Ethanol sales may not be hurt by EPA decision on Renewable Fuel Standard

corn ethanolAre you producing and selling an alternative fuel that’s getting tangled up in regulatory limitations? No worries – just sell it overseas. While ethanol and other biofuels producers have been frustrated with delays in the Renewable Fuel Standard decision by the US Environmental Protection Agency (EPA), exports of corn ethanol have increased 31% this year and have reached their highest level since 2011.

Ethanol used in gasoline will probably never hit the 15% ethanol E15 target that the EPA had been considering; and the 10% ethanol mark may be reduced by pressure being placed on the EPA by oil refineries and producers. Exporting petroleum products with the additive ethanol blend has been a big growth sector for petroleum products and ethanol in the past few years. The US passed Russia in 2010 to become the dominant exporter of petroleum products, and ethanol sales have increased with that growing overseas demand.

Archer-Daniels-Midland Co., Green Plains Renewable Energy Inc., and Valero Energy Corp., three of the four largest U.S. ethanol companies, say that ethanol exports have been a significant part of their revenue growth. “If we can’t sell it here, we’ll sell it someplace,” said Bob Dinneen, president and CEO of biofuels industry group Renewable Fuels Association (RFA). “We’re going to focus overseas.”

Exporting fuel has been a bit more difficult for liquefied natural gas (LNG). So far, the US Dept. of Energy (DOE) has approved each export application, but the approval process has been complicated. Some analysts worry that strong demand for US-drilled natural gas may drive up the price for LNG and compressed natural gas, but so far it remains stable for users of natural gas vehicles.

The shale-oil boom in the US has created a stream of oil and gas products being sold overseas; ethanol is seeing a record level of crops being grown for these exports. The US is now producing about 66 million metric tons more corn than 10 years ago; that’s nearly as much as the rest of the world will export this year. Overseas demand is keeping ethanol sales strong even though the EPA has been easing off the ethanol mandate for the past year.

Ethanol trade lobbyists have traveled to Peru, Panama, Japan, and South Korea and trips are planned to Thailand, Malaysia and the Philippines this month to gain support for more overseas ethanol sales, according to RFA. A Commerce Department-sponsored trade mission to northern Brazil last year won sales contracts valued at $29 million, the RFA says. If the EPA mandates a lower volume of ethanol sales in US fuel, it probably won’t matter much for the ethanol industry.

Reactions to EPA dragging out biofuels decision until next year

Renewable Fuel StandardThe US Environmental Protection Agency decided to once again put off its decision on biofuel production and gasoline blending until next year – nearly one year after deciding to extend that decision on production volume. A deadline wasn’t given, but it’s probably not going to be announced anytime soon.

While government regulations aren’t the only market force determining what happens to a business sector, it appears that the EPA decision on production volume mandates will shape the future of biofuels. That industry, and oil producers and refiners, have placed a massive amount of energy and resources on influencing the federal agency. Reactions to the latest EPA decision have been mixed.

On Friday, the EPA released this statement: “Today EPA is announcing that it will not be finalizing 2014 applicable percentage standards under the Renewable Fuel Standard (RFS) program before the end of 2014. In light of this delay in issuing the 2014 RFS standards, the compliance demonstration deadline for the 2013 RFS standards will take place in 2015.”

The EPA’s announcement on Friday came after it was nearly a year late in issuing its 2014 requirements for the production and use of ethanol, biodiesel, and cellulosic fuels. Oil refiners and producers had been arguing and lobbying hard over how much renewable fuel could be blended into the gasoline supply; and they say that the Renewable Identification Numbers (RIN) credit market system is volatile and costing them way too much money. Automakers have been sending out warnings on the corrosive effect that E15 could bring to engines. Biofuel farmers and producers have been fighting for victory on RFS for increasing the gasoline blend to E-15 and for supporting advanced biofuels, particularly cellulosic ethanol and biodiesel. The EPA held public hearings around the country over the past year where thousands of people made their case for or against the RFS.

The EPA has sent out mixed messages. EPA Administrator Gina McCarthy may agree with automotive engineers sending out warnings that too much ethanol in gasoline will damage vehicle engines. McCarthy has also suggested that the EPA is leaning toward increasing biofuel production in the 2014 rules and beyond. That could be a reference to backing off corn ethanol (such as leaving it at E10) and increasing volumes of advanced biofuels such as biodiesel, cellulosic ethanol, and other fuels coming from algae and biomass.

So, how did industry groups perceive the EPA decision? It’s been a mixed bag, according to Biofuels Digest:

  • National Biodiesel Board is very frustrated with the delay and sees it undermining the biodiesel industry. While it acknowledges that the decision is complex, it makes no sense that the decision on how volume should be produced has been delayed again. Biodiesel producers have laid off workers, idled production, and some have shut down completely, says Anne Steckel, VP of federal affairs at National Biodiesel Board.
  • BIO President and CEO Jim Greenwood appreciated the delay in finalizing the proposal with what he considers to be flawed methodology for setting renewable fuel volumes. He’s concerned to see that the delay in the EPA decision has chilled investment and financing of future cellulosic biofuel plants.
  • Advanced Biofuels Association President Michael McAdams thinks the EPA has recognized that cutting requirements for advanced biofuels would be a mistake. He thinks the EPA has “hit the big reset button.”
  • Advanced Ethanol Council, Renewable Fuels Association, and Growth Energy are tired of seeing it being dragged out but are confident that the EPA understands it was wrong about its original ruling. The influence of “Big Oil” has been extreme, and the EPA will likely be issuing standards more supportive of biofuels, the groups say.
  • The American Fuel & Petrochemical Manufacturers (AFPM), speaking for the oil industry, wasn’t too happy about it. “Today’s announcement indicates that the Administration plans to continuously mismanage this program in a manner that equates to playing Russian roulette with the nation’s fuel supply at the American consumer’s ultimate expense,” said Charles Drevna, the association’s president. The AFPM filed a notice of its intent to sue the EPA over its failure to issue the 2014 RFS regulations.
  • The Environmental Working Group thinks that the corn ethanol blend in gasoline needs to be reduced and that Congress should reform what it calls “our badly broken food-to-fuel policies.” The group thinks that corn ethanol needs to go away and truly “green” biofuels need to be adopted for reducing greenhouse gas emissions.
  • Friends of the Earth Climate agrees with that argument. “Final volume levels or no, the simple fact is that the statute requires too much climate-busting corn ethanol,” according to Friends of the Earth Climate’s Lukas Ross. “Today’s announcement shows that Congress handed the EPA an unworkable policy. Now it’s time for Congress to step in and fix the corn ethanol problem they created.”

EPA Appears to be changing its mind on biofuels and E15 mandate

E15It looks like E10 could very well remain the blended ethanol-to-gasoline ratio instead of 15%, or E15, according to a leaked proposal last week from the US Environmental Protection Agency (EPA). If that’s the case, courts are likely to see more case filings coming from biofuels industry associations focused on the EPA backing away from 2014 targets. The oil industry had already filed two suits over 2013 targets. The EPA document referred to the E10 blend wall as an “important reality” and comes from more acceptance that the federal 2007 Renewable Fuel Standard biofuels mandate appears to be unreachable. If it gets approved, the EPA proposal would cut the biofuel mandate in 2014 to 15.21 billion gallons from 18.15 billion gallons. The EPA only has a draft proposal and has not made a final decision on it, according to administrator Gina McCarthy. EPA also considered a corn-based ethanol rate of 12.36 billion gallons and 13.18 billion gallons.
Days prior to the leak, two US oil industry groups had sued the EPA over its 2013 biofuels target. Ethanol groups were ready to sue over any changes to the 2014 rule. The Renewable Fuels Association said it would sue over any attempts to roll back the targets – if the EPA does issue its revised 2014 target, biofuels groups appear ready to file lawsuits.
The clash comes down to industries fighting over falling profits – biofuels companies are depending on increasing output and delivering ethanol to gas stations, and oil companies and refineries are fighting the increased cost of adding more ethanol to gasoline. The oil industry is also upset with the soaring cost of ethanol credits built into the Renewable Fuel Standard. While the EPA has ruled that gasoline blended with E15 is safe to use in vehicles made after the 2001 model year, many automakers are refusing to allow their vehicle warranties to cover the use of fuel over E10. Gas station owners don’t want to invest in another storage tank and pumps to provide E15.

Why I disagree with Forbes article on Pickens and Clean Energy pulling a scam
Forbes staff writer Christopher Helman says the launch of Clean Energy Fuel’s “Redeem” renewable natural gas is a bit of a scam. Read his article “The Clever Gimmicks Behind T. Boone Pickens’ New ‘Green’ Fuel” for details. The commentary states that while the company is gathering landfill gas from dump operators across the country and two of its own, it’s just a marketing gimmick that comes out of selling carbon credits like the one being implemented by the California Air Resources Board. Helman wrote that the natural gas is,” simply injected into the nation’s natural gas pipeline grid, where it’s intermingled with all the other conventional gas flowing down the pipes to plants that turn it into CNG…. The ultra-green nature of Redeem is really just an accounting gimmick. The more gas that Clean Energy’s traders can procure from landfills (as well as methane-rich wastewater plants and dairies) across the country, the more CNG it can slap with the Redeem label. But on the molecular level, it’s exactly the same stuff.”
Well here’s my take on it:  For anyone interested in buying Redeem, such as a fleet with stringent sustainability targets, there would probably be interest. It costs the same as natural gas. It would have the same GHG/carbon reduction benefit as natural gas – around 20% to 25% less than diesel. Natural gas has another benefit in air pollution reduction – 90% less NOx in natural gas compared to gasoline/diesel. There would also be the part about tapping into landfill for the natural gas. If you were a corporate or government fleet, you could say you’re contributing to reducing our landfill problem and using clean fuel.  Plus, you get credits from California Air Resources Board. Helman also makes a comment about it costing 50 cents less than gasoline and diesel. If that’s per gallon equivalent, he was way off – natural gas is sold for only about one third the cost, or around $1.25 or more per gallon – much more than 50 cents in savings.
Another interesting point was seeing a statement by Energy Vision, an energy advocacy group in Washington that tends to hold the natural gas vehicle industry accountable….By capturing and refining the biogases generated from a number of large landfills across the country, one of which is the Sauk Trail Hills landfill in Michigan, which is owned and operated by Republic Services, Clean Energy will provide approximately 15 million gallons of ultra-low-carbon “Redeem” (RNG) this year alone, a volume far greater than most (including the EPA) estimated was possible nationally, let alone in California. Energy Vision commends the pioneering efforts of Clean Energy/Clean Energy Renewable Fuels in making the path to fully-sustainable renewable natural gas a reality.

Green transportation news roundup:

  • Another Tesla Model S competitive model releases details…. The 2014 Cadillac ELR is priced at $75,995 including destination charges. It’s more than twice the price of the Chevrolet Volt and uses the same powertrain, but GM is expected to produce it in smaller numbers and hopes that increases its value to buyers.
  • As Ecotality leaves the charging infrastructure following its bankruptcy filing, competitor and fellow DOE-grant recipient ChargePoint is offering owners of Ecotality Blink charging stations a trade-in credit for switching over – for those switching to a dual-port CT4000 station ($2,200 credit) or a single-port station ($1,200).
  • The U.S. Department of Energy on Friday started an auction on its loan to Fisker Automotive that was made back in 2010. The DOE is still owed $168 million from the $192 million loan, though any sale is expected to be at a discount.
  • Intertek, which certifies electric vehicle supply equipment, has acquired ETEC Labs, a leader in advanced transportation testing, including alternative energy vehicle analysis, research, and demonstration projects.
  • Honda is going after Toyota’s domination of the hybrid market by rolling out a hybrid version of the Fit (joining its ICE and EV versions). The automaker began selling the hybrid Fit last month in Japan where it’s competing directly with the Toyota Aqua, which is known as the Prius C in the US market.
  • Toyota is dropping the base prices of the 2014 Prius Plug-In to $29,990, a $2,010 reduction from the current price.
  • Ford Motor Co. and the University of Michigan, Ann Arbor, are opening up an $8 million battery research lab. Researchers will be developing and testing new chemistries for automotive applications, and making breakthroughs for electric vehicles and hybrids that will go to market as quickly as possible.
  • Toyota thinks it can cut hydrogen fuel cell vehicle costs in half by 2020 – closer to the production cost of a plug-in hybrid and cheaper than the MSRP for an electric vehicle. It’s still going to be expensive when it launches its first fuel cell vehicle in 2015 – somewhere between $50,000 and $100,000 as its sales price. That came down from Toyota’s cost of $1 million per unit in 2007 to build 100 Highlander fuel cell demonstration vehicles.
    1. Los Angeles-based MPG Car Rental is now offering the Toyota Model S to renters for $499.99 per day. MPG Car Rental prominently displays other vehicles in its green-only lineup including the BMW i3, Volkswagen Jetta TDI, Chevy Volt, Honda Insight, Toyota Camry Hybrid, Toyota Prius, Toyota Highlander Hybrid, and Chevy Tahoe Hybrid.

    New book follows the money trail shaping renewable energy – Plus, a very surprising prediction of stance Obama will take on Keystone XL pipeline
    “Do you get the feeling that the energy industry and the Congress that it owns are deliberately lying to you? If so, you are 100% correct,” according to an announcement that Editor Craig Shields just had his third book published, Renewable Energy: Following the Money. The book features another set of interviews; the effects that economics and financial power have on the course of the energy industry are explored by high-ranking officers in the US military, lobbyists, scientists, economists, environmentalists, journalists, and heads of NGOs. I applaud Shields’ hard work and wide ranging perspectives on renewable energy and clean transportation. I admire how much he’s kept his word on staying in the trenches on where all of this is going as a business – whether that be through attending key conferences or interviewing experts of all genres for his books and blog. This new book digs into what I would describe as what “Deep Throat” ex-FBI official W. Mark Felt kept telling reporter Bob Woodward about the Watergate scandal: “Follow the money trail.”
    Shields also wrote a surprising blog post on the Keystone XL pipeline and President Obama’s decision on whether to back or reject supporting the pipeline from Alberta to Texas. Here’s a few reasons why he thinks it’s going in that direction….

    Smart transportation explored in market report and Toronto conference
    Navigant Research issued a report on “smart transportation” covering global smart city projects around the world. This came out soon after the annual Meeting of the Minds took place in Toronto last month. Meeting of the Minds has been bringing together urban sustainability and connected technology stakeholders since 2007. Navigant Research thinks the global smart city technology market will grow from $6.1 billion in revenue last year to $20.2 billion by 2020. New projects include investment in smart grid, urban mobility, water management, and government service applications for smart cities. Forecasters see urbanization as a major trend around the world impacting transportation in significant ways.

    More skepticism about alternative technology vehicles from industry bible
    What an Automotive News video had to say about tough sales challenge cars like Tesla Model S, Chevy Volt and Toyota Prius have on market…. Stop start, micro-hybrids, and regenerative braking are taking away the strength of plug-ins and hybrids.

    Solazyme just took top spot for the third year in a row on Biofuels Digest’ “50 Hottest Companies in Bioenergy” for 2013-14. Propel Fuels (provider of biofuels and other alternative fuels refueling stations) made the list for the first time at No. 29. Solazyme produces renewable oil and bioproducts from a range of plant-based sugars. The company is providing algae diesel with Propel Fuels. Cellulosic biofuel producer KiOR made No. 3 on the top 50 list. The annual rankings recognize innovation and achievement in biobased chemicals and materials development; it’s based 50% on votes from an invited panel and the other 50% from readers – more than 100,000 individual company ratings were received from panelists and voters.