Obama seeks growth in biofuels beyond ethanol
"My administration is committed to moving as quickly as possible to commercialize an array of emerging cellulosic technologies so that tomorrow's biofuels will be produced from sustainable biomass feedstocks and waste materials rather than corn," Obama wrote in a letter to a group of farm-state governors.
Most biofuel currently used in the United States is ethanol made from corn. The U.S. government wants to boost production of renewable fuels made from non-food crops like switchgrass and plant waste left over from harvesting grain.
"But this transition will be successful only if the first-generation biofuels industry remains viable in the near term," Obama said in the letter.
Biofuels help reduce climate-changing greenhouse gas emissions, reducing the need for importing oil while creating jobs, Obama wrote.
The ethanol sector has been hit hard by high corn prices, lower oil prices, and overcapacity. New types of biofuels are currently more expensive to produce than corn-based ethanol.
Meanwhile, regulators and lawmakers are debating how to measure the impact of land-use change on the environment -- for example, emissions released when corn production displaces other crops, giving farmers the incentive to turn forests into cropland.
Poor market conditions have threatened the development of new types of biofuels, the Governors' Biofuels Coalition told Obama in a letter earlier this year, asking him to put forth a vision for biofuels and establish a task force on the debate over biofuels' greenhouse gas emissions.
Obama established that task force earlier this month.
The governors also asked Obama to increase the maximum allowed limit for blending ethanol with gasoline to 13 percent from the current 10 percent level to expand the market.
The Environmental Protection Agency is slated to rule on an industry request to increase the blend rate by December 1.
In his letter, Obama said the next generation of biofuels will be successful only if "long-standing artificial barriers to market expansion" are removed.
(Reporting by Roberta Rampton; Editing by Gary Hill)
Big Oil Warms to Ethanol and Biofuel Companies
The erstwhile enemies, it turns out, are gradually learning to get along, as refiners increasingly see a need to get involved in ethanol production. Ethanol, made chiefly from corn, now represents about 9 percent of the country's market for liquid fuels. And the percentage is growing year after year because of federal mandates. With the nation's thirst for gasoline, and the ethanol that is blended into it, expected to revive when the economy does, the oil companies want to be in a position to take full advantage.
The interest expressed by big oil companies is coming in the nick of time for small companies that desperately need capital and cannot find it these days in the private markets. Take the case of Verenium Corporation, a small company based in Cambridge, Mass., that here in Jennings is testing new forms of biofuels in alliance with BP. Instead of ethanol made from food crops, the partners are devising a version from grasses in the sugar cane family.
The experiments here are preparation for building a second, $250 million plant in Florida with the capacity to produce 36 million gallons a year of new biofuels — the first commercial plant of its type built with oil company money and expertise. Verenium scientists have already developed a secret sauce of enzymes and microbes that ferment and distill biomass into ethanol. Now BP is contributing technical expertise aimed at getting the temperatures and pressures in the vats just right.
Commercial success is not assured, of course. But the fact that a major oil company has even made an alliance to go commercial with Verenium is considered a breakthrough by many ethanol executives.
"Any time you get Big Oil into the game, that changes the paradigm because nobody can go large scale chemical engineering like Big Oil," said Brent Erickson, an executive vice president of the Biotechnology Industry Organization, a trade group.
Only two years ago, BP had only a minuscule investment in biofuels. But since then the company has committed $1.5 billion to various projects. Along with its work with Verenium, it entered a partnership with a Brazilian concern last year to produce ethanol from sugar cane.
Lessons learned in Louisiana may eventually help convert Brazilian cane into more advanced biofuels, researchers say, producing a potentially vast new reserve for BP.
BP also speaks with optimism about a partnership with DuPont to test production of biobutanol, an advanced liquid alcohol fuel that is made from the same feed stocks as advanced ethanols and is compatible with existing pipelines and car engines. Executives say they hope to begin making the fuel in large amounts by 2013.
"We can see biofuels as being a really big potential reservoir," said Phil New, president of the company's BP Biofuels unit. "For an energy firm to get into sugar cane farming is a pretty big move."
Oil companies are still skeptical about conventional ethanol, especially the type made from corn, which they say corrodes pipelines and is inefficient.
The plant here is just one sign that the big oil companies are now at least grudgingly accepting biofuels — particularly those made from wastes and nonfood sources, which do not bear corn ethanol's stigma of raising food prices.
The big change came in the 2007 energy law enacted by Congress that set ambitious mandates for refineries to blend increasing amounts of biofuels over the years. By 2022 they will be obliged to blend 36 billion gallons of biofuels, or more than three times current levels.
"If the government is going to make a market happen, we needed to be able to participate commercially in that market," Mr. New said.
The oil companies also say that as crude oil becomes ever more difficult and expensive to find, biofuels can bolster their reserves.
"There will be a need for all these fuels," said Graeme Sweeney, executive vice president for future fuels and carbon dioxide at Royal Dutch Shell. He predicted that the 1 percent of the world's transportation fuels that are biofuels today "could easily be 10 percent in the next decade or so."
Shell was the first of the big oil companies to venture significantly into the new biofuels, getting its toes wet in 2002 by providing money to a Canadian company called Iogen Corporation to research making ethanol from plant waste. Shell would not discuss how much money it is now investing in biofuels, but said it had quadrupled biofuel research spending since 2007.
Shell has also formed partnerships with a variety of small companies at work on improving enzymes that break down various plants and waste materials for ethanol, making fuels from algae and even biogasoline from sugary liquids derived from plant materials. Chevron has formed a joint venture with Weyerhaeuser to develop biofuels from wood waste.
And Valero Energy Corporation, the country's largest petroleum refiner, has snapped up seven corn ethanol plants from VeraSun Energy in recent months since VeraSun filed for bankruptcy protection last fall. Valero has suggested that it could transform the plants for newer blends of ethanol.
Each initiative is still small compared with the companies' multibillion-dollar oil exploration and refining budgets, prompting skeptics to say they are more interested in improving their image than producing clean fuels.
"If we depend too heavily on the big oil companies to drive the biofuel agenda," warned Jeff Broin, chief executive of the ethanol producer Poet, "we'll be using large volumes of oil for many, many years to come."
But taken together, the research projects and deals are a sharp contrast to the scaled-back oil company projects in other alternative energy sources like hydrogen and solar. And the support is welcome for small entrepreneurial companies that are long on new technologies and short on capital.
"With any start-up company, people say 'Wow, but is it going to work?' " said Randy Cortright, founder and chief technical officer of Virent Energy Systems. His company wants to make a biogasoline from plant sugars that is chemically similar to gasoline produced by conventional petroleum refineries.
He said Shell's investment raised his company's credibility with lenders "by giving their vote of confidence in this technology, spending resources and providing their own people for development." Shell also will eventually distribute the product, he said, "and they already have the infrastructure for taking the product to the fuel pump so the consumer can use it."
Arnold R. Klann, chief executive of BlueFire Ethanol, a company that converts municipal waste into ethanol and is seeking financing to build plants, said lenders wanted to know that an ethanol company had credible long-term customers to generate revenues. He said he had draft contracts with two major oil companies he could not yet identify that wanted to invest in his operations and use his fuels.
"There is tremendous interest by the oil companies to invest in these first-of-a-kind projects," Mr. Klann said. "Where they were initially investing very tentatively in new technology development, in the last year they have begun to finally invest in companies that are building commercial production facilities."
In Jennings, BP technicians advise Verenium technicians on what types of metals to use to line their pipes, what kind of valves will last longest and how to position blades in fermenting tanks to best mix chemicals and feed stocks. It is all an effort to reduce the price of the product to quickly compete with conventional ethanol and perhaps, eventually, with gasoline.
"We are the chef, and they are more like the restaurant manager," said Mark G. Eichenseer, Verenium's vice president for operations. "We have the recipes, and they have the experience and know-how to select the pots and pans."
Viewpoint May 26, 2009, 12:09PM EST
The Ethanol Lobby: Profits vs. Food
If the ethanol lobby really believes in the biofuel, why are there so few E85 pumps in corn-growing states?
By Ed WallaceIf you had two customers for the same product and one paid more than the other, which customer would you choose? That's the situation in which ethanol producers in the U.S. find themselves. They could grow corn and other crops for food and get one price, or produce the same crops for biofuel and get a higher price and tax credits. The problem is that by focusing on more profitable biofuels, farmers not only deplete the food supply, they are also producing an alternative fuel whose usefulness is still hotly debated.
Last year 17 billion gallons of biofuels were created and used worldwide. The previous year 100 million tons of grain had been turned into biofuels. According to Ronald Bailey at Reason magazine, enough food was turned into fuel for our vehicles in 2007 to feed 450 million people for a year.
On Apr. 10 this year the Congressional Budget Office published a report saying that "Higher use of the corn-based fuel additive accounted for about 10% to 15% of the rise in food prices between April 2007 and April 2008." That's just for one year.
Ethanol use has much more impact on prices of foods directly connected to corn, whether it be Kellogg's Corn Flakes or beef from the butcher's department at your local grocery store. An especially alarming CBO statistic shows another hidden cost of ethanol: Increased food prices could cost Americans $900 million more for food stamps and nutritional programs for children.
Growing crops for fuel also carries a serious environmental cost. Last month the International Council for Science released a new study, which in turn validated work from 2007 by Paul Crutzen at Germany's Max Planck Institute for Chemistry. These studies show that the amount of nitrous oxide released as a result of farming corn or rape for biofuels had been underestimated by a factor of 3 to 5 times. Nitrous oxide is a greenhouse gas 300 times more potent than carbon dioxide. That inconvenient truth negates any savings from so-called carbon neutral fuels.
Save the Rainforests: Avoid Ethanol!But let's look at the claim that using biofuels lowers overall carbon dioxide emissions. Essentially it isn't true.
Take Brazil. The region around São Paulo is their main ethanol production center. It was once a major center for cattle ranching, but the ranchers have often been supplanted by sugar cane plantations, whose proximity to the city make them efficient producers of ethanol for the urban market. Cattle and other agriculture have been pushed farther west, requiring that large patches of the Amazon rainforest be cleared. Yes, the world's greatest natural carbon dioxide trap, the Amazon rainforest, is being cut down so the world can have all the ethanol it thinks it needs.But ethanol isn't the No.1 fuel in Brazil either: It's diesel.
According to a Time magazine article from March 2008, not only does deforestation create 20% of the world's current carbon emissions, but in the second half of 2007 alone an area the size of Rhode Island was cleared from the Amazon forest. That year a study in Science magazine stated that when you take deforestation into account, ethanol and biodiesel produce twice as much carbon dioxide emissions as regular gasoline.
The Time article also covered the 2003 study at the University of Minnesota, which found that the increased use of biofuels would double the amount of hunger in the world by 2025, to 1.2 billion people.
Killing the Gulf's WildlifeThe damage doesn't stop there. A 2008 study by Simon Donner of the University of British Columbia and Chris Kucharik of the University of Wisconsin-Madison shows that the increased use of fertilizers required by additional corn production due to ethanol will widely increase the dead zone in the Gulf of Mexico. That is because the runoff from farms throughout the Midwest feeds into the Mississippi's tributaries to the Gulf.
Corn growing and ethanol production also raise issues about water use. Recently the University of Minnesota concluded that the amount of water needed to grow corn for ethanol varied widely, from 1.3 to 565 gallons per gallon of ethanol made—in Western states such as Nebraska, Colorado and California corn crops must be irrigated. In Mercer County, Ohio, residents banded together to stop a $125 million, 50-million-gallon ethanol refinery from being built after they found out that the proposed refinery was going to dump 300 million gallons of wastewater a year into nearby Grand Lake St. Marys.
It is a combination of these issues that keep biofuels from being widely touted by serious environmental groups. It's referred to as green energy only by those selling ethanol to Congress, which in turn forces it on the public by mandate.
Lead by ExampleThe real problem with ethanol is that in spite of the full court press and misinformation campaign put out by the various lobbying groups that insist this is the cure all to our energy problems, the fact is they don't really believe in the product themselves. Take Indiana, for instance. Indiana is the fifth-largest grower of corn for the nation, according to recent government figures, yet E85.org states that they only have 124 pumps selling E85 ethanol in the entire state. It gets worse.
On Mar. 10 of this year the Indiana Economic Digest published an article, "E85 Sales Fizzle in Wake of Low Gasoline Prices." Phillip Lampert, director of the National Ethanol Vehicle Coalition, was quoted in that article: "Sales of E85 are down across the country." Bummer. Nobody wants to buy E85. Of course, Indiana can't hold a candle to Nebraska, whose corn production is almost 50% higher. Nebraska, whose slogan is "Possibilities…Endless" apparently doesn't feel that way about the state's residents using E85 ethanol. To this day only 58 pumps in the entire state of Nebraska pump E85. These groups sincerely believe in the future for ethanol—as long as it's someone else forced to buy it.
Still, in spite of all the downsides to biofuels, there is a way to make ethanol work, reduce America's dependence on oil, and help mitigate the gasoline shortfall that could well come our way by 2015: Simply sell the fuel where it's made.
Ethanol can't be put into gasoline pipelines and shipped across the country because of its propensity to attract moisture, so it has to be sent by truck, train, or barge. So don't ship it anywhere: Think of the incredible energy savings we would achieve by not shipping ethanol all over the country. No diesel needed for any long-distance travel, no energy wasted by local distributors to add it into real gasoline for everyone's use.
Instead, alter the government mandate so that all ethanol has to be sold as an E85 blend within 75-100 miles of the refinery that made it. The upside to this plan is that it would free up gasoline for the rest of the nation, and save more by reducing the energy needed to transport as much oil and gas to the Midwest. This energy-efficient plan would likely save most of America a few cents per gallon on gas.
The car companies could simply sell their E85 Flex-Fuel vehicles in nearby counties in which ethanol refineries exist. The brilliance of the plan lies in its simplicity and obvious energy savings for the nation by keeping ethanol in regions in which it's produced. It's the obvious answer. The people who tell us ethanol is wonderful would become the people who have to use ethanol. What could be fairer?
The "Truthiness" TestIf one seriously believes that ethanol is the answer to our oil problems, our other option is to get into the ethanol business in a big way. Or to engage in real free trade. That means we must immediately drop the 51-¢-per-gallon blending credit for ethanol creation in America and drop the 54-¢-per-gallon tariff on imported Brazilian ethanol. This would allow much cheaper and more energy-efficient sugar cane ethanol to be sold in gasoline at least in coastal cities, again saving the energy needed to ship ethanol across the country.
Here are two great ways to enhance our energy security with ethanol. Neither one will change the environmental impact of using this fuel, nor will either reduce the costs of certain foodstuffs. But if the ethanol lobby puts their full lobbying pressure behind these plans, then we will know they sincerely believe in their product.
If they resist selling ethanol only where it's refined, or block the cessation of blending credits and won't budge on import tariffs, then we'll know they don't really believe in ethanol—they're only in it for the money.
Wonder which way they will go?
Ed Wallace received the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Four's Good Day, contributes to BusinessWeek.com with some regularity and hosts the top-rated talk show Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. Visit his highly respected Web site, www.insideautomotive.com, to read all his work. E-mail: firstname.lastname@example.org