Date Posted: August 5, 2010

Who Knew - Oil Production Does Emit Greenhouse Gas Emissions

Finally. A piece of research has been conducted that addressed the “indirect land use” of petroleum.

Securing Foreign Oil: A Case for Including Military Operations in the Climate Change Impact of Fuels, was published by Environment Magazine and authored by University of Nebraska professors Adam Liska and Richard Perrin.

The study demonstrated that the greenhouse gas emissions (GHGs) derived from military use of oil is worse than previously thought.

The reason the authors conducted this study is because they noticed that in current legislation, biofuels must meet direct and indirect life cycle emissions. However, only direct GHGs are accounted for when calculating life cycle emissions of petroleum.

I’m simply stunned that it took several years of debate over the veracity of indirect land use before anyone studied gasoline’s ‘indirect land use’.

Ultimately the authors wanted to understand how military emissions affect the total amount of GHGs of gasoline.

What they discovered is that direct spending on military activity and military acquisition of oil results in the release of nearly 289,000 tons of carbon dioxide per billion dollars spent.

Let’s try to wrap our minds around the cost of war and the consequential amount CO2 that will be emitted.

The U.S. Congressional Research Service report estimated that the average annual cost of the Iraq War has been $93.5 billion.

We are now in our seventh year of war and some economic experts predict that at wars end, America will have spent more than $1 trillion dollars.

I’m not great at math, but that is quite a large amount of carbon dioxide emitted.

It should be noted that the purpose of the report was not to criticize war, but merely to point out that when engaging in a discussion about climate change, the impacts of biofuels and gasoline must both be considered.

I know, such a novel idea.

The authors write, “U.S. fuel policy must be guided by the best possible estimates of the GHG consequences of switching from gasoline to renewable fuels.

"Emissions changes that indirectly result as consequences of changes in policy must surely be included in rational policy-making, but these emissions can only be estimated with considerable judgment and substantial uncertainties.”

They continue, “Given that the potential GHG implications of future behavioral change may be quite significant for changes in gasoline use as well as for changes in ethanol use, it is appropriate that they should be considered by regulatory agencies, as well as necessary that they be considered as the 2007 EISA legislation directs.

This report is a breath of fresh air.

It is long overdue that the production of petroleum be put to the same scrutiny as biofuels.

Let’s hope that this study is not a lone wolf, but part of a pack of research that evaluates the impact of petroleum production on climate change.

For more information:

• University of Nebraska—402-472-7211

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Biofuels Blasted With Global Rebound Effect

Today, I’m going to take a moment to discuss my new favorite argument against biofuels: global rebound effect.

Created out of thin air by the Clean Air Task Force, along with various other groups including Friends of the Earth, this new “effect” claims that because of the Renewable Fuels Standard (RFS2), the U.S. is going to use less oil.

This will cause the world to use more oil, which will cause more pollution.

Yes, folks. You read right.

By American’s using less oil, we’re in essence forcing other countries to use more oil and directly causing even more pollution than we have today.

Seriously?

How do you even make this stuff up?

It’s like saying a person who starts eating more vegetables is causing his neighbor to become obese because he is forcing him into eating more Twinkies.

The above argument makes about as much sense as Global Rebound Effect.

The Clean Air Task Force is using this arguable logic to sue the EPA into getting rid of RFS2. In a nutshell, they claim that any action taken in the U.S. to reduce greenhouse gas emissions will lower overall demand for petroleum, cause prices to decline, and cause other countries to use more petroleum, which will result in higher greenhouse gas emissions in other countries.

This argument is along the same lines as indirect land use, yet another theory not scientifically proven and one that blames the sins of others’ on the American ethanol industry.

But if our country has demonstrated anything about the fight against biofuels, it’s that logic and sound science are not criteria required to create policy or to file a federal lawsuit.

Fortunately, the ethanol industry is not standing by watching biofuels being slandered by groups so desperate to repeal biofuels that they’re grasping at straws.

Bob Dinneen, the President of the Renewable Fuels Association said in a statement, “To penalize a technology, any technology, that reduces American oil consumption for any potential oil use in other nations is asinine.”

He goes on to say of Global Rebound Theory, “It simply defies logic.”

However laughable this argument against biofuels is, it will not be the last illogical one lobbied at the industry.

So I wait with bated breath to hear the next irrational argument against biofuels.

I hope it’s soon. I could use another good laugh.

For more information:

• Renewable Fuels Association—202-289-3835.

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The Point of No Return

Are the RFS2 requirement numbers enough to take an almost idle industry and put it on the path to revival?

Do we still need the biodiesel tax incentive or can the biodiesel industry stand on its own?

I’ve spent a lot of time asking these questions and wondering if there is a point of no return for the biodiesel industry.

By this I mean is there a point where plants have been idle for so long that policy and incentives become too little too late?

I don’t know the answers so I spoke about my concerns with David Kruse, President of CommStock Investments.

The major problem today, Kruse told me, is that so far efforts to extend the tax credit have been one-year extensions.

Even if it passes this year and it’s retroactive, what about next year?

A one-year extension would have very little positive impact.

What the biodiesel industry needs to turn around is a long-term extension, says Kruse.

He believes that the biggest problem is that to start the industry again, many plants will need clearance from their lenders.

To do this, they’ll need to demonstrate profitability.

Despite the RFS and fluctuating RIN values that fortunately are going higher, they may not be enough on their own to save the industry.

It appears that the tax incentive is still needed.

“It may require, in my opinion, an extension of the tax credit much longer than a few months.

"It will need to be 3-5 years to justify the cost,” explained Kruse.

Yes, there is a cost to shut a plant down and there is a cost to start a plant back up and there are costs that continue to mount even when a plant is idle.

Worse yet, the lender, not the plant, now determines the cost-risk benefit of going back into production or staying idle.

This is a scary thought since one of the major problems in the industry, which began before the biodiesel plants even began to shut down, is lack of capital.

If bankers don’t loosen the purse strings soon, it may not matter if the RFS2 is enough - it just won’t be enough to get the idle plants back in operation.

“But overall,” Kruse told me, “for the industry as a whole, I would say at this point in time, it looks relatively bleak as far as their financial ability to come back.”

Despite concerns, I refuse to be a pessimist.

But I do have some food for thought.

Create one tax incentive package that covers both the biodiesel and the ethanol industry for five years, rather than trying to pass them separately.

Maybe a united biofuels front can achieve what the biodiesel industry alone can not, and that is the passage of a piece of policy that would play a supporting role to the RFS while at the same time, be moving us forward in our energy goals.

For more information:

CommStock Investments—800-242-5014.

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Is Our Biofuels Pathway Heading Down the Wrong Road?

Back in June, the USDA released its report, “A USDA Regional Roadmap to Meeting the Biofuels Goals of the Renewable Fuels Standard by 2022.”

The crux of the report was to determine what feedstocks could be grown in what regions in what amounts to meet the 36 billion gallons of biofuels in 2022.

The USDA decided that we’ll need 527 biorefineries with an average size of $40 million gallons for a cost of $168 billion.

In addition to their reiteration of financial support for the industry through loan guarantee programs (which you can liken to a mirage) they call to the table several barriers to success: scaling the blend wall, limited flex-fuel vehicles, need for more rail and truck transportation, lack of blending terminals, and lack of storage and dispensing.

Surprisingly enough, these also happen to be the exact same barriers of starch-based ethanol.

However, as I mulled over the conclusions of the report several thoughts came to mind. First, where is the mention of the barriers to biomass harvesting and storage?

Several equipment companies have developed biomass balers most notably for corn stover but equipment will need to be developed for the harvesting of other types of biomass.

From there, once the biomass arrives at the plant, how will it be stored? How long can it be stored for? If we can’t store biomass year-round like starch-based crops, what is the plan to produce advanced biofuels year round?

Yet, maybe more importantly this is the question sticking in my craw.

Is our biofuels pathway heading down the wrong road?

Although I hesitate to type in these three letters here they are: Yes.

Why? By biofuels mimicking the same pathways as gasoline, we fall into some of the same problems, namely excessive infrastructure for delivery, aka transportation costs.

Let me explain.

Today, the majority of ethanol is produced in the Midwest but the majority of drivers live on the coasts. Blindly developing transportation infrastructure is costly and maybe not needed.

Wouldn’t we be better off with smaller refineries, using local indigenous biomass, producing the fuel right on the farm and then keeping the fuel local, say within 300 miles of the refinery?

No trains needed. No pipelines needed. Just trucks running on biodiesel (also produced locally), blender pumps, flex-fuel vehicles, and consumers passionate about supporting an energy policy that will lead to energy independence.

So I caution, let’s reconsider our biofuels pathway before we get too far down the road and run out of gas.

For more information:

• USDA—202-720-2791

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Bad News for Biofuels?

Iowa State University professor Bruce Babbock released July 20 a new report, “Costs and Benefits to Taxpayers, Consumers and Producers from U.S. Ethanol Policies.”

The purpose of the report was to determine the economic ramifications to the U.S. ethanol industry if the ethanol tax credit and/or the ethanol tariff were removed.

For disclosure purposes, the Brazilian Sugarcane Industry Association (UNICA) was one of the report sponsors.

The results were not favorable to the domestic ethanol industry—one that is currently engaging in an all-out assault on policy makers.

The report states, “Projected strong demand for ethanol in Brazil combined with a largely saturated U.S. ethanol market means that the elimination of ethanol import tariffs would have almost no impact on U.S. corn and ethanol markets in 2011.”

The report continues, “Elimination of the tax credit would impact markets modestly, with ethanol production declining by an average of about 700 million gallons.

"This reduction in ethanol production would cause corn prices to drop by an average of 23 cents per bushel. Ethanol prices would drop by 12 cents per gallon.

"Elimination of the tax credit would shift the burden of meeting mandates from taxpayers to blenders and consumers.

"Taxpayers would save more than $6 billion through elimination of the tax credit, or almost $7.00 per gallon of ethanol produced in excess of mandated amounts.”

The impacts of a change in U.S. ethanol policy in 2014 (the tax credit is up for review every five years) are larger but no less devastating to the long-term survival of the ethanol industry according to the report.

This report mimics what Purdue University agricultural economist Wallace E. Tyner told me recently – as long as RFS2 stays in place, the tax credit does not matter and is in fact, largely redundant.

The ethanol industry, like all reports it finds are defamatory, have already pointed out everything wrong and most groups stand firm on the need for both policies.

The exception is Growth Energy.

Last week they announced their willingness to forgo the tax credit in lieu of moving the subsidy equivalent to build infrastructure.

However, Joel Velasco, Chief representative of North America for UNICA, which has also been engaging in a Beltway PR campaign, said of the report, “Bottom line: Allowing the ethanol tax credit and import tariff to expire won’t create the dramatic, adverse affects that groups like Growth Energy or the Renewable Fuels Association claim.

"And truth be told, Brazilian producers don’t see sugarcane ethanol exports rise all that much either.”

“So, why spend $6 billion a year when we’re $13 trillion in debt?” Velasco concluded.

Regardless of which side of the fence you are sitting on in this debate, another question that should be asked, “If we’re $13 trillion in debt, why are we spending billions a year subsidizing oil?”

For more information:

• Center for Agricultural and Rural Development, Iowa State University—515-294-1183.

• UNICA—202-506-5299.

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Can RFS2 Save the Biodiesel Industry?

The biodiesel industry is really not much of an industry these days. But there are still people who have high hopes that it’s not too late to turn around.

Especially with two recent moves by the EPA.

First, the Renewable Fuels Standard (RFS2) went into effect on July 1, 2010 and mandated 1.15 billions of biodiesel must be used in 2010.

Then, last week, the EPA announced the minimum blending requirements for 2011.

The requirement is lower in 2011 than 2010 – 800 million gallons must be blended by the end of 2011.

To me this appears to be an acknowledgement that the market is in fact short of biodiesel RINs.

The very claim that Big Oil is claiming in its lawsuit against the EPA asking to be excused from their 2010 requirement.

There are some experts who claim that as long as the RFS2 stays in place, and is enforced, the biofuels industry will survive – with or without tax credits.

But there are others who say that the RFS2 is not enough – especially with Big Oil breathing down the back of the EPA.

The real question, I believe, is does the EPA have the backbone to enforce RFS2?

If they do, the biodiesel industry has a fighting chance.

If they don’t, the biodiesel industry will cease to exist.

For more information:

EPA—202-272-0167

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Put Up or Shut Up

The EPA has released its proposed 2011 overall volumes and standards this week, and not surprisingly, they have lowered the cellulosic biofuels goal to between 5-17.2 million gallons, or .004 – 0.15 percent of the total renewable fuels target of 13.95 billion gallons.

Why? Because according to their market analysis, there is not enough cellulosic ethanol in the marketplace to meet the original goals.

However the EPA “remains optimistic that the commercial availability of cellulosic biofuel will continue to grow in the years ahead.”

Really?

I’m a bit curious as to how cellulosic biofuels are going to grow when both private and government funding for the development of cellulosic ethanol is all but nonexistent.

Dried up. Kaput.

Not only that but many companies that have been awarded guaranteed federal loans, have yet to see a penny.

Case in point, Project Liberty, a cellulosic ethanol project funded by POET that will turn corn stover into ethanol, will not move forward unless the government releases the money they have been promised.

Might I add this is the closest large-scale cellulosic project in development in this country?

My suspicion is that the government can’t release the money because they don’t have it and the banks won’t loan it—to anyone.

I’ve said this before and I’ll say it again.

It baffles my mind that our government can promote how desperately our country needs to become energy independent, yet not actually commit to any renewable energy programs long enough for the goals to be met.

Here’s a free piece of advice for the feds.

Our country is never going to achieve energy independence unless YOU have the courage to make the hard decisions and support the growing biofuels industry.

It can’t be done without biofuels.

So either “put up or shut up.”

For more information contact:

POET Project Liberty—605-965-2200.

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Does Corn Ethanol Contribute to the Dead Zone?

For several years, researchers, environmental groups and others have linked corn ethanol to the increase of the Gulf of Mexico Dead Zone.

Scientists claim the cause is nitrogen and pesticides, chemicals often used in agriculture, especially corn and soybeans.

They also claim that corn ethanol is causing the problem to get worse since many farmers are now changing their crops to corn to meet the demand for ethanol.

The issue was originally brought to light at the end of 2007 and hasn’t had much recent attention until last week, when some researchers began comparing the environmental devastation of the BP oil spill to the environmental devastation of corn ethanol.

Not surprisingly, ethanol opponents are accusing ethanol subsidies of creating the demand for ethanol, and therefore increasing the demand for corn, thusly increasing run-off and finally, increasing the size of the Dead Zone.

In case you’ve been on vacation this entire year, you should know that the ethanol subsidy, or blender’s credit is set to expire, unless it is renewed.

One thing I love about the people who are against the subsidy is that is doesn’t go to the ethanol industry, it goes to the blender, aka the oil industry.

Call me crazy but since the oil industry has been reaping subsidies for more than 100 years, you’d think they’d want to keep this one as well.

But I digress.

The debate over the Dead Zone culprit is a classic case of he said, she said.

I’m not going to debate the merits of various studies. I am, however, going to say that while no forms of energy are perfect, and no forms of agriculture are perfect, agriculture continues to do more with less each year (less land, less fertilizers and pesticides, less water).

The only achievement the fossil fuel industry has made in recent years is leaving us with less, period.

For more information contact:

• The National Corn Growers Association—636-733-9004.

• National Academy of Sciences—202-334-2000.

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Biodiesel – Helping Children Breathe Easier

Each year, more than 24 million children are transported by school buses.

While they may seem harmless to the causal observer, many parents have come to realize that their child’s health is at risk every time they get on the bus.

The cause? The toxic emissions spewing out of the tailpipe.

Nearly 90 percent of all school buses on the road are fueled by diesel.

Yet dozens of studies have shown diesel’s emissions cause asthma, heart disease, cancer, and even premature death, in part because children’s respiratory systems are not fully developed.

However, there is an easy way to eliminate many of the diesel emissions, even more than low sulfur diesel and improved emission technology.

Biodiesel.

Using a B20 blend in school buses reduces particulate matter by 12 percent, carbon dioxide by 16 percent, carbon monoxide by 12 percent and unburned hydrocarbons by 20 percent.

Today there are many schools that have already converted their school bus fleets to biodiesel, but many of these programs are now in jeopardy and new programs are on hold.

The cause is the dying U.S. biodiesel industry fueled by the inability of federal legislators to pass the tax credit and an RFS2 that is under fire by the oil industry.

With all of the problems our country is facing and an element of the solution staring us in the face, it’s a shame that biodiesel is not getting it’s rightful place.

You may not be on board with biodiesel for the energy security benefit.

You may not be on board with biodiesel because of tax credits and incentives.

You may not be on board with biodiesel because you don’t think we’re running out of fossil fuels.

But you should be on board with biodiesel, if for no other reason, than the fact your children will be safer and healthier.

For more information contact:

• Biofuels for Schools—707-849-5234

•National Biodiesel Board—800-841-5849.

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Advanced Biofuels Flowing From a Pump Near You

Yesterday I wrote about the potential consequences for ethanol if the ethanol tax credit is not extended.

What I alluded to, but didn’t go into detail about, is what will happen to advanced biofuels if the tax credit isn’t renewed.

Well, it depends.

I reached out to Purdue University agricultural economics professor Wallace E. Tyner to learn more about what could happen to advanced biofuels in the future based on the uncertain future of the tax credit.

Tyner explained, “If the EPA does not increase the blend limit, the ethanol blender's tax credit does not matter.

"It does not go to the ethanol producer anyway so long as the blend wall is binding as it is today.

"If the RFS is viewed in the industry as being iron clad (no exceptions), then the blender's tax credit also does not matter.

"Blenders have to buy the ethanol regardless of price.”

However, Tyner continued, if the RFS is not viewed as being iron clad (a view many opposed to ethanol hold) then the ethanol tax credit matters and may be needed to achieve production goals.

In other words, if the RFS2 is rescinded and refiners have no legal requirement to blend ethanol, there would be no room for advanced fuels and they would be dead in their tracks.

Fortunately, Tyner said that he believes most view the RFS as sufficiently binding and this means that it is the primary instrument of government policy today.

It also means that the subsidy is largely redundant.

He also noted that, “It is always difficult politically to remove an existing subsidy even if it has outlived it usefulness.”

So in a nutshell, even if the ethanol tax credit disappears, as long as the RFS stays in place, there should be some advanced biofuels flowing from the gas pump near you.

For more information, call 765-494-0199.

• Purdue Iniversity

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And Then There Were None

Dinosaurs. Mayans. The Roman Empire. What do they have in common?

They’re extinct.

Will the next thing to become extinct be the biofuels industry?

Let’s hope not but I’m afraid. Very afraid.

And you should be too. This is a big year for ethanol.

The tax credit expires at the end of the year; the ethanol tariff is up for review; the 2012 Farm Bill is under fire and the E15 Waiver is continually postponed by the power hungry EPA (i.e. the tailoring rule).

Unfortunately, while the ethanol industry lobbies to keep these incentives in place, Big Oil, Big Food and Big Green are rallying their troops against the only viable replacement we have for gasoline.

These groups, especially Big Green, are also killing next generation biofuels and drop-in fuels before they are ever born.

The biodiesel tax credit has yet to be extended and there was no vocal opposition to the tax credit.

There is huge opposition against all things ethanol.

Despite the loud voice of ethanol, we cannot assume success.

So am I sounding the alarm for biofuels.

Yes, we still have our supporters including the usual suspects, Senator Charles Grassley (R-Iowa) and Senator John Thune (R-South Dakota).

We also have many groups lobbying for ethanol including American Coalition for Ethanol, Growth Energy, the Renewable Fuels Association, and the National Corn Growers Association.

But it isn’t enough.

Every one of us needs to get involved. Now.

Before ethanol is added to the extinction list.

For more information contact:

• American Coalition for Ethanol—605-334-3381

• Growth Energy—202-545-4000

• Renewable Fuels Association—202-289-3835

• National Corn Growers Association—636-733-9004

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Too Little, Too Late?

July 1, 2010 marked the day that the EPA began enforcing the RFS2.

From a biodiesel perspective, the RFS2 requires Big Oil to blend at least 650 million gallons of diesel this year.

It also holds them accountable to meet the 2009 blending requirements of 500 million gallons.

Big Oil, claiming that they are not opposed to the RFS, filed a suit against the EPA several months ago saying that it was “unlawful and unfair” that they have to meet 2009 biodiesel requirements, especially after the EPA missed their ruling deadlines last year.

However, the biggest argument Big Oil has against meeting the requirements is that they claim there are not enough biodiesel RINs to meet either year’s numbers.

Huh, I wonder how that could have happened?

Could it be the fact that our legislators, who had no vocal opposition to the biodiesel tax credit, have failed to pass an extension?

Even if it were to get extended and made retroactive, it still wouldn’t add significant biodiesel gallons to the marketplace this year.

The other problem – there is only a one-year extension on the table.

The industry needs at least a five-year extension to get back on its feet.

I find it deplorable that the President of “hope and change,” who purports support of green jobs, has allowed nearly 30,000 jobs to disappear.

I’m also justifiably concerned that the EPA, who appears to working against further development of biofuels, will stab the biodiesel industry in the back and revoke the RFS mandates for 2009 and 2010.

Hey Prez, this is definitely a wrong message to send.

For more information contact:

• Iowa Biodiesel Board—573-234-8935

• EPA—202-564-7849

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Biomass Takes Global Center Stage

July 1—Earlier this week, the World Economic Forum released its new biomass report, “The Future of Industrial Biorefineries.”

The report ultimately concludes that there is enough biomass to replace all fossil fuels but there are some challenges that need to be overcome.

One of the biggest hurdles is identifying the best types of biomass. Corn stover and energy grasses are in the lead for commercialization, and research is being undertaken around the globe to ascertain what types of biomass will yield the most biofuels per acre.

But there are other hurdles: harvesting, transportation of crops, storage, infrastructure, lack of funding, and lack of cohesive public policy.

Sound familiar? It should.

These are the exact same issues facing first generation biofuels.

The U.S. has a very small window to continue its global lead on biofuels development —other countries are close behind.

Which ones? Those that have strong policies, incentives and private investors.

So wake up America. We have an opportunity to lead the world in sustainable biofuels production.

We’re blowing everything else biofuels. Let’s not blow this too.

For further information call: 41-(0)22-869-1212 or visit www.weforum.org.

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Carbon Sequestration for Ethanol Plants - Boon or Bust?

June 30—As several pieces of legislation loom large to curb greenhouse gas emissions (GHGs), including the final 'Tailoring Rule' that came out from the EPA earlier this month, ADM has been awarded a $99.2 million grant from the DOE to build a second commercial-scale carbon sequestration project that will capture and store 1 million tons of CO2 per year.

The carbon capture and sequestration project (ICCS), estimated to total $163.9 million, will be attached to ADM¹s ethanol refinery in Decatur, IL.

Should the project be successful, the technology could offer ethanol plants a way to both meet or exceed pending GHG levels, as well as provide an additional revenue stream should a federal cap and trade policy be adopted.

What is unclear at this juncture is whether the technology will work (the coal industry has been grappling with carbon sequestration projects for years) or how much this technology will add to the cost per gallon of ethanol.

With ethanol margins already tight, carbon legislation could spell doom for those plants already in financial turmoil.

However, on the upside, carbon sequestration technology could spell boon, ultimately lower ethanol¹s cost per gallon, making it more cost competitive at lower oil prices.

• ADM

• EPA

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