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Arctic Leaf

The game of checkers and corn-based ethanol

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Recent news concerning the use of corn waste or residual products to create commercially viable ethanol reminds me of a game of checkers. One jump forward, one jump backward, one move sideways. Depending how smart, bored or prone to crying the players are, the game often results in either a stalemate or a glorious victory, particularly glorious when it’s your grandson or granddaughter.

The good news! The American-owned POET and the Dutch-owned Royal DSM opened the first facility in Iowa that produces cellulosic ethanol from corn waste (not your favorite corn on the cob), only the second in the U.S. to commercially produce cellulosic ethanol from agricultural waste, according to James Stafford’s recent article in OilPrice.com (Sept. 5).

The new owners jumped (note the analogy to checkers…my readers are bright) with joy. They announced, perhaps, a bit prematurely, that the joint project, called Project LIBERTY, is the “first step in transforming our economy, our environment and our national security.” After their press release, quick, generally positive, comments came from electric and hydrogen fuel makers, CNG producers, advocates of natural gas-based ethanol and a whole host of other replacement fuel enthusiasts. The comments reflected the high hopes and dreams of leaders of public interest groups, some in the business community, several think tanks and many in the government who see transitional replacement fuels reducing U.S. dependency on oil and simultaneously improving the economy and environment. Several were fuel agnostic as long as increased competition at the pump offered a range of fuels at lower costs to consumers and reduced environmental harm to the nation.

Ethanol from corn waste, if the conversion could be made easily and if it resulted in less costs than gasoline, would mute tension between those who argue that use of corn for ethanol would limit food supplies and provide consumers a good deal, cost wise. The cowboys and the farmers might even eat the same table. (Sorry, Mr. Hammerstein.)

Life is never easy. Generally, when a replacement fuel seems to offer competition to gasoline, the API (American Petroleum Institute — supported by the oil industry) immediately tries to check the advocates of replacement fuel. The association didn’t disappoint. It made a clever jump of its own with a confusing move…sort of a bait and switch move.

API’s check and jump is reflected in their quote to Scientific American. It indicated, in holier-than-thou tones, “API supports the use of advanced biofuels, including cellulosic biofuels, once they are commercially viable and in demand by consumers. But EPA must end mandates for these fuels that don’t even exist.” Wow, how subtle. API supports and then denies!

What a bunch of hokum! Given their back-handed endorsement of advanced biofuels, would API and its supporters among oil companies agree to end their unneeded government tax subsidies simultaneously with EPA’s reductions or ending of mandates? Would API and its supporters agree to add provisions to franchise agreements that would allow gas station owners or managers to locate ethanol from cellulosic biofuels in a central visible pump? Would API work with advocates of replacement fuels to open up the gas market to replacement fuels and competition? Would API agree to a collaborative study of the impact of corn-based residue as the primers of ethanol with supporters of residue derived ethanol, a study including refereed, independent evaluators, and abide by the results? If you answer no to all of these questions, you would be right. API, in effect, is clearly trying to jump supporters of corn-based residual ethanol and block them from producing and marketing their product. Conversely, if you believe the answer is yes to one or more of the questions, you will wait a long time for anything to happen and I will offer to sell you the Golden Gate Bridge and more.

The advocates and producers of cellulosic-based ethanol from corn waste (next move) were suggested by overheard advisors to API. These advisors from the oil industry cheered API’s last move and noted that a recent study in Nature Climate Change, a respected peer-reviewed journal, suggested that biofuels made from corn residue emit 7 percent more greenhouse gases in early years than gasoline and does not meet current energy laws. They wanted checkerboard pieces held by advocates of corn residue off the policy board.

Oh, but the supporters are wise! They don’t give in right away. They pointed to an EPA analysis which indicates that using corn residue to secure ethanol meets existing energy laws and probably produces much, much less carbon than gasoline. Studies like the one reported in Nature Climate Change do not, according to an EPA spokesperson, report on lifecycle changes in an adequate way — from pre-planting, through production, blending, distribution, retailing produce and use. Moreover, a recent analysis funded by DuPont — soon to open a new cellulosic residue to ethanol facility — indicates that using corn residue to produce ethanol will be 100 percent better than gasoline, concerning GHG emissions. (Supporters were a bit hesitant about shouting out DuPont’s involvement in funding the study. It is a chemical company with a mixed environmental record. But after review, supporters indicated it seemed like a decent analysis.)

The response of supporters and its intensity caused API and its advisors to withdraw their insistence, that the checkers of the advocates of corn based residue derived ethanol come of the board. Instead, they asked for a two-hour break in the game. The residue folks were scared. “API was a devious group. What were they up too?”

When the game started again, both supporters and opponents pulled out lots of competing studies, before they made their moves. The only things they agreed on was that the extent of land use devoted to corn, combined with the way farmers manage the soil and the residue, likely would significantly affect GHG emissions. Keeping a strategic amount of residual on the soil would help reduce emissions.

Supporters of corn-based residue argued for a quick collaborative study that might help bridge the analysis gap. But they wanted a bonafide commitment from API that if corn-based residual, derived ethanol, proved better than gasoline, it would support it as a transitional replacement fuel. No soap! The game ended in a stalemate.

Based on talking to experts and surveying much of the literature, I believe that the fictional checkers game tilts toward corn residual derived ethanol, assuming significant attention is granted by farmers to management of the soil and the residue. Whether corn residual-based ethanol becomes competitive as a transitional replacement fuel will be based mostly on farmer intelligence, consumer and political acceptance and a set of even playing field regulations. It, as well as natural gas-based ethanol, as I have written in previous columns, are worthy of a set of demonstration efforts. The nation will have an extended wait until electric and hybrid cars make a big dent regarding the share of the total number of cars in America. We have a moral obligation to do the best we know how to do to lower GHG emissions and other pollutants. We shouldn’t let the almost perfect in our future reduce the possible good now.

Arctic Leaf

What the world needs now is land (and honesty) to get to replacement fuels

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I had the good fortune to meet and work a bit with Dr. Edwin Land, the inventor of the Polaroid camera. We were both on an informal poverty task force created by President Kennedy. I always admired Land. Throughout his life, his comments were always thought-provoking. His suggestion that “politeness is the poison of collaboration” really challenged, and continues to challenge, many of the facilitation and leadership gurus and practitioners who sometimes seem to have invented linguistic anti-depressants. Translated: don’t get angry, hold your tongue, mind your manners, mute some of your views or make them sound less critical, try to be nice and likeable, move toward a win-win situation, compromise and, if you get intense, take a break and go out for a while. Have a beer?

Times have changed, but only a bit, since Land died in the early nineties. Many participants still go into a collaborative and/or facilitative policy process with squeamishness about being direct and honest about their concerns. Because of this fact, it takes many sessions, rather than a few, to get real, difficult issues on the table and achieve a real meaningful and honest dialogue. Bonding and game playing (real and surreal) are often seen as more important than advocacy as well as early substantive dialogue. There is often little chance to compromise because the people at the table compromise their own views before they speak. They want to be polite. We don’t really know what they really think. Building collaboration in the hands of a facilitherapist (my own word), is regrettably, at times, using everyone’s favorite term, an existential threat. It makes collaborative victories, frequently short-term ones, in light of the fact that underlying disputes and tension were not given an airing.

With this as context, let’s look at key policy and behavioral issues now confronting the nation, concerning the harmful link between gasoline, the economy and social welfare, and the environment, particularly greenhouse gas (GHG) emissions and other pollutants. As relevant, let’s also think about why it’s been so tough to move toward replacement fuels for gasoline, even though such options would benefit consumers and the nation.

Gasoline now fuels approximately 250,000,000 vehicles in the U.S. While GHG emissions from gasoline are down because of improved technology in vehicles, gas still generally spews more GHG than alternative fuels such as ethanol, methanol, electricity or fuel cells. Gasoline also fails health and well- being tests when measured against a range of other pollutants, including NOx and VOCs (volatile organic compounds). Gasoline prices, while seemingly low (only) compared to the recent past, in some cases remain higher than alternative fuels, by a significant amount, whether based on renewables or fossil fuel. In this context, most of you reading this column are neither poor nor near poor. Imagine though, that you are, and in order to work, you need find housing at a reasonable cost relatively close to your job, see a doctor or take your family to see an aunt or uncle. But if you secure these and other basics, you have fewer choices since you have to spend from between 10-15 percent of your meager income on fuel. This is a verity now for most low- and moderate-income households. Indeed, based on EIA projections of gas prices and conservative as well as liberal economists conclusions concerning job growth and income, the percentages, likely, will increase in the future. If you were a person of very limited means, what would you limit first: travel to and from work, decent housing, health care or food, etc.?

Now, none of the replacement fuels are perfect. Most, including those based on or derived from fossil fuels such as natural gas, do emit some measurable GHG and other pollutants. This includes electric cars, particularly those that do secure their power from coal-fired electric utilities. But all are better than gasoline on environmental, economic and social welfare indices.

Why then is there not a clear movement toward transitional replacement fuels? Sure, electric car sales and CNG sales are up and hydro fuels will soon be on the market. Hopefully, they all will succeed in attracting consumers. But right now, all three together constitute from 1.5 to 3 percent of sales of new cars.

Why? Well, electric cars, CNG and hydrogen fuel cars are expensive and out of reach for many American households. For some, particularly those who purchase lower-end electric cars, the miles per charge often create road fear on the part of drivers. “What if I get stuck on the L.A. freeway?” Fuel stations are few and often far between for both electric, CNG and hydrogen fuel.

New electric, CNG or hydrogen fueled cars, at least for the near future, will illustrate for us all the comparative purchasing power of the haves, the have nots and the almost haves. Hopefully someday soon, most Americans will be able to compete — price, technology and design wise — for larger shares of the automobile market. But even if they become competitive, they will not be able to generate a major dent in the number of existing vehicles that rely on the internal combustion engine for a long time. Look at the data yourselves! Given their predicted annual sales, how many years would it take before the fleet of privately owned vehicles contained a very large percentage of electric, CNG, or hydrogen fueled vehicles (perhaps as much as 50 to 75 percent or more)? I have seen figures ranging up to almost several decades from respected analysts . Clearly, if sales of hybrid and plug-in vehicles are counted in the totals, the amount of time, it takes will be lower. However, achievement of a proportionately large share of the total number of cars will still extend out a many many years.

What can we do to achieve legitimate important national objectives concerning the environment, the economy and consumer costs for vehicles and fuel almost immediately? We can move to expand the number of FFVs (flex-fuel vehicles) in the country, first, by encouraging Detroit to build more each year and second, by asking public, nonprofit and private sectors to work together with the EPA to certify more conversion kits as well as existing in-use cars for conversion to FFV status. The net results would be vehicles able to use much higher percentages of ethanol (E85) derived from natural gas or from corn cobs, husks and stalks as well as other biofuels.

The proposed strategy is a transitional one. Clearly, electric, CNG and hydro fueled cars, when able to meet market tests concerning consumer needs, should join the mix of choices at the pump. I am optimistic. For example, twenty two states led by Colorado and Oklahoma have agreed to use CNG fueled cars to replace older cars retired from their state’s fleets. Detroit with the pool of CNG cars purchased by the states has agreed make best efforts to develop a lower cost CNG vehicle. Electric cars are coming down in costs. Hydro fueled cars will likely be produced in larger numbers soon and technology over time will reduce vehicle prices.

Now back to Edwin Land. I believe his comments about politeness, perhaps a bit too absolute, reflect his and my own views that the ground rules for collaborative efforts and consensus building may impede honesty concerning discussions of difficult topics. Being polite sometimes circumscribes and weakens important strategic dialogue. Involved participants fear being direct and sometimes avoid linking their intense feelings to their commentary. They try to avoid criticism or be seen as breaking the mythology of togetherness concerning long-term objectives and initiatives. Indeed, both objectives and initiatives are often so long term, that they are vague and don’t really matter to folks at the table. So why not go along? Individuals either avoid saying things that might lead to even temporary policy, program or behavior conflict and debate.

Politeness, certainly, is generally a virtue in most circumstances. Perhaps Land went too far in his choice of words. But the term, if used to guide collaborative efforts, often serves to mask real disagreements and necessarily blunt conversation. I have done lots of facilitative sessions on policy issues between senior officials of different nations and the U.S., as well as between community leaders on education, growth, environmental, race and poverty issues. Maybe the difference is miniscule, but I like the term being “civil” rather than being “polite;” the former presumes disagreement and allows for willingness to entertain tough dialogue and the possibility that the dialogue might step, at times, on intellectual toes; the latter, when translated into behavior, often suggests a willingness to skirt conflicts regarding ideas, if it temporarily reduces the ambience at the table.

Leaders from all sectors need to help build a collaborative “coalition of the willing” among environmental, public interest, government, private sector, nonprofit and academic leaders to push for flex fuel cars and replacement fuels. The criteria for coalition selection should be relevance to the policy and political issues related to gaining the public’s access to multiple fuel choices at the pump and to secure a much larger number of new FFVs as well as existing vehicles converted to FFV status. Identification and selection should not be limited to leaders who think exactly like us. But both should be limited to individuals who care about the environment, the economic and job growth of this nation, the well-being of consumers, particularly low- and moderate-income consumers and, although not discussed above, the security of this nation and the world. Claims of absolute wisdom should be a non starter for membership.

I suspect if the leadership group is diverse enough and if reasonable ground rules concerning structure and processes are set at the outset (ones that encourage substantive dialogue and debate ), disagreements can be bridged based on the data and agreements reached on transitional replacement fuel strategies that would influence public and private sector decision makers. A good facilitator would be needed, one weaned on policy and strategy more than psychology. A nationally respected foundation, or possibly even EPA, could either support or indeed facilitate the proposed serious exercise in collaboration and democracy. Civility, not politeness, should be a principle governing the dialogue.

Arctic Leaf

Natural Gas Demand Causes the EU to Invite Russia to Join…

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Hold the presses, stop the cable and network news shows, break away from Twitter, and forget for a moment about Facebook… Why? Read the latest wire from The Associated Press! Many European nations, including Great Britain, have signed a multibillion dollar long term contract for Russian natural gas. The signing was accompanied by a decision by the European Community to integrate Russia into the community’s governance– NATO officials expressed anger and disappointment. Great Britain’s ambassador to America gently, but affirmatively, responded to the New York Time’s question concerning “what does this do to America and Great Britain’s special relationship? Well, it isn’t so special anymore.” She went on, “the world is evolving and Europe, as well as Great Britain, is evolving also. . . The alliance, and indeed NATO, is a relic of the past. I am sorry but that’s just how it is!”

Please don’t respond like many in America did to the late 1930s broadcast of H.G. Well’s War of the Worlds, narrated by Orson Wells. Don’t fear! don’t run out to the street! No deal with Russia for natural gas has yet been signed, NATO is still intact. The European Commission and European Union are still alive, if not well, given the economic problems plaguing many of its members and the continent as well as Great Britain.

While not factual, my flight into hyperbole and negative fantasy could become a reality sometime in the future. What got me thinking about the possibilities was an interesting article in the Oct. 31 Financial Times (coincidentally, on Halloween) by Paolo Scaroni, Chief Executive of Eni, Europe’s largest natural gas dealer.

Scaroni’s thoughts were not offered to trick or treat us. They were meant to make us think seriously about opportunity costing and risk analysis sure to be undertaken by European countries because of their increased need for natural gas and other energy sources.

Scaroni suggests that Europe’s present energy policies and related energy costs impede economic growth, and do not reduce Greenhouse Gas (GHG) emissions. Of note, he indicates that “the problem is that we have so far failed to grasp the implications of the U.S. shale revolution for Europe. Thanks to the rapid increase in efficient non-conventional gas production, U.S. companies pay about $3.50 per million British Thermal Units (BTUs) for their natural gas…That is about a third of what Europeans pay. “

Apart from high gas feedstock costs, Europeans also pay a hefty set of charges to sustain incentives to invest in renewables. As a result, Europe’s electricity is “twice as expensive as America’s” and gives the U.S. a clear competitive advantage with investors around the world, including investors from Europe. Why invest, build or expand in Europe if your company is energy intensive?  The U.S. has the Red Sox, Lady Gaga, Madonna and, most importantly, relatively cheap natural gas fuel.

Because natural gas in the U.S. now crowds out coal, Europe gets a lot of its surplus coal for power plants. So while natural gas use has declined, it is increasingly hostage to dirty U.S. coal- sort of a negative equilibrium for our friends on the other side of the Atlantic. Rising carbon emissions from coal have come close to netting out the carbon benefits from investment in renewables, natural gas and the economic downturn.

What are Europe’s generally intelligent public and private sector leaders to do?  Sounds obvious!  Increase imports of shale gas from the U.S.!  No, says Scaroni. By the time transport costs are added and subject to liquefaction in the U.S. for shipping and regasification for use in Europe, shale gas exported from the U.S. is twice as expensive as gas in the U.S. While likely a bit exaggerated, the author indicates that buying U.S. natural gas would be economically disastrous.

It is also not a good political move. Besides the costs for U.S. natural gas, many Europeans still view the U.S. as “that” upstart nation, once defined by old Europe as the “colonies.” Heck, it was only near 325 years ago; it’s too early to pay reparations.

Scaroni thinks the answer is to explore home grown shale oil assets and nuclear energy, as well as increasing the efficiency of conventional fuels. To secure the first two, however, will be tough given the opposition of environmentalists and people who would like to keep Europe just as it is. Further, high density wall to wall development throughout Europe and Great Britain creates even more fear concerning despoiling the remaining open space and breeds an intense “not in my neighborhood” attitude in many areas. Efficiency is praised by most, because it is often used devoid of real meaning in political rhetoric. Who can be against it, until specifics and likely mandates, costs, and its impact are put on the table?

Scaroni, realizing the obstacles to lowering the costs of gas to U.S. benchmark prices, suggests strengthening commercial and political ties with Russia and perhaps other traditional non U.S. energy partners.  Reading between the lines of the author’s words, he seems to be saying, “let’s milk Russia for all the comparably inexpensive gas we can get.”  WOW!  Communist! Reprobate!  Misanthrope!  No.  Probably just a good analyst and business person.

Without access to NSA data or James Bond, I still almost can hear the buzz at the Pentagon and State Department.  I can see the dour faces at NATO offices in Brussels. I can visualize the depression in the EC and EU. Sure, Russia may soon find a welcome mat in Europe. Its entrance price will be relatively cheap natural gas. New alliances, new travel patterns for diplomats, better food in Russia in the future, new political fun and games as well as new problems for the U.S.

Russia’s natural gas exports to Europe are likely to increase, but Russia’s natural gas dominance is probably not around the corner. The West can take a deep breath.  Use of fracking, governed by strong environmental regulations, likely will increase and result in expanded natural gas supplies in Europe and Great Britain.  While exports from Russia will increase, they will reflect a measured increase at least in the short term.

Russian exports to Europe and Great Britain will not have a major impact on the U.S. We can manage any uncertain political changes and the European price of natural gas will not have a major effect on the U.S. price of the same.

What’s the U.S. going to do with its natural gas? While LNG exports from the U.S. may increase to Great Britain and Europe (as well as Asia), the increase will be moderate, given the continued absence of sufficient port capacity, the cost and the slow pace of government approvals. Pressure, in light of predicted surpluses and the advocacy of alternative fuel supporters, may help open up the almost monopolistic U.S. vehicular fuel markets and increase natural gas demand.

Natural gas prices in the U.S. will remain subject by and large to U.S. production and related costs, as well as regional market behavior and investor speculation. Contrary to oil, natural gas produced in the U.S. likely will not play a major role for at least the next several years in global markets

Is this good for U.S. and U.S. consumers?  On balance, yes. The gap between demand and production as well as production potential will remain visible. ROI in natural gas wells and rigs will probably be sufficient to secure modest production increases. Natural gas prices will likely go up over time but remain well under the price of oil when both are converted to vehicular fuels. Assuming positive government rule-making and the increased use of natural gas derivatives, ethanol and methanol as alternative transitional vehicular fuels, consumers at the pump will benefit from the continued differential and the U.S. will benefit security-wise as well as environmentally and economically.

Arctic Leaf

What do Grover Norquist and Edmund Burke have to do with Natural Gas?

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I don’t like the idea of advance pledges by candidates concerning how they would vote, if they were elected by us. I believe it is contrary to representative democratic government and denies the fact that economic, security, social and environmental conditions change, often rapidly, and must be responded to with studied intelligence and common sense, not constant polling or focus groups.

I guess I am, at least, part Burkian.  Although it departs from present reality, as the great philosopher and British MP, Edmund Burke indicated, our elected leaders , should use their “…unbiased opinion…mature judgment…enlightened conscience…(our) representative(s) owe …not (their) industry only, but (their) judgment; and (they) betray, instead of serving (us), if they sacrifice ( judgment) to (our often fleeting ) opinion(s).” Voters can, at least in theory if not always in practice, dismiss their representatives at the next election. I am not sure Burke won again after he made his plea for more thinking and less pandering.

I am suffering emotionally (not too significantly) by being tempted by  a Kaplan analogue to Grover Norquist’s “no new taxes” pledge, required of  candidates for office.  While the tax pledge, I believe, is responsible for at least some of the dysfunction in Washington, there is a certain romantic, almost utopian appeal to it with respect to frustrated advocates for more and better fuel choices at the pump than just gasoline. As Emerson wisely indicated, perhaps, “a foolish consistency is the hobgoblin of little minds.”

The new Kaplan analogue to the Norquist pledge would acknowledge that the natural gas train has left the station. Indeed, it has! One has only to look at the number of wells/rigs now in place compared to just a few short years ago and the relatively rapid escalation in gas production.

The natural gas sector has become, and likely will remain, an economic and political powerhouse. In this context, advocates of a “renewable transportation fuel only” approach, risk, implicitly, supporting a short and intermediate term future dependent on oil and gasoline. As a result, their success would likely result in increased environmental degradation, more greenhouse gas (GHG), higher costs for consumers, increased security problems and restricted economic growth. Clearly, the enemy of a short term good would become a distant perfect.

The Kaplan pledge would commit candidates to help secure reasonable and effective federal and state regulations to protect and enhance the environment and significantly reduce GHG production during production, distribution and sales of natural gas-from wellhead to automobile.

The pledge would commit candidates, once elected, to help foster a collaborative public, nonprofit and private sector effort to wean the country off dirty oil and gasoline. It would require them to develop and support initiatives that open up the now almost closed transportation fuel market to safe, environmentally sound, cheaper alternative transition fuels. Finally, it would commit candidates, should they take office, to support the development of renewable fuels and vehicles that would reflect competitive costs and mileage capacity that match the budget and occupation as well as life-style needs of low, moderate and middle income Americans.

I feel sinful in departing from the philosophy of Edmund Burke. I need to contemplate my fall from philosophical grace. I apologize!  I hope I am treated with grace and redemption. My excuse in proposing a Congressional pledge was only a temporary errant fantasy. It “ain’t” going to happen. It is a flight from reality.

But, was it all bad? Perhaps, the Kaplan pledge points the way to an alternative that is not antithetical to Edmund Burke. What if, instead of trying the impossible with elected officials, many  of whom try to fit their views to the, often of the moment, views of their constituents, advocates of a free fuel market and alternative transitional transportation fuels worked to form  a coalition of nonpartisan or bipartisan groups: business, labor, environment, government, academic and community . Each group would join because they are consistent in heart and mind with the Kaplan fuel freedom pledge. Each would accept the intent explicit in the pledge; that is the nation’s need for a comprehensive fuels strategy that would bridge the gap between renewable and natural gas advocates, between environmentalists and the natural gas industry, between liberals and conservatives.

Free market business and conservative adherents would put muscle behind their ideology in seeking a more open fuel market. Liberals would put meaning behind their desire to aid the needy who suffer from the high cost of gasoline and limited job opportunities because budget constraints limit driving. Environmentalists would match their concern for the environment with support for natural gas, ethanol and methanol as transitional fuels — fuels that would reduce GHG and other gasoline generated pollutants. The nation would be better able to secure the stimulus now required to improve economic growth because of the reduced dependency on foreign imports. Every one of us would benefit from success in assuring research and development of renewable fuels. The coalition would inform and increase Congressional understanding of the need for an integrated coherent national fuel strategy. The payoff to elected leaders:  The Coalition would promise to help voters comprehend the nation’s need for alternative fuels and a comprehensive fuel freedom strategy. It would meet with measured success. Sign me up! The best of all possible worlds! Oh Happy Day!  I can dream can’t I?