangerous foreign oil dependence.”

The Summit and trade show will be held in Des Moines, Iowa at Veterans Memorial/Community Choice Credit Union Convention Center from 8:30 a.m. to 3:30 p.m. The event is free and open to the public. Pre-registration is required.

As expected, the California Air Resources Board today filed an appeal in the U.S. Court of Appeals for the 9th Circuit to challenge last week’s ruling that the California Low Carbon Fuel Standard (LCFS) violates the commerce clause of the U.S. Constitution.

The Renewable Fuels Association (RFA) responded to the expected action by noting that the judge who issued the ruling has made a good decision in determining that the LCFS discriminates against Midwestern ethanol producers. “Judge O’Neill agreed, basing his ruling on strong evidence and sound constitutional law,” said the RFA statement. “In the Court of Appeals, RFA will vigorously defend the result obtained at the District Court level.”

The judge’s ruling found that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct and the court therefore issued an injunction against the enforcement of the LCFS in California.

RFA’s Matt Hartwig provides a good overview of the ruling and its implications on the E-xchange Blog. “The RFA is not opposed to carbon-reducing programs but believes any such initiative should be undertaken at the national level, thus avoiding a state-by-state patchwork of unworkable and possibly unconstitutional policies,” notes Hartwig. “If based on the best available science and grounded in real world perception, a national low carbon fuel strategy that complements the Renewable Fuel Standard would be something the RFA and its members would support.”

Corn growers are pleased with the ruling last week by a Federal District Court judge in Fresno, California that the state’s Low Carbon Fuel Standard (LCFS) violates the Commerce Clause of the U.S. Constitution and is therefore unconstitutional. The ruling is in response to a suit filed in December 2009 by the Renewable Fuels Association and Growth Energy asserting that the LCFS violates the Commerce Clause by seeking to regulate farming and ethanol production practices in other states.

“This ruling reaffirms our position that the state of California violated the U.S. Constitution when it created a low carbon fuel standard punitive to farmers and ethanol producers outside of the state’s border,” said National Corn Growers Association President Garry Niemeyer. “Corn farmers are good stewards and advocates for thoughtful, fair strategies that will improve our environment through the advancement of biofuels. We hope that this ruling will lead to an inclusive discussion where regulators join other stakeholders to find effective renewable energy solutions.”

The judge ruled that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct and that the California Air Resources Board (CARB) failed to establish that there are no alternative methods to advance its goals of reducing GHG emissions to combat global warming.

Abengoa Bioenergy is starting 2012 by shutting down production indefinitely at the company’s two smallest ethanol plants, located in Portales, New Mexico and Colwich, Kansas.

Company officials say the plant closures are temporary and due to current depressed market conditions for ethanol. The two plants amount to 55 million gallons per year of production.

Abengoa is a major biofuels producer in Europe the United States and Brazil. The company has a total of six ethanol plants in the United States, with two cellulosic ethanol facilities planned for York, Neb., and Hugoton, Kan. Abengoa Executive Vice President Chris Standlee serves as chairman of the Renewable Fuels Association.

A Federal District Court judge in Fresno, California has sided with America’s ethanol industry in ruling that the State of California’s Low Carbon Fuel Standard (LCFS) violates the Commerce Clause of the U.S. Constitution and is therefore unconstitutional.

In a joint statement, Renewable Fuels Association President and CEO Bob Dinneen and Growth Energy CEO Tom Buis said: “The state of California overreached in creating its low carbon fuel standard by making it unconstitutionally punitive for farmers and ethanol producers outside of the state’s border. With this ruling, it is our hope that the California regulators will come back to the table to work on a thoughtful, fair, and ultimately achievable strategy for improving our environment by incenting the growth and evolution of American renewable fuels.”

On this claim the Court found that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct. As a result, the Court issued an injunction. Judge O’Neill also ruled that CARB failed to establish that there are no alternative methods to advance its goals of reducing GHG emissions to combat global warming.

The ruling allows California to immediately appeal the decision to the U.S. Court of Appeals for the 9th Circuit and the ethanol industry is prepared to defend the decision that the LCFS is unconstitutional in any appeal that may be filed.

Ethanol industry developments in 2011 have set the stage for a new era. The Renewable Fuels Association has identified five top stories for the ethanol world from 2011 that will change the future.

They are:

1. EPA approval of 15 percent ethanol for use in 2001 and newer vehicles
2. The end of the blenders tax credit and secondary tariff on ethanol imports
3. Surge in U.S. ethanol exports
4. New strides in advanced and cellulosic ethanol development
5. Emergence of the integrated biorefinery model

In this edition of “The Ethanol Report,” Renewable Fuels Association president and CEO Bob Dinneen comments on the year in review and some of the top ethanol stories of 2011.

Listen to or download the Ethanol Report here: Ethanol Report on 2011 in Review

The amount of land in the United States devoted to growing crops declined between 2002 and 2007, which indicates that increased ethanol production is not using up more land.

According to the report, “Major Uses of Land in the United States 2007,” total cropland was down by 34 million acres in 2007 to its lowest level since 1945. Cropland accounted for 18 percent of the total land area in the country – the third largest land use behind forest (30%) and grassland (27%).

Renewable Fuels Association (RFA) president Bob Dinneen said the new report shows increased ethanol production has not resulted in expansion of total U.S. cropland or a decline in grassland and forest.

“Using real data from the real world, this report from USDA shows yet again that U.S. cropland is not expanding in response to increased ethanol demand,” said RFA President Bob Dinneen. “The report also shows that forest and grassland increased dramatically during a period when ethanol production more than tripled.”

The smallest total use of land in the U.S. is urban at 61 million or three percent. However, while urban land use accounts for the smallest percentage, the USDA report shows that it accounts for the biggest increase in land use, quadrupling between 1945 and 2007, increasing at about twice the rate of population growth over
this period. Urban land use increased almost 2 percent from 2002 to 2007.

“It is ironic that the land use debate has fixated on biofuels, when the actual culprit of land conversion has clearly been urban and suburban sprawl,” Dinneen said. “Subdivisions full of mini-mansions, big box stores, shopping malls, and parking lots are encroaching on productive farmland across the country.”

Read the USDA report here.

Today, the Renewable Fuels Association (RFA) wrote to Environmental Protection Agency (EPA) Administrator Lisa Jackson seeking an explanation for the delay in releasing the 2012 Renewable Fuel Standard (RFS) requirements. According to statute, volume requirements for the coming compliance year were due by November 30th.

The entire letter from RFA President and CEO Bob Dinneen to Administrator Jackson is as follows:

December 20, 2011

Sincerely,
Bob Dinneen
President and CEO

The Renewable Fuels Association (RFA) sends holiday greetings to all.

There’s a hot new craze called the “Ethanol Shuffle” that’s sweeping seaports from Sao Paulo to Los Angeles. No, it’s not a new dance, this shuffle is all about the “confounded realignment of the global ethanol trade.”

Renewable Fuels Association (RFA) Vice President of Research and Analysis Geoff Cooper wrote about the “Ethanol Shuffle” this week on the RFA E-xchange Blog. Basically, it’s about the shuffling of sugarcane ethanol from Brazil to California to meet that state’s Low Carbon Fuels Standard (LCFS) – at the same time, Brazil is importing lower priced corn ethanol from the United States to make up for not only the ethanol it is exporting to California, but the shortfall that country has experienced in ethanol production recently.

So, that’s how the “Ethanol Shuffle” works. California imports sugarcane ethanol from Brazil rather than corn ethanol from Nebraska or Kansas; and in turn, corn ethanol from the Midwest travels to Houston or Galveston via rail, then is shipped to Brazil via tanker to “backfill” the volumes they sent to the U.S. Picture the irony of a tanker full of U.S. corn ethanol bound for Brazil passing a tanker full of cane ethanol bound for Los Angeles or Miami along a Caribbean shipping route.

Cooper explains the sweet irony of it all in this edition of “The Ethanol Report.” Geoff Cooper on the Ethanol Shuffle

Advanced biofuel producers are calling on Congress to take action now to ensure that tax incentives for cellulosic ethanol continue past 2012.

In a letter to Congressional leaders, the Advanced Ethanol Council (AEC) asked for a multi-year extension of the Cellulosic Biofuels Producer Tax Credit (PTC) and the Special Depreciation Allowance for Cellulosic Biofuel Plant Property, both of which are set to expire December 31, 2012.

AEC Executive Director Brooke Coleman noted in the letter that the incentives “are vital to the ongoing development of the domestic advanced ethanol industry. To ensure stability in the marketplace, and prevent unnecessary job losses, Congress should provide long‐term extensions of these provisions (5+ years).”

As new ethanol biorefineries are beginning construction, the AEC emphasized the importance of consistent federal policy to this kind of multi-billion dollar investment.

The AEC is asking Congress to extend these important tax incentives this year as part of a final tax extenders package as they are set to expire next year. “As Congress considers the extension of a number of tax provisions for the clean energy sector, we would also like to highlight the importance of timing. The mere prospect of the expiration of the PTC and Special Depreciation Allowance for cellulosic biofuels in 2012 will start to affect projects that take 18 months to build, and could drive our industry into a series of ‘fits and starts’ that has dampened investment in other domestic clean energy sectors for decades.”

A number of ethanol supporting organizations recently sent a letter to the chairman and ranking members of the U.S. Senate and House Appropriations Committees urguing them to oppose a proposal by Reps. John Sullivan (R-Okla.) and Gary Peters (D-Mich.) that would delay commercialization of next generation ethanol.

The groups, which includ Growth Energy, the Renewable Fuels Association, the American Coalition for Ethanol and the National Corn Growers Association, oppose a proposal by Sullivan and Peters to include language in the FY12 omnibus appropriations package that would prohibit the U.S. Environmental Protection Agency (EPA) from using any appropriated funds to implement the E15 waiver.

The Sullivan-Peters proposed language — which did not receive a vote during this year’s appropriations process or a hearing in the Energy and Commerce Committee — is aimed at derailing and altering the long-standing process by which new fuel blends are brought into the marketplace. The EPA approved E15 after a more exhaustive study and data collection than any other of the 11 previously-approved fuel waiver petitions.

The letter from the organizations noted that “preventing the EPA from implementing the use of E15 for cars, pickups and SUVs made in model year 2001 and newer, further contributes to our nation’s reliance on foreign oil. Extensive testing has been done on E15 and it has been found to be a safe and effective fuel for use in the vehicles approved in the waiver. There has been no evidence to the contrary that would indicate problems in any vehicle regardless of vintage.”

Further, the EPA’s decision does not make E15 mandatory. Consumers are not required to use E15. Gas stations will not be required to sell E15. And the EPA will require a fuel label that clearly delineates that using E15 in model year 2000 vehicles, small engines and marine engines is illegal.

Lastly, the Sullivan-Peters language would inhibit new and innovative alternatives to fossil fuels. We are looking toward cutting-edge innovation to move to new ethanol feedstocks, like plant wastes, wood chips and switchgrass. The Sullivan-Peters language would solidify the status quo-a 90 percent mandate of our fuel supply from oil and would prevent American-made ethanol from being made available to consumers.

The latest government data on exports for October shows continued strong demand overseas for U.S. ethanol.

According to the data, exports of denatured and undenatured ethanol which are not eligible for VEETC totaled 121.4 million gallons. That is just short of the record 127.4 million gallons of exports set in July 2011.

On the Renewable Fuels Association E-xchange Blog, RFA’s Vice President for Research and Analysis Geoff Cooper notes that Brazil continues to be the leading destination for U.S. exports, receiving a total of 50 million gallons in October. Canada and the EU continued to be other top export markets. Through the first 10 months of 2011, U.S. exports stood at 867.9 mg, more than double the 2010 export total. The U.S. is on pace to export more than 1 billion gallons in the calendar year.

Meanwhile, the U.S. imported 13.1 mg of ethanol for fuel use from Brazil in October, presumably for compliance with the Renewable Fuel Standard’s (RFS) advanced biofuel requirement and California’s Low Carbon Fuel Standard (LCFS). Imports of sugarcane ethanol from Brazil have picked up significantly in recent months at the same time U.S. exports of corn ethanol to Brazil have grown.

Cooper says that this “shuffling effect” will be the subject of an extensive analysis and blog post he is preparing for this week.

Read more from the E-xchange Blog here.

Brazilian and U.S. ethanol interests are challenging each other over ethanol trade policy.

The U.S./Brazil Council and the U.S. Chamber of Commerce wrote a joint letter to Congress last week asking that the U.S. secondary tariff on imported ethanol be allowed to expire as scheduled at the end of the year, together with the Volumetric Ethanol Excise Tax Credit (VEETC).

Meanwhile, Congressman Charles Rangel (D-NY) introduced legislation last Friday that would extend the 54-cent per gallon ethanol import tariff until the end of 2014. “My legislation would preserve duty-free ethanol for the U.S. as well as ensuring that the gains achieved for the Caribbean remain intact,” stated Rangel.

The legislation, which is not backed by the U.S. ethanol industry, was immediately condemned by the Brazilian Sugarcane Industry Association (UNICA), saying that “certain parties who benefit from the current, anti-competitive arrangement and their allies in Congress are trying to change the rules by making the tariff a true trade barrier rather than a subsidy offset.”

“As the world’s top producers, the United States and Brazil need to lead by example in creating a free market for clean, renewable fuel,” said Leticia Phillips, UNICA’s Representative in North America. “That means putting an end to trade distorting tariffs on ethanol.”

Today, the Renewable Fuels Association (RFA) in turn challenged Brazil’s commitment to free trade.

RFA president and CEO Bob Dinneen wrote his own letter to the U.S./Brazil Council and the U.S. Chamber of Commerce. “Please know that while we share your desire for the removal of trade distorting practices between the U.S. and Brazil, we are very concerned about the Council’s singular and biased focus on U.S. ethanol policy, and its failure to address more timely recent trade distorting practices engaged in by Brazil,” wrote Dinneen, pointing out specific actions taken by Brazil that limit U.S. access to that market.

“Recently, the Brazil government reduced the volume of ethanol that can be blended in fuel from 25% to 20%. As a result of this mandated reduction in blend volumes, U.S. exports of ethanol to Brazil are being dramatically reduced from levels that would have otherwise occurred had Brazil left the mandate at 25%,” said Dinneen.

“Second, while your letter to Congress is correct to state that Brazil’s 20% import tariff has been suspended, you fail to further explain that this suspension was only on a temporary basis. While Brazil’s Chamber of Foreign Trade (CAMEX) did indeed reduce its tariff in April of 2010, the temporary suspension is scheduled to expire one day after the U.S. tariff is set to expire,” Dinneen added, noting that the tariff reduction instituted in April 2010 is scheduled to end the day after the U.S. tariff is set to expire at the end of this month.

Read the RFA letter here.

The Renewable Fuels Association (RFA) has sent a letter to the Senate Environment and Public Works Committee leadership refuting statements that were made in a Nov. 30th letter sent to the committee by ethanol critics.

According to RFA, the letter sent by ethanol critics misrepresented the findings of two recent papers on American biofuels and American biofuel policy — one from the National Academies of Science (NAS) and one from United Nations Committee on Food Security (CFS). Authors of the letter, including corporate livestock, food manufacturing, fossil fuel production, and other industries, are seeking a hearing on domestic biofuels and the Renewable Fuels Standard (RFS).

In a follow-up letter sent this week, RFA provides additional research confirming the benefits of domestic biofuel production. Specifically, RFA took exception to assertions made that the NAS study offered definitive conclusions about the environmental impacts of ethanol or the efficacy of the Renewable Fuels Standard (RFS).

RFA also highlighted a finding of the NAS report that was omitted in the letter that, “using biofuels holds potential to provide net environmental benefits compared to using petroleum-based fuels…”.

RFA notes that even some participants in the NAS research work have questioned its incompleteness and lack of definitive conclusions. It has been reported by the American Association of Advancement of Science that Dr. Virginia Dale, an ecologist at the DOE’s Oak Ridge National Laboratory believes the NAS report, “is not based on the most current information” and could be “misleading if the assumptions of the analysis are not considered.” Dr. Dale encouraged readers to “read the details with care,” a point which RFA notes was left out of the letter to the committee.

Regarding the UN CFS study, the RFA noted that no mention of the RFS or specific biofuel policies were included in the study.

RFA believes the letter and claims sent by the ethanol critics does not warrant a hearing by the Senate EPW Committee. However, if a hearing is granted, RFA encourages the committee to hear from witnesses from the biofuels industry and academia who can testify to the benefits of the biofuels industry.