Ethanol. Right. Now.

Energy independence through fuel choice, ACE Conference keynote by Anne Korin

Anne Korin, co-director of the Institute for the Analysis of Global Security, presented a keynote address at the ACE Ethanol Conference on the topic of energy independence through fuel choice.

She began by mentioning the recent mandate by the U.S. Congress that all television switch over to a digital signal – we have a real problem with our leadership, she believes, if this is what they are willing to focus on instead of real problems like oil.

“We need to change the focus of our leadership,” Korin said.  “We need to make it clear what the problems are we’re trying to solve.”

National security issues really relate to oil, she said, stating that three-quarters of world oil reserves are in places where radical Islam is on the rise.

“It’s very unlikely that we’re going to win this war if we continue to fund both sides,” Korin said.

Korin believes there is confusion in Congress about the issue of energy and how to solve the problem.

“When it comes to oil, the national and economic security vulnerabilities that we face do not stem from our level of consumption – not even our level of imports,” she said.  “Oil is a strategic commodity.”

Oil’s status as a strategic commodity is discussed in her recent book with co-author Gal Luft, “Turning Oil into Salt: Energy Independence through Fuel Choice.”

In centuries past, salt was a strategic commodity as oil is today.  Salt was the only method for preserving food, and was therefore extremely important to society.  But when other methods of food preservation were developed – canning, refrigeration, etc. – salt’s status as a strategic commodity was broken because people now had other options.  Korin noted that the world consumes way more salt today than in the past, but it’s not important to anyone where we get it or who holds the reserves.

“Oil’s status as a strategic commodity is because of its monopoly over transportation fuel,” Korin said.

Korin believes the solutions on both sides of the energy debate are completely irrelevant and completely tactical – they don’t address the core issue.  On one side you have “drill, baby, drill” (produce more) and on the other you have calls for conservation and increased efficiency (use less).

“These are essentially useless tactics when it comes to energy independence,” Korin said.

She notes that we are facing a cartel, OPEC, that sits on three-quarters of the world’s oil reserves, yet only accounts for 40 percent of the world’s oil supply.  During the Arab oil embargo, OPEC produced 30 million barrels a day; today, OPEC produces 29 million barrels a day, even though global demand has dramatically increased.

What does OPEC do when we drill more or use less?  When oil went to $147 a barrel and gas was $5 at the pump, she noted that people drove less and consumption dropped by 1 million barrels a day.  In response, OPEC cut production by 4 million barrels a day.  “We use less, they drill less,” Korin noted.

Every time non-OPEC countries increase production, OPEC drops production.  If there’s a net increase in production, OPEC reduces supply to drive prices up.

“The same old tactics are not going to work to change the playing field,” Korin said.  “OPEC is literally in the driver’s seat.  We need to open the market to fuel competition.”

Specifically, what can be done?  According to Korin, it must start with the cars.

“Vehicles have to be platforms on which fuels can compete,” she said.

Korin believes that Flexible Fuel Vehicles (FFVs) and an Open Fuel Standard are key.  If FFVs were tweaked slightly to allow the use of methanol in addition to gasoline and ethanol, she believes we could form an undefeatable coalition.  Methanol can be made from coal and natural gas, and bringing these interest groups into the fold with the traditional agriculture and biofuel supporters would strengthen the coalition by gaining us key votes in U.S. Senate leadership.  For example, any FFV bill gets referred to the Commerce Committee in the Senate – Sen. Rockefeller from West Virginia, a coal state, and Sen. Hutchinson from Texas, a natural gas state, would look upon the bill much more favorably if it benefited their constituents as well.

“If you start to put these producers together, all American producers of energy, it’s very hard to argue against that kind of political clout,” Korin said.

Gasoline became an alternative fuel in Brazil in 2008, she noted, and we can do the same here.

“We want an open and competitive fuel market,” Korin said. “You should have the right to choose, just as consumers in Brazil choose.”

The first step, in her mind, is an Open Fuel Standard.  She urged ethanol supporters to focus Congress’ mind on this.

Near-term liquid fuel choice is “very, very doable,” Korin said.  “If producers had an incentive to expand capacity, if only they weren’t facing a blend wall, if vehicles actually enabled there to be a market.”

Korin believes this emphasis on flex-fuel vehicles and fuel choice integrates very well with new technologies like plug-in hybrid vehicles – flex-fuel plug-in hybrids.

“We’re going to go back to three-digit oil, there’s no doubt in my mind,” Korin said, if we emerge from this recession and oil consumption grows again.  The economy is going to decline again, she believes in a series of “w” shapes instead of an upward swing.

Energy is the second-largest household expense, and a spike in oil prices affects our entire economy.  “Everything we buy has an oil component to its price,” Korin said.  “A spike in oil prices affects our entire economy.”

She called fuel choice a “cheap insurance policy” against the economic and national security damage that oil is and can do against the United States. 

“Until we do this, we are at the mercy of countries who hate us and will do everything in their power to weaken us,” Korin said.

For more information about Anne Korin, visit the website of the Institute for the Analysis of Global Security:

http://www.iags.org/staff.htm

Ethanol land use change drops under new Purdue modeling

Dr. Wallace Tyner of Purdue University’s Department of Agricultural Economics made his second appearance at an American Coalition for Ethanol conference, his presentation this year a follow up to 2009 where he discussed his department’s new GTAP (Global Trade Analysis Project) modeling for biofuels and land use change. 

Dr. Tyner first discussed the E10 Blend Wall and the impact it will have on the next generations of biofuels.

“We are at the blend wall,” Tyner said.  “It is literally a wall.  You cannot technically go beyond that wall.”

Because corn-based ethanol has now filled the allowable marketplace, the break-even price is now based on corn instead of being linked with gasoline as it has been in the past, he explained.

Dr. Tyner also explained that the U.S. Environmental Protection Agency made a fundamental change in the Renewable Fuels Standard (RFS) in its February 2010 final ruling.  The agency changed the metric on the rule, effectively converting the RFS from a volumetric basis to an energy basis.  The RFS now calls for 36 billion gallons of “ethanol equivalent.”  All possible biofuels – bio-gasoline, algae, etc. – are all given an “ethanol equivalent” rating – bio-gasoline is given a 1.5 gallon rating, for example.  This could actually lower the total amount of biofuel being used in the U.S. under the RFS>

Regarding the E10 Blend Wall, Tyner said that it is firmly standing in the way of cellulosic ethanol development.

“There’s no room at the inn for cellulose-based ethanol,” he said.  “If we stay at E10, you can forget about cellulose-based ethanol.”

Even if EPA regulations are changed to allow E15, it might only increase the ethanol blending limit to 19 billion gallons.  If corn ethanol is limited at 15 billion gallons and “other advanced” biofuels are given 4 billion gallons, as stated in the RFS, there is still no room for the growth of cellulosic ethanol.

“Even if we go to E15, there’s no room at the inn for cellulose,” Tyner said.  “The implications of the blend wall are much farther than just corn ethanol alone.”

Dr. Tyner has been working on the issue of land-use change for about three years, a timeframe he says isn’t actually very long given the complexity of the issue.  He has developed the Global Trade Analysis Project (GTAP) model to study how biofuels impact land use, and this year they have made updates to the model based on some new information.

Changes to the Purdue GTAP model include:

• Three major biofuels have been incorporated into the model: corn ethanol, sugarcane ethanol, and biodiesel.

• Cropland pasture and Conservation Reserve Program (CRP) land have been added, not accounted for in previous work.

• Energy sector demand and supply have been re-estimated and calibrated to 2006.

• Distillers grain has been added to the model, including its treatment, production, consumption, and trade – Tyner called this a “significant improvement”

• The structure of the livestock sector has been modified to better reflect its actual functioning

• A corn yield response to higher prices has been built into the model.

• A change has been made to the way the model treats new land brought into production, better reflecting the actual productivity of the new land.

Dr. Tyner showed the evolution of the GTAP results, from the beginning of the model to now with these updates and improvements to the data.  The modeling in January 2009 showed that .27 hectares of land were needed (globally) for every 1,000 gallons of biofuel.  In August 2010, the improved modeling shows that only .13 hectares are needed – less than half of their earlier estimate.

“All of these changes in the model and improvements in the database have led us to conclude that the land-use implications are much smaller than we had estimated recently,” Tyner said.

He pointed out that the Purdue estimate is substantially less than Tim Searchinger’s much-publicized research on land-use change.  Searchinger’s results found that .75 hectares of land are needed, compared to Purdue’s .13 hectares.

“In terms of land use change based on greenhouse gas emissions, the results that we’re getting today are fourteen percent of the results Tim Searchinger got in his original work,” Tyner said.

Dr. Tyner said he is a proponent of changing the way the emissions of gasoline and biofuels are compared.  Currently the law in California and at the U.S. EPA compares averages, not marginals.  He believes it’s more fair to compare the most recent ethanol plant built with the most recent oil extracted, which is likely oil from the Canadian tar sands.  Using averages ignores the fact that ethanol is increasingly efficient while oil is increasingly damaging to the environment as it becomes harder and more costly to extract.

Dr. Tyner acknowledged that land use change is a controversial topic.  Some say it’s not even possible to measure these things, but he believes that with one-third of the corn crop going to ethanol, it is important to use the best science available to try to accurately measure any land use change. 

“What we’ve tried to do to the best of our ability, and to the best data available, is to estimate these,” Tyner said.  “They are still highly uncertain.  I do this work all the time, and I’m the first to tell you that these estimates are highly uncertain.”

Dr. Tyner said that, in terms of public policy, this GTAP modeling work can be helpful in how the EPA is implementing the Energy Independence and Security Act (EISA) and the threshold tests for greenhouse gas emissions.  However, what the California Air Resources Board is doing with its Low Carbon Fuel Standard is an entirely different story, he said, because they are using the measure in the value of implementing the policy.  Every tenth of a percent of carbon under the CARB rules can make a huge difference. 

“We cannot measure it accurately enough to withstand almost any court case test,” Tyner said.  “It depends on how you use the information, in my view, whether or not it’s something that’s useful in the debate.”

Distillers grain debunks "food vs. fuel"

The second day of the ACE Ethanol Conference featured a panel discussion titled “Grain Changers: DDGS & the Truth Behind Food Prices.” 

Jay O’Neil, Senior Agricultural Economist for the International Grains Program at Kansas State University, outlined four variables that can affect the price of food: commodity prices, fuel prices, world economic growth, and speculation.  These variables, combined with weather-related problems in crop production, impact the price of food.  Ethanol, however, does not have a large role in food prices.

“Ethanol had very little to do with it,” O’Neil said, referencing the world-wide run-up in commodity prices in 2008.  The increase in world grain prices was due to a shortage in the wheat crop, in Australia, Europe, as well as the U.S. and Canada.  Other commodities followed, and the subsequent increase in food prices was wrongly blamed on corn used for ethanol.  The current drought in Russia affecting the wheat crop may bring another round of misguided “food or fuel” questioning if other commodity prices are affected.

O’Neil asked what we as Americans are more afraid of: corn prices increasing by 50 percent, or crude oil prices increasing 50 percent.

“Which of these scenarios would display the biggest threat to our economy?" he asked. "While ethanol gives America fuel independence and represents an investment in farm values, our dependence on crude oil negatively impacts our economy and our national security."

The second panelist was Bill Couser, owner of Couser Cattle Company of Nevada, Iowa.  He is current president of the Iowa Renewable Fuels Association and serves on the board of Lincolnway Energy, also of Nevada. 

At his family-owned cattle feedlot, Couser said he witnesses first-hand that “food versus fuel” is an absolute myth.  He delivers corn to the ethanol plant harvested on his farm, and then takes the co-product distillers grain home to incorporate into the feeding ration for his cattle.  Not everyone realizes that only the starch portion of the corn kernel is used to make ethanol, and all the nutrients from the corn – fat, fiber, protein etc. – is returned to the feed/food supply in the form of distillers grain.

“Instead of ‘food versus fuel’ I like to say it’s ‘food, fuel, feed, and fertilizer’,” Couser said.

Couser also reminded the attendees of the importance of story.  “Farmers, ethanol producers, and industry supporters alike need to tell their stories to lawmakers," he said.  "It's these stories, coming from your mouths, that bring credibility to ethanol's story."

Cellulosic ethanol producers talk about meeting the Renewable Fuels Standard

A panel discussion at the ACE Ethanol Conference, “Cellulosic Ethanol: When Can it Meet the RFS?”, gathered industry leaders focused on the advancement of cellulosic ethanol.

ICM, Inc. Director of Research and Development Doug Rivers said that the integration of grain-based and cellulose-based ethanol production is essential. Rivers suggested that the industry must leverage existing operations and pursue feedstocks with high yield (8-20 tons/acre) and high carbohydrate content, ideally gathered from a 50-mile radius. He points out that we can expect significant developments in this industry in the next five years.

Jeff Passmore of Iogen Corporation pointed out that the successful production of cellulosic ethanol is currently taking place at demonstration plants and pilot projects across the country, but the trick is to scale that up to commercialization. He pointed out that players in the renewable energy field must successfully launch one billion gallons of commercial cellulosic ethanol and then work on fortifying a toolbox that includes tax, policy, and infrastructure components.  Passmore emphasized that we’re going to have to be innovative to get policies launched and act quickly to realize the goals of the RFS. 

Jim Imbler, CEO and President of Zeachem, Inc., stressed that flexibility is key for this industry to grow. You’ve got to have the ability to use flexible feedstock, he said, and focus on a cost-effective process that can scale up to large production.

According to Range Fuels, Inc. Sr. Vice President Bill Schafer, ethanol and other biofuels will be increasingly derived from non-food biomass. He said that weather and market dynamics play a role in the volatility of feedstock, but the strategic management of these components can help the industry tap into three of its great opportunities: energy independence, environmental benefits, and economic development.

Lamberty: Let's talk about ethanol's benefits

“We truly rely on your expertise,” Ron Lamberty said to the attendees at the American Coalition for Ethanol annual conference.  “We are a true grassroots organization.”

Lamberty, who is ACE’s Vice President / Market Development, cited a sermon he heard on a recent Sunday morning.  The priest said that too often today, people confuse celebrity with expertise and confuse those with the most money for those who truly do have the most knowledge.

“ACE has not been the most famous or most high profile of the other groups,” he said, but that doesn’t diminish its effectiveness – the opposite, in fact.

Lamberty walked through ACE’s history with developing markets for ethanol.

“Market development is in ACE’s DNA,” Lamberty said. 

One of the organization’s original goals was to get ethanol information out to people like mechanics, especially because so many were involved with motorsports and racing.  ACE helped install the first E85 pump in Sioux Falls, South Dakota, and in 2000 the ACE board decided to create a staff position to work specifically on market development.  Ron took the position in September of 2000.

“We’re at the blend wall,” Lamberty said.  “If anyone does the math right now and sees how much less ethanol is, they are going to buy it.  But we’re at the point right now where we’re not allowed to sell any more of it.”

From a public relations perspective, he encouraged all ethanol supporters to do a better job of letting people know how good ethanol is.

“We spend a lot of time correcting misinformation and dispelling myths, trying to convince people ethanol is not bad,” Lamberty said.  “But historically we’ve been most successful when we tell people why ethanol is good.”

Ethanol can solve a lot of the country’s problems, he said.  It’s a clean, renewable, high octane, all-American fuel that keeps fuel prices low for consumers and boosts the economy.

“Let’s get back to talking about ethanol’s benefits and how it can make things better,” Lamberty said.

Empowering fuel choice, remarks by ACE's Brian Jennings

“We’ve chosen ‘empowering fuel choice’ as our theme for this year’s conference,” said Brian Jennings, Executive Vice President of ACE, “and it really embodies what ACE has been about for a long time.”

Jennings cited several years of progress on the idea of fuel choice and multiple fuel blends.  In 2007, ACE published an “optimal blends” study which found that blends like E20 and E30 can perform well in cars, and in some cases get mileage as good as with straight gasoline.  In 2008, ACE published the first technical guide for petroleum marketers on the topic of blender pumps.  Last year, ACE was proud to sign on to the E15 waiver application along with other groups, ACE launched the “Blend Your Own Ethanol” national campaign, and bi-partisan legislation was introduced in Congress to improve access to flexible fuel vehicles and blender pumps.

However, with all this progress, ethanol has been forced against a wall.

“The blend wall is real, and it’s here,” Jennings said.

“Congress is arguing over everything, and EPA continues to dither on the E15 waiver,” Jennings said.  “This is gravely serious for us in the ethanol industry, but it’s also important for every American.”

If regulations allowed more ethanol to a gallon of gasoline, every consumer would be able to save money at the pump.  This is being blocked today by 30-year-old regulations, and Jennings says the Administration doesn’t recognize the mixed signals it is sending.

“The RFS sends a signal to produce more ethanol, but a thirty-year-old Clean Air Act restriction that limits ethanol to ten percent per gallon of gasoline is sending a signal to limit the use of ethanol,” Jennings said.

He expressed the industry’s frustration over the multiple delays in the U.S. EPA’s decision on the E15 waiver.  After 270 days, they said they needed more time.  In June they said they needed even more time, and now they are leaning toward approving up to E15 only in 2007 and newer vehicles.

“We could say the EPA is slow-walking the E15 issue, but that would imply that some progress is being made,” Jennings said.

He points out that if EPA approves E15 in only 2007 and newer vehicles, only 2 out of 10 vehicles would be able to use it.  How many petroleum retailers are going to change their fuel slate for that small market?

A main focus right now is the ethanol tax credit, the Volumetric Ethanol Excise Tax Credit (VEETC).

“If VEETC expires, jobs will be lost and prices will rise for consumers,” Jennings said.

Jennings said that Members of Congress are expressing to ACE that, with only 20 days left in the Congressional calendar, we need to focus on what’s doable.  Part of that depends on grassroots advocates and their willingness to talk to their Members of Congress – especially during the August Congressional recess.

“The very best ethanol lobbyists are sitting here,” Jennings said.  He encouraged ACE members and all ethanol supporters to take advantage of the August recess and meet with their Representatives, invite them to visit your ethanol plant or meet with your board of directors.  “That’s how we get things done,” he said.

Opening comments at ACE Ethanol Conference by President Lars Herseth

The American Coalition for Ethanol’s 23rd annual conference opened today in Kansas City, with opening remarks by President Lars Herseth.  Herseth is a family farmer from Houghton, South Dakota – a corn grower, livestock producer, and investor in several locally owned ethanol plants.  He spoke of some of the challenges facing the U.S. ethanol industry today.  

“We answered the bell, and we answered it so well that a few years later we seem to be bogged down in some issues that, frankly, get very frustrating to deal with,” Herseth said, speaking of the call to action issued by Congress through the Renewable Fuels Standard (RFS) and the blend wall facing the industry today.

 

Though the RFS calls for 36 billion gallons of biofuels to be used annually nationwide by 2022, we’ve hit a blend wall because the regulations haven’t caught up with the legislation.   “The most frustrating thing is being up against a blend wall and getting involved with the bureaucracy,” Herseth said.  “We are stonewalled from going forward.”  

He called for policymakers to fix the frustration of inaction by reaffirming the policy of increasing biofuels use.   “We need to have that policy reaffirmed by them – and not just with lip-service – and then we can grow and be what we can be, and what were asked to be by the policy of this country,” Herseth said.  

He believes it’s incumbent upon members of the American Coalition for Ethanol to talk to our policymakers and bring them a positive message.  And that message, Herseth says, is what the U.S. ethanol industry has done in just a few short years.

 

Follow the ACE Ethanol Conference online

We've arrived in Kansas City and are making final preparations for our ACE Ethanol Conference & Trade Show.  We hope you'll consider joining us (on-site registration opens on Tuesday morning, August 3), but if you can't, you can follow the proceedings online through a number of different websites:

ACE's blog: www.ethanol.typepad.com

Twitter: www.twitter.com/blend_ethanol

YouTube: www.youtube.com/ACEethanol

Flickr: www.flickr.com/photos/ace_ethanol

Check throughout the week for updates as we convene our 23rd annual ethanol conference!

American Coalition for Ethanol announces final agenda for conference

The American Coalition for Ethanol (ACE) today announced the final agenda for its conference to be held August 3-5 in Kansas City.  The organization’s 23^rd annual ACE Ethanol Conference & Trade Show will take place in Bartle Hall at the Kansas City Convention Center.

The full, final agenda is published here: http://www.ethanol.org/index.php?id=94&parentid=30

Activities begin on Tuesday morning with the Jeff Fox Memorial Golf Tournament, and continue that evening with the Welcome Reception in the ACE Trade Show.

The conference begins Wednesday morning with breakout sessions on a variety of topics, and the general session begins Wednesday afternoon with addresses by leadership from ACE and the National Corn Growers Association, and a keynote address by Anne Korin, co-author of “Turning Oil into Salt: Energy Independence through Fuel Choice” and co-director of the Institute for the Analysis of Global Security.

The general session continues on Thursday morning, with a concluding keynote address by Marc Rauch, co-founder of The Auto Channel.

Online registration for the event will remain open until Thursday, July 29 at www.ethanol.org under the “Conference” menu heading.  People interesting in attending may also register on-site in Kansas City beginning Tuesday morning, August 3.  Members of the media may register for a complimentary media pass by contacting Kristin Brekke ([email protected]). 

Ethanol efficiency to be featured at ACE conference in Kansas City

Two new studies on ethanol efficiency have found that the ethanol production process itself is more efficient and the resulting ethanol has a more positive energy balance.

The first is from Dr. Steffen Mueller at the University of Illinois at Chicago, who studied the dry mill ethanol process and found that today's ethanol producers are using far fewer energy inputs than they did in 2001, as well as producing more ethanol per bushel of corn.  That study can be read here.

The second is from the U.S. Department of Agriculture, a study on the net energy balance of ethanol.  The agency has updated data from 2004 and found that for every 1 BTU (British Thermal Unit) of energy used to create ethanol today, 2.3 BTUs of energy are produced in return.  This is a clearly positive energy balance, up from the 1 to 1.77 positive energy balance from 2004 data.  The USDA report can be read here.

The technology innovations that are driving these increases in efficiency will be featured at the American Coalition for Ethanol conference in Kansas City on August 3-5.  The full agenda may be viewed here.  We hope to see you there!