Archive for May, 2009

What a surprise–gas prices are on the climb again. They have risen so fast that G8 energy ministers have urged oil producers, as Reuters recently reported, “to keep oil prices stable or risk derailing a fragile global economy recovery.”

A price rally has boosted oil prices to a six-month high of more than $60 per barrel, and Saudi Arabia has forecast prices gradually moving to $75 per barrel.

With this in mind, you could save more than 20 percent when filling up your tank if you are lucky enough to have a flex fuel vehicle (FFV). Check out www.e85prices.com. This Web site shows the best price spreads between gasoline and E85 around the country. In a couple of Wisconsin towns this week, for example, E85 was selling for $1.89 per gallon, 27 percent lower than gasoline at $2.59 per gallon.

The Web site also keeps a running tally of total E85 stations in the U.S., as well as the number of cities selling E85. To date, e85prices.com reports that there are 2,128 total E85 stations and 1,526 cities selling E85.

Miami, Florida has become the latest metro area to add E85 pumps in a significant way. The fuel is now available at 12 locations in the Miami metro area and three more locations on the Florida Turnpike.

Griffin U-Gas, Davies, Fla., has made a special “green lane” for E85 and encourages FFV operators to—I like this—“Fill up, feel good.” If gas prices continue to rise, E85 may encourage more FFV owners to feel even better this summer.

The acquisition of bankrupt Northeast Biofuels by Sunoco Inc. this week marks what will likely be a continuing trend. As the U.S. must work to meet the Renewable Fuel Standard (nearly 13 billion gallons of renewable fuels by 2010 and 30 billion gallons by 2020), the petroleum industry is looking for ways to blend more ethanol into gasoline.

At the same time, recent bankruptcies in the ethanol business are making it possible for oil companies to pick up ethanol assets for relatively inexpensive prices . . . some might say “on the cheap.”

In March, we saw another oil company, Valero Energy, purchase seven ethanol plants from ethanol giant VeraSun in a bankruptcy auction.

This week, Sunoco announced it will buy the bankrupt Northeast Biofuels, near Fulton, New York, for $8.5 million. The Syracuse Post-Standard reported the purchase price “is a pittance compared with the $200 million spent in recent years to develop, build and start the plant, which just began producing ethanol last summer.” However, Sunoco could pay up to $14 million to correct some design problems with the 100-million gallon per year capacity plant.

Also this week, Valero Energy assumed VeraSun Energy’s investment in Qteros (formerly known as SunEthanol). Qteros has developed a microbe technology for converting biomass into cellulosic ethanol. Qteros plans to open a pilot plant this year.

This week also brought Pacific Ethanol’s announcement that its subsidiaries, which own four wholly-owned ethanol production facilities in California, Oregon and Idaho, have filed for Chapter 11. But, the company and its “marketing subsidiaries, including Kinergy Marketing LLC and Pacific Ag Products, LLC, have not filed for bankruptcy protection.

The largest ethanol producer on the West Coast, Pacific Ethanol is the latest ethanol producer to file for Chapter 11 bankruptcy. Several other companies have filed for bankruptcy protection over the last several months, including VeraSun Energy, Aventine Renewable Energy, Renew Energy, Cascade Grain Products, Panda Ethanol and White Energy. The bankruptcies have resulted primarily because of volatile corn and oil prices, low ethanol prices and sources of financing drying up due to the credit crisis.

Pacific Ethanol is expected to continue to manage the “plant subsidiaries” under an asset management agreement, and the marketing subsidiaries are expected to continue to market and sell the plant subsidiaries’ ethanol and feed production.

The plant subsidiaries and WestLB AG and certain other lenders under the credit agreement have agreed in principle to first priority secured debtor-in-possession financing in a maximum amount of $20 million. This is intended to enable the ethanol plants to continue to satisfy customer obligations.

What will be Pacific Ethanol’s fate? At this point, it is hard to tell. But, if an oil company doesn’t buy it, the trend would suggest that some other ethanol producer will come under an oil giant’s ownership.

While the biofuels industry is facing challenging times right now, it is important not to lose sight of the research being conducted to further reduce biofuel production costs. The research advances being made today in both the public and private sectors will help meet America’s goals to become more energy independent. Here are just a few examples:

New Bioprocessing Technology Called a “Breakthrough”

Consolidated bioprocessing, CBP, is being called a breakthrough. Developed by Mascoma Corporation, Lebanon, NH (www.mascoma.com), CBP uses engineered microorganisms that produce cellulases and ethanol from cellulosic biomass at high yields in a single step.

“Many had thought that CBP was years or even decades away, but the future just arrived. Mascoma has permanently changed the biofuels landscape from here on,” said Bruce Dale, distinguished professor of chemical engineering and materials science at Michigan State University.

CBP is considered a low-cost technology for cellulose hydrolysis and fermentation. Mascoma’s technology utilizes bacteria that grow at high temperatures (thermophiles) and recombinant celluloytic yeasts.

“These advances enable the reduction in operating and capital costs required for cost-effective commercial production of ethanol,” said Jim Flatt, executive vice president of Research, Development and Operations at Mascoma.

New Purdue Research Center Could Help Double Amount of Fuel from Biomass

The Department of Energy plans to fund a $20 million effort to create a research center at Purdue University that will focus on converting biomass to biofuels and other bio-based products. The new Center for Direct Catalytic Conversion of Biomass to Biofuels, or C3Bio, will utilize new chemical catalysts and thermal treatments to produce fuels that resemble gasoline in terms of their molecular makeup and energy density, said Maureen McCann, Purdue associate professor of biological science who will lead the project.

The center will investigate methods to bypass biological fermentation, reducing the need for large biorefineries and expanding the range of biofuels beyond ethanol, Purdue reported.

Currently-used fermentation technologies are just 40-50 percent efficient in terms of the carbon atoms starting out in biomass and ending in fuel molecules, McCann said. “We think with different catalysts, the lignin could actually be used and converted to fuel molecules. If we can use the lignin, there is the potential to double the amount of fuel from each unit of biomass. That fuel could be more energy-dense, more similar to gasoline.”

McCann added that using chemical catalysts or a combination of catalysts with heat may make mobile hydrocarbon refineries possible. This could possibly allow taking the “refinery” to the field instead of having to transport biomass to another location.

Ceres and University of Georgia to Develop High-Yielding Switchgrass Varieties

Ceres, Inc. (www.ceres.net), Thousand Oaks, CA, and the University of Georgia are collaborating on a multi-year project to develop new high-yielding switchgrass seed varieties and improved management techniques for the southeastern United States.

The University of Georgia’s collection of switchgrass breeding materials and germplasm will be put to work. “By trialing and selecting new products in the middle of their target market, we can make greater gains more quickly and with greater certainty,” said Charles Brummer, University of Georgia plant breeder. In addition to work on varieties, researchers will evaluate seeding rates, row spacing, no-till planting recommendations and other crop management practices.

Ceres will have commercialization rights for varieties developed under this Ceres-funded project. Last December, Ceres introduced the first switchgrass and sorghum varieties targeted for bioenergy markets. They are sold under the company’s Blade Energy Crops brand (www.BladeEnergy.com).

President Obama today issued a presidential directive to USDA Secretary Tom Vilsack to “aggressively accelerate the investment in and production of biofuels.” This should be welcome news to everyone in the renewable energy industries—from crop producers to ethanol and biodiesel producers to biofuel industry equipment suppliers to ag equipment manufacturers.

I keep returning to Thomas Friedman’s book Hot, Flat, and Crowded in this blog, but the President’s directive today reminds me of what Friedman wrote—that America needs to move beyond a Code Red mindset toward a Code Green one where we are “united and propelled by a common purpose, not a common enemy.”

That common purpose, making this country the greenest one on Earth, “is a core national security and economic interest,” Friedman writes.

The Obama Administration “gets” that, as evidenced by today’s directive. Moreover, in line with the directive, the USDA, EPA and DOE will form an interagency working group to increase America’s energy independence and spur rural economic development.

A news release from the USDA reported that President Obama directed Secretary Vilsack to expedite and increase production of and investment in biofuel development efforts by:

• Refinancing existing investments in renewable fuels to preserve jobs in ethanol and biodiesel plants, renewable electricity generation plants and other supporting industries; and

• Making renewable energy financing opportunities from the Food, Conservation and Energy Act of 2008 available within 30 days. These opportunities include

Loan guarantees for the development, construction and retrofitting of commercial- scale biorefineries and grants to help pay for the development and construction costs of demonstration-scale biorefineries;

Expedited funding to encourage biorefineries to replace the use of fossil fuels in plant operations by installing new biomass energy systems or producing new energy from renewable biomass;

Expedited funding to biofuels producers to encourage production of next- generation biofuels from biomass and other non-corn feedstocks;

Expansion of the Rural Energy for America Program, to include hydroelectric source technologies, energy audits and higher loan guarantee limits; and

Guidance and support for collection, harvest, storage and transportation assistance for eligible materials for use in biomass conversion facilities.

The USDA reports that the collaboration between the federal agencies will accelerate the production of renewable energy by coordinating policies that impact the supply, secure transport and distribution of biofuels.

Going forward, the Biofuels Interagency Working Group also will take into consideration land use, crop management practices, water efficiency and quality, and lifecycle assessments of greenhouse gas emissions.

Understanding just how much biofuel plants can help rural economies and improve rural job prospects, I am glad to see that the directive calls for refinancing existing investments . . . and doing it quickly. I think the American public will see a good return on their investment from the renewable energy industry.

What are your thoughts? Please send them in!

This week, Senator John Thune (R-SD) introduced a bill to prevent attempts to use inaccurate indirect land use models to assess the environmental impacts of ethanol.

“Following California’s recent decision to use flawed models to estimate ethanol’s impact, I am concerned that the EPA could soon apply similar standards that will handicap renewable fuel relative to regular gasoline,” Thune said. “Congress has asked EPA to apply greenhouse gas emission standards that reflect ethanol’s proven environmental benefits. However, with the EPA’s current decision that is pending at the White House, I am concerned that EPA’s action could have a detrimental impact on our renewable fuel industry and efforts to reduce our dependence on foreign oil.”

The EPA has not yet issued rules for the new Renewable Fuels Standard (RFS), which was enacted as part of the 2007 Energy Bill under the Bush Administration. Senator Thune’s office explains that the new RFS requires new corn ethanol plants and new cellulosic ethanol plants to produce a fuel that emits fewer lifecycle greenhouse gases relative to regular gasoline.

But, Congress also included a requirement to quantify emissions from indirect land use changes. “There is growing concern that EPA could unfairly interpret this provision and discredit American made ethanol with indirect land use changes that may or may not occur in other countries around the world,” Thune’s office reported.

The new bill directs the EPA to focus on direct lifecycle greenhouse gas emissions, which would level the playing field between ethanol and gasoline and bring more regulatory certainty to the ethanol industry, Thune’s office said. The bill would require the agency to publicize the model for measuring lifecycle greenhouse gas emissions before taking regulatory action and also would allow ethanol producers with new production methods to apply to the EPA for a lower carbon score, which Thune’s office, suggests “would provide an incentive for ethanol companies to develop innovative ways to produce ethanol.”

The indirect land use issue is extremely complex and controversial. What I find troubling is that, at least in the California Air Resources Board deliberations and recent decision about the Low Carbon Fuel Standard, petroleum and other fuels were assumed not to cause any indirect carbon effects or “market-mediated” impacts. Don’t oil spills and subsequent environmental damage figure into the equation? What about indirect carbon effects from wars over oil in foreign countries?

Thune’s bill is important in that it calls for transparency when it comes to explaining the rationale for measuring lifecycle greenhouse gas emissions. It may also show how science needs to catch up to public policy—whether it’s in California or at the federal level.

What are your thoughts on the indirect land use impacts of biofuels? Please send them this way.