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By Robert Rapier on Jul 15, 2010 with 43 responses

The Ethanol Question I Did Ask

Last December, I received an intriguing request from the Public Relations Director at the world’s largest ethanol producer. Nathan Schock asked if I would be interested in posing a video question that would be answered by POET CEO Jeff Broin. He said that any topic was fair game, except for questions dealing with proprietary information.

I considered a number of questions, and wrote an essay detailing my thought process as I ran through a list of potential questions: The Questions I Didn’t Ask. But I had one question that had been weighing on my mind more than any other, and I posed that one in the video I sent in.

Since then, Nathan and I have exchanged a number of e-mails about the status of the question. As the months went by, I began to suspect that even though anything was supposed to be fair game, the particular question I did ask was a bit tricky for them to answer. But today, they answered that question and issued a press release calling for a change in direction on the nature of the ethanol tax credit:

Ask POET Episode 3: the Ethanol Tax Credit

I have long maintained that with the Renewable Fuel Standard (RFS) in place, the ethanol tax credit (the VEETC)  is redundant. I have made this argument many times on my blog (see Strategizing for the Ethanol Industry), and I made the argument at Forbes.

My argument has been that we don’t need the tax credit with the RFS in place, but if we do have a tax credit it should be directed at building out incentives and infrastructure for E85 – particularly in the Midwest close to the source of the ethanol. The current nature of the VEETC is to pay oil companies for complying with the law requiring them to blend specific quantities of ethanol.  This was the gist of a plan announced today by Growth Energy:

Growth Energy Proposes Fundamental Shift in America’s National Fuel Policy

The “Fueling Freedom” plan calls for the phasing out of current ethanol supports over time, by redirecting a portion of those funds to build out the infrastructure for the distribution and use of ethanol, and shifting the remaining portion away from the oil companies to opening the market. The primary elements of the plan include:

* Funds currently going to the oil industry as an incentive for blending ethanol into gasoline (the VEETC) would be redirected to provide backing for the build out of distribution infrastructure for ethanol – such as tax credits for retailers to install 200,000 blender pumps and federal backing of ethanol pipelines. This will provide Americans the access to choose ethanol in an open and free market, and would allow for the elimination of the tax supports over time in exchange for that level playing field.

* Requiring that all automobiles sold in the U.S. be flex-fuel vehicles – as many as 120 million. This requires no additional cost to taxpayers and a minimal cost (about $120 per vehicle) to vehicle manufacturers.

Growth Energy’s Fueling Freedom plan, once implemented, would build out the infrastructure in the United States to create a path that leads to a genuinely free market – an open market that is free of government supports. Redirecting monies currently paid to oil companies to blend ethanol into gasoline toward infrastructure improvements would enable consumers to choose between gasoline and renewable, homegrown ethanol.

POET also issued a release voicing support for the plan:

POET voices support for Fueling Freedom Plan proposed by Growth Energy

I was told that the development of this plan is why it took longer for my question to be answered; that they didn’t want to answer it when it anticipated the change in strategy that they were working on.

I will note a couple of things related to the announcement. First, I don’t think the fact that it will cost the auto industry an additional $120 to produce E85 vehicles means there will be “no additional cost to taxpayers.” Someone will pay for that, and I don’t think it will be the car manufacturers. I am not suggesting that it is a bad idea (I actually support this) but the cost will be borne by taxpayers in one form or another.

Second, there are phrases in there like “phasing out of current ethanol supports over time” and “eventual phasing out of government support for ethanol.” Those comments will require significant clarification. What exactly does that mean? A cynical person might suggest that the ethanol industry could see that the government was losing an appetite for the subsidies, and by embracing a strategy of “eventual phasing out” they might be able to keep the bulk of the subsidies for many more years. So right away the question becomes “What does your time-line look like for the phase-out?”

We know that the VEETC expires at the end of 2010. We have been hearing for quite some time now that ethanol is competitive with gasoline. We know that the oil industry is the recipient of the VEETC payments. Why then is an “eventual” phasing out required? I think it is time to move on to the question of “What would be the impact if the tax credit is not renewed at the end of 2010?”

In fact, in the answer to my question, Jeff Broin calls on the oil industry to walk away from their subsidies. Given the recurring argument that the VEETC is really an oil company subsidy since they receive the payments, wouldn’t allowing the credit to expire this year mean they are walking away from a subsidy?

In any case, I do thank POET for taking on the question. I believe their answer is a step in the right direction, and I appreciate the opportunity to be involved in the debate.

  1. By Rufus on July 15, 2010 at 2:25 pm

    ACE, RFA, NCGA are mightily gnashing their teeth, and rending their garments. That’s why Jeff Broin felt he had to form/get behind Growth Energy.

    The other outfits just don’t get it. Of course, the fact that he’s the “low-cost” producer doesn’t hurt, I guess. :)

    Seriously, though, I think Poet, and Growth Energy have captured the Mood of the Country. What they’re proposing eliminates an unnecessary subsidy, and allows for a move forward at the same time.

    In short, it makes sense.

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  2. By Rufus on July 15, 2010 at 2:32 pm

    Unspoken in all this, of course, is the fact that the blenders credit is in some danger of not being renewed.

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  3. By rrapier on July 15, 2010 at 2:44 pm

    Rufus said:

    ACE, RFA, NCGA are mightily gnashing their teeth, and rending their garments. That’s why Jeff Broin felt he had to form/get behind Growth Energy.


     

    Yeah, I wondered about that. I wondered about their reaction to this, and I wondered if there was a lot of arguing behind the scenes about it. It does seem to highlight the differences of opinion among these organizations. 

    RR

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  4. By paul-n on July 15, 2010 at 3:10 pm

    Some dissension among the ranks?  Say it ain’t so!

     

    It would seem to me that some of these groups have lost sight of the fact that their primary purpose is to foster a STRONG (i.e. profitable) ethanol industry, and that subsidies are not the only way to so.   In fact, they are about the worst way.

    Kudos then to POET and Growth Energy for daring to consider a different path.

    The ultimate objective (for thew ethanol industry) should be to make ethanol the fuel of choice, not the fuel of mandates and subsidies.

    Broin (incorectly) said that gasoline has a de-facto mandate for 90% of the market.  This is just not true, it is that gasoline is, for various reasons, the fuel of choice.  Ethanol, methanol, diesel, propane, CNG/LNG and now, electricity, are all legal alternative fuels. Gasoline does not have a mandate, it is just the incumbent, the most convenient, and what everyone is used to using.  Interestingly, as a fuel, it is also the most expensive, per  output BTU, than any of these.

    The fact that it is the most expensive, and the most convenient demonstrates that people will pay for convenience and simplicity.  This is where the other fuels must work at, because price alone only seems to win in specific niche markets (e.g. taxis, commercial fleets, etc).

     

    Interesting that it took six months to come up with a still partly evasive answer, though I understand why they waited to release, but the fact they didn;t want to air this four months ago suggests it wasn’t “fair game”.  They could have put that answer out there for discussion then.  Holding back until after their change of direction suggests they don;t really invite serious public debate about what is going on.  If you are only going to answer questions when its favourable to do so, you are stacking the deck.  

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  5. By Nathan Schock on July 15, 2010 at 3:25 pm

    Paul N said:

    Interesting that it took six months to come up with a still partly evasive answer, though I understand why they waited to release, but the fact they didn;t want to air this four months ago suggests it wasn’t “fair game”.  They could have put that answer out there for discussion then.  Holding back until after their change of direction suggests they don;t really invite serious public debate about what is going on.  If you are only going to answer questions when its favourable to do so, you are stacking the deck.  


    Paul,

    First of all, I’m glad you like our plan. Thanks for the feedback. We look forward to competing with oil on a level playing field.

    I wanted to make one point of clarification on the timing. In December, we reached out to several bloggers to get questions for our CEO to answer as part of a monthly YouTube program. It took us a little while to get technology in place and calendars aligned, but the first episode came out in April. The second was in May. We had intended to run Robert’s question in June, but were right in the middle of getting this plan finalized and trying to get others in the industry to support it. We felt that talking about the plan at that point could have upset some of those discussions. Perhaps we should have answered sooner, but I just wanted you to be aware of the reasons behind the delay.

    BTW, feel free to ask a question any time. Next month’s is already in the queue, but we will need more in the future. Thanks,

    Nathan Schock

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  6. By Rufus on July 15, 2010 at 3:50 pm

    Nathan, I have a question, right now. In light of the difficulty of arranging loan guarantees, and the tightness of money, Has Poet considered doing a less ambitious (than Project Liberty) project to prove commerciality? Say, a 25 Mgpy corn cob project, without the added corn facility?

    Or, maybe even a smaller project that could be scaled up in the future?

    Someone needs to break the log-jam on this cellulosic thingy. And, they really need to do it pretty soon.

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  7. By OD on July 15, 2010 at 5:21 pm

    Completely off topic, but looks like they have stopped the leak! At least for now. Let’s hope it holds until the relief wells do their job.

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  8. By paul-n on July 15, 2010 at 8:58 pm

    Nathan,

     

    Appreciate the reply.  Hadn’t thought about the scheduling side of it, but can see your point.  

    I think the ask Poet is a good idea – openness is always good.

    I do like the effort on E85, as it shows ethanol as a true alternative to gasoline, not just a gasoline extender.

    I do like the flex fuel mandate, as long as those vehicles are suitable for both ethanol and methanol, and at any concentration from 0 to 100%.  The idea here is flexibility, and if the flex fuel standard only means E85 then we are only bringing one player into the game, when we could open it up to many.  I particularly like 100% alcohol, as it does not need the molecular seive dehydration, making it cheaper to produce – why spend extra energy and cost on fuel production if we don’t need to?

    It is possible that some or all of these changes will occur in the lifetime of vehicles sold next year, so if they are going to be flex, they should truly be flex.

    I am not sure that the government needs to pay for 200,000 pumps to ensure access, – even 20,000 is an order of magnitude increase from today.  If every vehicle sold is flex, they will get their own momentum soon enough.

    The Poet website talks about, as RR mentioned, “gradual removal of government support”. “Support”, of course, can mean different things, it sounds me like they mean subsidies, but do they also mean the 10% mandate, which is arguably the strongest “support” ethanol gets.  Is Poet asking for this to be gradually decreased?  Even the Flex Fuel mandate counts as “support”.  There is nothing wrong with congressmen or government saying “we support ethanol”, and I expect they will continue to do so – surely Poet does not want to see a congressman saying “I will gradually decrease my support for ethanol”? 

    So they are asking for more support while saying government should decrease support – what is Joe public meant to think? I think this should be clarified promptly.   

     

    If they meant “financial support” (tax credits/subsidies) then they should say so, if they mean the mandate, or other non financial regulatory mechanisms, then they should say so.  

    As we all know with technical discussions, ambiguous terms lead to different people thinking different things.  If the objectiove is to obfuscate, then you put in as many ambiguous terms as possible.  If the objective is to communicate, then you do your very best to remove them.  Say what you mean, and mean what you say.

    I don;t want to beat up on Poet here, as they are moving in the right direction, but that particular statement is a bit vague.  They did give clear details on what they want with pumps,etc, so give clear details on what you want with decreasing support – then it can be first understood, and then discussed.  

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  9. By paul-n on July 15, 2010 at 9:00 pm

    Log-jam on this cellulosic thingy.

    That’s a pretty good description of the situation – turning a log into ethanol just ain’t easy!

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  10. By Rufus on July 15, 2010 at 9:26 pm

    Getting easier, though. :)

    http://ethanolproducer.com/art…..le_id=6807

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  11. By Walt on July 16, 2010 at 8:53 am

    I had posted this question on another of RR’s posts, but it remains unanswered.  As I’ve been reading this blog the past month or so, it is clear to me that there is not a lot of solutions to known problems.  The one idea RR posted to dramatically reduce consumption received a counter argument that was equally (or more so) persuasive.  It seems to me that everyone is focusing on good and bad policy decisions funded out of Washington, and certainly this is a valid macroeconomic concern to address.  Investors and multi-nationals do not plan or risk until they are certain the political risk is largely certain…thus the key is either to aide in drafting the legislation or heavily influencing its creation.  While that issue remains, I would like to shift the focus away from the economics of ethanol policy and economics for a minute.  We know the big money is going to continue to present their arguments for needed subsidies and mandates to bring these ethanol technologies to market.

    What I would like to focus on is really the value of alcohols in the fuel supply chain for cars and trucks.  As Carbon Taxes are implemented (likely starting at the gas pump), I would like to know how to make the case to convince the average American driver than moving toward methanol and ethanol blended fuels is a smart move.  I’ve seen some very excellent arguments on this blog defending alcohols in fuels, and I must admit up until my visit here I have had little experience receiving such positive technical arguments on alcohols being used in the fuel supply chain.  Indeed, ethanol has been widely promoted for blending, but fighting for 15% blends is almost laughable if it is a quality fuel to replace petroleum gasoline.  The same goes for methanol, although I’m not keen on shifting from crude oil imports to refine into gasoline to importing all our methanol from Methanex and a hand full of other controlling quasi monopolies.  Call me biased I suppose to want to branch out methanol production into multiple smaller, profitable plants than 2-3 jumbo plants where prices easily skyrocket during peak shutdowns, maintenance or political reasons.

    If we focus just for a minute on the value of alcohols, and their SOLUTION in the fuels supply chain, can the case be made they are superior to petroleum derived gasoline and diesel.  China is demonstrating and moving toward a methanol economy for fuels, and other Southeast nations are starting to look at the same issues.  I receive far more emails on our methanol technology from outside America than within…and much of this is coming from those who want to convert biomass and biowaste into methanol for fuels cheaply.  It is not gasoline or biodiesel that is interesting.

    Can the problem the person outlined below be overcome, and open up alcohols as a viable solution in America?  If the argument can shift from all the negative reasons against using ethanol and methanol in America, and it can be demonstrated as alcohols they are preferred fuels and can be very cost competitive to forthcoming higher oil prices (even temporary spikes if wars break out in the middle east), perhaps we can find the downstream technical problems (e.g., EPA/Automakers) and overcome them from the bottom-up.  If the economy worsens, which many in my circles anticipate with the expectation of a weakening dollar and carbon taxes coming over the next few years, more people are going to migrate to cheaper fuels and cars.  The trend has already started in many parts of the country.

    Since I cannot shift the topic of this blog as the next subject is going to be another technology to make mixed alcohols cheaper/better than Range Fuels or others, I don’t think the topic on the best/brightest technologies to make cheap alcohols is going to go far.  At least if commercial plants costs hundreds of millions to build after 5-10 years of pilot, demo and commercial scaling takes place.  The real driver will come further down the supply chain to the consumer who needs to be convinced alcohols are the cheap and preferred fuel of choice.  This is certainly going to be blocked as the information demonstrates below.  Can this be fixed…whether mixed or pure alcohols is on the table?

    —————————–

    While I appreciate and support Mr. Zurbin’s desire to offer
    alternatives to oil, I believe he approaches the problem in the wrong
    way. As several other posts here have alluded, government mandates and
    regulations are the opposite of what the flex fuel market needs.

    First, my qualifications. I am a degreed engineer. I have spent the
    last 10 years working in the automotive arena. My experiences include
    converting and developing many vehicles primarily production based race
    cars) to run on non-standard fuels including methanol, ethanol,
    nitromethane.

    In my opinion, the real problem resides in existing government
    regulation. For example, virtually any modern fuel injected car can be
    converted to run on a variety of ethanol mixtures, from E20 (20%
    ethanol/80% gasoline) to E100 with little difficulty (I prefer sugar
    ethanol over corn ethanol). At worst, a new fuel pump and fuel
    injectors are needed, and perhaps a new fuel line here or there. Once
    those components, if needed, are in place, all that remains is to
    recalibrate the Engine Control Unit (ECU) to adjust for the different
    requirements of ethanol. This recalibration can be done with relatively
    cheap software (sometimes free), and there are thousands of technically
    competent vendors across the country that can do so.

    The problem with this approach? It’s completely illegal according to
    the letter of the law. By tampering with the ECU, you’re altering the
    emissions control system and that’s against the law for a licensed on
    road vehicle. Never mind that the vehicle will pass annual emissions
    tests with better than new results. Unless someone spends huge sums of
    money going through a recertification procedure (at costs orders of
    magnitude larger than the conversion cost itself), the vehicle can be
    deemed not road legal, and in some states, even seized for emissions
    violations.

    The solution? Eliminate the restrictive regulations that only allow
    large companies or OEM automakers to easily implement new technologies
    on modern vehicles. Doing so does not imply increasing emissions, as I
    fully support regular, thorough emissions testing. In fact, I have
    converted one of my personal vehicles to run on E85. It has passed
    several regular state emissions inspections with fewer tailpipe
    emissions at 10 years old and 100k miles than it had when new. But I
    only escape problems because no emissions inspector is capable of
    identifying my fuel system changes without tearing the car apart.
    Still, my car is not road legal by law.

    In summary, Mr. Zubrin should seek to reduce restrictive regulation on
    vehicle modifications. Endpoint testing of emissions as performed in
    many states eliminates the need for laborious restrictions on changes
    to vehicle systems. As long as a vehicle passes the tailpipe test, the
    means by which it does so should be largely irrelevant.

    http://www.washingtontimes.com…..auto-fuel/

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  12. By Rufus on July 16, 2010 at 9:35 am

    It’s all in the “Price” of gasoline, Walt. It gets complicated, and the explanation requires “pages,” but the U.S. is not Europe. Our Economy is, literally, built on Cheap Energy – especially, cheap gasoline.

    The guys in the retail business say Americans aren’t much interested in “alternatives” until the price of gas gets over $3.00. Many of the “peak oilers” think we will be there by Spring. Some think “sooner.”

    We have engines coming out, in the next couple of months, that will deliver practically the same mileage on E85 as on gasoline. At some point it will start registering in peoples’ psyches that “More HP,” and $15.00 “Less” per fill-up might be a pretty good thing when combined with “Equal” Mileage.

    “When” this all happens, however, is totally unknowable. We just know it “Will” happen.

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  13. By Walt on July 16, 2010 at 10:25 am

    Rufus said:

    It’s all in the “Price” of gasoline, Walt. It gets complicated, and the explanation requires “pages,” but the U.S. is not Europe. Our Economy is, literally, built on Cheap Energy – especially, cheap gasoline.

    The guys in the retail business say Americans aren’t much interested in “alternatives” until the price of gas gets over $3.00. Many of the “peak oilers” think we will be there by Spring. Some think “sooner.”

    We have engines coming out, in the next couple of months, that will deliver practically the same mileage on E85 as on gasoline. At some point it will start registering in peoples’ psyches that “More HP,” and $15.00 “Less” per fill-up might be a pretty good thing when combined with “Equal” Mileage.

    “When” this all happens, however, is totally unknowable. We just know it “Will” happen.


     

    Rufus,

    We have run our own numbers based upon the spreadsheet given to me from the methanol institute.  Our model is based upon a commercial scale ($100 million dollar) methanol plant using natural gas (30 mmscfd).  These are the costs which were provided to us to make M85, except for the US$ 0.23/gallon which is our cost of production.  The other price was from Methanex on imported methanol in May…which is now increased.

    M85 Price Build-Up
    5/3/2010
    Methanol $0.76 $0.23
    Gasoline $2.27 $2.27
    M85 $0.99 $0.54
    Mark-Ups $0.38 $0.38
    M85 Pump Price $1.37 $0.92
    Methanol
    Energy Content
    56,800 56,800
    Gasoline
    Energy Content
    114,000 114,000
    M85
    Energy Content
    65,380 65,380
    Energy
    Content Ratio
    1.65 1.65
    Effective Price $2.25 $1.51
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  14. By rrapier on July 16, 2010 at 12:36 pm

    The one idea RR posted to dramatically reduce consumption received a counter argument that was equally (or more so) persuasive.

    I hate to have to continue beating that dead horse, but it wasn’t an idea to reduce consumption. It was an example of the kind of thing it would take to make us energy independent. In the end, the person making that counter argument finally said “OK, I see what you are getting at.”

    RR

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  15. By rrapier on July 16, 2010 at 12:38 pm

    Since I cannot shift the topic of this blog as the next subject is going
    to be another technology to make mixed alcohols cheaper/better than
    Range Fuels or others, I don’t think the topic on the best/brightest
    technologies to make cheap alcohols is going to go far.

    Ah, but you can. Forum members can start topics on any topic they wish. That was the primary reason for creating the forums; so people who had something to say could start a topic and say it.

    RR

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  16. By Bob Schmidt on July 16, 2010 at 1:08 pm

    I like the proposal very much, as far as it goes. My opinion on what should happen is that elimination of the perverse wasteful economic effects of the oil company subsidies need to be included in this plan. The subsidies ( $3/gal plus range) could be returned to the taxpayer as lowered taxes based on the amount of harm by the resulting increase in gas prices (and everything else!) to help reduce the shock. ( I know, dream on) Making the price of energy reflect what it really costs is the most important part of the solution if we are to expect rational decisions from the consumer. As far as a timeline goes, doubtless this would be very disruptive and would need some fair warning, but just knowing this is coming should cause some radical changes in consumer behavior toward energy conservation. I doubt my modest suggestion would be politically acceptable, however. The powerful special interests would fight to maintain their competitive advantages and profit streams. But if we believe that subsidies are inherently wasteful, there should be a net improvement in economic efficiency when the subsidies are finally gone.

    I have access to e85 so I’m probably one of those criminals who have illegally reduced their vehicle’s pollution by using a converter kit. But I can only adjust a pot to compensate for input fuel mix. The right solution is the fuel line sensor in a true flex-fuel vehicle and an ECU that knows what to do with the info. When I first put the kit in, I tried to find an emissions measuring station to get tested at (not to be found, anymore). But I did have a few ex-racecar mechanics tell me that I needed stainless steel fuel lines when they found out I was running alcohol. It turned out they used methanol, so I wonder about the FFV price tag with respect to that.

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  17. By Rufus on July 16, 2010 at 1:11 pm

    Walt, don’t you need to add in taxes, and transportation?

    Also, how many gallons would a $100M plant turn out? I ask because I would expect “debt service” on a $100M plant (principal, and interest) to run about $10M/yr.

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  18. By paul-n on July 16, 2010 at 1:32 pm

    Walt, 

    I have started a new forum topic, and copied your above post to it.

    Moving towards an alcohol economy

    lets talk about the grand plans there, and leave this thread to its original topic, of ethanol and tax credits.

     

     

    Paul

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  19. By Walt on July 16, 2010 at 7:21 pm

    Robert Rapier said:

    The one idea RR posted to dramatically reduce consumption received a counter argument that was equally (or more so) persuasive.

    I hate to have to continue beating that dead horse, but it wasn’t an idea to reduce consumption. It was an example of the kind of thing it would take to make us energy independent. In the end, the person making that counter argument finally said “OK, I see what you are getting at.”

    RR


     

    Sorry I did not follow the thread to the end…so I stand corrected.

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  20. By Walt on July 16, 2010 at 7:22 pm

    Paul N said:

    Walt, 

    I have started a new forum topic, and copied your above post to it.

    Moving towards an alcohol economy

    lets talk about the grand plans there, and leave this thread to its original topic, of ethanol and tax credits.

     

     

    Paul


     

    Thank you Robert and Paul.  I’m still trying to get the hang of the blog features.

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  21. By Rufus on July 16, 2010 at 9:14 pm

    I posted, here, a few months back that I wouldn’t be surprised to see the VEETC cut by a bit – maybe a dime, or so.

    Voila:

    http://hosted.ap.org/dynamic/s…..TE=DEFAULT

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  22. By Terry on July 17, 2010 at 1:59 pm

    On the issue of making all new cars E85 capable, what would it take to make those cars also M85 capable? I’ve seen the ~$150 quoted for making cars E85 but I don’t think I’ve ever seen a cost to make it M85. If the cost difference between making an E85 vs M85 is very small (like <$50), then maybe we should make all cars M85 capable too.

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  23. By Wendell Mercantile on July 17, 2010 at 5:11 pm

    If the cost difference between making an E85 vs M85 is very small (like <$50), then maybe we should make all cars M85 capable too.

     

    I agree Terry, although Big Corn and the ethanol lobby wouldn’t like that.  I have a hunch that on a level playing field where neither methanol nor ethanol received special government policy breaks, tax credits, subsides, and protective tariffs,  that methanol would climb to primacy.

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  24. By Rufus on July 18, 2010 at 8:30 am

    I just posted this on the Carpe Diem Blog:

    The Buick Regal that comes out this fall has a 2.0L Direct Injected, Turbocharged Engine that gets Superior HP on E85 (85% Ethanol – 15% gasoline,) and within 5% the same mileage on E85 as on gasoline. The next iteration is supposed to get the Same mileage on E85 as on gasoline.

    The cost of producing Cellulosic Ethanol (ethanol made from switchgrss, corn cobs, waste paper, etc) is, now, around $2.00/gal – Without Subsidies.

    So, let’s review the bidding.

    We spend, approx, $360 Billion/Yr Importing Oil, and “Protecting” the foreign oil fields/sea lanes.

    An area of about 3 mi. radius per county would supply all the cellulosic feedstock necessary to virtually eliminate our Oil Imports.

    We have almost 10% unemployment – mostly among the less skilled, and in construction.

    The build-out of our cellulosic refining capacity could employ as many as a million construction/manufacturing workers.

    The money would be circulated Locally, boosting Local economies.

    Upon completion of the refineries our balance of trade would improve dramatically, and we could shed the cost of protecting Saudi/Iraqi/Kuwaiti oil fields.

    Rather than spend the money on importing, and “Consuming” a Declining resource, we would be Investing in infrastructure for utilizing a “Sustainable,”/Renewable resource.

    What am I missing?

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  25. By Wendell Mercantile on July 18, 2010 at 12:24 pm

    An area of about 3 mi. radius per county would supply all the cellulosic feedstock necessary to virtually eliminate our Oil Imports. What am I missing?

    Perhaps three square miles in Tunica County, MS; but not Johnson, Natrona, or Campbell Counties in Wyoming; or Ortero Co, NM; or, et al. (But of course we could cut Campbell County some slack since they supply so much coal.)

    The cost of producing Cellulosic Ethanol (ethanol made from switchgrss, corn cobs, waste paper, etc) is, now, around $2.00/gal – Without Subsidies

    Companies have claimed that in media releases, but where is the full-production commercial cellulosic plant I can call or e-mail to arrange for delivery of several railroad tank cars of ethanol for $2.00/gallon? (Plus transportation costs of course.)

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  26. By Wendell Mercantile on July 18, 2010 at 12:26 pm

    Sorry, a three mile radius would be 29.6 square miles, but the point is the same.

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  27. By Benny BND Cole on July 18, 2010 at 6:02 pm

    I do have to agree with Rufus on one key point: I would much rather send my money to natural gas guys in the United States, or to ethanol folks in corn country, than oil thug states.

    I do have a question: We are now forced to buy gasoline with 10 percent ethanol in it, maybe going to 15. A federal mandate, an intrusion into private sector–a complete lack of freedom of choice, etc. Normally, all these tripwires would send the Republican Party ballistic, and the radio-heads into hysteria. But hardly a peep. No Tea Partiers foaming at the mouth about this storm-booted federal control of your basic right to buy unadulterated gasoline, and besides that ethanol lowers your MPGs, helps destroy your cars’ innards etc etc etc. Ethanol should be regarded as a leftie plot from hell.

    Now, suppose the feds mandated that all new cars be PHEVs. I can just imagine the torrent of abuse Obama would take.

    Politics, baby, politics.

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  28. By Rufus on July 18, 2010 at 7:16 pm

    The Republicans Have been, largely, anti-ethanol. Heck, McCain ran against it. It was a big part of his campaign strategy. Fox News has fought it. Rush Limbaugh has railed against it. Doesn’t matter. They’re on the “wrong side” of history. That’s a tough place to be.

    There’s still quite a bit of ethanol-free gasoline out there – if you want to pay an extra ten to thirteen cents (4 to 5%) for an extra 2% mileage.

    The E15 deal is not about a 15% mandate, but authorization to Voluntarily use up to 15% ethanol in non-ff engines.

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  29. By Rufus on July 18, 2010 at 7:19 pm

    Oh, and Benny, there’s Never been a car, Ever, brought to a shop, Anywhere, that’s had its “innards” destroyed by ethanol. Why not stick with facts, and leave the silliness back at the schoolhouse?

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  30. By Wendell Mercantile on July 19, 2010 at 9:40 am

    There’s still quite a bit of ethanol-free gasoline out there – if you
    want to pay an extra ten to thirteen cents (4 to 5%) for an extra 2%
    mileage
    .

     

    An extra 10-13 cents? What are you talking about?  There are gas stations in our city with signs in front saying, “Our gasoline is ethanol free.”  The price for their regular is the same as the gas stations that sell E10.

     

    You’re looking at this backwards.  The stations that blend ethanol to make E10 should be selling their fuel for less (since it delivers less energy), but by selling it at the same price as regular gasoline, they are actually tricking consumers into paying a hidden markup.

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  31. By Rufus on July 19, 2010 at 10:35 am

    Yep

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  32. By paul-n on July 19, 2010 at 3:01 pm

    Rufus, if the 15% thing is not a mandate, but a voluntary authorisation, could not the same thing be achived (without legisaltion) simply by having the E85 blender pump also have an option for E15 (and E30, and even E100)?  The Brazilian pumps do this.

    Then, as Wendell points out, price it so that it trades at a real discount to E0 or E10, and let the drivers decide.

    Seems to me the best thing, as GE and Poet are advocating, is to get more blender pumps out there asap.  I have no problem with shifting the subsidy to that – as long as the whole system (ethanol tanks and pumps) are also methanol and mixed alcohol compatible too.

    Surely this would be easy to demonstrate in, say Sioux Falls, or somewhere like that that has lots of E85 pumps (and ethanol aware drivers).

    Showing consumer demand is there would make it easier for lawmakers to do this, though it also shows the law is not really required – some entrepreneurship from the ethanol industry.

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  33. By MMerritt on July 19, 2010 at 6:01 pm

    Paul, it isn’t a mandate, although it has been called a “mandate” in many media reports, so I understand the confusion.

    Right now, if you put E15 in your (non-flex fuel) car, you are technically breaking EPA regulations. Growth Energy filed a request with the EPA to raise the allowed limit from 10% up to 15%.

    The ethanol industry would like nothing more than what you propose: pumps that can dispense a range of blends, from which drivers can choose what they want.

    The E15 request basically asks the EPA to say “Drivers, go ahead and use E15 if you’d like.”

    Thanks,

    Matt (FYI: I work at POET)

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  34. By Wendell Mercantile on July 19, 2010 at 6:22 pm

    The ethanol industry would like nothing more than what you propose:
    pumps that can dispense a range of blends, from which drivers can choose
    what they want.

     

    Matt Merritt~

    Then why don’t you do that? My understanding is the only thing holding back the EPA from authorising higher blends is the possibility of engine damage or voiding auto company warranties. Why doesn’t POET step in and say to the EPA and car owners who’d like to use higher blends than E10, “If you have any engine damage due to using E15 or higher, our company will be good for it.”

    A statement such as that from one of the major players in the corn ethanol industry would probably carry a lot of weight with the EPA — and with consumers. Don’t you think?  (And from what I’ve read, the ethanol industry’s position is that higher blends cannot cause any damage. If you really believe that to be true, what would you have to lose?)

     

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  35. By Russ Finley on July 19, 2010 at 8:25 pm

    Video is for entertainment.

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  36. By Wendell Mercantile on July 20, 2010 at 12:11 am

    Heck, McCain ran against it.

    Rufus~

    You need to refresh your memory of the 2008 campaign. John McCain didn’t run against ethanol, he ran against subsidized corn ethanol. Big difference. Here’s one of his statements from the 2008 campaign as reported by MSNBC:

    “My friends, we will disagree on a specific issue and that’s healthy,” McCain said as he stood near bales of straw at one of the nation’s premiere farming showcases. “I believe in renewable fuels. I don’t believe in ethanol subsidies, but I believe in renewable fuels.”

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  37. By Rufus on July 20, 2010 at 12:16 am

    Whatever. He got his butt stomped either way.

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  38. By paul-n on July 20, 2010 at 1:46 am

    @ Matt,

     

    This being the case, then the ethanol industry should come out and explain that, clearly.

    I just googled Growth Energy E15, and the first line on their website was this;

    The Growth Energy Green Jobs Waiver to increase the ethanol blend wall to 15 percent blended into gasoline…

    That sure sounds like a mandate to me.  Then there was a whole section on “E15″, which implies that it is a distinct product.

    and this;

    On March 6, 2009 Growth Energy submitted a waiver to the United States Environmental Protection Agency (EPA) to lift the arbitrary regulatory cap on ethanol from a 10 percent blend of ethanol to a 15 percent blend of ethanol in our gas supply.

    Yet what you are saying is that you want the cap removed, not raised.  So why then is Growth Energy not saying something like;

    “We submitted a waiver to the EPA requesting a removal of the regulatory cap to allow motorists to blend any amount of ethanol they like into their fuel tanks”

    After all, the EPA’s mandate is environmental protection (in this case air quality), theoretical engine damage is not their problem, that is up to auto industry.

    I’ll give them that they want E15 available as an option, and that’s fine, but the way all this is being presented is as if it is to replace E10 with E15.

    I agree that if there is a regulatory barrier, then it should be removed, but don’t just go to E15, get it removed, period.

    And then focus efforts on the blender pumps, so people can dial in what they want.  

    I thoroughly support removing regulatory limits on ethanol (or alcohol) content, but if the ethanol industry wants more market share than 10%, they will have to earn it.

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  39. By Wendell Mercantile on July 20, 2010 at 9:02 am

    Whatever. He got his butt stomped either way.

    Certainly true, and it wasn’t because of his position on ethanol subsidies.

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  40. By MMerritt on July 20, 2010 at 10:05 am

    Wendell, There are more than a dozen different components in a gallon of fuel at the pump. Ethanol is not going to hurt your engine, and I don’t think it’s right to single out ethanol from everything else and highlight it as a potential “threat” to consumers when it isn’t.

    Paul, to your point, perhaps the industry hasn’t worded things in the best way to highlight that E15 is not a mandate, just as E10 is not a mandate. It’s definitely worth thinking about, so thanks. As for lifting the cap completely, the easiest way to do that is just get FFVs on the road, at which point the 10 or 15 percent cap is irrelevant. E15 will buy time to ramp up FFV and blender pump numbers. Drivers can decide what they want to do once they have an option.

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  41. By paul-n on July 20, 2010 at 12:50 pm

    Matt,

     

    It would seem, with all this talk about reducing/eliminating the VEETC, and Growth Energy promoting a different path from the other groups, that this is a turning point for the ethanol industry.

    And that being the case, why go for a “buy time” measure of E15?

    Surely the marketing could be something like this;

    “Ethanol fuel is proven to be cleaner burning than gasoline, at any blend level, and we want to give all Americans the freedom to use as much American made ethanol as they like.  The present EPA regulations have a regulatory limit of 10% ethanol for non flex fuel vehicles, and we ask that this limit be removed altogether. The longer that any such limit remains in place, the more it hinders our progress towards energy independence.”

    I’m sure the wordsmiths could come up with something better than that, but the point is, that asking for the limit to be raised to 15, instead of removed altogether, is a pretty limp effort.  If the ethanol industry truly believes that ethanol can truly replace oil, then it should be campaigning for removal of ALL unneccessary barriers to its use.

    Decades of development and tens of billions of subsidies, and the best they can do is ask for a raise from 10 to 15%?  That is hardly the sign of a confident industry.  Apple was stuck with low market share decades, but increased it by making people want to use their product, not mandating it.

    If we only go to 15% now, how long before it goes to 20% or more, another decade?  This is not solving the problem at all, it is just kicking the can down the road, to avoid the harder issue of how to get people to want to use higher blends.

    Get the limit removed, get the people of corn country to embrace ethanol in a big way, and show that oil can truly be displaced, at least at some local level.  

    Until then, fiddling around with mere 10-15% blend levels is simply avoiding the bigger issue of getting people to embrace E85.

    I think what congress should do is this;

    1. End the VEETC completely (but retain they can retain the import tariff)
    2. Bring in some equivalent measure for cellulosic/alternative feedstock alcohol (Methanol, or ethanol, or mixed) from non food feedstocks, which is paid to the producer.
    3. Remove the EPA blend limit completely.  If this requires a series of blend testing for emission levels, that has not already been done (and surely it must have) then get it done, and fast
    4. Bring a limited fund for the installation of blender pumps.  e.g. $20k/pump, and enough for, say, 20,000 pumps, first come , first served.  A limited fund so that it creates a sense of urgency and does create handwringing about cutting off a subsidy.

    What I am getting at here, is resolve the VEETC issue, and the EPA issue, but leave the mandate exaclty where it is.  That way the path to more ethanol use is to get peiople to use higher belnds.  If that is the ONLY way forward fopr the ethanol industry, then they will focus their efforts on that, which will deliver some real value, instead of lobbying for more subsidies and mandates, which don’t.  

    Ethanol has been given the government funded college education to allow it to get a job in the fuel business.  Like any graduate, how well they do from there is, and should be, entirely up to them.

     

     

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  42. By Walt on July 24, 2010 at 10:50 am

    I am looking for someone to help me write a bookklet on blending
    methanol and gasoline up to M15, M30 and M85 as well as what is
    generally required to modify existing vehicals to operate on these
    blended fuels.  I want this to be written in a technical manual format,
    and welcome anyone who would like to participate.  You can contact me
    through http://www.gastechno.com

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  43. By Walt on July 24, 2010 at 12:43 pm

    I saw this post this morning on another site, and found it very fascinating.  I’ve not spent anytime to do the due diligence on the claims, but assuming they are correct that is a LOT of profit per gallon for a very small plant.  I find it amazing even without tax credits for such a small plant.  I am actually thinking of buying one myself now…if the claims turn out to be true.

    Quote

    Adrian of IEC Biodiesel informed me this morning that his company will
    be setting up their own biofuel facility in Iowa with a ready buyer that
    will take all their production. In the process, he has put together
    some numbers for their facility. For $600,000, you can have a biofuel
    set-up that will produce 5000 gallons per day. The profit is $1 per
    gallon without the government tax credits. With the tax credits, the
    profit per gallon of biofuel produced is $1.70/gallon. At 5000 gallons
    per day, that means $25,000/week without the tax credits. The
    government has been requiring an increasing amount of biofuel to be
    blended with the our fuel supply each year like ethanol. The source of
    the oil for the biodiesel can come from canola, yellow grease,
    sunflowers, and many other crops. Most refineries are accepting biofuel
    for blending. The US requires refineries to blend.

    If you don’t have $600,000 dollars laying around or don’t want to pull
    together the investors, IEC Biodiesel is willing to set up a facility
    for you at cost, but will take a percentage of the revenue stream. If
    you want to learn more give Adrian a call at 770-606-4403.

    Unquote

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