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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

The best and worst of times for ethanol

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For ethanol it is the best and worst of times. Silos are bursting with a bumper crop and the price of corn has fallen by half, from $7 to $3.50 a bushel over the past year. Refiners are buying feedstock at rock-bottom prices.

“This is the most profitable time I can remember,” Dan Syekh, plant manager at Southwest Iowa Renewable Energy of Council Bluffs, told the Lexington Clipper-Herald of Nebraska. “People are beginning to pay off debt and invest in ever more advanced technologies.”

Yet hanging over all this is the question of what the U.S. Environmental Protection Agency will do about the Renewable Fuel Standard, which specifies how much ethanol the refining industry must buy next year.

“I feel like [the EPA is] playing politics instead of doing what’s right for America,” Iowa Gov. Terry Bradshaw told a Farm Progress Show in Boone last week. “Farmers aren’t buying equipment and John Deere is laying people off. What EPA has done is not only damage farm income but cost us jobs in farm machinery and manufacturing.”

At issue is the EPA’s announcement last spring that it would cut the mandate from the 14.4 billion gallons, originally required by the law, to 13.01 billion gallons, in order to deal with overproduction. With gasoline consumption having fallen since 2007, although numbers are now starting to rise again, the federal requirement had pushed ethanol additives past the 1 percent “blend wall,” where auto and oil companies claim it will damage engines. Many people dispute this but the auto companies are refusing to honor warranties in cars that use blends higher than 10 percent without authorization. Others say the solution is E85 — a blend of 85 percent ethanol and 15 percent gasoline — is the answer but it is not yet widely available outside the Midwest.

The EPA was supposed to make a decision on the mandate last November but has delayed after the furor over its initial proposal. Only last week it sent a final proposal to the White House for review. Rumors are that the EPA has settled on a figure somewhere between the original mandate and its April number, but there is nothing definite. In any case, the Obama administration could take several weeks to approve, even pushing its verdict past the November elections. This is the longest delay in the program’s history.

For several years now the ethanol industry has seen its influence waning in Congress. In 2011, Congress repealed the tariff on foreign biofuels, opening the door to cheaper sugar ethanol. Then it allowed a production tax credit to expire. Perhaps most significant has been the loss of support from large portions of the environmental community. Last year the Associated Press ran a story documenting how the mandate has led to over intensive cropping and the removal of land from conservation soil banks. “Corn ethanol’s brand has been seriously dented in the last 18 months,” Craig Cox, director of the Environmental Working Group in Ames, Iowa, told Politico. “The industry is still politically very well connected but it doesn’t occupy the same pedestal it did two years ago.”

Yet oddly enough, all this is happening at the moment when the industry may be on the verge of a huge breakthrough. On September 3, POET, the South Dakota refiner of ethanol, and Royal DSM, a Dutch maker of enzymes, will hold opening day ceremonies in Emmetsburg, Iowa for the inauguration of what could be the country’s first cellulosic ethanol plant — long considered the holy grail of biofuels. King William-Alexander of the Netherlands is scheduled to be in attendance.

Cellulosic ethanol uses the non-grain parts of the corn plant — the shucks and stalks that cannot be eaten. By cultivating certain enzymes and bacteria from the stomach of cows and other ruminants, several companies now believe they are able to break down the starches in these plant “wastes” and turn them into fuel. Various inventors have made the same claim over the years but have never been able to achieve cellulosic digestion at a commercial level. Now it appears POET may be about to break the barrier.

They aren’t the only ones. In fact, there is now $1 billion worth of cellulosic ethanol investments in the Midwest about to bear fruit:

  • In Nevada, Iowa, DuPont is investing $200 million in a cellulosic plant that will have a capacity of 30 million gallons annually. Operations are slated to begin before the end of 2014.
  • In Hugoton, Kansas, Spain-based Abengoa Bioenergy is spending $500 million on a plant to make ethanol from corn leftovers, wheat straw, milo stubble and prairie grasses. It will produce 21 million gallons of ethanol plus 21 megawatts of electricity.

Should any of these plants succeed, it would change the face of the industry.

So ethanol finds itself in a very strange position. Just as it may be on the verge of a huge breakthrough in production, it finds its markets drying up. Several Midwestern agricultural professors have suggested that the real solution is E85, which readily substitutes for gasoline and would create an almost unlimited demand. There are 15.5 million flex-fuel vehicles on the road — 6 percent of the entire fleet — all of which accept E85. There are also 3,200 gas stations that dispense it. But there is a huge mismatch between them. Most of the stations are in the Midwest where support for ethanol is strong while the flex-fuel vehicles are concentrated in cities on the East and West Coasts. So far no one has come up with a solution for making a better match.

There remains one potential market, however, that could tide over the ethanol industry until better auto markets develop. This is the U.S. Navy. The Department of Defense burns 300,000 barrels of oil a day, 2 percent of national consumption. For some time the Navy has been trying to find “drop-in” biofuels that would substitute for imported oil in jets and other vehicles. This year, for the first time, the Navy will include biofuels in its annual procurements. It is trying to get 50 percent of its fuels from renewable resources by 2020. “Up in the air you don’t have any other choice but liquid fuels,” said Tyler Wallace, professor of agricultural economics at Purdue. “The U.S. uses 21 billion gallons of aviation fuel annually and cellulosic ethanol would make a perfect drop-in.”

So would a huge order from the Navy be able to galvanize an infant cellulosic industry? Or will ethanol have to continue to holds its breath waiting for a decision on the Renewable Fuel Mandate from the White House and the EPA? For the industry, it remains the best and worst of times.