Domestic Fuel

Agriculture Secretary Tom Vilsack today announced that Fiscal Year 2009 funding is once again available again for three USDA Farm Bill programs to promote increased production of biomass and bioenergy.

Applications for the Biorefinery Assistance Program, which uses loan guarantees to develop, construct, and retrofit commercial-scale biorefineries, must be received by June 1, 2010. Applications are also being accepted for remaining FY 2009 funding under the Repowering Assistance Program, which provides for payments to biorefineries in existence when the Farm Bill was passed to replace the use of fossil fuels in their operations with renewable energy from biomass. Biorefineries interested in obtaining funding must apply by June 15, 2010.

Finally, those biomass producers eligible under the Bioenergy Program for Advanced Biofuels may also apply to receive payment from remaining FY 2009 funds. Applications must be received by May 30, 2010. Under this program, payments are made to eligible producers in rural areas to support and ensure an expanding production of advanced biofuels. Payments are based on the amount of biofuels a recipient produces from renewable biomass, other than corn kernel starch. Eligible examples include biofuels derived from cellulose, crop residue, animal, food and yard waste material, biogas (landfill and sewage waste treatment gas), vegetable oil and animal fat.

At the recent Commodity Classic, Secretary Vilsack noted that the administration is focused on expanding the biofuels industry. “We’re going to make sure that it is a national industry, not just focused in one particular area, one particular region, or one particular feed stock. There are enormous opportunities here in all parts of the country. Enormous opportunities for farmers and ranchers, enormous opportunities for rural America. And, there needs to be a concerted effort in growing and expanding this industry,” Vilsack told the crowd of more than 4,000 meeting in Anaheim, Calif. “That’s part of the strategy of USDA. So, we’re putting resources behind this, and we’re using our rural development resources to help build these refineries. We’re using our energy title of the farm bill to promote payments to farmers for feed stocks, to help build refineries, to retrofit existing refineries, to put people to work in rural communities.”

Listen to or download Vilsack’s speech from Commodity Classic here:

Podcast: Play in new window | Download (13.5MB)

Getting energy from the land and practicing good conservation are not mutually exclusive. A federal ag deartment researcher says we can have both through using biomass.

USDA researcher Doug Karlen, who works at the Agricultural Research Service’s National Soil Tilth Lab in Ames, Iowa, told attendees of the recent USDA Outlook Forum that conservation and energy from biomass can be compatible if three things are considered.

“If we utilize multiple feedstock options, multiple conversion platforms and recognize that’s there’s no single solution.”

Karlen also told the group that you have to consider how land conditions vary. In addition, biomass cannot always be seen as just a waste waiting to be made useful. He points out that the trade-off for using biomass from fields for bioenergy is that there is no residue left over to renew the soil with nutrients, as well as losing the habitat for wildlife those crop leftovers provided. Karlen says that’s why it is so important to have a diversity of biomass products within a certain area.

A Colorado-based firm with a planned biorefinery located near Soperton, Georgia is the recipient of a loan guaranteed by USDA Rural Development to make cellulosic biofuel from wood chips, according to a USDA announcement. The finalized deal with Range Fuels was first announced last year and represents the first ever loan guarantee by USDA to a commercial-scale cellulosic biofuel plant. This project is expected to provide biorefinery jobs, construction jobs and support the timber industry.

“USDA’s investment in the construction of Range Fuels’ commercial facility, which will produce cellulosic biofuel from non-food biomass, such as wood chips, demonstrates the Obama Administration’s goal to make the United States a leader in renewable energy production and furthers the President’s ongoing efforts to bring jobs to rural communities,” said Under Secretary for Rural Development Dallas Tonsager. “USDA is proud to work with the lender and the private sector to bring economic opportunity to rural areas.”

The $80 million loan, being made by AgSouth Farm Credit to Range Fuels, Inc., is being guaranteed through USDA’s Biorefinery Assistance Program authorized by the Food, Conservation, and Energy Act of 2008 and administered by USDA Rural Development. When fully operational, the plant is expected to produce an estimated 20 million gallons of cellulosic ethanol per year. USDA announced a conditional commitment to provide the loan guarantee for Range Fuels in January, 2009.

Questions by the Secretary of Agriculture himself about the USDA’s and EPA’s climate change analysis has prompted the two ranking members of the U.S. Senate and House Ag Committees to ask questions as well.

U.S. Senator Saxby Chambliss (R-Ga.) and U.S. Representative Frank Lucas (R-Okla.) have sent a letter to Secretary Tom Vilsack, asking him about his apparent lack of confidence in the modeling used by both USDA and EPA. They’d also like to see Vilsack on Capitol Hill and ask him about the impact cap and trade legislation would have on the agriculture and biofuels sector:

The Department’s testimony delivered earlier this month to the House Agriculture Committee is clear and unequivocal; agriculture will undergo significant structural impacts that will change how food, feed, fiber and fuel are produced in the United States. The disappearance of 59 million acres of cropland, higher food prices and lower exports will undoubtedly shape how farmers and ranchers make a living in the years ahead. While we can disagree on policy, we cannot ignore the facts when they are inconvenient to our preferred narrative.

In light of your critique of USDA’s analysis, we respectfully request your office consult with the EPA and report to the House and Senate Agriculture Committees on the problems with the economic model in order to reflect realistic scenarios while examining the impact of cap and trade on the agriculture and forestry sectors. Moving forward with flawed studies will only result in bad policy and legislation.

You can read USDA’s analysis on cap and trade here.

Producing more energy from cow manure could help reduce greenhouse gas emissions.

At the climate summit in Copenhagen, U.S. Agriculture Secretary Tom Vilsack announced an agreement with U.S. dairy producers to accelerate adoption of innovative manure to energy projects on American dairy farms.

“This historic agreement, the first of its kind, will help us achieve the ambitious goal of drastically reducing greenhouse gas emissions while benefiting dairy farmers,” Vilsack said from Copenhagen. “Use of manure to electricity technology is a win for everyone because it provides an untapped source of income for famers, provides a source of renewable electricity, reduces our dependence on foreign fossil fuels, and provides a wealth of additional environmental benefits.”

Under the agreement, USDA intends to increase the number of anaerobic digesters supported by USDA programs. Beyond promoting the digesters, the agreement will encourage research, and development of new technologies to help dairies reduce greenhouse gas emissions. Anaerobic digester technology is a proven method of converting waste products, such as manure, into electricity. The technology utilizes generators that are fueled by methane captured from the animal manure. Currently, only about 2 percent of U.S. dairies that are candidates for a profitable digester are utilizing the technology. Dairy operations with anaerobic digesters routinely generate enough electricity to power 200 homes.

Agriculture Secretary Tom Vilsack has responded to the Environmental Protection Agency’s (EPA) postponement of the E15 Waiver request.

In a statement issued by the United States Department of Agriculture (USDA), Vilsack said, “We are very encouraged that the results of the tests of E15 in newer model cars have been positive. The Environmental Protection Agency’s (EPA) movement towards developing an effective labeling rule sends a strong signal about the future viability of the biofuels industry. Biofuels are a vital component of America’s energy future, helping to break our dependence on oil. This commitment reflects the Obama Administration’s support for a strong biofuels industry helping to increase income for farmers and jobs in rural America.”

In other news, the industry is still waiting to hear EPA’s announcement of the Renewable Fuel Standard (RFS) for 2010. which were to have been released by November 30. The number for 2009 was 10.21 percent of all gasoline sold or approximately 11 billion gallons. The RFS is used by obligated parties including refiners, importers and blenders to determine their renewable fuels obligation. Compliance is monitored through the Renwable Indentificaion Number, or RINs. The notice is required under section 211(0) of the Clean Air Act as amended by the Energy Independence and Security Act of 2007 which was signed into law on December 17, 2007.

Even though USDA lowered its forecast for 2009 corn production in the latest report out today due to lower yields, farmers are still expected to see record yields and production is still expected to be the second highest on record.

Corn production is forecast at 12.9 billion bushels, down 1 percent from last month but 7 percent higher than 2008. Based on conditions as of November 1, yields are expected to average 162.9 bushels per acre, down 1.3 bushels from October but 9.0 bushels above last year. Despite the drop in yield from October, this yield will be the highest on record if realized. Total production will be second highest on record, only behind 2007.

The harvest continues to be slow throughout the Corn Belt. According to USDA, just 37 percent of the corn had been combined as of Sunday, compared to 82 percent average and even well behind last year’s slow harvest which was 69 percent complete at this time in 2008. Meanwhile, despite moisture issues, corn quality remains strong, up one percent this week to rate 68 percent good to excellent.

While high moisture and low test weights are getting to be major concerns with the crop, ethanol plants are able to utilize the lower quality corn. Arlan Suderman with Farm Futures spoke with Dave Vander Griend, President and CEO of ethanol developer ICM, Inc. of Kansas about the situation last week.

“We can utilize the crop,” says Vander Griend. “A lot of people don’t want it, which means that it will be discounted. Many people in the industry haven’t been through this before, but I’ve been around long enough to have lived through it before and know that it can work. Ethanol plants can usually beat the price of the other discounts being offered and make use of it.”

Suderman notes that Vander Griend emphasized the importance of farmers talking to their local ethanol processor now about how to best care for and deliver lower quality corn.

It looks like soybean-based biodiesel is returning to profitability.

This article from Biodiesel Magazine says the USDA-funded Agricultural Marketing Resource Center model shows that a hypothetical, soy biodiesel plant has reversed a six-month trend of losses and would now be operating in the black.

The overwhelming impact of soybean oil prices, which amount to close to 90 percent of the overall cost of biodiesel production, is shown in the comparison of September’s improving numbers with the poorest month, May 2009. The biodiesel revenue for that month was actually slightly higher than September at $3.10 per gallon. However, soy oil was 38 cents a gallon higher at $2.73 per gallon, natural gas remained the same at 3 cents per gallon and methanol cost was lower in May at 6 cents per gallon. AgMRC’s model plant showed a total breakeven cost per gallon, including variable and fixed costs of $3.32 for that low month of May 2009. The net return over variable costs was 4 cents per gallon in May and the net return over all costs was a negative 22 cents per gallon.

It should be noted that the model indicated negative net returns over all costs for the latter half of 2007 turning to positive in March of 2008 until March of 2009. During that year, biodiesel revenue started at $5.16 per gallon, peaked at $5.51 in June 2008 and dropped to $2.68 per gallon when the net return over all costs dropped into the red. EIA reports the spot diesel price at Chicago a year ago in October, 2008, was $2.85 cents per gallon.

The article adds that this model doesn’t tell the whole soy biodiesel story, admitting that a drop in petroleum prices has pushed regular diesel to prices significantly lower than biodiesel… if the $1 per gallon blenders tax credit is not taken off the price of a gallon of biodiesel. But the report does give hope that some of the pressure on the biodiesel industry is letting up.

You can read the report for yourself here.

USDA Deputy Secretary Dr. Kathleen Merrigan will get some first hand knowledge of Iowa’s ethanol industry during a tour scheduled for October 20. During her visit, Dr. Merrigan will learn about ethanol production, utilization of co-products and biodiesel research.

Merrigan will first visit Lincolnway Energy, a 50-million gallon per year ethanol plant with a corn oil extraction process. Next, she will tour Couser Cattle Company’s 5,000 head operation which utilizes distillers grains as livestock feed. Finally, Deputy Secretary Merrigan will tour Renewable Energy Group’s Research Center which houses industry-leading biodiesel programs, including cutting-edge corn oil-to-biodiesel commercialization research.

Greensburg, Kansas, literally destroyed by a tornado in May, 2007, is getting some help from the government to have a green energy source supply the power for the town as it continues to rebuild.

The USDA has announced a $17.4 million loan to Greensburg Wind Farm, LLC, to provide financing for the 10 wind turbine project that will supply power to the community:

The total project cost is estimated at $23.3 million. Approximately, $17.4 million will come in the form of a loan to Greensburg Wind Farm, LLC, a subsidiary of John Deere Renewables, with the remaining $5.8 million, or 25 percent of the total project cost, being provided through an equity investment by Deere & Company. The loan will support the 10 wind turbine project that will generate 12.5 MWs of electricity that will serve the electric needs of the City of Greensburg and other rural communities through the Kansas Power Pool.

“I am proud of the long standing commitment by USDA Rural Development’s Rural Utilities Service toward working with community-based electric cooperatives to find new and more energy independent ways to power rural America,” said Rural Development Under Secretary Dallas Tonsager.

The USDA claims it has provided the town with about $20 million in financing to help with the community rebuilding efforts.