Silicon Investor - $2 or higher gas - Can ethanol make a comeback?

[richardred] Dow Chemical stocks.apple.com

richardred — 5/29/2023 10:53:15 AM

[richardred] Dominion Energy Turns to Cow Manure in Gas Pact Deal is the l...

richardred — 12/12/2019 12:48:08 PM

Dominion Energy Turns to Cow Manure in Gas Pact Deal is the latest venture between livestock concerns and power producers to generate gas from animal waste

A Vanguard Renewables anaerobic digester at a farm in Deerfield, Mass. Vanguard will build and operate digesters in its pact with Dominion Energy and the Dairy Farmers of America. Photo: Vanguard Renewables

By
Ryan Dezember

Updated Dec. 11, 2019 7:20 pm ET

Dominion Energy Inc. has struck a $200 million pact with a renewable energy producer and the Dairy Farmers of America Inc. to extract natural gas from cow manure.

The arrangement calls for the utility to fund construction of organic-waste processing facilities called anaerobic digesters amid clusters of large dairy farms, connect the facilities to natural gas distribution pipelines and sell the gas. Vanguard Renewables, of Wellesley, Mass., will build and operate the digesters, which break down organic waste into usable fuel and fertilizer. Dairy farmers, for a fee, will supply manure, and in some cases lease out land upon which the equipment will be built.

It is the latest venture between big livestock concerns and power producers aiming to generate pipeline-quality natural gas from animal waste. Doing so results in gas that is more expensive than that which has flooded the market from U.S. shale formations. So-called biogas, however, is in high demand among consumers, businesses and local governments eager to lower their emissions and earn environmental plaudits. It can generate valuable and tradable carbon offset credits for buyers, which can make producing biogas worthwhile for companies like Dominion.

Number of anaerobic digesters on U.S.livestock farmsSource: Environmental Protection Agency

OperatingUnder construction

Number of anaerobic digesters on U.S.livestock farmsSource: Environmental Protection Agency

The utility, which serves 7.5 million customers in 18 states with electricity or natural gas, in October enlarged to $500 million an existing deal to capture gas at Smithfield Foods Inc. hog farms in five states. Last month, Perdue Farms Inc. and a Maryland renewable energy company said they were building a digester in Delaware to break down fat, sludge and offal from poultry slaughterhouses into gas.

Twelve years ago, the cutting edge of utilities’ efforts to reduce emissions involved stretching tarps over manure lagoons to trap the methane fumes so they could be funneled to a flare and burned instead of just wafting to the clouds.

The advent of markets for carbon offset credits—and the urgency with which investors and governments are pushing companies to reduce or counter their greenhouse-gas emissions—has increased the appeal of biogas. Demand is growing even though it often costs many times more than gas produced by drillers, which is about $2.25 per million British thermal units lately.

Methane, which cattle produce in abundance thanks to their multichambered stomachs, is a particularly potent greenhouse gas. The methane from the manure of a typical cow is roughly equivalent to the annual emissions of a car that gets about 20 miles per gallon and is driven 12,000 miles.

“It’s an entire strategy on how we’re approaching sustainability and greenhouse-gas reductions,” said Diane Leopold, co-chief operating officer at Dominion. “We’re looking to be a leader in clean energy.”

The anaerobic digesters are to be built over the next five years around clusters of dairy farms in Georgia, Nevada, Colorado, New Mexico and Utah. Each digester needs the manure of 20,000 to 30,000 cattle to be economical, said Ryan Childress, director of gas business development at the utility. Dominion expects the facilities to produce 1 billion cubic feet of gas annually. Though just a sliver of total U.S. output, that is still enough to power thousands of homes.

Cattle provide manure for a renewable natural gas operation at a Massachusetts dairy farm. Photo: Vanguard Renewables
Vanguard Renewables has built five digesters in Massachusetts, is building one in Vermont and is in the permitting stage for another in New York. The gas has been sold to companies as well as a city and a Vermont college. Kevin Chase, Vanguard’s chief investment officer, said the company found a receptive audience among dairy farmers as it sought participants for the Dominion venture.

“A lot of the dairies that we’re talking to are going through succession plans and the younger dairymen coming through are all about being good stewards of the environment,” Mr. Chase said. “They’re also looking at ways to diversify their balance sheet.”

Most digesters on dairies have been built and operated by farmers, which had limited appeal among Dairy Farmers of America’s roughly 8,000 farm owners for the expense and operational complexity involved, said David Darr, the cooperative’s chief strategy and sustainability officer. The prospect of having third parties handle gas production and sales while earning fees for the manure is more enticing, he said. Plus, the farmers get their manure back once the methane is gone so that they can fertilize with it.

“You still have access to those nutrients for cropping operations,” he said. “This is just to have an additional harvest, to capture that methane that would otherwise just be emitted into the environment.”

Write to Ryan Dezember at ryan.dezember@wsj.com

wsj.com

[richardred] ADM considers ethanol spin-off as Q1 profits fall [graphic] Credit: ADM Biofue...

richardred — 5/3/2019 12:00:25 PM

ADM considers ethanol spin-off as Q1 profits fall

Credit: ADM

Biofuels producer Archer Daniels Midland (ADM) has announced first quarter net earnings of $233 million (approximately €209 million) after extreme weather and flooding in the US Midwest negatively impacted earnings.

The company announced plans to spin off its ethanol business after disappointing biofuel margins and flooding in the Midwest caused ADM’s profits to drop 41%, from $393 million in Q1 2018, Reuters reported.

“The first quarter proved more challenging than initially expected,” said chairman and CEO Juan Luciano. “Impacts from severe weather in North America were on the high side of our initial estimates, and the ethanol industry environment limited margins and opportunities.

“Despite a challenging start to the year, we continue to make excellent progress on our key imperatives for 2019: improving performance in certain businesses, accelerating our Readiness efforts, and delivering results from our growth investments.”

In a commitment to delivering its objective of year-on-year comparable or improved full-year earnings, ADM announced a number of new measures to achieve long-term growth and shareholder value, including the creation of an ethanol subsidiary.

This subsidiary will include ADM’s dry mills in Columbus, Nebraska; Cedar Rapids, Iowa; and Peoria, Illinois. Operating as an independent segment, the new structure will allow ADM to ‘advance strategic alternatives, which may include, but are not limited to, a potential spin-off of the business to existing ADM shareholders’, the company noted.

ADM’s carbohydrate solutions segment, which includes ethanol, posted first quarter earnings of $96 million, down from $213 million in 2018. The company put this down to a ‘continued weak industry environment’, with production volumes impacted by severe weather.

Revenue fell to $15.3 billion, with earnings of $0.46 per share on an adjusted basis.

biofuels-news.com

[richardred] Raven - Running on all cylinders this QTR.

richardred — 8/25/2018 9:46:23 AM

[richardred] ARTW- 8K-On March 6, 2018, Art’s-Way Manufacturing Co., Inc. (the “Company”) an...

richardred — 3/9/2018 9:23:17 AM

ARTW- 8K-On March 6, 2018, Art’s-Way Manufacturing Co., Inc. (the “Company”) and J. Ward McConnell, Jr., Vice Chairman of the Board of Directors of the Company, entered into a letter agreement terminating an agreement between the parties dated February 12, 2002 that contained restrictions on Mr. McConnell’s ability to acquire fifty percent (50%) or more of the issued and outstanding shares of common stock of the Company without approval of the Company’s Board of Directors, excluding Mr. McConnell and his son, Marc H. McConnell. The Board of Directors, excluding Mr. McConnell and Marc H. McConnell, has determined that such restrictions are no longer in the best interests of the Company. The full text of the letter agreement is set forth in Exhibit 99.1 attached hereto and is incorporated by reference in this Current Report on Form 8-K as if fully set forth herein.

[richardred] If you haven't fallen asleep yet Lance. Ward JR. has been busy buying around 27...

richardred — 11/26/2017 2:07:17 PM

If you haven't fallen asleep yet Lance. Ward JR. has been busy buying around 275k worth of ARTW. It kinda caught my attention as form 4's kept happening . IMO they need to get some of those Ag. building and equipment shipped to China. I thought that since China bought Smithfield Foods.

Message 31367039

[richardred] POET ‘more optimistic than ever’ about cellulosic ethanol November 24, 2017 ...

richardred — 11/26/2017 1:06:19 PM

POET ‘more optimistic than ever’ about cellulosic ethanol

November 24, 2017 By Ken Anderson Filed Under: Crops, News, Renewable Energy

POET-DSM Advanced Biofuels’ cellulosic ethanol plant “Project Liberty” near Emmetsburg, Iowa

The recent news that DuPont has closed and plans to sell its two-year old cellulosic ethanol plant in Iowa raised questions about the future of cellulosic ethanol production. But Matt Merritt, public relations director for POET, tells Brownfield they’re more optimistic than they’ve ever been about cellulosic.

“We have overcome what has been the main roadblock to getting this technology out there,” Merritt says, “and we are more excited than we’ve ever been about it.”

Merritt says POET has solved a problem that has plagued cellulosic ethanol producers—getting the biomass, that includes corn cobs, stalks and leaves, to move through the system.

“You’ve got to sort of beat that up and break it down—turn it into kind of a softer mud material—so you can get at it with yeast enzyme and turn that into biofuels,” he says. “That is where the challenge has been, I think, for everybody in this industry. That’s where the real struggle has been is how do you get that to flow through the process properly.”

Merritt says their “pre-treatment” breakthrough is a game-changer for cellulosic ethanol.

“We definitely see a future where this technology is going to be all over the Midwest—and as it evolves to new feedstocks, all over the country and all over the world,” he says.

Merritt says the federal government needs to keep its commitment to cellulosic ethanol in the Renewable Fuel Standard.

“That’s really the only thing that’s going to hold us back.”

brownfieldagnews.com

[richardred] Special Report: Refiner Valero's secret campaign against U.S. biofuels mandatesU...

richardred — 8/21/2017 9:40:30 AM

Special Report: Refiner Valero's secret campaign against U.S. biofuels mandatesU.S. biofuels regulations, which mandate mixing corn-based ethanol into gasoline, have lately drawn together a diverse cast of political opponents.Reuters | August 21, 2017, 17:35 IST

Newsletter A A

New Delhi: U.S. biofuels regulations, which mandate mixing corn-based ethanol into gasoline, have lately drawn together a diverse cast of political opponents.

They include an upstart gas station owners' trade group, a former Obama administration environmental adviser and billionaire activist investor Carl Icahn, who owns a refiner and served as U.S. President Donald Trump's special advisor on business regulation - until he resigned Friday amid allegations of a conflict of interest.

Even the Renewable Fuels Association (RFA), a leading biofuels industry group, recently dropped its opposition to policy changes sought by this ad hoc coalition.

These players would seem to have few shared interests, but they share one key connection – close ties to Valero Energy Corp., America's largest oil refiner.

As part of an extensive behind-the-scenes lobbying campaign, Valero played a key role in bringing these people and groups together around a policy proposal that could save the refiner hundreds of millions of dollars each year in regulatory costs, according to two former Valero executives with knowledge of the firms' lobbying strategy.

Valero is a big loser under current regulations, which require refiners to either blend biofuels into their gasoline and diesel or buy government-issued credits from firms that do such mixing. After selling off much of its ethanol-blending operations in cash-raising deals in 2006 and 2013, Valero was forced to spend $750 million last year alone buying the credits, according to Valero's securities filings.

The policy overhaul favored by Valero would free refiners from the obligation to blend biofuels or buy credits, shifting that burden to firms further down the supply chain toward retailers.

Such a change would amount to a multi-billion-dollar transfer of wealth to Valero. It would also benefit Icahn's refining company, CVR Energy, and a handful of other refiners that lack blending operations.

Top Valero officials wanted others to act as the public face of the push to upend renewable fuels policy, the former Valero executives told Reuters.

"There was an effort to line up people who would support us who were more palatable to decision makers," said one of the former executives. "It's easier to support a small business than a big refining company."

In response to Reuters' inquiries, Valero stressed that it has publicly criticized current regulations. Spokeswoman Lillian Riojas called the rules harmful to "workers, small business retailers, consumers, the refining base, energy security and even the drive for more biofuels blending."

Valero has joined petitions to change the law, sued the EPA, and sent executives to challenge the policy at industry conferences. But its more extensive and less visible lobbying through proxies served a purpose – to create a perception of broader support for a change that would primarily benefit Valero and a small number of other refiners.

The push to change the so-called "point of obligation" for biofuels blending is opposed by most ethanol producers and large integrated oil companies with blending facilities. They argue the shift would rope in thousands of additional companies - from gasoline retailers to shippers such as FedEx - and undermine the program by complicating enforcement.

The Trump administration has said it is considering the regulatory changes, but it has not announced a decision.

In early August, three sources familiar with the administration's biofuels policy deliberations told Reuters that the Environmental Protection Agency (EPA) was preparing to reject proposals for the change. The White House declined comment and referred questions to the EPA, which did not respond to requests for comment.

Valero strategists viewed Icahn as a better public advocate to change biofuels policy despite his majority ownership of a small refinery, the two Valero executives said. That's because the famous Wall Street investor has a diverse array of business interests and unique access to Trump, a longtime friend.

"Our folks wanted to get him involved," said one of the Valero executives, who was regularly involved in company discussions on biofuels lobbying.

When Icahn wrote the EPA in August of 2016 to push for the policy change - arguing current rules create a "rigged market" - representatives from Valero helped him craft the letter, the executive said.

Valero declined to comment on its role in crafting Icahn's proposal. Jesse Lynn, a lawyer for Icahn, said the billionaire "sought input from a number of people" on the letter but declined to name them.

Shortly after being elected, Trump named Icahn his special advisor on regulation, an informal role.

Icahn stepped down from the post on Friday after facing criticism that he was advising Trump on policy changes that would enrich his refining business. Icahn denied any conflicts of interest late Friday in an open letter to Trump.

"I never sought any special benefit for any company with which I have been involved, and have only expressed views that I believed would benefit the refining industry as a whole," he wrote.

The White House has said there is no conflict of interest between Icahn's refining business and his biofuels policy advocacy because he was not paid as a presidential advisor.

'REGULATORY HAIL MARY’

The Renewable Fuel Standard (RFS) was adopted in 2005 during the presidency of Republican George W. Bush as a way to bolster U.S. energy independence, reduce pollution and support Midwest corn farmers. Today, about 10 percent of U.S. motor fuel comes from vegetation.

The law's critics - which cover a broad ideological spectrum, from fossil-fuel firms to environmentalists - argue variously that it is essentially a farming subsidy; that ethanol hurts gas mileage and does little to help the environment; and that its impact in reducing foreign oil dependence has been dwarfed by booming U.S. oil production.

Jack Lipinski, chief executive of Icahn's CVR Energy, told Reuters that the current rules create a "contrived and manipulated marketplace." The law provides a windfall to major integrated oil companies - who profit from selling the credits - and unfairly punishes certain refiners for not investing in costly biofuels blending facilities, he said.

Lobbying against the mandates became more urgent for CVR and Valero in 2013, when prices for biofuels credits soared as energy firms worried about an impending increase in required biofuels blending volumes.

By then, major refiners such as Tesoro Corp and Marathon Corp were investing in blending facilities to lower regulatory costs.

But Valero, looking to focus on its core refining business, had been selling off its already limited blending operations as part of larger deals. It sold a pipeline and logistics unit in 2006 to raise $880 million and spun off its retail unit in 2013 in transactions that brought it $1.4 billion.

Valero has said it now has little ability to blend ethanol and biodiesel into the more than 2 million barrels of petroleum products it produces each day in the United States. As a result, the firm is forced to spend hundreds of millions of dollars annually on biofuels credits.

By 2015, Valero CEO Joseph Gorder was convinced that lobbying the EPA to change regulations was a better strategy than operating blending facilities, one of the former Valero executives told Reuters.

The second former Valero executive described the tactic as a "regulatory Hail Mary".

SIGNING UP AN OBAMA ENVIRONMENTAL ADVISOR

In 2015, Valero's external lobbying firm - Bracewell LLP, a Houston-based law and government relations outfit - hired Ron Minsk, a former advisor to President Barack Obama on energy and the environment, as a consultant.

Bracewell never announced the high-profile hire, made months after Minsk left the White House, and Minsk never registered as a lobbyist, according to U.S. Congressional disclosures.

In February 2016, Minsk testified before Congress as an expert on biofuels regulation, citing his experience as an Obama advisor and arguing in favor of a shift in the point of obligation for blending.

Minsk did not disclose his relationship with Valero in his written testimony but acknowledged it when a lawmaker pressed him about industry ties.

"I have been retained by a law firm to consult on issues related to the RFS, and Valero Energy Corporation is one of their clients," Minsk said, referring to Bracewell.

Asked why he didn't disclose the Valero connection before testifying, Minsk told Reuters: "I was sharing my own views, and not anyone else's."

Minsk also filed public comments to EPA in February 2017, urging the same policy change – again without noting his Valero connection.

Scott Segal, a Bracewell partner in Washington, said in a statement that Minsk "provides technical advice to us on a variety of topics" and that he was "certainly not testifying or writing on behalf of the firm or its clients."

'RETAILER OF THE YEAR'

Throughout 2016, Valero cultivated allies that would ultimately mobilize around the same policy proposal to the White House.

The refiner helped one of its retailers, Bill Douglass, launch a grassroots organization of small gas station owners that would argue biofuels mandates hurt their mom-and-pop businesses.

Douglass said he contacted all of his fuel suppliers for help in starting the organization, but only Valero provided assistance, giving him a list of its retailers to recruit.

Bracewell helped connect the fledgling Small Retailers Coalition with a website developer, the firm said. The site is devoted largely to arguing for the same regulatory changes Valero supports. Douglass also sent a letter to the EPA and spoke personally with an EPA official to urge adoption of the policy.

Bracewell was happy to help a political ally of its client Valero, Segal said.

"It should come as no surprise that groups with which we are allied, we help," Segal said, while noting the firm did not control the website's content. "We share information and frankly we're glad to do it. We are not opposed to providing assistance when it's appropriate."

Valero's spokeswoman denied the company had played a significant role in setting up the SRC and declined further comment on the firm's relationship to the group.

Valero did, however, name SRC founder Douglass its "Retailer of the Year" in 2016.

'TRYING TO SPLIT THE INDUSTRY'

Valero also sought to join biofuels industry groups and persuade them to back its policy position, according to the former Valero executives and three biofuels industry sources.

Valero had reason to join one of those groups. Although it lacked sufficient ethanol-blending facilities, it was one of the nation's top five ethanol producers.

Still, Valero was seen as an outsider by many biofuels producers because the refiner had opposed regulations they supported, two oil and four biofuels industry sources told Reuters.

Michael McAdams, President of the Advanced Biofuels Association, said he received a phone call in May or June of 2016 from Valero's Richard Walsh – a senior vice president and corporate counsel who led the refiner's push to change biofuels policy, the former Valero executives said.

Walsh said Valero wanted to join the biofuels organization - but first wanted the chance to convince the group to support its proposed regulatory change.

"My board said, 'No, thank you. We can't align with you,'" McAdams said, adding that it seemed Valero was "trying to split” the biofuels industry, McAdams said.

Walsh did not respond to requests for comment.

NEUTRALIZING AN OPPONENT

The refiner, however, did end up joining the Washington-based Renewable Fuels Association (RFA), among the most prominent biofuels producer groups and a powerful lobbying force.

The RFA had previously criticized proposals to shift the biofuels blending point of obligation, arguing it would discourage production of blends with higher ethanol content and complicate enforcement.

Valero and RFA President Bob Dinneen declined to discuss how and why Valero came to join the group but said it had nothing to do with the RFA's position on the refiner's policy priorities.

The RFA, however, ultimately did agree to drop its opposition to the policy change sought by Valero – a clear victory for the refiner.

In February, Valero representatives and Icahn held a meeting with the RFA's Dinneen. Icahn told Dinneen he believed Trump would support the refiners' biofuels policy proposal – and that the RFA should lend its political support.

Dinneen told Reuters at the time that the RFA decided not to oppose what it believed was a done deal. He also said Icahn assured the group that it could win concessions from the Trump Administration in return, including support for a different regulatory change that would encourage production of fuel blends with higher ethanol content.

Other biofuel industry groups slammed the RFA's policy shift. Fuels America, a coalition of renewable fuel and farm groups, dropped the RFA as a member of their alliance in response.

LOBBYING A LOBBYIST AT THE WHITE HOUSE

In March, Valero's Walsh, CVR's Lipinski and representatives from other refiners went to the White House to pitch their case to Trump's top aide on domestic energy policy, Michael Catanzaro, a former energy industry lobbyist.

Trump had banned former lobbyists hired by his administration from participating in issues on which they lobbied for two years – but the White House later granted Catanzaro a waiver from that rule.

Catanzaro is advising on the same issues that were recently the focus of his lobbying for clients such as Koch Industries - a diversified conglomerate with major energy assets - and groups including the American Fuel and Petrochemical Manufacturers, which petitioned the EPA for the biofuels change last year.

Catanzaro declined to comment.

Valero's Walsh invited Douglass to join the meeting to represent the Small Retailers Association, Douglass said.

As in other forums, Valero representatives let others take the lead in carrying the message, mainly Douglass and a union representative for workers at a Philadelphia refinery.

"They let me do most of the speaking," Douglass said. "They let me hold the floor because I think they regard my dilemma as being more critical."

(Additional reporting by Erwin Seba in Houston; Editing by Richard Valdmanis and Brian Thevenot)

energy.economictimes.indiatimes.com

[richardred] Advanced and Cellulosic Ethanol Ethanol’s evolution continued in 2016, as pl...

richardred — 8/13/2017 9:22:09 AM

Advanced and Cellulosic Ethanol

Ethanol’s evolution continued in 2016, as plants across the country adopted new technologies allowing them to process new feedstocks and produce new low-carbon biofuels and bio-products. Quad County Corn Processors near Galva, Iowa – the first plant to produce commercial volumes of cellulosic ethanol from corn kernel fiber – surpassed the 5 million gallon threshold for cellulosic production in September 2016.

Other ethanol producers, including Pacific Ethanol, Little Sioux Corn Processors, and Flint Hills Resources, also adopted “bolt-on” technologies in 2016 that will allow them to produce both starch-based and cellulosic ethanol from the same corn kernel.

Some companies – like Adkins Energy and CHS – used onsite technologies to convert corn distillers oil into biodiesel, an advanced biofuel under the Renewable Fuel Standard (RFS). East Kansas Agri-Energy completed construction on its co-located facility that integrates refining technologies like hydrocracking and isomerization to convert corn distillers oil into renewable diesel and naptha. In Minnesota, Green Biologics finished its conversion of a small corn ethanol plant into a facility producing n-butanol.

Progress toward full commercial production continued at stand-alone cellulosic ethanol facilities owned by DuPont and POET-DSM. DuPont’s facility near Nevada, Iowa has the capacity to produce 30 million gallons (mg) per year, and the POET-DSM plant at Emmetsburg, Iowa has 20 mg of annual capacity.

EPA’s finalization of strong RFS blending requirements for cellulosic and advanced biofuels in 2017 injected some badly needed certainty in the marketplace and restored a positive investment signal. Against that backdrop, 2017 promises to be a big year for cellulosic and advanced biofuels.

ethanolrfa.org

[richardred] USGC, Growth Energy, RFA Statement on Delay of Decision to Impose U.S. Ethanol I...

richardred — 8/13/2017 9:16:43 AM

USGC, Growth Energy, RFA Statement on Delay of Decision to Impose U.S. Ethanol Import Tariff
By

Emily Druckman

July 26, 2017 at 8:53 am

WASHINGTON – The Executive Management Committee of CAMEX, Brazil’s Chamber of Foreign Trade, announced Tuesday a 30-day delay of a decision on a pending proposal to impose a 20 percent tariff on U.S. ethanol imports. The proposal would allow 500 million liters annually of U.S. ethanol imports (132.1 million gallons) before triggering the tariff. The following is a joint statement on this action from U.S. Grains Council (USGC) President and CEO Tom Sleight, Renewable Fuels Association (RFA) President and CEO Bob Dinneen and Growth Energy CEO Emily Skor:

“We are encouraged to see Brazil’s postponement on a decision regarding a pending proposal to impose tariffs on U.S. ethanol imports. This decision should not be taken lightly, as imposing tariffs on U.S. ethanol imports will hurt Brazilian consumers by driving up their costs at the pump. Additionally, this action on U.S. ethanol imports will go against Brazil’s own longstanding view that ethanol tariffs are inappropriate and will harm the development of the global ethanol industry. We will continue to work towards educating Brazilian policymakers on how misguided this tariff would be, which would harm consumers by denying them access to the lowest cost, cleanest and highest octane source of fuel in the world. This proposal, if implemented, would have wide-ranging and long-standing impacts on both our industries and the global fuel supply.”

ethanolrfa.org

[richardred] EPA ‘Well-Justified’ to Maintain 15 Billion Conventional Biofuel RVO in 2018 RF...

richardred — 8/13/2017 9:12:57 AM

EPA ‘Well-Justified’ to Maintain 15 Billion Conventional Biofuel RVO in 2018 RFS, But Cellulosic Ethanol Target Needs Increase, RFA Tells EPA
By

Emily Druckman

August 1, 2017 at 8:20 am

WASHINGTON – In testimony delivered at a public hearing today in Washington, D.C., Renewable Fuels Association (RFA) President and CEO Bob Dinneen thanked the Environmental Protection Agency for proposing to maintain the 15 billion gallon requirement for conventional renewable fuels in its 2018 Renewable Fuel Standard (RFS) rule, but urged the agency to increase its proposed cellulosic ethanol requirement to reflect growing bolt-on technologies at existing ethanol plants.

EPA’s recently released 2018 RFS proposal calls on refiners to blend 15 billion gallons of conventional renewable fuels like corn ethanol in 2018, adhering to the statutory requirement and unchanged from the final 2017 renewable volume obligation (RVO) rule.

“We believe EPA is well-justified in that decision, given the overwhelming evidence that more than sufficient D6 RINs [conventional ethanol renewable identification numbers] will be available for compliance this year and next,” Dinneen testified.

However, EPA is proposing to lower the cellulosic ethanol requirement to 238 million gallons in its 2018 rule. “We understand the agency’s dilemma in establishing an appropriate RVO for cellulosic ethanol, but we truly believe the agency has erred on the side of pessimism with regard to the potential for significant growth in cellulosic ethanol commercialization,” Dinneen told EPA. “We know that many plants are in the process of adding bolt-on fiber conversion technology to their existing facilities that could dramatically increase cellulosic ethanol production next year, and we intend to provide you with updated projections during the comment period.”

In EPA’s proposal, the agency noted that it will initiate a separate re-set rule, since a reduction in both the cellulosic ethanol and advanced biofuel requirements have triggered this authority. “We respect the agency’s obligation to reset the advanced and cellulosic biofuel targets to provide greater long term stability and certainty in these markets,” Dinneen testified. “But we caution the agency that reset does not mean repeal, and the agency must be faithful to the spirit and intent of the RFS, which is to maximize the nation’s use of these fuels, to drive marketplace innovation and investment in these new technologies, and to make the U.S. more energy diverse and lower carbon emissions from transportation fuels. Congress entrusted EPA with the ability to reset the RFS, not to gut the RFS,” he told EPA.”

Dinneen also told EPA about continued concerns with RIN market manipulation and suggested EPA continue to allow imported biofuels to help comply with the RFS. “The RFS is not the platform to address trade concerns,” he testified.

“The RFS has been an incredible success story – lowering consumer gasoline costs, creating jobs, reducing carbon, stimulating investment in new technologies, providing energy and economic security, and assuring a more sustainable energy future,” Dinneen said. A strong RFS will continue to help drive investment and ensure the future growth of ethanol, the cleanest, lowest cost and highest source of octane on the planet, he added.

Dinneen’s testimony, as prepared for delivery, is here.

ethanolrfa.org

[richardred] Aemetis produces cellulosic ethanol from orchard waste [graphic] California-base...

richardred — 8/13/2017 9:06:14 AM

Aemetis produces cellulosic ethanol from orchard waste

California-based biorefining company Aemetis is now producing cellulosic ethanol from orchard waste.

The company has announced the news after successfully completing the construction and commencement of an integrated demonstration unit. The company said it produced the material from technologies from itself, LanzaTech and InEnTec.

The plant is a continuously operating demonstration facility located at InEnTec’s Technology Center in Richland, Washington that is processing various feedstocks and demonstrating the integration of technologies to be used in the full-scale operating biorefinery.

“The Aemetis integrated demonstration unit was built to showcase high yield cellulosic ethanol production through the integration of advanced gasification from InEnTec with patented microbial fermentation from LanzaTech,” said Eric McAfee, chairman and CEO of Aemetis.

“The plant converts waste orchard wood and nutshells from California’s Central Valley into cellulosic ethanol. California has more than one million acres of almond, walnut, and pistachio trees that currently produce over 1.6 million tonnes of waste wood and shells per year. Cellulosic ethanol can reduce greenhouse gas emissions by up to 80% compared to gasoline.”

Demo unit

Yields and other data from operation of the integrated demonstration unit will be provided to the US Department of Agriculture (USDA) as part of completing the Phase II loan guarantee process under the USDA 9003 Biorefinery Assistance Program. Aemetis is building a 10 million gallon per year cellulosic ethanol production facility near the existing Aemetis 60 million gallon per year ethanol plant in Keyes, California.

Under the 2007 Federal Renewable Fuel Standard, the cellulosic ethanol production mandate limit increases each year to up to 16 billion gallons per year by 2022. The current market price of cellulosic ethanol sold in California is estimated to be $4.50 per gallon, which is approximately $3.00 more per gallon than conventional ethanol.

biofuels-news.com

[richardred] US court decision on renewable fuel standard: Good day for biofuels [graphic] Th...

richardred — 8/13/2017 9:03:12 AM

US court decision on renewable fuel standard: Good day for biofuels

The US Court of Appeals for the District of Columbia has ruled that the Environmental Protection Agency (EPA) was mistaken to use the methodology it did for lowering the 2016 renewable fuel standard

The US Court of Appeals for the District of Columbia has ruled that the Environmental Protection Agency (EPA) was mistaken to use the methodology it did for lowering the 2016 renewable fuel standard. The decision is being hailed as a major victory for the biofuels industry.

The ruling was made on Friday (28th July, 2017). This decision was in response to a joint petition filed in January 2016 to hear a challenge to the EPA’s Renewable Fuel Standards for 2014, 2015, and 2016. Growth Energy along with Americans for Clean Energy, American Coalition for Ethanol, Biotechnology Innovation Organization, National Corn Growers Association, National Sorghum Producers, and the Renewable Fuels Association filed this petition.

The D.C. Circuit Court of Appeal's decision is a major victory for the ethanol and alternative fuel industry, which argued that the EPA erred in its interpretation of its authority to waive biofuel requirements and that the EPA's misuse of the authority played into arguments touted by the oil industry and refiners.

Court decision

We reject all of those challenges, except for one: We agree with Americans for Clean Energy and its aligned petitioners ... that EPA erred in how it interpreted the 'inadequate domestic supply' waiver provision," the court decision read.

The court statement said: "We hold that the 'inadequate domestic supply' provision authorizes EPA to consider supply-side factors affecting the volume of renewable fuel that is available to refiners, blenders and importers to meet the statutory volume requirements. It does not allow EPA to consider the volume of renewable fuel that is available to ultimate consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers," the decision read. That means that the EPA can't waive the renewable fuel requirements because there are not enough biofuel refueling stations or pumps at gasoline stations, for example. It can waive the annual blending requirements for ethanol and other biofuels only because of lack of supply.

"We therefore grant Americans for Clean Energy's petition for review of the 2015 Final Rule, vacate EPA's decision to reduce the total renewable fuel volume requirements for 2016 through use of its 'inadequate domestic supply' waiver authority, and remand the rule to EPA for further consideration in light of our decision.”

Response

In a response to the ruling, Poet CEO Jeff Broin said: “Today’s decision is a victory for US drivers and everyone who supports clean, American-made fuel.

“Congress clearly laid out its vision for increasing our nation’s use of American-made biofuels, and the biofuels industry has worked tirelessly to make that vision a reality. We must use every available gallon of clean, domestic biofuels in lieu of importing more oil. It’s environmentally responsible; it’s economically responsible; it’s common sense; and it’s the law.”

“We hope this decision will help us move past the unjustified resistance to year-round use of E15 by those protecting oil markets and pave the way to the expansion of higher biofuel blends across the United States.

“Biofuels today replace toxic chemicals linked to cancer, developmental disorders and other health issues. Biofuels lower greenhouse gas emissions by at least 43%. Today’s decision will help to increase those benefits while lowering costs for consumers at the pump.”

‘Good day for biofuels’

DuPont’s global business director for Biofuels, Jan Koninckx, added: “Today is a good day for biofuels. We look forward to working with EPA as the agency re-examines the renewable volume obligation rules on biofuels and translates the Court’s decision into regulatory action. Consistent and long-term biofuels policy is critical to continued growth and investment in renewable fuels.”

‘America’s fuel mix’

“We’re very pleased with the court’s ruling, which restores Congressional intent and will ensure that renewable fuels continue to play a growing and important role in America’s fuel mix,” Growth Energy CEO Emily Skor said.

“This is a major win for consumers, who save money when American biofuels can compete at the pump with foreign oil. Every year, American biofuels get more affordable and more sustainable. Ethanol slashes greenhouse gas emissions by 43%, and biofuel production supports hundreds of thousands of jobs across the US We appreciate the court recognizing the value of the RFS, and we look forward to working with the EPA to make sure that America’s biofuel targets reflect the goals set down in law.”

This story was written by Liz Gyekye, editor of Biofuels International.

http://biofuels-news.com/display_news/12675/us_court_decision_on_renewable_fuel_standard_good_day_for_biofuels/

[richardred] US fuel ethanol production continues to grow in 2017US production of bioethanol ...

richardred — 8/13/2017 8:58:42 AM

US fuel ethanol production continues to grow in 2017US production of bioethanol has continued to grow in 2017, according to the US Energy Information Administration (EIA).

Through the first six months of 2017, US weekly ethanol production averaged 1.02 million barrels per day (b/d), an increase of 5% over the same period in 2016.

On a weekly basis, US ethanol production set a record of 1.06 million b/d in the week of January 27, 2017, and it has averaged near or above 1 million b/d in every week of 2017 except for a few weeks in April, when ethanol plants typically undergo seasonal maintenance. If ethanol production remains relatively high through the second half of the year, as EIA’s Short-Term Energy Outlook (STEO) expects, 2017 will set a new record for annual fuel ethanol production.

King corn

Corn is the primary feedstock of ethanol in the United States, and large corn harvests have contributed to increased ethanol production in recent years. The US Department of Agriculture estimates that the US produced a record 15.1 billion bushels of corn in the 2016–17 harvest year, 11% more than the 2015–16 harvest. Increased corn production and relatively stable corn prices have helped make increased ethanol production more profitable and less susceptible to corn price shocks that had affected ethanol profitability and output in the past.

US ethanol plant capacity increased for the fourth consecutive year in 2017, reaching a nameplate capacity of approximately 15.5 billion gallons per year in January. Total ethanol production is expected to reach 1.02 million barrels per day in 2017, a rate equivalent to 15.8 billion gallons. Annual ethanol production is able to exceed capacity for two reasons: new production capacity has likely been added since the January 2017 capacity survey date, and many ethanol plants are able to operate at levels beyond their nameplate production capacity.

In the US, ethanol is primarily used as a blending component in the production of motor gasoline and mainly blended in volumes up to 10% ethanol, also known as E10. In recent years, ethanol production increased as a result of higher Renewable Fuel Standard (RFS) targets and growth in domestic motor gasoline consumption, almost all of which is now blended with 10% ethanol by volume. Demand for higher ethanol blends such as E15 and E85 remains limited.

US motor gasoline consumption has grown the past four years, increasing from 8.7 million b/d in 2012 to 9.3 million b/d in 2016, resulting in an increase of 7% in additional ethanol demand by way of E10 blending that has helped to support consistent growth in ethanol production over the same period.

Exports of ethanol have also been increasing. Through the first four months of 2017, US gross ethanol exports have averaged 96,000 barrels per day—40% higher than exports during the same period in 2016—and the highest level on record for that period of the year. In its latest Short-Term Energy Outlook, EIA forecasts that US ethanol net exports will reach nearly 80,000 b/d in 2017, likely surpassing the previous record of 70,000 b/d set in 2011.

Through the first half of 2017, increasing ethanol production rates have outpaced domestic E10 gasoline demand and export growth, leading to elevated ethanol inventory levels at a time when they are typically falling to meet peak driving demand. As of July 14, 2017, weekly ending stocks of ethanol reached 22.1 million barrels, 5% higher than the same time last year and 13% higher than the previous five-year average. Ethanol inventories reached a record level of 23.7 million barrels for the week ending 31 March, 2017.

biofuels-news.com

[richardred] April 7, 2016Summit breaks ground at Brazil’s first large-scale corn ethanol pla...

richardred — 8/13/2017 8:54:05 AM

April 7, 2016Summit breaks ground at Brazil’s first large-scale corn ethanol plant
Summit Agricultural Group (SAG), a renewable energy, agribusiness development, and production agriculture company, has broken ground on the first large-scale corn ethanol production facility in Brazil.

The $115 million (appr. €101m) plant is an international collaboration between Iowa-based SAG and the Brazilian agribusiness Fiagril.

The production facility is being built in Lucas do Rio Verde in Mato Grosso, a preeminent agricultural state in west central Brazil and the country’s largest producer of corn and soyabeans.

SAG CEO Bruce Rastetter estimated that the plant, which will be the only dedicated corn ethanol plant in Brazil, will be completed in mid-2017.

The facility is expected to be the most modern and efficient ethanol plant in the world, and when fully operational it will employ nearly 90 people and produce 60 million gallons of ethanol annually for domestic markets, SAG says.

Rastetter said the landmark project will bring immediate value to Brazil by helping offset the country’s increasing demand for domestic ethanol, which cannot be met by the existing sugarcane ethanol production, and by introducing to the region valuable high fibre and high protein co-products, which will serve as high-value feed for the Brazilian livestock industry.

SAG’s partner in the corn ethanol project is Fiagril – a diversified company whose operations throughout Mato Grosso and adjoining Brazilian states include biodiesel production, grain trading, crop production inputs, and infrastructure development.

Fiagril’s commitment to sustainable agricultural development in Mato Grosso has served as a model for other regions of Brazil for more than 25 years.

“Mato Grosso has set the standards for Brazilian agriculture and business development for years and thanks to this effort, the region will grow to new heights in the area of renewable fuels,” said Marino Franz, founder of Fiagril.

The SAG/Fiagril production facility will utilise process technologies from Kansas, US-based ICM, which provides engineering, construction, and operational services for more than 100 ethanol plants in North America.

Growing demand for ethanol

Brazil began sugarcane ethanol production in the mid-1970s and today produces 25% of the world’s ethanol.

Bank of America has estimated that annual ethanol sales in Brazil could reach 13.5 billion US gallons in 2022, two-thirds greater than the 8.1 billion gallons estimated in sugarcane ethanol production in 2016.

The Mato Grosso region’s substantial corn production – both proven and potential – make corn-derived ethanol the most viable option to complement existing sugarcane ethanol production and fulfil an annual multi-billion gallon shortfall.

Additionally, the introduction of corn ethanol production to Brazil will generate dividends beyond the fuel pump and highway, according to Justin Kirchhoff, investment development manager for SAG.

“Mato Grosso will also benefit from corn ethanol co-products such as high fibre and high protein feedstocks for the region’s growing beef, pork and poultry industries,” Kirchhoff said.

“That’s why today’s ground breaking at this facility is so important – it will open many new doors for the future of agriculture in Mato Grosso and throughout Brazil.”

biofuels-news.com

[richardred] Brazil to Double Corn-Based Ethanol Production in 2018 ...

richardred — 8/13/2017 8:40:11 AM

Brazil to Double Corn-Based Ethanol Production in 2018

Ethanol profits are fantastic.

By
Bruno Santos

3/24/2017

Because Brazil’s number one raw material for ethanol production faces seasonal issues, biofuel producers are turning to corn as a more reliable source.

Sugarcane plants historically face a major problem: a shortage of raw material to produce biofuel during the off-season for sugarcane. During this period, the sugar energy sector would lay essentially dormant for four months. The main producing region called the Mid-South, for example, has downtime from December to April, whereas for sugarcane producers in the Northeast region, the off-season runs from May to September. However, in the past five years, plants have found a solution in corn, given that it can produce ethanol uninterruptedly all year-round.

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Since 2011, Usimat has bet on this alternative, producing corn ethanol in the city of Campos de Júlio, Mato Grosso state. This was only possible because Usimat invested R$ 25 million ($8.3 million) to adapt its infrastructure and become a flex plant (able to process both sugarcane and corn). Operating during the off-season, the company ensures extra income of R$ 70.2 million ($23.4 million). This alternative was so attractive that Unimat did not stop producing corn ethanol and became a source of inspiration for other plants in the state. Using corn, in 2015, Usimat produced 42,000 liters of ethanol during the sugarcane off-season.

OUTPUT CAN BE DOUBLED Currently, there are 10 plants processing sugarcane in Mato Grosso. Of these, three are flex, i.e., they can also use corn to produce biofuel. Akin to Usimat, Libra plants, located in São José do Rio Claro and Porto Seguro in Jaciara, are operating at full capacity. Combined, the three plants have a production capacity of 150 million liters per year.

For comparison, in the period from the start of the current sugarcane harvest up to October 16, the plants produced 21.2 billion liters of sugarcane ethanol, according to data from the Sugarcane Industry Union. Thus, it is clear that, relatively, the volume of ethanol produced from corn is tiny.

However, experts predict that this segment will grow at a rapid pace. According to Glauber Silveira, president of the Sector Committee for Soybeans, a body affiliated to the Ministry of Agriculture, there are two new plants being built in the state, and production is expected to double next harvest. “With these two new processing plants coming online in the 2017/2018 season, production will exceed 300 million liters of ethanol,” stated Glauber.

Boosting corn ethanol production will be feasible with projects such as that of FS Bioenergy. This is a joint venture between Fiagril, suppliers of grain used to produce biodiesel, headquartered in Lucas do Rio Verde, and the North American group Summit, a farm management and agricultural investments company based in Iowa. The building of the plant has reached the final stages, with inauguration scheduled for June 2017.

According to the director-general of the Summit group in Brazil, Rafael Abud, the enterprise will help meet the growing demand for ethanol that cannot be supplied by sugarcane. “The focus of FS Bioenergia is to produce corn ethanol and its coproducts using the latest technology available on the market, which we believe to be the most lucrative move for the region,” he states.

FS Bioenergia is investing R$ 372 million ($124 million) in the plant, which shall have the capacity to produce 220 million liters of ethanol annually. The processing capacity for corn and sorghum will be 1 million tons per year. “Besides ethanol, we will also produce 6,000 tons of corn oil and 60,000 megawatts of electricity to feed the grid,” said Abud.

Another plant under construction is one by Cevital, an Algerian multinational with interests in the food processing, mining, and steel industries. Cevital is investing around R$ 2.5 billion ($0.83 billion) in building its plant in the city of Vera, close to the centers of soybean and corn production in Mato Grosso state, at the cities of Sorriso and Lucas do Rio Verde.

THE PLAN IS TO RAISE PROFITABILITY According to Glauber Silveira, corn ethanol is here to stay in Mato Grosso and Brazil. “Corn ethanol solves two major historical problems: the idle time of plants during the sugarcane off-season and the need to add value to corn, given that the grain produced in the Mid-West, particularly in the northern part of Mato Grosso, is one of the cheapest in the world,” stated Glauber.

To understand how corn ethanol adds value to the grain, Silveira cites production in Mato Grosso as an example. From January to October this year, the state exported around 10 million tons of grain, generating revenues of approximately R$ 3 billion ($1 billion), according to data from the Mato Grosso Institute of Crops and Livestock Economy (Imea). According to Silveira, if this volume of corn were to be processed for ethanol production, it would result in 4 billion liters of fuel.

Calculating overall income, including profit from the ethanol, electricity production, and the sale of DDG (dried distillers’ grain, a high-protein by-product of corn highly valued as livestock fodder), the sector would have made R$ 13 billion ($4.3 billion). “The profits from corn ethanol are fantastic. On top of this, we have growing demand because Brazil is not self-sufficient in fuel and has to import gasoline,” said Silveira. Also according to Silveira, corn ethanol production does not compete with the animal nutrition sector. “For the coming year, Brazilian corn production should be around 85 million tons and consumption about 55 million tons. In other words, we have a surplus of 30 million tons, and we´ll produce ethanol with this excess corn,” said Silveira.

“With yield gains every harvest, Brazil is sure to remain one of the biggest corn producers in the world,” said Ângelo Luís Ozelame, market analysis manager of Imea.

”The profits from corn ethanol are fantastic. On top of this, we have growing demand because Brazil is not self-sufficient in fuel and has to import gasoline,” says Glauber Silveira, president of the Sector Committee for Soybeans.
Brazil’s corn stocks for ethanol usage can grow and still not compete with the needs of the animal sector.

WON´T THERE BE A CORN SHORTAGE? With the climate problems and loss of the second 2015/2016 corn harvest, Brazil experienced an atypical situation: There was a 17-million-ton decrease in production, falling from 84 million tons of grain in the 2014/2015 harvest to 67 million tons in the 2015/2016 harvest, according to a survey by the National Food Supply Company (Conab).

Mato Grosso, Brazil’s highest corn-producing state, saw a decline in production of 5.5 million tons, producing 15.2 million in the 2015/2016 harvest. According to Glauber Silveira, despite this, the corn ethanol plants have no cause for concern. “Even with the loss of harvest this year, we still had surplus corn for ethanol production and also managed to export 12 million tons up to October, a significant volume,” said Silveira. “Also, for the coming year, a high yield harvest is forecast.”

According to Ângelo Luis Ozelame, market analysis manager of the Mato Grosso Institute of Crops and Livestock Economy (Imea), the 2016/2017 harvest should again hit high numbers.

“With the good planting of soybeans in Mato Grosso, which is going ahead at a fast pace, the next harvest should total 23 million tons of corn. We won´t beat the 26 million tons of 2015, but we shall continue to rise in the forthcoming harvests,” stated Ozelame. This expectation of growth was also one of the topics presented at the Congress of the Sugar Energy Sector of Brazil, held recently in Cuiabá. According to the survey by Imea, conducted together with the Brazilian Institute of Geography and Statistics (IBGE), by 2025, the state of Mato Grosso alone will attain production of up to 40 million tons of corn, representing an 81% increase. “With yield gains every harvest, Brazil is sure to remain one of the biggest corn producers in the world,” said Ozelame.

agriculture.com

[richardred] Lance ARTW a loss of a penny on a big sales decline. FWIW-I guess I have to be ...

richardred — 8/2/2016 6:55:48 PM

Lance ARTW a loss of a penny on a big sales decline. FWIW-I guess I have to be impressed with that. This in regards how they must have brought the cost structure down. If and when they ever get selling. IMO Margins should be a lot better than before. Ebola never lead to scientific orders. But hey, just maybe money to be spent on Zika virus related is a remote possibility for scientific?

[richardred] I personally think you need that time frame to make the big LT gains. If and whe...

richardred — 5/20/2016 3:59:13 PM

I personally think you need that time frame to make the big LT gains. If and when I'm successful in a LT hold. When I've made a double, triple, or more. I generally will eventually sell it all or in stages and diversify proceeds. Diversifying more into value type companies with potential. As you know, ARTW has a very low float. So that generally makes for big swings when things are positive or negative. Otherwise unfavorable boring conditions, like now. Make for the stock to trade thinly and sometimes not at all. I guess farm income is real important factor for this company. Deere earnings were, above expectations, for the quarter, but the outlook was not good, moving forward. I think Artway needs some type of catalyst to get it out of it's doldrums. Otherwise I guess we'll be waiting awhile.

FWIW- RE-ARTW message board memories

Message 28861796

[Lance Bredvold] Now that you mention it, I did have 3 good ARTW sales in 2007, two at just under...

Lance Bredvold — 5/20/2016 11:09:09 AM

Now that you mention it, I did have 3 good ARTW sales in 2007, two at just under $20 and one just under $30. But I never do all or nothing, so still had most of my position. Still do in fact.

At least you and I seem to operate on a similar time frame.

[richardred] RE; ARTW I made out very well as I sold my first position during the ethanol b...

richardred — 5/20/2016 9:39:44 AM

RE; ARTW I made out very well as I sold my first position during the ethanol boom, before it went bust. Not working out to well this time. The stock had a quick run again a couple years ago. This when it was thought the Ebola scare would lead to orders for Artway Scientific. It just never happened. I myself really thought some of the leading research hospitals might come through for some orders for future preparedness. It also made sense to me that countries affected or subject to Ebola, to have facilities to work in for containment. For cash & economically poor countries. The funding I thought, by organizations that support the World Health Organization. Aside from that miss, the farming side, and scientific side of buildings IMO still have potential. The rest of the diverse business (Vessels & machine tools)is a drag to mixed bag for now I think. For the farming side. This might not be any bellwether sign, but I think Deere just reported ok results for this qtr. Moving forward I just guess it just depends on how well Artway dealer/distributors want to replenish or stock inventory levels?

P.S.
Message 23705201

[Lance Bredvold] I too have some ARTW remaining. At a loss, of course. I would not call Ward no...

Lance Bredvold — 5/19/2016 11:17:05 PM

I too have some ARTW remaining. At a loss, of course. I would not call Ward non aggressive. In fact, his regular willingness to bet more money on another purchase of marginal ag manufacturers seems awfully adventurous to me. Especially from an octogenarian. In any case, we are now going to ride with Marc for a while. I've worried about our CEO's (Carrie Majeski--could not think of her name earlier) ability to manage so many diverse and geographically dispersed operations bought by Ward. When I was paying closer attention, I know that Ward and Marc would take turns travelling up to Dubuque and then spend the next week or 10 days driving from factory to factory. And Marc was much better liked than Ward. I think they were afraid of Ward.

I even visited the Ward McConnell home in N. Carolina just as Ward was driving into his long driveway and I was driving out. I did not stop. Big old mansion with gatehouse and as I recall a collection of antique cars on a hill at the edge of town. Pretty impressive behind a lot of bushes and land. The ladder company looked abandoned but apparently was still used for storage and an old, off brand tractor sat beside the loading dock--and that's where Ward made his money as I recall it. He did inspire several people by being Ward and doing things which did not look sensible. The board was full of guys who had admired him during his more active career. A straight shooter I'd gather, with employees and partners. But extremely sharp and tough.

Also accidentally ran across a New York ladder factory run by Marc. Just driving across the state on a freeway when I saw the name and pulled into town. Nothing very special about it and it was after hours. But to think that a kid 22 years old was president of this and a few other similar small companies was impressive. Yet he never said much at annual meetings when his dad was around. I worried that he lacked gumption, but probably just wiser to be quiet while Ward held sway.

ARTW was an interesting experiment for me. But I have to remember that Ward got well rewarded by buying up half the company at something like $0.60 a share (somewhere under a dollar) and what happened later was just piddling around. He could have sold off most of his holdings at $15 and called the whole thing a great success. Instead he just kept putting more money into it. Maybe it'll pay off eventually?

[richardred] Lance: Good to here from you! Thanks for the opinion & summary . When I saw the...

richardred — 5/19/2016 10:06:47 PM

Lance: Good to here from you! Thanks for the opinion & summary . When I saw the Raven name on the gainers list. I thought of you.

BTW Fool that I am. I've bought back into ARTW- I have a net loss on my position. Scientific just got a 1,7 mil order. The stock is stuck and looks to be untimely for the year ahead and maybe further. Still 2 cents was better than a loss I was expecting. Maybe the son will be more ambitious than his father.

Regards

Rick

[Lance Bredvold] Well, there is an unexpected blast from the past. I do offer opinions on RAVN s...

Lance Bredvold — 5/19/2016 8:44:40 PM

Well, there is an unexpected blast from the past. I do offer opinions on RAVN still as it is one of my larger holdings. Clearly would have been better to get out of it a few years ago, but my system included a few sales above $40 followed by replacement purchases from $30 down.

My comments are on Investor Village's RAVN board and I did read the SEC filing this afternoon which led to the amazing 13% rise in stock price today. I'm not impressed, but when a company has been in the doldrums as long as RAVN has, any little sign of life is rewarded. I expect the price to retreat again.

If you have not been following RAVN, the old chairman retired along with the COB. The long planned replacement stepped in as CEO and promptly set to work spending all the accumulated wealth on new buildings and facilities. Also gave up on electronics manufacture to large customers, only retaining the ability to build their own electronics. I regard that as a mistake as working for others kept their knowledge on the cutting edge.

So down to 3 divisions they have lost all of the old heads and seem to have acquired politically active ones including even a military contractor in Washington DC.

It's not your father's Raven Industries any more. But, perhaps it will shine again. They been excusing poor results based upon poor ag and poor energy markets. True, but I'd say their bigger problem is that overhead has doubled along with fancy new facilities. Corporate expense at least twice what it used to be on a much larger sales base. Everyone getting paid considerably more.

So I stopped buying at $20 or so but will purchase more if there are signs of sustained life. I no longer go to the annual meeting because I'd not enjoy criticizing management. So I just criticize here.

No longer have this board bookmarked, but somehow SI sent an e*mail telling me of this response.

best, L

[richardred] Lance if your still with us? RAVN is starting to look interesting to me.

richardred — 5/19/2016 12:25:04 PM

[Glenn Petersen] American Ethanol on the Rocks Walter Russell Mead & Staff The American Interest...

Glenn Petersen — 9/6/2015 1:51:57 PM

American Ethanol on the Rocks

Walter Russell Mead & Staff
The American Interest
Posted: Sep 06, 2015 - 12:51 pm

It’s been a bad week for U.S. ethanol producers after two plants, one in Wyoming and one in Virginia, closed their doors. Their shuttering signals a retrenchment in the fledgling biofuel industry that’s struggling to deal with falling demand and shrinking margins. The two shuttered facilities were so-called “destination plants,” sited well outside of the corn belt that produces their product’s primary feedstock. While just a few years ago their existence made sense thanks to government mandates creating an artificial market for corn-based ethanol, today it is harder to justify. Reuters reports:

[Those plants] that suspended operations this week were built in the ethanol boom years of the 2000s when the promise of increased U.S. government blending mandates could justify the cost of having to buy railcars full of corn from hundreds of miles away. That is no longer the case for some of these “destination” plants.

And demand is falling. With gasoline cheaper than ethanol in some parts of the country, little demand is seen beyond the U.S. government blending requirements that mandate nearly every gallon of gasoline sold in the United States contain 10 percent ethanol.

This is just the beginning. One ethanol trader told Reuters they “wouldn’t be surprised to see more” destination plants close as they prove incapable of turning a profit in a tightening market as a result of their increased transportation costs. And while these plants make up the minority of America’s ethanol production, their closing might be a kind of canary in the coal mine for the industry. Refiners can only blend so much biofuel into gasoline (beyond 10 percent by volume, ethanol can start harming older engines, creating what’s come to be known as the “blend wall”), a limit that ties ethanol’s fate to gasoline demand.

But even as that demand ticks upwards while prices decline to 11-year lows, ethanol is struggling to make it into your car’s gas tank—gasoline is simply cheaper without the biofuel blend, so refiners have no reason to demand any more than the government mandates.

This is just the latest chapter in the long, sordid story of America’s biofuel boondoggle. What was once billed as an eco-friendly way to bolster our country’s energy security has instead turned out to be a policy disaster. Our federally mandated corn-based ethanol program starves the world’s poor by raising global food prices (and potentially incites riots), costs consumers an estimated $10 billion annually, and worst of all isn’t even green. It’s no surprise then to see contractions in the already struggling industry. The sooner we reform or repeal this harebrained policy, the better.

the-american-interest.com

[Glenn Petersen] Commercial-scale cellulosic ethanol plant opens U.S. Energy Information Admini...

Glenn Petersen — 9/5/2014 12:49:26 PM

Commercial-scale cellulosic ethanol plant opens

U.S. Energy Information Administration
September 5, 2014

Source: Republished with permission from POET-DSM

On September 3, a joint venture company called POET-DSM Advanced Biofuels held the grand opening of its Project Liberty cellulosic ethanol plant in Emmetsburg, Iowa. The plant is the first of three commercial-scale cellulosic ethanol facilities under development in the Midwest that convert corn stover (corn cobs, leaves, husk, and stalk) into ethanol.

The 50/50 joint venture Project Liberty is owned by POET of Sioux Falls, South Dakota, and Royal DSM, a Dutch company. At full capacity, the plant will process 770 tons/day of corn stover.

Source: Republished with permission from POET-DSM

While nearly all ethanol produced in the United States comes from corn starch, ethanol can also be produced from cellulosic feedstock such as wood, grasses, straw, and agricultural waste. Despite legislated mandates as part of the federal renewable fuel standard (RFS), there has been very little production of cellulosic ethanol to date. For instance, the legislated RFS target volume for 2013 was 1 billion ethanol-equivalent gallons of cellulosic biofuel, which the Environmental Protection Agency (EPA) reduced to 6 million gallons in August 2013, based on its assessment of supply capacity. Ultimately, EPA retroactively reduced this requirement to 0.81 million gallons in May of this year, after production shortfalls.

The three facilities now under development or beginning operations in the Midwest (including Abengoa's 25-million gallon per year facility in Hugoton, Kansas; Dupont's 30-million gallon per year facility in Nevada, Iowa; and the POET-DSM plant) offer the best near-term prospects to prove technology for producing cellulosic ethanol at a meaningful scale. These plants use a more complex process than the recently announced effort to ferment the naturally accessible sugars present in corn kernel fiber into fuel, which only recently received EPA approval as a cellulosic biofuel meeting RFS criteria. The process used by POET-DSM, enzymatic hydrolysis, has been developed over many years and is one of the best understood ways to produce cellulosic ethanol. The first global commercial-scale application of this process occurred last fall when Beta Renewables started production at its Crescentino, Italy, facility. Beta's parent, BioChemtex, plans to start up a similarly designed plant with partner GranBio in Brazil later this year.

Source: Republished with permission from Abengoa
Principal contributor: Bill Brown

eia.gov

[richardred] EPA scales back ethanol mandate to avert ‘blendwall’ Posted By Michael Ba...

richardred — 11/16/2013 8:57:46 AM

EPA scales back ethanol mandate to avert ‘blendwall’

Posted By Michael Bastasch On 5:08 PM 11/15/2013 In | No Comments

The Environmental Protection Agency announced it is scaling back its ethanol blending requirement for 2014.

Refiners had voiced concerns about putting more biofuels into the already strained fuel supply.

The agency has lowered the amount of ethanol that must be blended into U.S. fuel supplies from 16.55 billion gallons in 2013 to 15.21 billion gallons in 2014. The refining industry warned the agency earlier this year that refiners were reaching the maximum amount of ethanol that could safely be blended into the fuel supply, known as the “blendwall.”

The industry welcomed the reduced blending requirements, but warned that this did not address long term problems.

“While we are pleased that EPA has taken steps to avoid the blendwall in 2014, we remain concerned that the proposed rule leaves open the possibility that the biofuel mandates will exceed the maximum amount of ethanol that can be safely added to our gasoline supply,” said Charles Drevna, president of the American Fuels & Petrochemical Manufacturers.

“Consumers should be shielded from the costs of an overly aggressive biofuel mandates and Congress should address this issue immediately before this unworkable law does further damage,” Drevna added.

The biofuels industry shot back at the refining industry and the EPA over the lowered blending requirements.

“While only a proposed rule at this point, this is the first time that the Obama Administration has shown any sign of wavering when it comes to implementing the RFS,” said Brooke Coleman, executive director of the Advanced Ethanol Council. “EPA is in the right ballpark for cellulosic biofuels, and we are confident that the final number will be the right one for the industry in 2014. But bigger picture issues must be resolved in the final rule because advanced biofuel investors also pay attention to the big picture.”

The industry has recently launched a campaign against lowering ethanol blending requirements, framing it as an effort by “Big Oil” to squeeze out competition.

“What we’re seeing is the oil industry taking one last run at trying to convince administrators of the [ethanol mandate] to relieve the legal obligation on them to blend more biofuel based on clever arguments meant to disguise the fact that oil companies just don’t want to blend more biofuel. The RFS is designed to bust the oil monopoly. It’s not going to be easy,” Coleman added.

The ethanol mandate has put the Obama administration in a tough spot. President Obama received huge political support in the Midwest because of his pro-ethanol stance, but a recent investigation by The Associated Press shed light on the environmental damage caused by ethanol production.

The AP reported that 5 million acres of conservation land has been put into service since President Obama took, and more than 1.2 million acres of “virgin land” in Nebraska and the Dakotas alone have been plowed into corn and soybean fields since 2006.

The boom in corn production has meant more nitrogen fertilizer must be used. The fertilizer is toxic and has been known to cause “blue baby” syndrome in children. Nitrogen fertilizer use shot up by one billion pounds between 2005 and 2010, and another billion pounds of fertilizer are estimated to have been used for corn production since then.

Furthermore, the ever increasing ethanol mandate has been blamed for driving up food and fuel prices, as about 40 percent of the country’s corn supply is diverted to ethanol production. Refiners are also seeing the price of ethanol credits skyrocket as the industry approaches the blendwall.

“It is progress for the EPA to finally recognize and attempt to address the ‘blendwall’ by slightly reducing next year’s mandates, but let’s not get ahead of ourselves: the [ethanol mandate] remains a fundamentally flawed program that limps along year after year, wreaking havoc on those required to participate, including the American consumer,” said Louisiana Republican Sen. David Vitter.

http://dailycaller.com/2013/11/15/epa-scales-back-ethanol-mandate/

[Glenn Petersen] For First Time, E.P.A. Proposes Reducing Ethanol Requirement for Gas Mix By M...

Glenn Petersen — 11/15/2013 7:58:14 PM

For First Time, E.P.A. Proposes Reducing Ethanol Requirement for Gas Mix

By MATTHEW L. WALD
New York Times
November 15, 2013

WASHINGTON — The Environmental Protection Agency on Friday proposed reducing the amount of ethanol that is required to be mixed with gasoline, the first time it has taken steps to slow down the drive to replace fossil fuels with renewable forms of energy.

The move was expected, but it drew bitter complaints from advocates of ethanol, including some environmentalists, who see the corn-based fuel blend as a weapon to fight climate change. It was also unwelcome news to farmers, who noted that the decision comes at a time when a record corn crop is expected, and the price of a bushel has fallen almost to the cost of production.

“We’re all just sort of scratching our heads here today and wondering why this administration is telling us to burn less of a clean-burning American fuel,” said Bob Dinneen, president of the Renewable Fuels Association.

Farmers, ethanol producers and high-tech companies trying to make renewable fuels from wastes have all invested heavily in the ethanol industry, with an expectation of a heavy demand, advocates said.

But the E.P.A. said that a big part of the problem was that automobile fuel systems and service stations were not set up to absorb more than about 10 percent ethanol. Most cars on the road, according to the automakers, and most fuel pumps, according to service station groups, are limited to the current mixture, called E10, and there has been little demand by consumers for more.

Charles Drevna, president of the American Fuel and Petrochemical Manufacturers, said that the ethanol interests were relying on “a continual government program that is an anachronism in 2013, that is seriously flawed, that puts consumers at risk, that consumers don’t want.”

The timeline for phasing in enormous volumes of renewable fuel is laid out in the Energy Independence and Security Act, but the schedule has turned out to be impractical, forcing year-by-year adjustments. In the years since 2007, when the law was passed, imports of oil have declined sharply and domestic production has risen.

Meanwhile, American oil production has increased in ways not expected in 2007, because of a new drilling technique, horizontal drilling in shale, combined with fracking, the same technique that has flooded the market with natural gas.

Last month, domestic oil production exceeded oil imports for the first time in years. That has led the oil refiners to argue that requiring ethanol use to displace oil imports is no longer so important, and that the whole system of mandates should be dropped.

At the same time, there has also been a decline in the overall demand for motor fuel, and it is poised to go yet lower. Demand had been growing, year by year, and Congress expected that it would continue to do so. The 2007 law set ethanol quotas that would have meant a modest percentage increase in the amount of ethanol used in the fuel mix.

Instead, ethanol became an unexpectedly large percentage of total fuel supply, and began to push up against the barrier of 10 percent, the maximum ethanol fraction allowable in most gasoline. Millions of cars can handle blends of up to 85 percent ethanol, so-called “flex fuel” vehicles, but few consumers like that fuel so few filling stations sell it.

Those that do are struggling. For example, on Nov. 6, a Sunoco station at a suburban mall in Potomac, Md., about 15 miles northwest of the E.P.A. headquarters, opened an E85 pump, with a formal ribbon-cutting and speeches by Maryland officials. But the manager, Amit Sharma, said Friday that the pump was selling only 60 to 70 gallons a day. “It’s nothing,” he said. One problem, according to Mr. Sharma and others, is that many people drive the flex fuel vehicles, but do not understand that means that they can accept to 85 percent ethanol.

In another strategy to dispose of rising volumes of ethanol, the producers have pushed the E.P.A. into allowing a blend that is 15 percent ethanol rather than 10, but few gas stations are equipped to sell that, and since it is approved only for newer cars, few stations have spent the money to refit their pumps to handle it. In addition, trade associations for companies that make power garden equipment and boat engines complain that that fuel will cause breakdowns.

The E.P.A. will now take public comment, which is certain to be voluminous, as the issue is crucial not only to corn farmers, who produce most of the feedstock for ethanol, and for oil companies, whose product can be displaced by the fuel, but also to all other corn customers, including livestock producers, grocers and restaurant chains.

Ethanol, the most prominent of the renewable fuels, divides environmentalists. It may involve modestly lower carbon production, but the increased market for ethanol may also have increased farmers’ use of fragile, marginal land. Its effect on fuel prices at the pump is disputed.

nytimes.com

[richardred] BASF buying biotechnology company Verenium for about $51.2 million SAN DIEG...

richardred — 9/20/2013 10:12:57 AM

BASF buying biotechnology company Verenium for about $51.2 million

SAN DIEGO (AP) -- Chemicals company BASF Corp. is buying biotechnology company Verenium for approximately $51.2 million.

Verenium focuses on developing and selling high-performance enzymes used in food and fuel markets. BASF is a diversified company whose products range from chemicals, plastics and performance and crop protection products to oil and gas.

BASF will pay $4 per share for Verenium, which is a 59 percent premium to its Thursday closing price of $2.51.

Verenium Corp., based in San Diego, currently has about 12.8 million outstanding shares, according to FactSet.

A tender offer related to the transaction is expected to close in the fourth quarter.

Both companies' boards approved the deal.

finance.yahoo.com

[Glenn Petersen] Wall St. Exploits Ethanol Credits, and Prices Spike By GRETCHEN MORGENSON and...

Glenn Petersen — 9/15/2013 5:22:27 PM

Wall St. Exploits Ethanol Credits, and Prices Spike

By GRETCHEN MORGENSON and ROBERT GEBELOFF
New York Times
September 14, 2013

It was supposed to help clean the air, reduce dependence on foreign oil and bolster agriculture. But a little known market in ethanol credits has also become a hot new game on Wall Street.

The federal government created the market in special credits tied to ethanol eight years ago when it required refiners to mix ethanol into gasoline or buy credits from companies that do so. The idea was to push refiners to use the cleaner, renewable fuel, or force them to buy the credits.

A few worried that Wall Street would set out to exploit this young market, fears the government dismissed. But many people believe that is what happened this year when the price of the ethanol credits skyrocketed 20-fold in just six months, according to an analysis of regulatory documents and interviews with more than 40 people involved in the market, including industry executives, brokers, traders and analysts.

Traders for big banks and other financial institutions, these people say, amassed millions of the credits just as refiners were looking to buy more of them to meet an expanding federal requirement. Industry executives familiar with JPMorgan Chase’s activities, for example, told The Times that the bank offered to sell them hundreds of millions of the credits earlier this summer. When asked how the bank had amassed such a stake, the executives said they were told by the bank that it had stockpiled the credits.

A spokesman for JPMorgan, when asked about the exchange with the executives, disputed the account, saying the bank does not trade ethanol credits for a profit in the way it trades other securities, but is registered to deal in credits through its energy business. From time to time, the spokesman, Brian J. Marchiony, said in a statement that the bank also purchased credits “on behalf of clients who need to fulfill their E.P.A.-mandated obligations,” though it had not done so in the past year.

But other market participants, including Thomas D. O’Malley, chairman of PBF Energy in Parsippany, N.J., identified JPMorgan Chase and other financial institutions as being active sellers of the credits this year. He said the institutions had helped transform an environmental program into a profit machine, contributing to the market frenzy this year. “These things were designed to monitor the inclusion of ethanol in the gasoline pool,” Mr. O’Malley said. “They weren’t designed to become a speculative item. For the life of me I can’t see the justification for it.”

While banks are by no means the largest player in ethanol credits, Wall Street’s activity in this market reflects a larger effort by financial institutions to exert their influence over loosely regulated markets for basic commodities, from aluminum to oil. The opacity of the ethanol credit market makes it difficult to determine the extent to which large financial actors have profited.

The banks say they have far less influence in the market than others are suggesting, and are doing nothing wrong. But the activities, while legal, could have consequences for consumers. In the end, energy analysts say, the outcome will be felt at the gas pump — as the higher cost of the ethanol credits gets tacked onto the price of a gallon of gasoline. (The credits, which cost 7 cents each in January, peaked at $1.43 in July, and now are trading for 60 cents.)

The Valero Energy Corporation, a refiner that owns thousands of gas stations, says the squeeze in ethanol credits might cost it $800 million. PBF Energy, also a refiner, puts its bill at about $200 million. A review by The Times of a federal registry of nearly 1,500 businesses and individuals in the renewable fuel market found big Wall Street banks as well as a handful of people with troubled legal histories among the participants. Several high-profile cases of fraud have emerged.

Scott Mixon, the acting chief economist of the Commodity Futures Trading Commission, said in an interview Friday that the issue of banks’ involvement in this market was something the agency was tracking and might look into more deeply because of the ethanol component. The commission regulates the commodities futures market, including trading in ethanol and gasoline.

Though the ethanol credits are traded by many major investment houses, they were created not on Wall Street but in Washington, on Capitol Hill and at the Environmental Protection Agency. At its inception, the so-called Renewable Fuel Standard was promoted as a means to reduce the nation’s reliance on foreign oil, fight global warming and provide a boost to farmers. The rules call for a set amount of ethanol, most of which is made from corn, and other renewable fuels to be blended with fossil fuels each year, with quotas assigned to individual refiners and importers.

Every time they mix ethanol into gas, or import fuel already blended with ethanol, energy companies get a credit from the government, and that credit can be sold to other companies that don’t blend ethanol to help them meet federal requirements. If refiners fall short of their obligation, they can face fines of $32,500 a day. To monitor compliance, each gallon of ethanol is assigned a 38-digit Renewable Identification Number, or RIN. Six billion of them were generated in the first six months of this year.

The E.P.A. makes sure participants comply with the fuel standard. But rules that apply to almost every other market — on transparency, disclosure and position limits, for example — are not imposed on the trade of RINs, making Wall Street’s role harder to gauge.

If Wall Street traders take a 5 percent stake in a public company’s stock, for instance, they are required by law to flag that they have acquired a sizable stake in a filing with the Securities and Exchange Commission. There is no such obligation for traders buying RINs.

Like JPMorgan, other big banks downplay their involvement, contending that they are in the market primarily because their firms, through subsidiaries and other arrangements, have ownership interests in gasoline and other energy production and therefore are required to participate in the federal renewable fuels program.

Until 1999, regulations barred banks from owning nonfinancial companies like commodities operations. This was meant to keep banks from self-dealing or pursuing monopolistic practices in their financial operations that could benefit their nonfinancial affiliates. Separating these operations, regulators believed, would also protect a bank’s core lending and deposit-taking businesses from risky trading by nonfinancial units. Those restrictions fell by the wayside with the passage of the Gramm-Leach-Bliley Act, which struck down Depression-era banking laws. Now, however, the Federal Reserve is reviewing commodities ownership by banks.

In the case of JPMorgan, the industry executives familiar with its activities in the RINs market said they were told by a top banker in its commodities operation about the stockpiling. The executives said the banker maintained that one of JPMorgan’s traders had urged the bank to buy up every available credit. The executives spoke on the condition of anonymity for fear of harming business relationships.

Through a spokesman, the banker denied that the conversation took place. Mr. Marchiony, the JPMorgan spokesman, characterized the report as a misunderstanding. He denied the bank had stockpiled the credits. He added that the bank mainly dealt in RINs as a byproduct of its joint venture with a refiner in Philadelphia. “The fact of the matter is, we simply don’t trade RINs, nor do we carry an inventory other than a marginal amount for compliance purposes,” the statement said.

Morgan Stanley also generates RINs through TransMontaigne, a subsidiary with 21 blending facilities, and it trades the credits via the Morgan Stanley Capital Group. According to regulatory filings, TransMontaigne’s biggest customer for its energy products is the commodities unit of the Morgan Stanley Capital Group, a trading operation that runs out of the former Texaco headquarters in Purchase, N.Y.

Mark Lake, a spokesman for Morgan Stanley, said that the firm had not benefited from the increase in RIN prices in 2013. “The firm’s obligation to purchase RINs as part of our importing and blending of gasoline exceeded the RINs we have received from our wholesale business,” he said.

Mr. Lake declined to discuss Morgan Stanley’s holdings of RINs or to say whether the bank’s traders used market information received from TransMontaigne.

Trading on information gleaned from a subsidiary like TransMontaigne would be illegal in the stock market, but there are no rules against it in commodities. ( Morgan Stanley also holds a stake Heidmar Holdings, of Norwalk, Conn., which owns a fleet of oil tankers.)

Saule T. Omarova, an associate professor of law at the University of North Carolina at Chapel Hill, said Morgan Stanley’s overlapping activities illustrate how large financial institutions have become deeply entwined in every aspect of the commodities markets.

“In the trading chain between the oil well and the gas station,” Ms. Omarova said, “Morgan Stanley is clearly accumulating as many stakes along the way as possible because that is what gives them the most flexibility of control.”

Seizing an Opportunity

The market in ethanol credits is exactly the kind Wall Street loves: opaque, lightly regulated and potentially very lucrative.

Officials at the E.P.A., which oversees the market, say they have seen no evidence of improper trading, like hoarding, in the market. But they do not police the RIN market as a financial regulator would.

“If there were any evidence now or in the future that that was happening, we have the ability to amend the regulation to constrain that,” said Christopher Grundler, director of E.P.A.’s office of transportation and air quality, which oversees the renewable fuels program.

It is difficult for outside groups, or even other regulators and law enforcement agencies, to keep tabs on the market, because the E.P.A. declines to disclose who actively trades the credits, or how much they trade, citing the confidentiality of refiners and other participants.

Trading is a private affair, usually conducted by phone, and just about anyone can participate. In creating the market, the E.P.A. says it did not limit the market for RINs to refiners and other energy companies because it wanted to encourage a free market.

Price movements on other commodities futures are limited by the exchanges on which they trade as a check on speculation. But the biofuel credits are not traded on an exchange: their prices are unbridled. And, unlike in the broader financial industry, no formal qualification or license is required before a broker can start trading.

“There is a RINs trading desk at any major brokerage now,” said Paul Niznik, bio-fuels manager for Hart Energy, based in Houston. “There are people who are not refiners that are buying and selling RINs like a commodity. They treat it like something to be traded, to be day-traded.”

The RINs story began in 2005, when the Bush administration joined Democrats in Congress to pass an energy bill mandating renewable fuel standards. That law was broadened in 2007 to establish requirements for the amount of biofuel to be blended into gasoline annually through 2022. This year, refiners and importers are required to blend 13.8 billion gallons of ethanol, up from 13.2 billion last year. For 2014, the figure is 14.4 billion.

But the estimates Congress used about how much gas Americans would keep buying were wrong. When the biofuel credits were created, gasoline consumption was projected to grow 6 percent by 2013. But thanks in large part to the recession and more fuel-efficient cars, consumption has actually fallen.

As a result, refiners this year began hitting what is known as “the blend wall,” meaning that the amount of ethanol the government is requiring them to use is close to the maximum amount that can be blended into gasoline without creating problems for gas stations and motorists.

Distributing gasoline with greater levels of ethanol is more costly and corrodes gas station pumps and tanks. Raising the ethanol level in gasoline, therefore, would require gas stations across America to install new systems. Therefore, refiners have turned to RINs to meet their government obligations rather than blend more ethanol into gasoline.

Some say financial players saw it coming, and jumped into the market.

“When you see something change as rapidly as this, somebody’s hoarding them, somebody’s buying them, somebody’s making big bucks,” said Senator Thomas A. Coburn, Republican of Oklahoma, a big oil state. After his staff examined the run-up in prices this summer, he said he was concerned that “big moneyed interests” were gaming the credits.

For now, companies like Valero say that they are eating the cost of high RIN prices, which are still eight times more expensive than they were in January. But industry analysts, executives and even researchers at the investment banks predict the cost of the RINs’ surge will be passed along to consumers by increasing the price of gasoline, if not later this year then next year.

Mr. O’Malley, the chairman of PBF Energy, likens the outcome to a hidden tax on the public. Unlike other taxes, which go to the government, this one goes to the speculators.

Double-Dipping on Credits

Every day, RINs are born in places like Fort Lauderdale, Fla., Chesapeake, Va., and Bainbridge, Ga. Across a network of 45 fuel terminals in the Southeast, and along the Mississippi and Ohio rivers, Morgan Stanley’s TransMontaigne stores, blends and distributes gasoline and other fuels.

Even though it is based in Denver, TransMontaigne sits at the center of a powerful Wall Street energy operation. It delivers 200,000 barrels of refined petroleum products each day, just under 2.5 percent of the total market, and plays a role in the RINs market in addition to any trading its parent, Morgan Stanley, might do. Morgan Stanley bought TransMontaigne in 2006.

For banks, trading RINs for clients can be lucrative. A big reason is that the credits are far more difficult to buy and sell because they are not traded on exchanges like stocks. As a result, the difference between the price at which one party is willing to sell and another is willing to buy is unusually wide. Those fat spreads mean big money for anyone serving as a middleman.

At a hearing in late July at the Commodity Futures Trading Commission, Mr. Mixon, the commission’s acting chief economist, estimated that RIN spreads were 4 percent of a transaction’s value. That is far more than the average stock commission.

In addition to Morgan Stanley and JPMorgan Chase, other big banks, like Citigroup and Barclays, are also registered with the E.P.A. to trade the credits.

Edward Westlake, an analyst at Credit Suisse, said many big financial firms have gone beyond RINs trading and pushed into blending fuel to create them as well. “Building a tank and blending doesn’t cost a lot of money,” Mr. Westlake said, “and there are folks on Wall Street who own tanks who are benefiting from the RINs.”

Bank research departments are also trying to pique investor interest in this market. Goldman Sachs and Bank of America Merrill Lynch recently published bullish reports on the market. In July, Morgan Stanley published a report predicting that RIN prices would keep rising — and eventually cause gas prices to spike later this year.

Officials at the E.P.A. do not see excessive influence by financial speculators. They suggest the price spikes in RINs this year reflect the expectation of a shortage of the credits because rising renewable fuel mandates are occurring as consumer demand for gasoline is falling. “The market is expecting this future scarcity as the statutory mandates continue to increase,” Mr. Grundler said.

Others say that prices are up mostly because the oil industry has refused to invest in renewable energy. For example, Jeremy Martin, a clean energy expert for the Union of Concerned Scientists, said many of the complaints about the credits come from industry players who want to see the renewable fuels program killed.

“It was meant to change behavior, and it was understood that if it was to be binding, RIN prices would not be close to zero,” Mr. Martin said.

In fact even before RINs took off, they had become a contentious issue within the energy industry. Ethanol producers like the renewable fuel standards because they essentially guarantee a market for their product. But refiners — particularly those without operations to blend the fuel — regard the standards as an onerous and unnecessary business cost.

The Impact at the Pump

Margo T. Oge, who oversaw the creation of the ethanol credit program at the E.P.A., says that the rising price of RINs — no matter the cause — is good news and an indication that the program’s goals are being met.

As the credits get more expensive, she says, oil and gas companies have a financial incentive to add more ethanol to fuel rather than buy credits. That, in turn, reduces oil imports and emissions — which was the point of creating the system in the first place.

Ms. Oge, who retired from the E.P.A. last year and is now a visiting scholar at the International Council on Clean Transportation, a research group in Washington, said RINs were never supposed to affect the price of gasoline at the pump. If that is the result of the price run-up this year, as many energy analysts predict, it would be an unwelcome outcome, she said.

“The last thing we wanted in implementing this program is to get price increases for the consumer,” she said.

Even beyond the likely rise in gasoline prices, critics of the RINs market say it is deeply flawed, and they do not share Ms. Oge’s optimistic takeaway of this year’s market frenzy.

First, by allowing anyone to trade, including those with no real interest in energy, the E.P.A. encouraged speculation, the critics say. Second, the market operates largely in the dark, leaving it vulnerable to manipulation. Third, and perhaps most significant, the federal requirement for ethanol in gasoline means oil companies are captive buyers — meaning they are required to buy the credits when they do not or cannot blend their own fuel — a fact that savvy traders use to their advantage.

“The problem the E.P.A. had is they opened up the market on the trading side, but restricted it on the obligated side to refiners and importers,” said Lawrence J. Goldstein, the former president of the Petroleum Industry Research Foundation, a nonprofit bipartisan group.

Analysts and others say the market is vulnerable to questionable practices like short squeezes, where prices are pushed up by holders of the credits to benefit their positions.

“Anybody who’s participating in these markets has the opportunity to throw their weight around,” said David J. Hackett, president of Stillwater Associates, a transportation energy consulting firm. “Whether it’s a hedge fund or a refiner or ethanol producer, they would tend to drive the market in directions that are beneficial for whatever their goals.”

An examination by The Times of participants registered with the E.P.A. found several people with troubled pasts, including one who was accused of helping run a Ponzi scheme, and another who pleaded guilty to illegal storage of hazardous waste.

The RINs market has come off the boil recently, but at 60 cents apiece the credits still cost far more than they did at the beginning of the year. While the E.P.A. says the market is sound, W. David Montgomery, an economist at Nera Economic Consulting, a unit of Marsh & McLennan, said the agency should install an overseer.

The E.P.A. disagrees, but said it was considering providing more data on who trades and holds RINs and had instituted a voluntary certification system for participants.

“We are exploring things like increasing the regularity of updating the transactional data system and providing more information about production volumes,” Mr. Grundler, the E.P.A. official, said. “All are aimed at increasing confidence in this market and increasing compliance, which is our major concern.”

But Tom Kloza, an analyst at the Oil Price Information Service, a leading source of petroleum pricing, said the potential for abuse will not disappear on its own.

“You could conceivably have a company in the middle holding millions of RINs,” Mr. Kloza said. “Any entity could have a 1, 2 or 5 percent market share in RINs and is waiting to sell them at some explosive gain. I wonder, who’s got the score card?”

nytimes.com

[richardred] Or start a new thread. :+ )or wait for bio mass conversions. I've kind of inde...

richardred — 4/25/2013 11:13:58 AM

Or start a new thread. :+ )or wait for bio mass conversions. I've kind of independently been keeping track of CNG on Big Dogs thread. I'm thinking Dennis Roth might be to. Although I haven't looked recently. I've been using as a gauge how many CNG stations ECA is building. FEX-X & UPS truck fleets are also IMO a good gauge as the the progress. Don't forget Westport, or Boone for that matter either. I was one up on Cramer. <G>

Thanks for entertaining the Idea. I'll think about it.

Rick

[robert b furman] Thinking maybe you should change the header of this thread to CNG. Bob

robert b furman — 4/25/2013 10:53:55 AM

[Glenn Petersen] No One Wants Corn Ethanol…Not Even the Ethanol Lobby Walter Russell Mead The A...

Glenn Petersen — 4/25/2013 1:35:21 AM

No One Wants Corn Ethanol…Not Even the Ethanol Lobby

Walter Russell Mead
The American Interest
April 24, 2013

American fuel producers are being forced to blend more and more ethanol into our nation’s gasoline to meet requirements set by the 2007 Renewable Fuel Standard (RFS). Most of this ethanol is produced from corn, a biofuel that isn’t green, starves the world’s poor, and potentially fuels riots. But there’s an even bigger problem with the ethanol mandate. Demand for gasoline is stagnating, and there’s no way to use—or even produce, for that matter—the amount of ethanol required by the RFS this year. The Financial Times reports:

World biofuel production is stagnating….In the US, which produces 60 per cent of the world’s ethanol, optimistic mandates emanating from Washington are crashing into a post-financial crisis reality of weak petrol demand and emptier roads.

The ethanol lobby is just about the last stakeholder still supporting this biofuel boondoggle, but as the FT reports, even they can see that it’s time for reform (h/t Smarter Fuel Future):

The US ethanol lobby has asked Washington to put the brakes on government biofuels targets, in an acknowledgment of a widening gap between policy goals and reality at petrol stations….

This was the first time the association recommended cutting the total renewable fuel mandate, the association confirmed. “We’re trying to be reasonable,” Bob Dinneen, president, told the Financial Times.

If you’re keeping score at home, that means that we’ve nearly reached a unanimous consensus that the ethanol mandate is in dire need of reform. As it happens, a bill was introduced in Congress last week to do just that. Let’s hope it wends its way quickly through the legislative maze.

blogs.the-american-interest.com

[Glenn Petersen] Is the End in Sight for America’s Biofuel Boondoggle? Walter Russell Mead Apri...

Glenn Petersen — 4/11/2013 9:30:27 PM

Is the End in Sight for America’s Biofuel Boondoggle?

Walter Russell Mead
April 11, 2013

Did we just hear the death knell for corn ethanol? Congress may finally be coming to its senses about one of the biggest green policy failures in America, as two bills were introduced yesterday to fix the corn ethanol mandate. Reuters reports:

The legislation would eliminate corn-based ethanol targets, which make up the vast majority of the biofuel mandate. It would also cap the amount of ethanol that can be blended into gasoline at 10 percent, while requiring the government to set targets for cellulosic ethanol use at levels of actual production.

Refiners have been required to buy credits for cellulosic biofuels, made from sources such as grasses, wood chips and agricultural waste, even though the fuel has not been commercially available.

To this point, US farmers have been diverting more and more of their corn crops towards ethanol refineries to satisfy EPA mandates stemming from the 2007 Renewable Fuels Standard. In 2006, before that standard went into place, just 23 percent of America’s corn crop went towards producing ethanol. That number rose to 43 percent last year.

Corn ethanol fails every test a biofuel could hope to pass. It doesn’t lower emissions; it raises them. It also raises the global price of corn, starving the world’s poor and possibly inciting riots. But EPA mandates are propping up this boondoggle. Producers are scrambling to snatch up biofuel credits to meet the federally-mandated quota this year because neither supply nor demand will be sufficient to produce the more than 13 billion barrels of ethanol required.

The bills working their way through Congress will also addresses the ill-conceived mandate for corn ethanol’s big brother: cellulosic ethanol. Cellulosic ethanol is considered an “advanced” biofuel, and it actually passes most of the tests that corn ethanol fails so miserably. But cellulosic ethanol still isn’t ready for mass production: there has been virtually no commercial production of the fuel, despite EPA quotas requiring nearly 20 million gallons since 2010.

We’ve been agitating for a reform to this short-sighted green policy failure, and we’re not alone in recognizing its folly. It’s past time for our country to kill corn ethanol. These bills could be the fatal blow we’ve been waiting for.

blogs.the-american-interest.com

[Glenn Petersen] Days of Promise Fade for Ethanol By JOHN ELIGON and MATTHEW L. WALD New York ...

Glenn Petersen — 3/17/2013 3:02:38 PM

Days of Promise Fade for Ethanol

By JOHN ELIGON and MATTHEW L. WALD
New York Times
March 16, 2013

MACON, Mo. — Five years ago, rural America was giddy for ethanol.

Backed by government subsidies and mandates, hundreds of ethanol plants rose among the golden fields of the Corn Belt, bringing jobs and business to small towns, providing farmers with a new market for their crops and generating billions of dollars in revenue for the producers of this corn-based fuel blend.

Those days of promise and prosperity are vanishing.

Nearly 10 percent of the nation’s ethanol plants have stopped production over the past year, in part because the drought that has ravaged much of the nation’s crops pushed commodity prices so high that ethanol has become too expensive to produce.

A dip in gasoline consumption has compounded the industry’s problem by reducing the demand for ethanol.

The situation has left the fate of dozens of ethanol plants hanging in the balance and has unsettled communities that once prospered from this biofuel.

“It’s a more somber mood,” said Todd Sneller, the administrator of the Nebraska Ethanol Board. “The growth opportunity that existed some years ago is still out there in theory, but the reality that it’s going to take an awful lot of time, money and political battles to realize that opportunity” is causing consternation.

Thousands of barrels of ethanol now sit in storage because there is not enough gasoline in the market to blend it with — and blends calling for a higher percentage of ethanol have yet to catch on widely in the marketplace. Advanced biofuels from waste like corn stalks and wood chips have also yet to reach commercial-level production as some had predicted they would by now.

Referring to the plants that have been idled, Eric Lee, a commodities expert at Citibank, said: “Is that going to be temporary or permanent? It’s hard to say.”

Not only do the plants employ residents of these small communities, but they also provide a market for farmers to sell their crops and buy grain to feed their livestock. They attract a steady flow of trucks whose drivers use truck stops and patronize other local businesses. Contractors visiting the plants stay in local hotels. And the plants hold large accounts with local banks.

“It’s been quite an ordeal, honestly,” Mayor Christopher Jackson of Walhalla, N.D., said of the closing of an Archer Daniels Midland ethanol plant there last April.

About a dozen families who had moved to Walhalla, a town of about 1,000, to work at the plant have left, he said. Many of the 61 people who worked there have since found new jobs, but the salary and benefits are not nearly as good, he said. Mr. Jackson manages his family’s bar in town, and he said Friday end-of-week gatherings did not happen as much because people had less to spend.

“It’s been hard on every business up and down Main Street,” he said. “I don’t know that people realized how big of an impact that plant closing had on the community. Now we’re a year into it; everybody’s feeling the pinch.”

Congress set out to create an ethanol industry that would produce enough to make up 10 percent of every gallon of gas pumped into a car, but the lawmakers assumed that demand for fuel would grow. Instead, it has shrunk to 8.7 million barrels a day from 9.7 million in 2007, said Larry Goldstein, an economist and a director of the Energy Policy Research Foundation. And with corporate average fuel economy rules now in place to double the number of miles that the average car gets per gallon by 2025, “you know we’re on a trend,” he added.

As the gasoline market got smaller, so did the amount of ethanol it could absorb, because most service stations are set up to sell fuel with an ethanol content of only up to 10 percent. Owners’ manuals of most cars call for fuel blends of no more than 10 percent ethanol. The industry calls this the “blend wall,” and it has won Environmental Protection Agency approval for some cars to run on blends of up to 15 percent, but thus far that fuel has not caught on with consumers.

Millions of cars are “flex-fuel vehicles” and can run on blends of up to 85 percent, known as e85, but that fuel is not popular and is not even widely offered outside a few corn-producing states.

But the ethanol producers were encouraged to build because the federal government had mandated that refiners use their product, and it established a tax credit of 45 cents per gallon of ethanol. The tax credit was allowed to expire on Dec. 31, 2011, but not before it had stimulated construction of ethanol plants.

The value of ethanol has also sagged. Its price is created in part by the price of the gasoline it displaces, and gasoline prices have been relatively modest for the past few months.

Mr. Sneller and others in the industry remain optimistic that technological innovations and sound public policy will keep the industry afloat.

Indeed, people here in Macon, in northeastern Missouri, are not as grim about the future of their plant, which is operated and partly owned by POET, an ethanol producer with more than two dozen plants nationwide. The plant has vowed to reopen, and it has retained all 44 of its employees to do maintenance work as it undergoes more than $13 million worth of renovations that it hopes will make it more efficient and able to produce ethanol more cost-effectively.

Signs of transition are evident at the plant. The growling factory motors, pumps and boilers are silent. But a sweet, acidic smell lingers, and signs of construction are everywhere: skid loaders sitting on fresh dirt, wooden planks cut for frames and dusty corners sectioned off with orange cones.

The plant, which President Obama visited three years ago, is adding equipment to allow it to produce corn oil that will provide additional income. It is also instituting technology that can produce ethanol without having to use heat, a move that will save on energy costs.

With the new technology, operators hope they will produce an extra three-tenths of a gallon of ethanol per bushel of corn.

Residents also understand why the plant halted operations.

The drought was particularly brutal here last year, leaving farmers with little to no corn. Don Mutter, who farms in nearby Cairo, said he produced about 25,000 bushels of corn last year, just 5.5 percent of his usual yield. Without corn nearby to purchase, the plant had to spend extra to haul it in from elsewhere. For several months it was operating at a loss. It ceased operations at the end of January.

“We are going to start back up, this year most likely,” said Steve Burnett, who has been the manager since the plant opened in 2000.

For the people around here, ethanol is invaluable. The plant had been buying 16.5 million bushels of corn per year and producing 46 million gallons of ethanol.

Before the plant opened, Mr. Mutter, one of more than 300 investors in a company that owns a majority of the plant, used to sow about 300 acres of corn each year. Now he plants 2,500 acres. His investment in the plant has paid off fivefold, he said. His farming business grew so much that he was able to buy seven semis and start a trucking company.

“It was the greatest thing for around here,” he said of the plant.

nytimes.com

[Glenn Petersen] Smells Like Progress: Here’s a Biofuel That Doesn’t Stink Walter Russell Mead ...

Glenn Petersen — 3/15/2013 12:51:35 PM

Smells Like Progress: Here’s a Biofuel That Doesn’t Stink

Walter Russell Mead
March 15, 2013

Will we soon be producing our energy with waste water? A new study has found that cellulosic biofuel, a fuel produced by breaking down woody plant matter, can be produced with extremely low environmental impact using waste water. This may not sound like much, but the use of this kind of water could have a major impact on the way this energy is produced.

Biofuels have gotten a bad rap lately, mainly due to the problems with corn ethanol, which starves the world’s poor by raising food prices and has been shown to actually increase greenhouse gas emissions. Yet misguided greens and big agriculture have successfully lobbied to secure billions of dollars in government subsidies for corn ethanol in one of America’s biggest energy boondoggles.

Cellulosic ethanol passes many of the tests that corn biofuel does not. It can be grown on marginal land so as not to displace food crops, it has relatively high yields (especially compared to corn ethanol), and it passes most green tests. Indeed, one of the biggest criticisms of this “second-generation” biofuel has been the relatively high amount of water necessary for its production. But as Triple Pundit tells us, a new University of Illinois study could put that objection to rest:

Divya Ramchandran, who wrote the study as his master’s thesis, noted the water efficiency issue: the production of ethanol from corn requires three to four gallons of water for each gallon of ethanol produced; that ratio spikes up to six to 10 gallons of water for each gallon of cellulosic ethanol. In world more stricken by drought, such ratios are a huge hurdle for cellulosic ethanol—and investors—to overcome.

Should Ramchandran’s work show promise, the future of cellulosic ethanol production could shine brighter, especially since plants used as feedstock for this fuel often grow in water stressed areas from India to the San Joaquin Valley. Some ethanol plants have promised to treat their wastewater and use it for irrigation water, but the possibility of using municipal or agricultural effluent could help this holy grail of clean energy scale without the troublesome impact on local water supplies.

Though this news is promising, it’s far too early to be calling cellulosic ethanol a “holy grail” energy source. Unfortunately, that is in effect what the government has been doing through it policy. Quotas from the EPA mandated 20 million gallons of the biofuel’s production since 2010, yet actual production has been near-zero, and the quotas were eventually struck down by a federal appeals court, which called those targets “wishful thinking.” Embarrassments like these serve as a reminder that propping up new technologies with mandates and subsidies before they’re ready for the market isn’t smart policy.

Rather than setting ambitious policy goals based on wishful thinking, we would like to see more research along the lines of this University of Illinois study to make sure the technology is viable. There’s potential here, but we need to see more results before we start hailing it as a game-changer.

[ Wastewater treatment plant image courtesy of Shutterstock.]

blogs.the-american-interest.com

[Glenn Petersen] Consequences: As Biofuel Demand Grows, So Do Guatemala’s Hunger Pangs By ELI...

Glenn Petersen — 1/7/2013 5:52:33 PM

Consequences:

As Biofuel Demand Grows, So Do Guatemala’s Hunger Pangs

By ELISABETH ROSENTHAL
New York Times
January 5, 2013

GUATEMALA CITY — In the tiny tortillerias of this city, people complain ceaselessly about the high price of corn. Just three years ago, one quetzal — about 15 cents — bought eight tortillas; today it buys only four. And eggs have tripled in price because chickens eat corn feed.

Meanwhile, in rural areas, subsistence farmers struggle to find a place to sow their seeds. On a recent morning, José Antonio Alvarado was harvesting his corn crop on the narrow median of Highway 2 as trucks zoomed by.

“We’re farming here because there is no other land, and I have to feed my family,” said Mr. Alvarado, pointing to his sons Alejandro and José, who are 4 and 6 but appear to be much younger, a sign of chronic malnutrition.

Recent laws in the United States and Europe that mandate the increasing use of biofuel in cars have had far-flung ripple effects, economists say, as land once devoted to growing food for humans is now sometimes more profitably used for churning out vehicle fuel.

In a globalized world, the expansion of the biofuels industry has contributed to spikes in food prices and a shortage of land for food-based agriculture in poor corners of Asia, Africa and Latin America because the raw material is grown wherever it is cheapest.

Nowhere, perhaps, is that squeeze more obvious than in Guatemala, which is “getting hit from both sides of the Atlantic,” in its fields and at its markets, said Timothy Wise, a Tufts University development expert who is studying the problem globally with Actionaid, a policy group based in Washington that focuses on poverty.

With its corn-based diet and proximity to the United States, Central America has long been vulnerable to economic riptides related to the United States’ corn policy. Now that the United States is using 40 percent of its crop to make biofuel, it is not surprising that tortilla prices have doubled in Guatemala, which imports nearly half of its corn.

At the same time, Guatemala’s lush land, owned by a handful of families, has proved ideal for producing raw materials for biofuels. Suchitepéquez Province, a major corn-producing region five years ago, is now carpeted with sugar cane and African palm. The field Mr. Alvarado used to rent for his personal corn crop now grows sugar cane for a company that exports bioethanol to Europe.

In a country where most families must spend about two thirds of their income on food, “the average Guatemalan is now hungrier because of biofuel development,” said Katja Winkler, a researcher at Idear, a Guatemalan nonprofit organization that studies rural issues. Roughly 50 percent of the nation’s children are chronically malnourished, the fourth-highest rate in the world, according to the United Nations.

The American renewable fuel standard mandates that an increasing volume of biofuel be blended into the nation’s vehicle fuel supply each year to reduce carbon dioxide emissions from fossil fuels and to bolster the nation’s energy security. Similarly, by 2020, transportation fuels in Europe will have to contain 10 percent biofuel.

Large companies like Pantaleon Sugar Holdings, Guatemala’s leading sugar producer, are profiting from that new demand, with recent annual growth of more than 30 percent. The Inter-American Development Bank says the new industry could bring an infusion of cash and jobs to Guatemala’s rural economy if developed properly. For now, the sugar industry directly provides 60,000 jobs and the palm industry 17,000, although the plantations are not labor-intensive.

But many worry that Guatemala’s poor are already suffering from the diversion of food to fuel. “There are pros and cons to biofuel, but not here,” said Misael Gonzáles of C.U.C., a labor union for Guatemala’s farmers. “These people don’t have enough to eat. They need food. They need land. They can’t eat biofuel, and they don’t drive cars.”

In 2011, corn prices would have been 17 percent lower if the United States did not subsidize and give incentives for biofuel production with its renewable fuel policies, according to an analysis by Bruce A. Babcock, an agricultural economist at Iowa State University. The World Bank has suggested that biofuel mandates in the developed world should be adjusted when food is short or prices are inordinately high.

Concerned about the effects of its biofuel mandate on world hunger, the European Commission recently proposed amending its policy so that only half of its 2020 target could be met by using biofuels made from food crops or those grown on land previously devoted to food crops.

The current American mandate, established in 2007 by Congress, can be waived by the Environmental Protection Agency, but, according to law, such adjustments focus on domestic issues like cases in which biofuel “requirements would severely harm the economy of a state, a region or the United States,” the agency said in an e-mail when asked for comment.

Once nearly self-sufficient in corn production, Guatemala became more dependent on imports in the 1990s as a surplus of subsidized American corn flowed south. Guatemalan farmers could not compete, and corn production dropped roughly 30 percent per capita from 1995 to 2005, Mr. Wise said.

But cheap imports disappeared once the United States started using corn to fulfill its 2007 biofuels standards. “The use of maize to make biofuel has led to these crazy prices,” said Guy Gauvreau, head of the United Nations World Food Program in Guatemala. It “is not ethically acceptable,” he added.

In part because the agency’s primary food supplement is a mix of corn and soy, it cannot afford to help all of the Guatemalan children in need, Mr. Gauvreau said; it is agency policy to buy corn locally, but there is no extra corn grown here anymore. And Guatemalans cannot go back to the land because so much of it is being devoted to growing crops for biofuel. (Almost no biofuel is used domestically.)

The southwestern village of La Ayuda is now an island of rickety dwellings in the middle of a giant African palm plantation. Félix Pérez, 51, used to grow corn, beans and fruit behind his home. He now walks about three miles to a cheap hillside plot that he rents for four months of the year. “Every day it’s more difficult to survive since we live off the land, and there’s less and less,” he said.

Although African palm was practically nonexistent in Guatemala two decades ago, palm oil is now the country’s third-largest export, after sugar and bananas, with exports rising by more than a third in 2011, according to United Nations trade statistics.

Although Susana Siekavizza, executive director of Grepalma, the local industry association, said that Guatemalan palm is currently exported for cooking oil, the high prices that it commands reflect heightened global demand for a crop also used in biofuel. It is exported in a raw form that can be distilled into biofuel in the receiving country, and Ms. Siekavizza said there was “interest” in manufacturing fuel in Guatemala.

Production of sugar cane, long a mainstay Guatemalan crop, has also skyrocketed as biofuels opened new market opportunities. Pantaleon Sugar Holdings, which once exported only food products, now uses 13 percent of its production for fuel. Local sugar prices have doubled.

For Guatemala’s largest landowners, long-term leases with large biofuel companies are more profitable and easier to manage than cattle ranching or renting to subsistence farmers.

In small towns like San Basilio, representatives of one palm company are pressing farmers to lease their fields.
“I’m trying not to because I need that land to grow corn,” said one farmer, Gilberto Galindo Morales, 46. But he added that farming has become difficult as nearby plantations divert and deplete rivers to feed industrial-scale irrigation systems. Ash from burning cane fields after harvest also damages his corn crop and irritates his children’s lungs, he said.

With sometimes violent confrontations over land and labor, plantation gates are secured with armed guards. Still, Ms. Siekavizza of the trade group contends that the belief that palm cultivation is robbing people of food is “more myth than reality” since much of Guatemala’s terrain and soil composition “is not well suited to growing corn.”

In the remote Mayan villages in the north of the country, the incursion of plantations has brought a few good jobs and some training, but many complain of low wages and the backbreaking nature of the work, which mostly involves picking the small red fruits from African palm trees or off the ground. “We sold our land, so now we have to work, but I think it’s better when you grow your own,” said Juana Paula Tec Choc in the village of El Cancellero. “At least then you have some security.”

A report last year by the United States Department of Agriculture noted Guatemala’s potential for biofuel production, saying that palm plantations tended to be on “underutilized” agricultural land and applied no dangerous pesticides to the trees; that assessment could be important for getting palm-based fuel approved for use in the United States.

But villagers in El Cancellero disputed that, saying they suspected chemical poisoning was behind the mysterious deaths of four young children last year. On a recent afternoon, a crop duster buzzed overhead, and workers wearing tanks fitted with spray hoses trudged along a narrow road that separates what remains of the village from endless rows of squat palms.

Mike McDonald contributed reporting.

nytimes.com

[Glenn Petersen] Growth of Ethanol Fuel Stalls in Brazil The nation's shortages are a sobering l...

Glenn Petersen — 11/27/2012 6:44:15 PM

Growth of Ethanol Fuel Stalls in Brazil

The nation's shortages are a sobering lesson for a biofuels pioneer

By Claudio Angelo and Nature magazine
Scientific American
November 27, 2012

“A new moment for mankind.” That was how Brazil’s former president, Luiz Inácio Lula da Silva, described his country’s biofuel boom in March 2007. Back then, Brazil was the poster child of ethanol fuel, its output second only to that of the United States. Fermenting the sugars in the country’s abundant sugar cane produced a motor fuel that lowered carbon dioxide emissions, and many saw Brazil as a model for how the world could shed its addiction to oil, creating jobs along the way.

Five years on, Lula’s vision has tarnished. Biofuels are falling from grace around the world as critics charge that devoting millions of hectares of agricultural land to fuel crops is driving up food prices and that the climate benefits of biofuels are modest at best. But the fall has been hardest in Brazil, where government policies have compounded the effects of the global economic downturn.

Domestic consumption of liquid ethanol this year has been 26% lower than for the same period in 2008. Forty-one of the country’s roughly 400 sugar-cane ethanol plants have closed over that time. The price of pure ethanol at the pump is so high that in most states it is cheaper to fill up flexible-fuel cars with petrol blends that contain about 20% ethanol. The shift back to fossil fuels, combined with rapid growth in the number of cars on the roads (see ‘ Fuelling Brazil’s transport boom’), has worsened city smog and caused emissions in the transport sector to spike at about 170 million tons of CO2 in 2011, up from less than 140 million tons in 2008. “We are increasing the world’s GDP: we are buying more oil and spending more on pollution-related health care,” jokes Ildo Sauer, who studies energy policy at the University of São Paulo and is a former director of the state oil giant Petrobras.

Brazil’s ethanol roller coaster is a sobering example of what can happen when climate and energy planning clash with economic decision-making. It began with the 2008 economic crisis, which staunched new investments in the sector just as it was expanding rapidly, and deep in debt. Rather than developing new plantations, the industry fell back on harvesting cane from older, less-productive sites, and average yields plummeted from 115 tons per hectare in 2008 to 69 tons this year. Combined with two bad harvests, this has forced Brazil to import some 1.5 billion liters of maize (corn) ethanol from the United States over the past 2 years.

But the killer blow came when the government decided to freeze the price of petrol and diesel to keep inflation under control, leaving biofuels less competitive. On the very night that current President Dilma Rousseff gave the closing speech of the Rio +20 conference in June — the final agreement of which promised to phase out fossil-fuel subsidies — the government said it would be reducing a federal fuel tax to zero. “We have taken away jobs from agroindustry, stalled growth and worsened the air of our cities for the sake of inflation control,” says Luiz Horta, a bioenergy researcher at the Federal University of Itajubá.

Meanwhile, the government has tried to stimulate the economy with tax breaks on the sale of new cars. That, combined with the cost of pure ethanol, has meant that “the share of alcohol in our transport fuel matrix has dropped from 55% in 2008 to 35%”, says André Ferreira, head of the Institute for Energy and the Environment, a think-tank in São Paulo.

According to Antônio de Pádua Rodrigues, technical director and acting president of UNICA, Brazil’s sugar-cane industry association, the government knows that the situation is unsustainable. It has promised the industry that petrol prices will go up next year, and that the blend of ethanol will rise from 20% to 25%, the maximum allowed by law. But it will take time for the industry to bounce back from its poor fortune, and ethanol is likely to remain scarce and expensive for the next two years, say Rodrigues and Horta.

Now, Brazil hopes to tap into a new biofuel source: second-generation ethanol, produced from the tough cellulose in plant stalks. Cellulose is difficult to break down and ferment, but several facilities in the United States are on the verge of making commercial cellulosic ethanol — for example, by using specialist enzymes to break down the long-chain cellulose molecules — and Brazil doesn’t want to be left behind.

In December last year, the Brazilian Development Bank launched a 1-billion-real (US$481-million) credit line to stimulate research and development in cellulosic biofuels and other advanced sugar-cane technologies. The Center for Sugarcane Technology, an industry-sponsored organization based in São Paulo, has taken up a 357-million-real loan to build a cellulosic ethanol plant next year, which would use waste plant matter from conventional sugar-cane fermentation. “We can double fuel yield per hectare when the technology is mature”, says Oswaldo Godoy, a project manager at the organization.

The Brazilian Agricultural Research Company (EMBRAPA) is also throwing its weight behind bioenergy. Its president, Maurício Lopes, a geneticist who took office in October, has promised to build up research on biomass technology and double EMBRAPA’s funding for that area, which today stands at a modest 24 million real per year. “I want to believe that the current state of the ethanol sector is a temporary blip,” he says. Lopes says that Brazil will be “unbeatable” once cellulosic technology matures. “No other country has the logistics we have in place, or the number of different species we can derive ethanol from.”

But cellulosic ethanol won’t be a quick fix, says Horta. “Nothing shall compete with conventional sugar-cane ethanol until 2050.”

This article is reproduced with permission from the magazine Nature. The article was first published on November 27, 2012.

scientificamerican.com

[Glenn Petersen] Government mandates trump consumers: E.P.A. Upholds Federal Mandate for Ethanol...

Glenn Petersen — 11/17/2012 11:37:40 AM

Government mandates trump consumers:

E.P.A. Upholds Federal Mandate for Ethanol in Gasoline

By MATTHEW L. WALD
Ne Yrk Times
Published: November 16, 2012

WASHINGTON — The Environmental Protection Agency declined on Friday to relax its requirement on the use of corn ethanol in gasoline, rejecting a request from several states related to a steep decline in the nation’s corn production.

A summer drought that withered crops led to a spike in prices, hurting the livestock industry and others that depend on corn for food. Estimates indicate that as much as half of the nation’s crop will be used to produce ethanol this year to meet the federal renewable energy standard for transportation fuel.

“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” Gina McCarthy, an E.P.A. assistant administrator, said in a statement. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met.”

To approve a change in the standard, the agency would have to conclude that the fuel rule would “severely harm” the economy. The E.P.A. said it had analyzed 500 potential market variations and that most of them showed no impact from the use of corn for ethanol; those that did showed an average impact of 7 cents a bushel, less than 1 percent of the price, it said.

A coalition of livestock groups expressed frustration with the decision, as did the National Council of Chain Restaurants, which says its costs have also risen because of the use of corn in ethanol production.

Several environmental groups are also opposed to the ethanol requirement, saying that corn ethanol production is not clean energy. “If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make E.P.A. act, it falls to Congress to provide relief from our senseless federal support for corn ethanol,” Michal Rosenoer, a biofuels specialist at Friends of the Earth, said in a statement. She said the mandate was “exacerbating our economic and environmental problems.”

That would put some environmentalists in rare alignment with the oil industry, which is required to use an increasing amount of ethanol in its fuel production but complains that its system is glutted with the substance.

Since Congress specified a year-by-year gallon quota for biofuels in 2007, total fuel demand in the United States has dropped, so the percentage of ethanol fuel in gasoline has reached unexpected highs.

Farm groups and trade associations for companies seeking to make ethanol from nonfood sources like wood chips or crop residues have applauded the mandate, however. They say that if the corn ethanol mandate is reduced, there will be less demand for their biofuels products as well.

At the Advanced Ethanol Council, Brooke Coleman, the executive director, pointed out that the quota rules include a provision that allows the oil industry to postpone up to 20 percent of its obligation to a future year “if there is a good year one year and a less good year the next.”

At Novozymes, which supplies enzymes to ethanol manufacturers, Adam Monroe, president of the company’s North American division, said the biofuels mandate “has generated 400,000 careers, billions in private investment, and domestic, renewable fuel for America.”

In the longer term, Congress anticipates substantial production of biofuels from nonfood sources, but so far that has not developed.

nytimes.com

[Glenn Petersen] Fuel From Waste, Poised at a Milestone By MATTHEW L. WALD New York Times Publ...

Glenn Petersen — 11/14/2012 3:46:22 AM

Fuel From Waste, Poised at a Milestone

By MATTHEW L. WALD
New York Times
Published: November 13, 2012

Ken Childress for KiOR

Pine trees being prepared for conversion into cellulosic gasoline and diesel fuels at KiOR’s Columbus, Miss., plant. The company has lined up three buyers.
____________________

WASHINGTON — For years, scientists and engineers have been juggling various combinations of acids, steam, bacteria, catalysts and the digestive juices of microorganisms to convert agricultural waste and even household garbage into motor fuel. So far, such alternative fuels have not moved beyond small pilot plants, despite federal incentives to encourage companies to develop them.

But that could be about to change.

Officials at two companies that have built multimillion-dollar factories say they are very close to beginning large-scale, commercial production of these so-called cellulosic biofuels, and others are predicting success in the months to come.

In Columbus, Miss., KiOR has spent more than $200 million on a plant that is supposed to mix shredded wood waste with a patented catalyst, powdered to talcumlike consistency. Its process does in a few seconds what takes nature millions of years: removes the oxygen from the biomass and converts the other main ingredients, hydrogen and carbon, into molecules that can then be processed into gasoline and diesel fuel.

KiOR aims to turn out 13 million gallons of fuel a year and has already lined up three companies to buy its output, including FedEx and a joint venture of Weyerhauser and Chevron. KiOR said on Thursday that it had begun producing what it called “renewable crude” and intended to refine that into gasoline and diesel that it would begin shipping by the end of the month.

And Ineos, a European oil and chemical company, is putting the final touches on a plant in Vero Beach, Fla., that would cook wood and woody garbage until they broke down into tiny molecules of hydrogen and carbon monoxide. Those molecules would be pumped into a giant steel tank, where bacteria would eat them and excrete ethanol. The company has spent $130 million on the plant, which is supposed to make eight million gallons a year, about 1 percent of Florida’s ethanol demand. The plant is next to a county landfill, and executives covet the incoming garbage.

Both plants are far smaller than typical oil refineries, but commercial production at either one — or at any of several of the plants that are a step behind them — would be a major milestone in renewable energy.

At such plants, the goal is sometimes to make ethanol and sometimes gasoline or diesel fuel or their ingredients. The pathways to make the biofuels are varied. But the feedstocks have something in common: they are derived from plants and trees, but not from food crops like corn kernels, which are the basis of most of the biofuel currently made in the United States.

Often, the raw ingredients for the cellulosic biofuels are the wastes of farms, paper mills or households, with a value that is low or even negative, meaning people will pay the fuel producers to dispose of them. And the companies developing the new fuels say that their products produce far fewer carbon emissions than petroleum-based gasoline and diesel.

KiOR says that its fuel will release one-sixth the amount of carbon dioxide as an equivalent amount of petroleum fuel. That is mostly because every tree or woody plant fed into its process will eventually be replaced by a new tree or plant, which will suck carbon dioxide out of the atmosphere. And a byproduct of its factory is surplus electricity, which will be exported to the grid, displacing electricity that would otherwise be generated from natural gas or coal.

Ineos goes a step further, saying its production process actually reduces the overall amount of carbon in the atmosphere. “We could make the argument that we’re carbon-negative,” said Peter Williams, the chief executive. The reason, he said, is that electricity produced from its plant averts emissions that would have come from other electricity sources.

Just becoming the first company to produce commercial volumes of these alternative biofuels is no guarantee of commercial success. That depends on further optimizing production processes to get more gallons of fuel per ton of raw materials at lower operating costs.

Industry officials say that profits also depend on continued high prices for oil, the commodity that biofuels would replace, and a continuation of a federal government mandate that requires fuel blenders to mix a certain percentage of biofuels into the gasoline sold at service stations.

“Sustainability requires good economics,” Mr. Williams said.

Many companies have produced biofuel successfully, but only in quantities characteristic of a factory that makes fine whisky or perhaps perfume. The trick is to get reliability up and costs down to a level that allows operation on a large scale.

Government policy has anticipated far more technical progress than the industry has made. Congress set a goal of 250 million gallons of cellulosic biofuel for 2011 and 500 million gallons for this year, but the Environmental Protection Agency cut the requirement to six million gallons for 2012 because of the lack of commercial production.

Six governors, oil refiners and companies hurt by high corn prices have asked the agency to waive its requirements for ethanol and other renewable fuels. Some single out the corn ethanol mandate, but others want the quota for cellulosic fuels waived, too, partly because there is no actual production.

The cellulosic biofuel industry has asked the E.P.A. to keep all the rules intact. Waiving the rule for corn ethanol would discourage investment in advanced biofuels as well, said Brent Erickson, a spokesman for BIO, a trade organization. “You can’t de-link them,” he said.

The agency was expected to rule on Tuesday, but instead said it would rule “shortly.” To grant the waiver, it would have to find severe harm to the economy. Energy experts say that eventually renewable motor fuel could have a much bigger impact on the United States economy than renewable electricity from wind farms or solar cells. Renewable electricity saves coal and natural gas, which are cheap and domestically plentiful. Renewable motor fuel displaces oil, which is much more expensive and often imported, which poses a host of national security and trade issues.

If either Ineos or KiOR began commercial production, it would break a long string of overly optimistic promises made by the industry and the government.

In October 1998, for example, the Energy Department showed off a plant in Jennings, La., that made ethanol from sugar cane wastes; the department said it would reach commercial production within a few years. At the time the plant was owned by a government-subsidized firm called BC International, which was later reorganized and renamed Celunol. Then it was taken over by Verenium, which, with backing from BP, tried another method. BP announced on Oct. 25 that it was dropping plans for a commercial plant based on technology piloted at Jennings, although it still does research there.

Mascoma, based in Cambridge, Mass., and backed by General Motors and Khosla Ventures, among others, is trying to make ethanol from wood waste. Samir Kaul, a board member representing Khosla, confidently predicted in 2006 that it would be in commercial production by 2008, but that goal remains elusive.

Iogen, an established Canadian producer of enzymes, began producing ethanol from wheat straw in 2004, and said in the fall of 2005 that it hoped to announce plans for a commercial plant by the end of that year. Eventually, it announced plans for a plant in southern Manitoba, but in April of this year it dropped that idea, and laid off some workers at its Ottawa headquarters.

But new chemistry technology, like hope, springs eternal.

POET, a major producer of ethanol by conventional means, is building a plant in Emmetsburg, Iowa, that is supposed to digest 700 tons of corn cobs a day and feed the resulting sugars into a conventional ethanol plant next door. The goal of the project, which is supposed to be ready by late 2013, is to produce 20 million gallons of cellulosic ethanol a year.

Abengoa, a Spanish firm, has been running a pilot plant in Salamanca, Spain, and in June 2011, broke ground on a $350 million commercial plant in Hugoton, Kan., that is now 50 percent complete, according to Manuel Sanchez Ortega, the chief executive. It is currently slated to open in the third quarter of next year and is supposed to make 25 million gallons of ethanol a year from agricultural waste, wood waste and nonfood crops.

And a variety of smaller companies are a step behind.

The holy grail is to find a way to profitably make renewable fuels from otherwise wasted biomass, as opposed to valuable food crops.

“If we can do it with biomass, then there is no more discussion of food versus fuel; it’s over,” Mr. Ortega said.

http://www.nytimes.com/2012/11/14/business/energy-environment/alternative-fuels-long-delayed-promise-might-be-near-fruition.html

[Glenn Petersen] The drought is crushing ethanol margins: Drought increases price of corn, redu...

Glenn Petersen — 8/31/2012 8:38:00 PM

The drought is crushing ethanol margins:

Drought increases price of corn, reduces profits to ethanol producers

Energy Information Administration
August 31, 2012

Source: U.S. Energy Information Administration, based on Bloomberg.

Drought conditions in Midwestern states have reduced expectations for the amount of corn that may be harvested in 2012, and contributed to a 35% rise in the price of corn from June 18 to August 29. During the same time period, the spread between ethanol and corn prices (known as the 'crush spread') declined by $0.22 dollars per gallon.

The corn crush spread indicates the relative profitability of producing ethanol from corn. The spread is calculated as the per bushel price of corn divided by 2.8, reflecting the average number of gallons of ethanol produced from a bushel of corn in a modern ethanol plant, and subtracted from the per gallon price of ethanol. A negative spread does not necessarily mean that producers are losing money by making ethanol since the leftover feedstock and other by-products can be sold. However, the $0.22 per gallon drop in the spread since early June has reduced profitability.

Source: U.S. Energy Information Administration, based on CME Group.

In addition to price, implied volatility (a forward-looking, market-derived measure of price uncertainty) moved higher for corn futures, an indication of a sudden supply disruption. Implied volatility for the front month corn futures contract increased by 14.3 percentage points from June 18 to July 20, settling at its 2012 peak of 49.4% on July 20. The increase in price and implied volatility for corn was primarily due to current drought conditions in the U.S. It was similar to the increases seen in crude oil prices and implied volatility during the first quarter of 2011, when a sudden change in supply expectations occurred as a result of the conflict in Libya and elevated geopolitical risks in other oil producing countries. The recent drop in corn implied volatility may reflect less uncertainty about continued drought conditions.

Ethanol is a component of gasoline after blending; however there is little evidence of the rising corn prices affecting the current price of gasoline. The ratio of the price of gasoline to the price of petroleum (called a crack spread) has remained relatively constant, indicating that the rise in cost of gasoline was largely due to the rise in cost of crude oil and not because of issues specifically related to the gasoline or ethanol markets. The recent increases in gasoline crack spreads experienced over the last week can be attributed to weather and refinery outages.

The impact of the drought on various financial markets was the subject of a special Market Prices and Uncertainty Report, a regular supplement to the Short-Term Energy Outlook.

eia.gov

[Glenn Petersen] Ethanol's Long Boom Stalls Fuel-Additive Plants Close as Gasoline Demand Falls,...

Glenn Petersen — 6/12/2012 8:32:34 AM

Ethanol's Long Boom Stalls

Fuel-Additive Plants Close as Gasoline Demand Falls, Federal Mandates Are Met

By MARK PETERS
Wall Street Journal
Updated June 11, 2012, 8:36 p.m. ET

WALHALLA, N.D.—For years, the biggest employer in this city of 1,000 people near the Canadian border was the ethanol plant on County Road 9, which pumped out the corn-based fuel additive to satisfy demand driven by federal mandates requiring its use in gasoline.

In April, plant owner Archer Daniels Midland Co. closed it, citing lackluster returns. The plant's 61 employees lost their jobs, and Walhalla lost its biggest source of tax revenue.

"Jobs like that are hard to come by," said Chris Jackson, Walhalla's 32-year-old mayor and proprietor of its main watering hole, Jackson's Bar. Business has suffered at the bar and the city's two motels and gas stations because truck traffic to the plant has ended. The mayor says that some residents who worked at the plant are planning to leave.

A local animal-feed company is considering buying the plant, but mainly to get access to a byproduct of ethanol manufacturing that is used to feed cattle.

America's ethanol boom is stalling, and the effects are starting to spread across a Farm Belt that had grown accustomed to soaring growth. Annual U.S. production of ethanol more than tripled from 2005 to 2011, driving up crop prices and pumping money into rural communities from Nebraska to North Dakota.

Now, ethanol demand is topping out. The amount used in gasoline is near federal mandates, and gasoline consumption is declining. After 15 straight years of growth, ethanol production this year will fall slightly and will be roughly flat next year, according to the U.S. Energy Information Administration's May forecast. Updated output numbers will be released Tuesday.

The ethanol industry expanded based partly on expectations that gas consumption would keep rising, and that ethanol's share of that would continue to grow. Instead, gas demand this year is projected to be 6.7% below its peak in 2007, and efforts to expand ethanol's share face challenges. U.S. plants now face excess capacity, producing less than 14 billion gallons of ethanol a year, compared to capacity of 14.7 billion gallons, according to the Renewable Fuels Association, an ethanol trade association.

"A lot of people are rethinking their assumptions on the ethanol industry and the potential size," said Jason Henderson, an economist at the Federal Reserve Bank of Kansas City.

Meantime, the broader farm sector remains a relative bright spot in the U.S. economy. Prices of some key commodities have fallen from historic highs reached in recent years, but land prices have continued to rise and unemployment in big agricultural states is generally below the national average.

The ethanol slowdown has been jarring, especially on the edges of the corn belt. About two dozen workers at an ethanol plant in Sutherland, Neb., were furloughed after the plant was idled in February.

Residents who invested in an ethanol plant in Levelland, Texas, have seen their holdings wiped out: The plant, which filed for bankruptcy protection last year, sold for $9.2 million in May, a fraction of the cost to build it four years ago. "It is a big chunk of the community's change that is gone," said Richard Levy, a lawyer representing the plant's ownership in the bankruptcy case.

ICM Inc., a Colwich, Kan., engineering firm that helped design and build about 100 corn-to-ethanol plants in the U.S., has cut its payroll to 325 workers from 750 workers in 2008, said Chief Executive Dave Vander Griend. Most of its business now is in South America and Europe.

The slump is weighing on prices American farmers get for corn, which rose to record highs in recent years based partly on ethanol demand. The ethanol industry now consumes about 40% of corn produced in the U.S., up from around 14% in 2005. The Agriculture Department projects corn prices for this year will decline at least 20% to an average of $4.20 to $5 a bushel, partly because of flat demand from ethanol producers.

The ethanol boom started in the latter half of the past decade. It was fueled by a need to replace the gasoline additive methyl tertiary-butyl ether—which was used to reduce air pollution but was found to contaminate ground water—and by a federal mandate requiring a growing volume of ethanol be blended into gasoline.

Annual production surged to 13.95 billion gallons last year from 3.8 billion gallons in 2005, according to the energy information agency. The Renewable Fuels Association says the ethanol industry directly employs more than 90,000 people.

Ethanol producers went through a rough patch around 2008, when surging corn prices and plunging prices for gasoline and ethanol squeezed profits. Some plants closed and factory construction slowed. But production kept growing.

Two key federal rules govern ethanol's use. One, created in 2007, requires total ethanol production of 15 billion gallons a year by 2015. That is only about 9% above current levels.

But that target, based on projections that fuel consumption would keep growing, now conflicts with an older rule that, until recently, capped ethanol's share of gasoline at 10%. That cap, in place for more than 30 years, determined how gasoline stations and most cars were built, and it has effectively been reached: Ethanol is expected to constitute 9.7% of the nation's gasoline supply this year, up from less than 5% in 2007.

In several steps in the past year and a half, the Environmental Protection Agency has effectively increased the cap to allow gasoline that is 15% ethanol, known as E15. The ethanol industry is pinning its hopes on rapid adoption of E15. "We are putting a lot of faith in E15," said Walter Wendland, CEO of two ethanol plants in northern Iowa. "We have a market problem out there for our production."

But large-scale adoption of E15 faces sizable challenges. Not a single fuel station sells it today. Gasoline stations need to spend money changing pumps and alerting customers. The auto and oil industries have voiced strong concerns about E15, saying the fuel could damage cars and leave customers with expensive repairs.

Meanwhile, the ethanol industry's once powerful political support has weakened amid high corn prices and efforts to cut federal spending and regulation. Congress last year eliminated about $6 billion in annual subsidies, and critics are pushing for cuts in the 15 billion-gallon-a-year mandate.

The change was evident in Iowa, where support for ethanol has usually been an important part of campaigning ahead of the state's caucuses. In this year's Republican race, the issue barely registered, said Tim Hagle, a political science professor at the University of Iowa. "It is taking a back seat to other issues," he said.

Changes in politics or other factors could brighten ethanol's outlook. For example, falling corn prices could improve the profitability for ethanol makers, who have struggled to balance strong corn prices with weak ethanol prices.

In Walhalla, there is still hope workers could return to the plant, but not because of optimism about ethanol. SweetPro Feeds is talking to ADM and state officials about buying the plant, said Bob Thornberg, SweetPro's president. ADM declined to comment.

If the deal goes through, the plant would start making ethanol again, but mainly because SweetPro sees value in an ethanol byproduct. Ethanol "has hit a limit right now," Mr. Thornberg said.

Write to Mark Peters at mark.peters@dowjones.com

http://online.wsj.com/article/SB10001424052702303395604577434782358634706.html

[richardred] Oh how thing have changed for ethanol since I started this board. Looks like...

richardred — 4/14/2012 5:06:00 PM

Oh how thing have changed for ethanol since I started this board. Looks like ethanol will still be used as an additive in gas to replace MTBE. Some big refiners have already purchased Ethanol companies. However, I still think cellulsosic ethanol will still play a role someday. I currently believe NG will flourish down the road. I am a Boone P. fan, always have been.

Message 27583154

Message 24450448

[gg cox] For most people, a natural gas fueling station in their garage or on the side of...

gg cox — 4/14/2012 1:19:48 PM

For most people, a natural gas fueling station in their garage or on the side of the house would make sense, plugging in and fueling over night as Boon Pickens pointed out... large trucks at layover points also.

I just recently purchased a new ford F150,6 cyl 3.7 litre super crew.Had there been a natural gas hybrid available from ford, I would have been on it in a flash.

Filling out the after purchase survey from ford I answered that if a natural gas hybrid was available i would have bought it ...so they are asking the right question anyway.

GM has just came out with a natural gas ..gas, hybrid which i am going to predict will be a winner.

This technology has been well proven and tested for many years with propane, so i do not think there would be problems purchasing a natural gas hybrid , right out of the gate...which a lot of people are reluctant to do with gas electric hybrid,, although very well proven technology now with the Prius.

cbc.ca

<<<<The world’s largest automaker announced plans Monday to sell pickup trucks that can run on both gasoline and compressed natural gas.

General Motors will launch two pickups in April that can “seamlessly” transition between the two fuels.

The vehicles will be sold in both Canada and the United States

According to a statement, GM says drivers could save between $6,000 to $10,000 in fuel costs over three years. That’s because natural gas is about one-third the cost of gasoline.

The Chevrolet Silverado and GMC Sierra 2500 HD pickups will have tanks for both fuels. GM expects the range of the vehicles to be over 1,000 kilometers.

GM began selling cargo vans that run on compressed natural gas in 2012.>>>>

[richardred] I wish I had Dominion Resources storage Tanks in my back yard. I'd be stocking ...

richardred — 4/14/2012 12:16:59 PM

I wish I had Dominion Resources storage Tanks in my back yard. I'd be stocking up at these prices.<g>

[Hawkmoon] I agree.. NG is proving to be a potentially vital fuel source. I have persona...

Hawkmoon — 4/13/2012 10:38:09 PM

I agree.. NG is proving to be a potentially vital fuel source. I have personally seen it work while traveling in SE Asia.

However, that said.. with current NG fuel tanks, the range is limited for vehicle use. But I know there are tanks that can hold substantially greater pressures very safely.. The problem will be having sufficient high pressure 10k/psi pumps.

There's more than enough room for all of these fuels, IMO. Big marketplace out there..

Considering converting my own vehicle to a dual-fuel use.. Still have to assess the cost.. But dual-fuel (gas/NG) is a requirement for new taxis in Singapore, so I know the tech is sufficiently proven. Their problem is that NG has risen to comparable prices to gasoline in their island country.

Hawk

[gg cox] Peterson's post was about fueling North America. Natural gas is plentiful, and...

gg cox — 4/13/2012 7:37:19 PM

Peterson's post was about fueling North America.

Natural gas is plentiful, and the distribution system for it, is already in place. ,,no need to liquify.

Natural gas burned in my furnace is already 95 percent efficient.

I do not know the efficiency of it burned to fuel cars and trucks, but i would assume that the losses of breaking natural gas down and turning it into liquid methanol, and then further distributing it, would be less efficient than taking it straight from the pipeline , pumped into vehicles .

[Hawkmoon] I think the question is transporting and storing it that makes ethanol more effi...

Hawkmoon — 4/13/2012 12:47:14 PM

I think the question is transporting and storing it that makes ethanol more efficient over NG.

It's a liquid, therefore requiring no energy to maintain cooling for LNG. It can be readily stored and transported (albeit not in pipelines that carry petroleum products).

Hawk

[gg cox] <
gg cox — 4/10/2012 10:25:22 AM
<<Celanese makes its ethanol by tearing apart and recombining the hydrocarbons found in plentiful natural gas or coal.>>

First dumb, corn into ethanol.

Second dumber dumb, tearing apart natural gas to produce ethanol, breaking laws of thermo dynamics.

Get real with T Boon, just fuel with efficient ,plentiful for now, natural gas.

[Glenn Petersen] How A Dumb Law Blocks A Great Way To Fuel America Christopher Helman, Forbes St...

Glenn Petersen — 4/8/2012 9:30:38 AM

How A Dumb Law Blocks A Great Way To Fuel America

Christopher Helman, Forbes Staff
4/03/2012 @ 3:38PM

This year American motorists will burn through 14 billion gallons of ethanol, the end product of 5 billion bushels of corn—a third of the U.S. crop—grown on 33 million acres of farmland. It arguably cuts pollution coming out of U.S. tailpipes, but at a huge cost. Since 2005, when Congress required that ethanol be added to your gas tank, U.S. corn prices have tripled.

Steven Sterin thinks he has a better way. As president of the advanced fuels division at Dallas-based chemicals company Celanese, he’s supervising construction of two new plants—one in Texas, the other in China—to make ethanol. But you won’t see any vats fermenting corn here. Celanese makes its ethanol by tearing apart and recombining the hydrocarbons found in plentiful natural gas or coal. “We have the best gas-to-liquids and coal-to-liquids technology in the world,” he says. If it works, what Sterin is building will revolutionize the fuel industry. But that’s a very big if.

The problem isn’t science. It’s Washington. Thanks to the 2007 Renewable Fuel Standard law, gasoline refiners are mandated to blend so much plant-based or renewable ethanol into the gas supply that it prevents Celanese or any other fossil-fuel-based ethanols from even competing for the market. Though the RFS caps the blending of corn ethanol at 15 billion gallons a year, it calls for total biofuels blending to grow to 36 billion gallons a year by 2022.

Cellulosic ethanol is supposed to make up most of the difference. Maybe you recall President George W. Bush’s 2006 State of the Union address, in which he declared his goal that cellulosic ethanol made from “wood chips and stalks or switchgrass” would be “practical and competitive within six years.” RFS mandated 100 million gallons of cellulosic for 2010, 250 million for 2011 and 500 million this year.

But that hasn’t happened, even though the feds under both Bush and Barack Obama pumped $1.5 billion in grants and loan guarantees into upstart cellulosic producers. Most, like Range Fuels, Cello Energy and E3 BioFuels, have ended up bankrupt. Survivors like Abengoa Bioenergy produced fewer than 6 million gallons last year.

Amazingly, gasoline refiners are still on the hook. For failing to blend into their mix the mandated quantities of a fuel that does not exist, the refiners have gotten a $10 million bill from the Environmental Protection Agency to pay for their so-called waiver credits. They’re appealing.

The corn-dominated ethanol lobby is conflicted about making ethanol out of fossil fuels. On one hand, corn growers don’t want competition from cheap gas. On the other, it’s in the national interest to cut oil imports. “We’re supportive of expanding all renewables and all alternative fuels,” says Matt Hartwig, spokesman for the Renewable Fuels Association. Says Joe Cannon, president of the Fuel Freedom Foundation: “We need every option. There are 2 billion people moving from bicycles to mopeds to cars, and that’s just in India and China.”

Thirteen congressmen led by Pete Olson, whose district around Houston, Tex. encompasses dozens of chemical plants, including Celanese, have introduced a bill to add natgas-derived fuels to the RFS. Any change would face attack from the greens but is supported by animal farmers who want cheaper feed corn. “We would prefer not to have the RFS at all,” says a spokeswoman for Olson, “but this is a step in the right direction.”

How did Celanese get into this business? For 30 years it has been perfecting the process of making acetic acid—more commonly known as vinegar—a chemical feedstock for plastics like vinyl acetate. The company makes a quarter of the world’s supply at giant complexes like those in Nanjing, China and Clear Lake, Tex. The building blocks for these chemicals are cheap natural gas (Texas) and plentiful coal (China). Using steam and catalysts like nickel, Celanese breaks apart the hydrocarbons in these feedstocks and reforms them into acetic acid. When coal is used, the gasification process captures bad stuff like mercury and cadmium.

Vinegar and ethanol are closely related. Ethanol is the stuff in a bottle of wine that gets you drunk; vinegar is what the ethanol turns into when you leave the bottle undrunk for too long. Air oxidizes ethanol into vinegar by pulling off its hydrogen atoms. In simplest terms, what Celanese does is reverse the process, taking the acetic acid components it already makes and using metal-based catalysts to add hydrogen to it to form high-purity ethanol. Finding the right catalysts was the real breakthrough.

And while using fossil fuels means emitting carbon dioxide, it’s not clear that corn ethanol is more carbon-friendly. A 2010 study by researchers at Rice University found no reason to believe that the process of planting, tending, harvesting and processing corn into ethanol emits less carbon dioxide than does gasoline.

Sterin figures Celanese can make ethanol for a cash cost of only $1.50 a gallon. Capital costs, starting with $200 million for the two new plants, will add some 25 cents a gallon. While the diluted ethanol that’s blended into gasoline sells for $2.30 a gallon today, the concentrated industrial ethanol that Celanese will make goes for closer to $3. That paves the way for big profits selling to makers of paints, pharmaceuticals and textiles, says Hassan Ahmed, analyst with Alembic Global Advisors. He expects Celanese to be making 300 million gallons a year by 2016, building a $1 billion business with net income of $250 million. Last year it earned $600 million on $6.8 billion in revenues.

What if Washington doesn’t get aboard? No matter, says Sterin. China sees ethanol as a vital fuel, but with so many mouths to feed it can’t waste farmland growing it. Celanese initially planned to build a 60-million-gallon-per-year ethanol addition at its Nanjing complex, but when Beijing issued final permits in March it was for an 80-million-gallon plant. (The Texas plant, in contrast, will do fewer than 6 million gallons.) Even so, he’s hoping politicians will at least give Celanese a shot at competing in America. “We don’t need subsidies,” says Sterin. “We’re ready to go.”

forbes.com