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By Robert Rapier on Aug 15, 2011 with 85 responses

Cellulosic Ethanol Targets: Mandating the Nonexistent

Another Year, Another Chapter

In what is becoming an annual ritual, the EPA is once more scaling back the cellulosic ethanol mandate for 2012. The 2007 Energy Independence and Security Act mandated that we would use 100 million gallons of cellulosic ethanol in 2010, 250 million gallons in 2011, and 500 million gallons in 2012. I said quite explicitly from the start that this was wishful thinking, and that there was practically zero chance of meeting these mandates. In one article, I wrote:

The next few years will see a record amount of back-pedaling from most of the companies trying to establish a foothold in this space – and overpromising on their technology to do so. There will be the normal litany of excuses – such as ‘the oil companies are suppressing the technology’ – but in the end the chemistry, physics, and most importantly the capital costs and logistical challenges will catch up with them. Yes, excuses will be made, but those who know a little about the technology will know what really happened.

OK, so the industry is falling short. But how much of the 350 million total gallons of cellulosic ethanol that was originally scheduled to be produced by the end of 2011 has actually been produced? Actual qualifying production of cellulosic ethanol through June 2011 is zero gallons. ZERO.

Punishing Peter to Pay for Paul’s Failure to Deliver

So, what difference does it make? They got a bit too aggressive with their projections, but was anyone really hurt? Funny you should ask. First, I would argue that out of desperation the government has listened to several groups selling the equivalent of magic beans, didn’t properly assess the technologies, and proceeded to throw tax dollars down a black hole. In fact, this is an ongoing problem.

But the other thing that might be a bit hard to believe is that even though there is no cellulosic ethanol available for purchase, refiners are subject to penalties for not buying it. Ethanol Producer Magazine recently weighed in on this topic. After first noting that the EPA is proposing to reduce the mandate for next year from 500 million gallons to as little as 3.5 million gallons, they summed up both sides of the issue:

In comments delivered to EPA officials at the hearing, ethanol representatives admitted that the proposed cellulosic production volumes were likely accurate, but stressed the need for continued optimism on the part of the EPA. Brooke Coleman, executive director of the Advanced Ethanol Council, urged the EPA to continue its aggressive goals regarding cellulosic biofuels, stating that the agency’s mandated volume directly affects the industry’s ability to produce fuel. “There is this funny thing going here where you guys have to go out and measure capacity, but the numbers you come out with and the amount of capacity that you put into the Federal Register will have a giant effect on how much capacity we actually create,” he said.  The EPA’s volume mandates send signals to the investment community, he said, indicating that investors may be unwilling to put up the desperately needed cash to build the first few commercial-scale plants if the EPA does not provide consistent production volume targets. “What is keeping us out of the marketplace and slowing us down is risk,” he said. “As a subset of that, uncertainty exacerbates risk.”

So advocates of the mandate insist that keeping the mandated volumes high is a fair deal. Bear in mind that the reason that the mandate is where it is in the first place is that would-be cellulosic ethanol producers have been over-promising on what they could deliver for many years now. Thus they promised a product, got a mandate, and now the people who they have failed to deliver to are the ones about to be penalized for the inability to purchase product the advocates can’t make. That’s a perfect example of dysfunctional energy policy.

The refiners, unsurprisingly, are crying foul:

Meanwhile spokesmen from the petroleum industry said optimistic production goals create financial hardships for their industry. Greg Scott, executive vice president and general counsel for the National Petrochemical & Refiners Association, pointed to this year’s 6 million gallon volume requirement for cellulosic biofuels as proof that optimistic expectations lead to real-world implications for refiners obligated to comply with the mandate. “If the EPA is wrong or if a biodiesel trade group representative or a cellulosic ethanol spokesperson is wrong in his or her rosy predictions for production, it is our members that will experience the economic and regulatory pain,” he stated. No cellulosic biofuel RINs (renewable identification numbers) were generated between July 2010 and May 2011 and the only facility registered to generate cellulosic biofuel RINs—Range Fuels Inc.—is not operating, he said, adding that the EPA should take that into consideration when determining next year’s cellulosic volume. “Obligated parties will be required to buy up to 6 million cellulosic biofuel waiver credits at a $1.13 per gallon RIN in 2011. This is, in essence, a $6.78 million tax that NPRA’s members must pay to EPA due to the agency’s misguided optimism regarding production this year.”

But I think I have the perfect solution. Since one side is advocating for mandates that threaten to penalize the other side, just switch the penalties to those advocating for the mandates. If the Advanced Ethanol Council thinks it is a good idea to mandate unrealistic production volumes, then they should pay the penalties when their industry doesn’t deliver. That should give them much more incentive to deliver than having someone pay the penalties who has zero control over what is produced.

Corn ethanol producers — in another move that I have long predicted –  have a different solution. They want an end to “corn-discrimination.” They would like to step into that void and supply the missing ethanol, thus raising the 15 billion gallon corn ethanol mandate that they currently enjoy to potentially 36 billion gallons by 2022. There are a number of problems with that approach, the biggest of which is the 10% blend wall the industry is currently facing. One way to resolve that would be to grow the E85 market, but the way it looks like they will try to handle it is by lobbying for more E15 — and after that E20 — into cars that weren’t designed for it.

  1. By Wendell Mercantile on August 15, 2011 at 9:47 am

    It just goes to show lawmakers and bureaucrats can’t trump the laws of physics, chemistry, and economics with mandates and rules.

    A favorite past time of the assembly in my state is to propose laws that would repeal the Second Law of Thermodynamics.

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  2. By Dan on August 15, 2011 at 10:51 am

    While the high mandated volumes for cellulosic are absolutely unattainable today, hearing the NPRA complain about sending $7 MM to the EPA is laughable! They spend over $250 MM per year on lobbying Congress alone! The total cost of cellulosic waivers is so tiny, I’m surprised they even bother to protest. (BTW, for 2012, the cellulosic waiver price is expected to be less, closer to $.95 each)

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  3. By rufus on August 15, 2011 at 10:58 am

    Wendell, your state has an unemployment rate 35% Lower than the National Rate.

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  4. By rufus on August 15, 2011 at 11:03 am

    Meanwhile, the U.S. Government, and the IEA are pumping One Million Barrels of Oil, and Products out of the Strategic Reserves Every Day (a situation that can only last for 30 more days,) and the National Price of Gasoline is $3.59/gal.

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  5. By Wendell Mercantile on August 15, 2011 at 11:34 am

    …your state has an unemployment rate 35% Lower than the National Rate.


    Who knows, if our lawmakers ever succeed in repealing the Second
    Law of Thermodynamics, we might get it down to zero. 

      Smile

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  6. By rufus on August 15, 2011 at 11:40 am

    Right now, your state is doing a wonderful job of turning wind, sunshine, and rain into usable energy, and food.

    I read where 20% of Iowa’s electricity has come from Wind so far this year, and that 85% of the population wants to increase that amount.

    Your state is not only a large exporter of food, but is getting within a hair’s breadth of being a “net energy exporter.”

    Not too shabby.

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  7. By Wendell Mercantile on August 15, 2011 at 12:05 pm

    Not too shabby.

    Mississippi is famously known for the fertility of the soil in the Delta, plus you have wind, and lots of Sun. What’s the problem down there?

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  8. By rufus on August 15, 2011 at 12:11 pm

    Just not as smart as Iowans; what can I say? :)

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  9. By Brooke Coleman on August 15, 2011 at 1:07 pm

    Dear Robert,

    As the author of the comments you cite in your post, I would like to take a second to respond.

    We could argue about “ethanol policy” for days, but let’s at least be honest about why the RFS exists (i.e. why the government has to require ethanol blending).

    The RFS exists because the marketplace is broken, not because renewable fuels cannot compete. Corn ethanol has been competitive with gasoline for years, and we are already seeing the first signs of price competitive cellulosic ethanol just four years after the RFS passed in December 2007.

    Unfortunately, cost competitiveness does not necessarily do the trick in a marketplace that is highly consolidated, dominated by incumbents, supported by a century of subsidies and dedicated infrastructural developments (for oil) on the taxpayer dime. And that’s before you get to the innovation-crushing role of OPEC’s price manipulations, and the fact that cars needlessly limit ethanol blending to 10% by volume.

    So yes, when the taxpayer holds the oil industry’s hand from well to wheels (and has done so for 100 years), the renewable fuels industry needs a leg up. There should be no apologies about this. Give us a free market and we would be happy to put our product to the test. Until then, let’s stop pretending shall we?

    On the RFS front, and specifically with regard to the oil companies paying for something that “does not exist,” let’s be honest about that too.

    The intent of the RFS is to drive advanced biofuel gallons into the marketplace. That’s what EPA is charged to do. You may not like that, and the oil companies certainly don’t, but for very clear economic and jobs-related reasons, this is in the best interests of the country (i.e. biofuels are one of the things we can produce right here in the USA).

    So given the Congressional intent and the broken marketplace, what are the mechanisms available to us? Given that the marketplace is controlled by entities that (largely) do not want to see renewable fuels accelerate, and that this predicament chills innovation, it is critical for EPA to set aggressive targets so the embedded incumbents are encouraged to change. If there is no consequence for inaction in a non-competitive marketplace, the oil companies (who control market access in most places) will simply block the marketplace.

    The alternative, of course, is to require all vehicles to run on any combination of ethanol and gasoline (i.e. FFVs) to open the market up and let these fuels compete on price. The cost is negligible. Consumers would have a choice. The same autos do it in other countries. But I think you are against that too, right?

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  10. By rrapier on August 15, 2011 at 1:22 pm

    Dan said:

    While the high mandated volumes for cellulosic are absolutely unattainable today, hearing the NPRA complain about sending $7 MM to the EPA is laughable! They spend over $250 MM per year on lobbying Congress alone! The total cost of cellulosic waivers is so tiny, I’m surprised they even bother to protest. (BTW, for 2012, the cellulosic waiver price is expected to be less, closer to $.95 each)


     

    Dan, that information isn’t accurate. I covered this in a recent article where Huffington Post claimed the oil industry is spending over a $1 billion on lobbying. According to OpenSecrets.org, the oil industry did spend $1.15 billion in lobbying over the span of 14 years. So a trillion dollar plus industry spent an average of $82 million a year on lobbying. At the same linked source, you find that the pharmaceutical industry spent twice as much money as the oil industry on lobbying, and the insurance industry, electric utilities, business associations, agriculture, and computer and Internet industry all spent more money on lobbying than did the oil industry. So your $250 million from refiners is not remotely correct, given that we are talking about an average of $82 million for the entire oil industry.

    Second, the refining industry is much more volatile and less profitable over time than the overall oil industry. In recent years, the big profits are being made on oil prices, and some pure refiners don’t have the benefit of that. So you are penalizing one of the least profitable parts of the industry. But think about it this way. How would you like to pay a speeding ticket just because you could afford to pay it? I bet you would think that was extremely unfair if you weren’t speeding.

    RR

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  11. By rufus on August 15, 2011 at 1:28 pm

    Uh, Robert, those Refiners that are refining oil out of Cushing are making just about the highest Crack Spreads in history (and have been for awhile.l)

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  12. By rrapier on August 15, 2011 at 1:32 pm

    Brooke Coleman said:

    The RFS exists because the marketplace is broken, not because renewable fuels cannot compete. Corn ethanol has been competitive with gasoline for years, and we are already seeing the first signs of price competitive cellulosic ethanol just four years after the RFS passed in December 2007.


     

    I don’t believe that is true; that corn ethanol has been competitive for years. Corn ethanol has only been competitive as long as natural gas prices have had a historically unusually low spread to gasoline prices. Since you use a lot of natural gas — and the price of gasoline has been high — you have been reasonably competitive given current conditions. But given the highly cyclical nature of the energy business, you are going to have to survive some tough times — just as the oil refiners have always had to do — to be able to claim true competitiveness. When refining margins get tight, we see refineries close down.

    And I certainly don’t agree that we see signs of price competitive cellulosic ethanol. On the other hand, we do see plenty of people making that claim, they just don’t seem to be able to sell it even though there is a mandate for it.

    On the RFS front, and specifically with regard to the oil companies
    paying for something that “does not exist,” let’s be honest about that
    too.

    Yes, let’s be honest. The failure of cellulosic ethanol to deliver has nothing to do with a broken marketplace. If you actually had a competitive product, you can sell it. If you don’t then forcing someone to buy it is probably indeed your only option.

    So given the Congressional intent and the broken marketplace, what are the mechanisms available to us? Given that the marketplace is controlled by entities that (largely) do not want to see renewable fuels accelerate, and that this predicament chills innovation, it is critical for EPA to set aggressive targets so the embedded incumbents are encouraged to change. If there is no consequence for inaction in a non-competitive marketplace, the oil companies (who control market access in most places) will simply block the marketplace.

    I can tell you exactly what mechanism is available to you. Instead of trying to force the incentives onto someone else — thus leaving yourself free to fail and others to deal with the consequences — there is absolutely nothing stopping the ethanol industry from setting up their own chain of E85 stations. If you really have a price-competitive product, then sell it yourself. This business about not being able to sell your product because the oil companies control everything is hogwash. Fewer lobbyists, and more entrepreneurs is the solution if you truly have a competitive product.

    RR

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  13. By rufus on August 15, 2011 at 1:32 pm

    Anyways, the numbers Are infinitesimally small. The Oil Companies, and their Republican/Tea Party sockpuppets are just trying to kill the kid in the crib.

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  14. By rrapier on August 15, 2011 at 1:35 pm

    Rufus said:

    Uh, Robert, those Refiners that are refining oil out of Cushing are making just about the highest Crack Spreads in history (and have been for awhile.l)


     

    The highest crack spreads in history happened in 2005 when oil prices were moderate but refining capacity was really tight. That drove a very large delta between oil prices and gas prices. And between then and now, refiners have seen some down years.

    What is your source of information on Cushing and crack spreads?

    RR

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  15. By rrapier on August 15, 2011 at 1:36 pm

    Rufus said:

    Anyways, the numbers Are infinitesimally small. The Oil Companies, and their Republican/Tea Party sockpuppets are just trying to kill the kid in the crib.


     

    I don’t buy that at all. Again, it would be like you getting a speeding ticket just because law enforcement needed the money and you could afford to pay it. Then, when you protest the idea of paying something that is patently unfair, having someone say “Rufus is just against law enforcement.”

    RR

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  16. By Wendell Mercantile on August 15, 2011 at 1:38 pm

    Unfortunately, cost competitiveness does not necessarily do the trick in a marketplace that is highly consolidated, dominated by incumbents, supported by a century of subsidies and dedicated infrastructural developments (for oil) on the taxpayer dime.

    Brooke,

    Really? Back in the 20′s, 30′s, and 40′s when companies such as Texaco, Phillips 66, Sinclair, etc. were expanding their networks of filling stations along US streets, roads, and highways, it wasn’t through subsidies.

    They had to borrow money; raise capital by selling stock; or convince independents to become franchise operators. The infrastructure of gasoline filling stations spread because of competition, capitalism, and a demand for the product, not because of subsides and mandates.

    Why can’t ethanol companies expand their networks of filling stations in the same manner? For example: Why aren’t the ethanol companies raising capital to build E85 stations along the Interstates and highways that run through the Corn Belt, instead of relying on the RFS mandates? (I know, it’s easier to get a friendly Congress to pass a mandate, than through the more traditional means of growing a business.)

    If I had a business that made panametric bi-modal turboencabulators, I’d also rather grow it through mandates and subsidies than having to do the hard work of going out and selling them.

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  17. By Benny BND Cole on August 15, 2011 at 2:25 pm

    This is a tough one. On one hand, the feds should “not pick winners.”

    On the other hand, remaining entirely naked in front of thug-state oil producing nations is not an appealing option either. See Libya–what if that is just a dress rehearsal for Saudi Arabia and Kuwait?
    What if Iran and Iraq melt down? Russia? Mexico? Venezuela. Nigeria? To have oil is to have the The Gong Show run your government.

    I come back to taxing energy imports, if that is possible under WTA, but favoring no domestic industry specifically. Or taxing gasoline heavily.

    If there is money to be made in ethanol, let them make it, using venture capital dollars.

    Meanwhile CNG beckons, as does methanol. GM has a PHEV on the market.

    The world is passing through the oil era, and it is ending with a whimper, not a bang.. The price signal accomplishes miracles.

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  18. By Wendell Mercantile on August 15, 2011 at 2:46 pm

    Meanwhile CNG beckons, as does methanol.

    To be fair, if there is an RFS for ethanol, why aren’t there also RFS mandates for CNG, methanol, and bio-butanol? (Oh wait, I already know the answer: They don’t have Big Corn and Big Ag behind them.)

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  19. By Dan on August 15, 2011 at 3:00 pm

    Robert Rapier said:

    Dan said:

    While the high mandated volumes for cellulosic are absolutely unattainable today, hearing the NPRA complain about sending $7 MM to the EPA is laughable! They spend over $250 MM per year on lobbying Congress alone! The total cost of cellulosic waivers is so tiny, I’m surprised they even bother to protest. (BTW, for 2012, the cellulosic waiver price is expected to be less, closer to $.95 each)


     

    Dan, that information isn’t accurate. I covered this in a recent article where Huffington Post claimed the oil industry is spending over a $1 billion on lobbying. According to OpenSecrets.org, the oil industry did spend $1.15 billion in lobbying over the span of 14 years. So a trillion dollar plus industry spent an average of $82 million a year on lobbying. At the same linked source, you find that the pharmaceutical industry spent twice as much money as the oil industry on lobbying, and the insurance industry, electric utilities, business associations, agriculture, and computer and Internet industry all spent more money on lobbying than did the oil industry. So your $250 million from refiners is not remotely correct, given that we are talking about an average of $82 million for the entire oil industry.

    Second, the refining industry is much more volatile and less profitable over time than the overall oil industry. In recent years, the big profits are being made on oil prices, and some pure refiners don’t have the benefit of that. So you are penalizing one of the least profitable parts of the industry. But think about it this way. How would you like to pay a speeding ticket just because you could afford to pay it? I bet you would think that was extremely unfair if you weren’t speeding.

    RR


     

    Robert, I won’t dispute your lobbying numbers (blame my lazy use of Google), but my point about this being a rounding error are accurate.  The US will consume approximately 137 billion gallons of gasoline in 2011.  The cellulosic requirement for 2011 iis 6 million gallons of ethanol equivalent gallons.  Using the $1.13 per RIN waiver price, the NPRA will spend $6.78 million dollars.  Spead $6.78 M over 137 billon gallons and it is an additional $0.00005 per gallon.  Gasoline doesnt even trade to 5 decimal places!  (RBOB only trades to 4)

    If the NPRA wants to charge me an additional $0.00005/gallon to support cellulosic research & development, count me in!  I will gladly mail them my dime every year Smile

     

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  20. By mac on August 15, 2011 at 3:16 pm

    Has anyone ever seen a gas station that sells both Shell and Exxon gasoline side by side ?

    The answer is “No”.

    While major oil companies may only own (out-right) about 8% of the more than 120.000 gas stations in the U.S., they effectively control the independent gas station owner through “exclusivity” franchising agreements. That’s why you will never see an “independent” gas station owner selling more than one brand of gasoline.

    If oil company owned and franchised stations refuse to sell gas from competitors (prohibited by the franchising agreements), then the only way they are going to sell ethanol (also a competitor) is by mandate.

    Just that simple.

    If we had vehicles in the U.S. that ran on pure ethanol as they do in Brazil, then we might talk about creating a new ethanol infrastructure, starting in the mid-west of course.

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  21. By Wendell Mercantile on August 15, 2011 at 5:21 pm

    If oil company owned and franchised stations refuse to sell gas from competitors (prohibited by the franchising agreements), then the only way they are going to sell ethanol (also a competitor) is by mandate.

    Mac~

    If an oil company-owned or franchised filling station refused to sell E85, it would be only because the ethanol company failed (or was unable) to make a compelling case that the station owner could make money selling E85.

    For example:

    * It might cost too much to install the E85 tanks and pumps, and the pay back time on that investment might be too long.

    * The per gallon profit of selling E85 may not be enough to make it worthwhile.

    My father owned a filling station when I was a kid. Believe me, had E85 existed then and if he could have made money selling it, he would have. It’s not a case of ethanol being a competitor, it’s a case of whether the station owner could make money. And that probably explains why ethanol companies haven’t started their own chains of filling stations: Their business model probably shows they wouldn’t be profitable.

    From their perspective, that’s the beauty of mandates — profits don’t matter if they can get someone with authority to say stations have to install the pumps, that stations have to buy it, and that drivers have to buy it. A mandated market is a thing of beauty — at least for some people.

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  22. By Paul Winters on August 15, 2011 at 5:33 pm

    How would you like to pay a speeding ticket just because you could afford to pay it?

    The Cellulosic Waiver Credit is not a penalty on obligated parties, it is an option for obligated parties to meet the requirements of the RFS if cellulosic biofuels are not available at a competitive cost. The CWC protects refiners and blenders from having to buy cellulosic biofuel or any available RINs at any price.
    The CWC is priced at $3.00 minus the average wholesale cost of gasoline (for the preceding year) or a minimum of $0.25. This means that cellulosic biofuel must be priced between $3.00 and $3.25, or obligated parties can use this alternative option. In fact, because the EPA is maintaining the overall advanced biofuel standard, allowing it to fill the cellulosic standard, cellulosic biofuel must sell at a price that competes with the lowest cost advanced biofuel plus the cost of the CWC.
    The CWC was put in place by Congress, when it initiated the program, at the insistence of the refiners and blenders. At the low volumes of the RFS in the initial years (less than 1% of U.S. fuel demand), it was foreseeable that a few obligated parties could buy up all available cellulosic biofuel, and then auction off RINs to other obligated parties. The CWC protected obligated parties from this by establishing a ceiling to the value of cellulosic RINs.
    But in practice, the CWC cuts both ways. Cellulosic biofuel producers incur costs to have their facilities approved by EPA and to generate RINs. At the small volumes that the EPA is counting — coming from demonstration facilities — the industry is unable to bring the product to market at a competitive cost. It is not a case of not producing the product.
    BIO has a white paper available that explains the system.

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  23. By mac on August 15, 2011 at 5:41 pm

    Wendell

    My main point was…. “Who really controls the retail gasoline business ?” It’s not the ethanol people. It’s not the CNG crowd. or the electric car gang. It’s the major oil companies, who (even if they only actually own 8 % of U.S. gas stations), they still control the gasoline retailing business through their franchise contracts with independent gas station operators.

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  24. By rrapier on August 15, 2011 at 5:49 pm

    mac said:

    Has anyone ever seen a gas station that sells both Shell and Exxon gasoline side by side ?

    The answer is “No”.


     

    You are confusing brand with product. You may not see those brands side by side, but the same station will sell gasoline that came from both. Shell stations sell Exxon gasoline all the time; it just isn’t branded as such. And all of them sell ethanol.

    And yes, if all of the mandates and subsidies went away, and they could buy ethanol for $1.50 a gallon or make alkylate for $2.50 a gallon and blend it into gasoline selling for $3.00 a gallon — I have news for you. They are going to buy the ethanol. This whole business about them controlling the infrastructure is just an excuse.

    RR

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  25. By rrapier on August 15, 2011 at 5:53 pm

    Paul Winters said:

    How would you like to pay a speeding ticket just because you could afford to pay it?

    The Cellulosic Waiver Credit is not a penalty on obligated parties, it is an option for obligated parties to meet the requirements of the RFS if cellulosic biofuels are not available at a competitive cost. 


     

    Paul, that’s just an exercise in semantics. If you mandate a product on me that doesn’t exist, and I have to buy credits because I can’t actually buy the product — then that is a penalty.

    At the small volumes that the EPA is counting — coming from demonstration facilities — the industry is unable to bring the product to market at a competitive cost. It is not a case of not producing the product.

    Of course I am well aware that they can produce the product. They were able to produce the product 100 years ago. What they haven’t done is produce qualifying product per EPA definitions, nor have they produced cost-competitive product.

    RR

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  26. By rrapier on August 15, 2011 at 5:57 pm

    Paul Winters said:

    BIO has a white paper available that explains the system.


     

    Paul, that link takes me to the home page for Industrial Biotechnology.

    RR

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  27. By mac on August 15, 2011 at 6:20 pm

    Well Robert,

    If everybody is just buying gas from everybody else why doesn’t every gas station in America just start selling all the major brands ?

    One stop shopping………..Since it’s all the same gas, why not just fill the storage tanks at the gas station with a single truck ? No fuss, no muss.

    Well. you know why not……………….

    This business about gas/oil companies buying gas from other gas/oil companies is true but it’s a red herring.

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  28. By rrapier on August 15, 2011 at 6:26 pm

    mac said:

    Well Robert,

    If everybody is just buying gas from everybody else why doesn’t every gas station in America just start selling all the major brands ?

    One stop shopping………..Since it’s all the same gas, why not just fill the storage tanks at the gas station with a single truck ? No fuss, no muss.


     

    There are huge numbers of unbranded stations out there that do exactly that. They generally save a lot of money on their fuel costs, although they are also at the end of the line when it comes to shortages.

    RR

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  29. By Tim Weiman on August 15, 2011 at 6:33 pm

    Robert,

    Like or not the RFS is the law of the land and the EPA does have the responsibility to encourage the development of cellulosic ethanol and other advanced fuels.

    Only Congress can change that.

    However, modest adjustments to EPA’s approach could more fairly balance the long term goal of encouraging cellulosic ethanol production with fairness to “obligated parties” that shouldn’t pay a tax for a product that doesn’t currently exist.

    Here is what should be done:

    (1) EPA should do an annual assessment of cellulosic ethanol production capacity.
    (2) EPA should determine a volume that is reasonable to expect the cellulosic industry to produce in the next calendar year.
    (3) EPA should publish the names of the cellulosic ethanol producers, the locations of their plants and the volume each plant is expected to produce to achieve the industry total target.
    (4) To encourage production, EPA should establish a reasonable “stretch” target.
    (5) EPA should use the total industry target to establish the RVO – “renewable volume obligation” – for obligated parties.
    (6) Cellulosic ethanol producers who made the list of companies to determine total industry production capacity should be required to report to EPA and DOE each month on their production, inventory and sales activities.
    (7) DOE (EIA) should publish the aggregate industry totals each month.
    (8) To ensure fairness to obligated parties, EPA should adjust obligated parties’ annual RVOs if the list of cellulosic ethanol producers, collectively, does not produce the established “stretch” target.

    The cellulosic industry should support such an approach. Taxing obligated parties for product that is not actually produced is not fair and isn’t politically sustainable. At the same time, potential cellulosic producers would be provided with a significant incentive to product the product – assuming they can actually do it.

    Obligated parties should support this approach because it fairly addresses their complaint about what is unfair about the current system.

    Policy makers should support such an approach because it doesn’t abandon the long term goal of developing cellulosic fuels, but it does inject an element of realism: the task is much more difficult and will take much longer than the Congress envisioned when it passed the RFS 2 in 2007.

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  30. By rrapier on August 15, 2011 at 7:03 pm

    Tim Weiman said:

    Robert,

    Like or not the RFS is the law of the land and the EPA does have the responsibility to encourage the development of cellulosic ethanol and other advanced fuels.


     

    I am not sure why the EPA has such a responsibility in the first place instead of residing solely with the DOE, but that’s beside the point.

    Let’s pretend for a moment that this cellulosic experiment ends in failure due to technical and economic issues. Nothing at all to do with refiners refusing to buy the product, but rather that it simply costs far more than proponents anticipated. This would describe cellulosic ethanol circa 1920, when producers figured out then they couldn’t make it cost competitively.

    In a situation like that, the risk/reward really needs to reside with the cellulosic producer. I have no problem at all with dangling lucrative incentives in front of them to get their product produced. I think though that it would become obvious pretty quickly that the economics stink if you said “I will give each cellulosic ethanol producer a direct $2/gallon credit for each qualifying gallon they produce and sell.” I still don’t think you would see any meaningful cellulosic ethanol production, but with an incentive structure like that people who have no control over the technology aren’t being penalized.

    In short, I like incentives that don’t put me on the hook for someone else’s failure. I don’t like having to cover a loan guarantee (soon to be the case with Range Fuels as they have reportedly stopped paying back principal on their loan) because someone else overpromised. On the other hand, I am all for people trying all sorts of things and offering them incentives if they deliver. That sort of structure would put a stop to a lot of the ridiculously hyped technologies where taxpayers end up footing the bill for failure. It would also result in a much more thorough due diligence process by investors who are considering getting behind a project.

    RR

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  31. By mac on August 15, 2011 at 7:12 pm

    Okay Robert,

    Unbranded Stations

    Well, you can buy gas from Marathon and I don’t think they require you to sell it under their name. Yes, there’s lots of grey market gas out there. Blending over-runs and gas that’s sat around a little too long and gas that may have uhh…….. accumulated a little humidity. True enough.

    I guess that’s why many people buy name brand gasoline. All gasoline is Not the same,

    All this evades the point. None of the major oil companies has to dump gas onto the grey market. And even if they do, they still control the retail market from top to bottom,.

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  32. By rrapier on August 15, 2011 at 7:40 pm

    mac said:

    All this evades the point. None of the major oil companies has to dump gas onto the grey market. And even if they do, they still control the retail market from top to bottom,.


     

    Tell me how they can stop someone from starting up their own E85 station and undercutting them. If ethanol producers can make ethanol for cheaper than the cost of gasoline, there is no way to keep entrepeneurs (or independent stations) from ultimately dominating that market with their own stations. That’s why I say this business about oil companies controlling the market is just an excuse.

    RR

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  33. By mac on August 16, 2011 at 1:50 am

    Well, Shell and Exxon may sell wholesale gas to each other, but if you are an independent gas station owner, I wouldn’t advise trying to sell both Shell and Exxon at the same station. French kissing is just for the big boys.

    I always thought it was the major oil companies that set the pump price for the gasoline they sell. In other words, I always thought that Shell Oil sets or controls the minimum price that Shell gas stations charge for gasoline..i.e Shell can raise or lower the “wholesale” floor price for gas at will.

    None of this has anything to do with competing with ethanol, Or the ethanol people setting up their own gas pumps. I’m not sure I see how a number of major oil company retailers setting gas prices has anything to do with ethanol whatsoever. Apparently, I missed the train of thought somewhere along the line.

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  34. By rrapier on August 16, 2011 at 4:24 am

    mac said:

    None of this has anything to do with competing with ethanol, Or the ethanol people setting up their own gas pumps. I’m not sure I see how a number of major oil company retailers setting gas prices has anything to do with ethanol whatsoever. Apparently, I missed the train of thought somewhere along the line.


     

    Well, you were the one to bring it up. Something along the lines of an implication that just like Shell stations won’t sell Exxon gasoline, and therefore they won’t sell ethanol. At least that’s what I gathered you were implying. But it isn’t true, which was my point in telling you that Shell stations sell gasoline produced in Exxon refineries all the time. Independents have even greater freedom. So it isn’t that gasoline stations won’t sell ethanol. That’s not the problem. That’s an excuse — and one I have seen coming for years. If you can’t deliver, blame someone else.

    RR

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  35. By Walt on August 16, 2011 at 10:02 am

    I was at a biodiesel plant 2 weeks ago where they separate glycern from methanol, and resell the methanol.  He mentioned that he has buyers for methanol by the ethanol producers as they are buying it cheap, blending it with their ethanol and selling it to the gasoline blenders to make a better profit margin.  I believe this is legal up to 3% methanol in each gallon of gasoline.

     

    While I’m in the methanol business, I must admit I was happy to see that the ethanol lobby is not complaining as vocally about the cheap methanol price (or the inferior quality of methano) now that they can buy and blend it with ethanol to make a better profit margin.

     

    See the August 15-18, 2011 article in ICIS Chemical Business magazine entitled, “China methanol demand to take off, Increasing use in fuel-blending and dimethyl ether sectors is likely to boost methanol growth as government formalizes plans”  It says:

     

    “The government had introduced a M85 (85% methanol blend) standard in December 2009, but this was slow to take of as it required costly retrofitting of engines.  But M15 gasoline can run on existing engines.  Ten provinces, including Xinjiang, Hebei, Shanxi, Guizhou, Shannxi, Heilongjiang, Fujian, Zhejiang and Sichuan, have issued local standards for M15, pointed out Jiang Lianbao, secretary-general of the Alcohol Ether Fuel Standarization Association, which is responsible for testing methanol-gasoline blends.  Meanwhile, illegal blending continues to take place across the country and nearly 2.8m tonnes of methanol was used in gasoline sector in 2010.”

     

    Of course, ethanol companies would not do this in America like they do in China, but it is interesting to see ethanol companies building profits using methanol.  It gives me hope one day we will ride the tails of the ethanol lobby into the gasoline pool in America!

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  36. By Tim Weiman on August 16, 2011 at 11:51 am

    Robert,

     

    Perhaps I didn’t make it clear. My feeling is that EPA needs to balance encouraging advanced fuels, including cellulosic, with fairness to obligated parties. So, if the cellulosic industry doesn’t actually produce the volume EPA determined they could produce, obligated parties should have their RVO – renewable volume obligation – reduced for that year, IMO.

    I am working with a large company evaluating investment in a cellulosic project that is off he radar screen. They do need regulatory stability. They don’t, however, need obligated parties to be taxed if the cellulosic industry fails to produce EPAs target volume.

    The RFS2 schedule for cellulosic ethanol obviously wasn’t realistic, but I don’t believe we should abandon the long term goal.

     

     

     

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  37. By Ann Stovel on August 16, 2011 at 1:20 pm

    There have been funds available from local governments (i.e. state of NY) to build E85 station infrastructure. The issue is with “supply and demand.”

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  38. By rrapier on August 16, 2011 at 1:23 pm

    Walt said:

    I was at a biodiesel plant 2 weeks ago where they separate glycern from methanol, and resell the methanol.  He mentioned that he has buyers for methanol by the ethanol producers as they are buying it cheap, blending it with their ethanol and selling it to the gasoline blenders to make a better profit margin.  I believe this is legal up to 3% methanol in each gallon of gasoline.

     


     

    That reeks of a scam. Why? Because biodiesel producers have to use methanol in their process anyway, and what they recover will be less than they use. So why would they resell it instead of reuse it in their process? Only if the market is being distorted such that this methanol is being treated as a biofuel and is then eligible for the subsidies and mandates.

    But in fact, this methanol was produced from natural gas and is fed into the process as a part of the biodiesel reaction. Methanol isn’t produced in the process, it is simply recycled.

    RR

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  39. By rufus on August 16, 2011 at 1:36 pm

    I think the “political window” for cellulosic ethanol has pretty much closed. All “Major” projects are probably, for all practical purposes, dead.

    We’re sliding into the 2nd inning of the “long recession,” or Great Depression II, whichever, and future oil prices are just too much “up in the air” for anyone to want to commit hundreds of millions on a Large-Scale Cellulosic, “First of a Kind” Plant.

    A handful of the more esoteric, proprietary-type projects will gather enough guvmint money, and Khosla-type financing to produce a little stuff, but there’s a good chance that, due to the experimental nature of the projects, none of them will be commercially viable, much less “reproducible.”

    In short, if I had to wager on it, I’d say we’re probably looking five or six years down the road to our first real stab at widespread cellulosic ethanol.

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  40. By rufus on August 16, 2011 at 1:40 pm

    And, maybe, more like 10 years.

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  41. By paul-n on August 16, 2011 at 1:46 pm

    @ Tim Weiman

    Your list what what the EPA “should do” sure sounds like a cop out for the cellulosic ethanol industry – you are asking the EPA to do what the industry itself should do.  Let’s take you points one at a time;

     

    (1) EPA should do an annual assessment of cellulosic ethanol production capacity.

    This one at least, is easy – it is zero.  The EPA should not report “capacity”, as this is very subjective.  Range Fuels had a “capacity” for millions of gallons per year, IF it worked.  But it didn;t, so the effective capacity was zero.  It is not up to the EPA to guess capacity.  All they should report is actual sales volumes of qualifying cellulosic ethanol – which to date is a round number.

    (2) EPA should determine a volume that is reasonable to expect the cellulosic industry to produce in the next calendar year.

    No, the industry should produce what they are able to produce. We have had four years of EPA making estimates, agreed to by industry, that industry then doesn’t meet.  And you think continuing this approach is somehow good?  If investors makes decisions to invest in cellulosic plants because of EPA estimates, and then those cellulosic companies fail, spectacularly,  to deliver on said estimates, who should the investors blame/sue.  The industry/companies can publish their own expectations, and if there are continually over-estimating, perhaps the SEC might want to start asking why.  The business of promising lots and delivering little is not exclusive to the cellulosic ethanol industry, and is not for the EPA to adjudicate – there are other regulatory bodies that should be looking is the false claims.

    (3) EPA should publish the names of the cellulosic ethanol producers, the locations of their plants and the volume each plant is expected to produce to achieve the industry total target.

    How does the EPA know this – only if the companies tell them,and the EPA has to take them on their word.  But having the EPA publish this somehow lends some sense of gov credibility, and this is plain wrong.  Let the companies publish their details and expectations – and answer for them. 

    (4) To encourage production, EPA should establish a reasonable “stretch” target.

    You have already suggested one target, that has never been met, and now another?  What have two targets when the industry has never even met one?

    (5) EPA should use the total industry target to establish the RVO – “renewable volume obligation” – for obligated parties.

    No, parties should not be obligated to do anything – because they  continually fail to meet them.  How meaningful are such obligations?  What are the penalties for non compliance?  What about a startup that is a “non-obligated company” that actually produces some cellulosic ethanol – what is their status if they couldn’t lobby to get into the “obligated club”?

    (6) Cellulosic ethanol producers who made the list of companies to determine total industry production capacity should be required to report to EPA and DOE each month on their production, inventory and sales activities.

    This I agree with, with the change being that, since the obligations are pointless, it should simply be that any party that proposes to produce cellulosic ethanol, must be registered and make such reports, and, at the point of first sale, must be inspected/audited to ensure the ethanol is actually cellulosic.

    (7) DOE (EIA) should publish the aggregate industry totals each month.

    Sure – pretty round numbers so far.

    (8) To ensure fairness to obligated parties, EPA should adjust obligated parties’ annual RVOs if the list of cellulosic ethanol producers, collectively, does not produce the established “stretch” target.

    “Adjusting their obligations” makes the obligations pointless.   

    The cellulosic industry should support such an approach. Taxing obligated parties for product that is not actually produced is not fair and isn’t politically sustainable. At the same time, potential cellulosic producers would be provided with a significant incentive to product the product – assuming they can actually do it.

    I’m sure they would support this, as they can hide behind EPA’s flexible obligations, and seemingly avoid consequences for non delivery.

    Obligated parties should support this approach because it fairly addresses their complaint about what is unfair about the current system.

    Doesn’t seem very fair to investors, or competitor who don;t achieve “obligated status” but do actually produce something

    Policy makers should support such an approach because it doesn’t abandon the long term goal of developing cellulosic fuels, but it does inject an element of realism: the task is much more difficult and will take much longer than the Congress envisioned when it passed the RFS 2 in 2007.

    If the task is truly this much more difficult, and takes that much longer – which it clearly is, and does, then why does the cellulosic industry continually say they can produce stuff “next year”?  Is the industry now ready to admit they can;t produce anything commercially for at least four years, or only if the price is $5/gal, or something?  

     

    Tim, you plan involves the EPA making  a complicates system of moving targets that, so far have never been met, and seem unlikely to, so what is the point? – it just seems like a bureaucratic boondoggle – and surely there have been enough of those.

     

    How about this for a more realistic plan, that can give some level of certainty;

    1.  The DoE (not EPA) will offer to pay a credit of $2/gal for cellulosic ethanol, for the first 100 million gallons produced each year from now till the end of, say 2015, and $1/gal for the next 100million.

    2. Anyone proposing to claim this credit must be registered./certified by the EPA to ensure their ethanol meets the definition of “cellulosic”

    3.  Any cellulosic ethanol actually produced in these years will displace an equal amount of corn ethanol, from that year’s mandate

    4.  And that’s it.

    Since every prediction to date has failed, we are giving up on predicting and  introducing a radical business concept – you only get paid if you produce something, and only for what you produce, and only when you produce it.

    BUT you do get a guaranteed level of payment, so there is your certainty .

    If the $2 credit, and four more years, is not enough, then the government should just give up on it altogether, and move on – it’s  not as if the cellulosic promoters won’t have had a fair chance to show their stuff.

     

     

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  42. By Wendell Mercantile on August 16, 2011 at 1:49 pm

    I think the “political window” for cellulosic ethanol has pretty much closed.

    What about the chemical, thermodynamic, and logistical windows? The politics mean little if no one finds a viable process that can scale up and also be continually supplied with feedstock from an economical source.

    Process, scale, and logistics are the operative words for successful cellulosic ethanol.

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  43. By rufus on August 16, 2011 at 1:56 pm

    The Cellulosic Producers’ Credit expires in 2012. The chances of getting it extended viat the Feinstein, Thune, Klobuchar Bill died when there was no “tax” bill to which to tie the amendment.

    In today’s political climate there is no chance that the cellulosic producers’ credit will be extended. W/O that extension, No One with any money is getting involved.

    Now, it’s just something to talk, and blog about. The Deal is Daid.

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  44. By Paul Winters on August 16, 2011 at 1:57 pm

    Robert Rapier said:

    Paul Winters said:

    BIO has a white paper available that explains the system.


     

    Paul, that link takes me to the home page for Industrial Biotechnology.

    RR


     

    Here’s the proper link to the paper: http://www.liebertonline.com/d…..2011.7.111

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  45. By Wendell Mercantile on August 16, 2011 at 2:26 pm

    The Cellulosic Producers’ Credit expires in 2012. W/O that extension, No One with any money is getting involved.

    Why does there always have to be a credit, subsidy, or mandate to make something happen?

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  46. By rufus on August 16, 2011 at 2:54 pm

    Wendell, since it’s now a moot point, I’m not going to bother with you on this.

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  47. By rufus on August 16, 2011 at 2:56 pm

    Obviously, $4.00 gasoline, and/or depression suits you, so there is nothing I could say that would change your outlook.

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  48. By Wendell Mercantile on August 16, 2011 at 3:01 pm

    How about this Rufus: Administration Pledges Half-Billion For Biofuels

    The federal government will spend up to $510 million over the next three years to develop “drop-in” biofuels for aircraft, ships, and ground transportation, for both military and civilian use, the Obama Administration announced on Tuesday.

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  49. By Paul Winters on August 16, 2011 at 3:15 pm

    Robert Rapier said:

    Paul, that’s just an exercise in semantics. If you mandate a product on me that doesn’t exist, and I have to buy credits because I can’t actually buy the product — then that is a penalty.


     

    Robert,

    Using the terms “penalty” and “product that doesn’t exist” is also semantics. If refiners and blenders were required to buy cellulosic biofuels at any price, I’m sure you’d see more of it available. You’d also likely see a few refiners rushing to buy up all available gallons — and locking it up tight in purchase contracts as early in the year as possible. They could then turn around and recoup their costs by reselling the RINs to other obligated parties, at an even higher price.

    The CWC was established to protect obligated parties from that situation. It is no more a penalty than other provisions of the Clean Air Act (since the RFS is part of the CAA). Does NPRA claim that it’s an unfair penalty that they can’t sell leaded gasoline any longer?

     

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  50. By Tim Weiman on August 16, 2011 at 3:21 pm

    Paul N,

    As an old school oil industry guy, I appreciate your skepticism about the EPA and cellulosic ethanol. Clearly, the schedule for developing this product – if it is developed at all – is going to be much different than what was envisioned by Congress when the RFS 2 was passed in 2007.

    As a result, there is no doubt Congress will revisit the RFS, probably in the next couple years. Already, there are key people in the advanced fuels business who openly question the cellulosic carve out.

    To me, the development of non food based alternatives to petroleum products is still a worthwhile goal, albeit one that will take decades not just a few years. The trick for government is to encourage progess without foolishly wasting the taxpayers money. That is why I proposed something along the lines I did.

    By the way, the company I am working with hasn’t promised anything to anybody, hasn’t taken any government money, is a well known, very substantial compaany but is not on the cellulosic ethanol radar screen. If they go forward with the project they are condering, it will be internally funded and won’t come on stream until about 2015 earliest.

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  51. By paul-n on August 16, 2011 at 3:56 pm

    Tim, 

    I wish your company well, and agree with the approach of not making promises – we have seen too much of that already, and of government paying for them.

     

    I just think the RFS is the wrong approach for developing cellulosic.  You can’t mandate technical breakthroughs, and that is what is clearly needed with cellulosic.  You can’t try to pick winners either, as we have seen how whoever hypes and lobbies the most gets picked.  So, I think the best thing the gov can do is guarantee a market, by offing a set price/ credit, for whenever stuff is actually produced.  This does not force refiners to play games, as Paul Winters would have them do,  by having a system that creates obligations to buy something that doesn’t exist, and then having a secondary system to limit such obligations!  They have already had to do this for several years, and likely for sevearl more before any cellulosic is produced.  Millions spent on creating and operating a bureaucratic system when there is ZERO physical product involved!  Only someone who gets paid to write and audit such systems could think it is a good idea.

     

    I think with cellulosic, it is time to clear the mess and simply say “we’ll pay if/when you produce it”, and let those who want to try it, get on with trying.

     

    This approach does not waste one cent of taxpayers money, until something is actually produced.  At which point, the gov is at least getting something – cellulosic ethanol – for it’s money.  The current system has wasted vast amounts for no production, and has rendered every target meaningless, so why bother continuing with it.  

    I think a large part of the problem is the celullosic industry has promoted itself as an industry “ready to produce”, when clearly it is not – it is still an R&D project.  So why not treat it like one, and remove the expectations/obligations for production, and just pay for the results, whenever someone  finally delivers them?

     

     

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  52. By Walt on August 16, 2011 at 5:46 pm

    Robert Rapier said:

    Walt said:

    I was at a biodiesel plant 2 weeks ago where they separate glycern from methanol, and resell the methanol.  He mentioned that he has buyers for methanol by the ethanol producers as they are buying it cheap, blending it with their ethanol and selling it to the gasoline blenders to make a better profit margin.  I believe this is legal up to 3% methanol in each gallon of gasoline.

     


     

    That reeks of a scam. Why? Because biodiesel producers have to use methanol in their process anyway, and what they recover will be less than they use. So why would they resell it instead of reuse it in their process? Only if the market is being distorted such that this methanol is being treated as a biofuel and is then eligible for the subsidies and mandates.

    But in fact, this methanol was produced from natural gas and is fed into the process as a part of the biodiesel reaction. Methanol isn’t produced in the process, it is simply recycled.

    RR


     

    It is not a scam Robert.  They are a biodiesel company that was not able to make money (like many) in biodiesel.  They converted to separating methanol from glycern for a number of older plants that cannot do it themselves.  They resell the methanol as a business model, as well as a couple other products made with the glycern.  It is owned by a large number of famers here.  They are straight guys and tough it out in the biodiesel sector like many, but learned a new business model to stay in business.

    Your wrong.  Methanol is not recycled in every biodiesel process.

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  53. By Tim Weiman on August 16, 2011 at 5:58 pm

    Paul N

    I would be surprised if Congress does not re-visit the RFS fairly soon (1-2 years), but can’t forecast what a revision will look like. Clearly, the corn guys will be arguing they can do more and they will seek to expand the corn based mandate. At the same time, the advanced fuels guys are probably going to argue that cellulosic should be rolled into the advanced category and the cellulosic carve out eliminated. Recent reports indicate they are already doing this.

    Your proposal for government to guarantee a market is interesting, but I do wonder if Congress would provide the funding. As bureaucratic as the current system is, if tweaked, it might be a less costly way to encourage cellulosic development.

    I’m seeing a more positive perspective on the cellulosic industry than what you portray. It is a large company which believes they are close to the technology breakthroughs required, but isn’t advertising it quite yet or asking for hand outs. As you suggest, they just want the assurance of a market if they actually build a plant and can produce the product.

    Keep in mind there are some old fashioned oil guys involved who want to see advanced fuels, including cellulosic ethanol, produced, but who are also quite realistic and believe we should be fair and reasonable to “obligated parties” – our former employers.

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  54. By rrapier on August 16, 2011 at 7:38 pm

    Walt said:

    Your wrong.  Methanol is not recycled in every biodiesel process.


     

    My point was that methanol isn’t actually produced in the process; any methanol that ends up in the glycerin is there because it was fed into the front end. So if it isn’t worthwhile for a biodiesel company to separate their own methanol, how can it be worth it to ship it to someone else and have them do it?

    The biodiesel companies that do this obviously find it cheaper to just buy fresh methanol, so the only way I could see someone separating it from glycerin and selling it is if they are getting a premium of some sort for doing so. So, yeah, it still sounds pretty fishy to me — and if they are getting any sort of preferential treatment that views this methanol as a biofuel — then it is fishy. If they aren’t, I don’t see how they can compete with methanol on the open market.

    RR

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  55. By rrapier on August 16, 2011 at 7:46 pm

    Paul Winters said:

    Robert Rapier said:

    Paul, that’s just an exercise in semantics. If you mandate a product on me that doesn’t exist, and I have to buy credits because I can’t actually buy the product — then that is a penalty.


     

    Robert,

    Using the terms “penalty” and “product that doesn’t exist” is also semantics.


     

    Paul, since there is no qualifying product available for purchase, then the product doesn’t exist. We can always come up with scenarios in which product could be made to exist, but that doesn’t change the fact that per EPA no qualifying product has yet been sold. So it isn’t semantics; it is just stating a simple fact per the EPA’s data.

    The CWC was established to protect obligated parties from that situation. It is no more a penalty than other provisions of the Clean Air Act (since the RFS is part of the CAA). Does NPRA claim that it’s an unfair penalty that they can’t sell leaded gasoline any longer?

    Wrong analogy. The right analogy would be to tell NPRA that in addition to selling leaded gasoline they have to sell a type of gasoline that doesn’t yet exist in commercial quantities. If they then had to pay for credits in order to meet that obligation that can’t be met because no product is available — then indeed that is a penalty. If you tell anyone who makes Product X that they have to start selling Product Y, and then require them to buy credits if Y isn’t available, then that is a penalty no matter the context. Wouldn’t you view it as a penalty if the ethanol industry had to cover the shortfall by coughing up the money for the RINs?

    RR

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  56. By rrapier on August 16, 2011 at 7:53 pm

    Paul N said:

    How about this for a more realistic plan, that can give some level of certainty;

    1.  The DoE (not EPA) will offer to pay a credit of $2/gal for cellulosic ethanol, for the first 100 million gallons produced each year from now till the end of, say 2015, and $1/gal for the next 100million.


     

    That is exactly the kind of system I have been thinking about. It is simple and to the point, and if all of these guys who claim they can produce it for $2 or $3 a gallon don’t respond to that, then the charade is up. There would be no more blaming the recession or oil companies.

    RR

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  57. By Walt on August 16, 2011 at 9:05 pm

    Robert Rapier said:

    Walt said:

    Your wrong.  Methanol is not recycled in every biodiesel process.


     

    My point was that methanol isn’t actually produced in the process; any methanol that ends up in the glycerin is there because it was fed into the front end. So if it isn’t worthwhile for a biodiesel company to separate their own methanol, how can it be worth it to ship it to someone else and have them do it?

    The biodiesel companies that do this obviously find it cheaper to just buy fresh methanol, so the only way I could see someone separating it from glycerin and selling it is if they are getting a premium of some sort for doing so. So, yeah, it still sounds pretty fishy to me — and if they are getting any sort of preferential treatment that views this methanol as a biofuel — then it is fishy. If they aren’t, I don’t see how they can compete with methanol on the open market.

    RR


    Robert,

    I’m not here to pick a fight.  The same thing happened over the gas flaring issue.  Believe what you want.  They have made a nice buisness out of buying the crude methanol and distilling it for resale.  This is often done as well with well known solvent recovery plants, and because it would never fit into your big oil/oil refinery mentality does not mean that it is “fishy”.  It is not fishy.  It is not high margin business, but like most tolling agreements or solvent recovery operations they try to process/buy something and make a reasonable profit.  In fact, there is more than 40 farmers in this plant and have with Michigan State University looked at various ways to make higher products from the glycern.  Today they sell the glycern to the coal industry who uses it.  They also figured out a way to make animal feed for local cattle and pig operations.  These are small business operators who don’t have the pedigree to operate a blog or write a book on how to fix our energy policy, but there is nothing fishy or a scam about what I initially wrote above.  In fact, I hope to send all my crude methanol to them for distillation and save myself another $5,000,000 or more in building my own facility.  They are just my type of guys…smart, ingenious and work hard. 

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  58. By rrapier on August 16, 2011 at 10:14 pm

    Walt said:

    Robert,

    I’m not here to pick a fight.  The same thing happened over the gas flaring issue. 


     

    I know. And just as was the case then, I see you getting agitated for no good reason. I am making what I believe are legitimate comments and asking legitimate questions. And I am very familiar with tolling operations; I have looked at the economics on many of them and they usually aren’t good. Especially if the company has an internal need for what they are sending off to be tolled. In that case, there are big losses in efficiency over what an integrated recovery cycle in the plant could achieve. So if I ran a biodiesel plant, I would certainly recover my own methanol if there was enough there to bother with. If there wasn’t, then nobody else will bother with it either.

    Where tolling can make sense is if you are extracting a high value speciality chemical. But not for a commodity chemical — unless something is distorting the market.

    So no reason for you to get agitated because I say it looks fishy. Any engineer is going to tell you that this sort of setup is odd in this case, and they will ask questions about the economics. If there are subsidies involved, then that could explain the economics — but in this case there should be no subsidies involved if they are treating the methanol as a biofuel. Your initial comments indicated that this might be the case with ethanol blenders using it — and then presumably collecting the credit. That is fishy no two ways about it. Or if you are offended by that word — let’s just say it would appear that the system is being gamed. Fossil-fuel produced methanol is collecting a credit intended for corn ethanol.

    RR

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  59. By paul-n on August 17, 2011 at 12:26 am

    Fossil-fuel produced methanol is collecting a credit intended for corn ethanol.

    I actually don;t see what is wrong with that.  We all know that ethanol is (currently) totally dependent on NG for its production, and it gets a credit.  methanol is also totally NG dependent for its production, so I don’t see why it should be treated any differently.

     

    Now, IF the ethanol lobby complains – and they might, then, obviously the solution to this nation threatening issue is that these alcholos that get the credit, should have to pay a debit for their fossil fuel inputs – in effect, a carbon tax.  Use NG, and you accordingly –  distill your ethanol using biogas, wood waste, solar hot water etc and you don;t pay.  Similarly, make your methanol from wood waste or whatever, and you don;t pay.  Anything that gets methanol into the fuel supply should be encouraged

    In the absence of that, i actually think methanol is fair game.  It has a negative EROEI compared to ethanol, but EROEI is not specified anywhere in the legislation about the credit.

    The legislation does say something about biologically sourced or some such, but so is “natural” gas, after all…

     

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  60. By paul-n on August 17, 2011 at 12:30 am

    It is simple and to the point, and if all of these guys who claim they can produce it for $2 or $3 a gallon don’t respond to that, then the charade is up. There would be no more blaming the recession or oil companies.

    And that, unfortunately, is precisely why the ethanol lobby won;t support such a system – the public can understand it, and it can’t be gamed.  And almost all American laws/systems these days seem to be set up with the primary intention of making the public think that A is being achieved, while in reality it is well connected companies making money by doing B in these artificial markets.

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  61. By perry1961 on August 17, 2011 at 12:46 am

    It’ll be nice if cellulosic fuels become available at an affordable price someday, but it’s not a must have. On a BTU basis, we already get more energy from domestic coal than from imported oil. Thanks to our massive reserves, coal could displace oil imports, and the resource would still be under-utilized. Synthetic fuel from coal isn’t presently economical, but it probably will be shortly, thanks to peak oil.

    Until then, we’ll continue to electrify transportation. We’ve got the world’s biggest reserves of coal, and some of the best natural gas, solar, wind, and geothermal resources. Making electricity is by no means a problem. As for cellulosic, it’s probably better to just burn the feedstock for electricity. At least for the foreseeable future.

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  62. By rrapier on August 17, 2011 at 3:44 am

    Paul N said:

    Fossil-fuel produced methanol is collecting a credit intended for corn ethanol.

    I actually don;t see what is wrong with that.  We all know that ethanol is (currently) totally dependent on NG for its production, and it gets a credit.  methanol is also totally NG dependent for its production, so I don’t see why it should be treated any differently.

     


     

    And that wasn’t my point either. I am all for equal treatment for methanol, but I also prefer transparency. If there was simply a direct credit for methanol, I don’t believe you would see the kind of thing that Walt is describing here.

    That situation still doesn’t make sense to me. If methanol can be sold to ethanol producers and blended in at 3%, you would expect them all to do it — unless there are some stipulations about that methanol that these guys have gotten around by recovering it from the glycerin. And if there are stipulations there should not be — because this methanol is no different than any other methanol produced from natural gas. So what I wonder about is whether it is for some reason being treated as “bio” methanol just because it was used in a biodiesel process.

    And that, unfortunately, is precisely why the ethanol lobby won;t support such a system – the public can understand it, and it can’t be gamed.

    In any case, I think I will put up a post on it. I think it is a workable idea, and right now is the time for discussing ideas like this. Otherwise, biofuel risks losing out on all incentives. So we need to move to incentives for actually delivering something.

    RR

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  63. By Walt on August 17, 2011 at 3:51 am

    Robert Rapier said:

     

    I know. And just as was the case then, I see you getting agitated for no good reason. I am making what I believe are legitimate comments and asking legitimate questions.


     

    If someone would have asked legitimate questions without using the word scam and fishy, I would have welcomed civil discourse on the topic.  There are a lot of older biodiesel plants that have not upgraded to recover the methanol from glycern.  It is foolish to send it to a disposal well when it could be sold for some revenue, or tolled to recover the methanol and glycern.  It is very true that low natural gas prices and some good heat exchanger efficiencies can make a process reasonably profitable.  Next week I’m building two 17 foot long shell & tube heat exchangers we designed (without any engineers) that will cost me $5K in stainless to replace VERY EXPENSIVE electric heaters and a costly refrigeration cooling system.  These are built every day in the oil & gas business by experienced non-engineers, and require very little maintenance compared to refigeration compressors and inefficiencies of electric heaters (whether run by a generator or by the grid or expensive solar panels).  I will pull another $25K out of my CAPEX and a lot of “repair kits” that seem to always be needed from the engineers who spec’d out the last design.

    These farmers might be running a scam or a fishy/questionable operation, but as I saw all the equipment the original engineers built into the plant that are basically worthless and sitting idle on the plant floor makes me shake my head and get really agitated.  It is always laughable in this industry how many engineers have flooded the market with hundreds of million’s of spent capital to meet the RSA and government grant guidelines, only to fold the plant down the road.  I cannot speak to what Obama just announced yesterday, but this is a LOT of money:

    Administration Pledges Half-Billion For Biofuels

    http://www.whitehouse.gov/the-…..try-and-en

     

    You can bet the farm that the same Silicon Valley funded companies are going to get all this money to protect the VC investors, and insure these IPO’s don’t go stumbling until these guys can exit their investment.  Those of us who have to live and die on practical applications and no subsidies (there is no gaming this methanol separation equipment to sell back the methanol to the market…as if there is something fishy it is on the ethanol guys using it to add before they sell to the gasoline blenders).  If there is a tax credit or economic benefit, I don’t know of any.  It is pure basic economics of supply and demand…and it is not specialty chemicals or fuels.  That business is for the bio-butanol and algae oil guys who are lining up for the Half-Billion dollars being handed out by the President to the usual people at the door with their “expert” engineers.

     

    Robert, I really look forward to reading your book.  Maybe one day if we get our technology to more profitable commercial operations in a trailer without government subsidies, I will find a ghost writer to tell the story how not to listen to what engineers tell you and don’t count on a sugar daddy (whether a wealthy business man or the federal government or a venture capitalist backed by government) to pay your bills.  I hope in your book you do get to disclose the plants you are building and the technology you have developed that is economically viable.  I know you have been at this for several years, and I for one am very excited to see the revealing of all your hard work.  Indeed, it will be mind blowing I’m sure as the market needs your technology solutions to get us on the right path.

    [link]      
  64. By Walt on August 17, 2011 at 4:17 am

    Robert Rapier said:

     

    And that wasn’t my point either. I am all for equal treatment for methanol, but I also prefer transparency. If there was simply a direct credit for methanol, I don’t believe you would see the kind of thing that Walt is describing here.

    That situation still doesn’t make sense to me. If methanol can be sold to ethanol producers and blended in at 3%, you would expect them all to do it — unless there are some stipulations about that methanol that these guys have gotten around by recovering it from the glycerin. And if there are stipulations there should not be — because this methanol is no different than any other methanol produced from natural gas. So what I wonder about is whether it is for some reason being treated as “bio” methanol just because it was used in a biodiesel process.


     

    I see the disconnect.  As I originally said, it is a biodiesel plant that is now converted separating methanol from glycern as a business.  They are not currently making biodiesel since up until January 2011 it was not profitable.  The economics to make biodiesel without the RINs was not making money for many smaller companies, so they either went out of business or came up with new business models.  The government came in to save biodiesel with RINs and now companies are getting top dollar for their biodiesel and making money again.

    What these guys are doing is taking the methanol/glycern blend and separating it to resell back to the biodiesel industry a little bit cheaper than the typical highest quality product by importers and distributors.  People might be surprised at some of the methanol prices that are being paid by the growing oil & gas industry, and it is not so simple as buying cheap methanol in some areas at all times.  In fact, domestic methanol is needed if it could compete with the large importers and distributors.  These guys are able to compete by running a simple business model selling the methanol, the glycern and making some feed for animals.  Nothing fishy…not a scam.  Just not high margin business.

    Of course, if they were producing biodiesel today and could figure out the RINs (which we hope could be workable for smaller producers) and the margin can be protected against “subsidy lost” then it would be work bringing in a lot of updated equipment.  Until then, there is no subsidy and if I can sell our methanol/ethanol blend to the ethanol industry for further sales to blenders, and find some sort of “government support” great.  If not, we will just feed the growing biodiesel or oil & gas market for methanol at competitive prices at larger scales.  It all boils down to natural gas prices at the source and at separation.  If prices stay low…the market will grow.  If natural gas prices rise…the market will suffer.  This is the OPEX that is the key no matter what the government games in the system, or takes away, in my opinion.

     

    [link]      
  65. By Walt on August 17, 2011 at 4:33 am

    Paul N said:

    It is simple and to the point, and if all of these guys who claim they can produce it for $2 or $3 a gallon don’t respond to that, then the charade is up. There would be no more blaming the recession or oil companies.

    And that, unfortunately, is precisely why the ethanol lobby won;t support such a system – the public can understand it, and it can’t be gamed.  And almost all American laws/systems these days seem to be set up with the primary intention of making the public think that A is being achieved, while in reality it is well connected companies making money by doing B in these artificial markets.


     

    This is exactly right…and what is worse that the average business person pours over the documents and still cannot understand how to follow the system to get the credits or the subsidies.  It is designed to be so complex with all these trigger points that most just give up and don’t even try.  The average small business is faced with little or no support.  Whether it is the methanol lobby, the ethanol lobby, the Open Fuel Standard Act “promoters”, they don’t reach out to anyone that is not going to play the games.  In fact, they will not only shut the door, they will do what they can to see that the small companies are ignored.  The lobby system is really seriously broken, and I’ve tried to start a new methanol lobby, but it is a lot of work and the more you dig into the requirements it is really only designed for the largest companies to fund.  If people think the ethanol lobby has influence and filled with “well connected companies” (as Paul said) just take some time to study the methanol lobby.  If the open fuel standards act does get approved, you can bet there will be a small handful of companies lining up for all the subsidies or any government guarantees to build these multi-billion dollar plants needed to promote the lobby agenda.  They will crush us small businesses…no doubt.

    The system is broken at the core.  I hope it changes with the next administration, but I don’t hold out much hope for the small business.

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  66. By rrapier on August 17, 2011 at 12:44 pm

    Walt said:

    Robert, I really look forward to reading your book.  Maybe one day if we get our technology to more profitable commercial operations in a trailer without government subsidies, I will find a ghost writer to tell the story how not to listen to what engineers tell you and don’t count on a sugar daddy (whether a wealthy business man or the federal government or a venture capitalist backed by government) to pay your bills.  I hope in your book you do get to disclose the plants you are building and the technology you have developed that is economically viable.  I know you have been at this for several years, and I for one am very excited to see the revealing of all your hard work.  Indeed, it will be mind blowing I’m sure as the market needs your technology solutions to get us on the right path.


     

    Walt, I had plenty of opportunity to go work for promoters. In many cases these are people who haven’t gotten to any sort of demonstration scale, and yet are still making grandiose claims about their product. Companies like Changing World Technologies and Range Fuels both claimed they could make fuel for a fraction of the cost they actually could when their technology was still at lab scale, got government to kick in money, and then failed to deliver (when it was obvious to any engineer familiar with their scheme that this was the likely outcome). One thing I will be explaining in the book is how to recognize companies that fall into this category.

    So it is possible that I may fail, but I won’t be over-promising and spending your tax dollars in the process. I turned down inquiries from people that I felt were hyping their technology and were at high risk of grossly over-promising what they could deliver. So your sarcasm is really highly misplaced.

    RR

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  67. By Wendell Mercantile on August 17, 2011 at 11:35 am

    It is designed to be so complex with all these trigger points that most just give up and don’t even try.

    That’s the same thing that happens with the Federal tax code. It’s mostly written by lobbyists and corporate lawyers. They can read it and know exactly what is in it and how to take advantage of it. Most normal folk can’t understand it, and don’t have the time or inclination to learn, or the money to hire someone who does.

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  68. By Walt on August 17, 2011 at 1:19 pm

    Robert Rapier said:

    I turned down inquiries from people that I felt were hyping their technology and were at high risk of grossly overpromsing what they could deliver. So your sarcasm is really highly misplaced.
    RR


     

    Fair enough.  As I tell all critics of us developing new technology from the ground up, let’s see you do it better and cheaper.  Engineers are always the first to walk from the challenge as seldom will they use their own money to fail and start over again, and again, and again.  Unfortunately, many bloggers out there in the marketplace only support those technologies that have received lots of government funding or VC backed funding thinking they must be the best of the best.  Just watch what they write before and after these IPO’s.  Few look past the headlines as you know.

     

    I’m still looking at the Solazyme Form S-1 Registration Statement hoping to find hard numbers on the CAPEX and OPEX of these new planned commercial plants to get their “cost of production” below $3.44 per gallon (page 1).  When I saw Gevo spend all that money buying up plants in several locations, and then announce recently they are going to go into production to start providing “samples” for customers to evaluate and start a “pre-sales” marketing program my stomach turned.  You can bet both these companies are at the door for the new Obama half billion for drop-in fuel replacements.  I would not be surprised whatsover if they both walked away with $100 million each for drop-in fuels commercialization.  They went public, raising $100+ million and my guy feeling is that neither of them will be able to raise another $100 million+ from the market.  They are going to need to get it from Uncle Sam in this next round.  Let’s see…I could be wrong.

     

    In regard to my being critical of these recent IPO’s…I only am because I have an interest in this fight.  If things go well by the end of this month, or worst case by the end of September we will be sending full production samples for distillation and have complete samples for the customer “pre-sales” program as Gevo calls it.  As I tell all the engineers who want “quality certificates” to meet or beat the standards out there, we can beet any quality if you want to put money into the best distillaiton towers and equipment.  If you are too sketpical, then go build a $1 billion dollar plant yourself and stop the sarcasm/skepticism until you start production yourself.  If you succeed with traditional technology and I loose with something new, than hammer on me all you want…I can take the heat…but I will keep trying.

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  69. By rrapier on August 17, 2011 at 1:31 pm

    Walt said:

    Robert Rapier said:

    I turned down inquiries from people that I felt were hyping their technology and were at high risk of grossly overpromsing what they could deliver. So your sarcasm is really highly misplaced.

    RR


     

    Fair enough.  As I tell all critics of us developing new technology from the ground up, let’s see you do it better and cheaper.  Engineers are always the first to walk from the challenge as seldom will they use their own money to fail and start over again, and again, and again. 


     

    In fairness, that isn’t really the role of the engineer, it is the role of the entrepreneur. The skill set that makes an engineer good at their job isn’t the same skill set required to commercialize a technology. One requires a good set of technical problem solving skills, and the other requires good business skills. There is some overlap in each case, but the best engineer isn’t likely to be the best entrepreneur.

    If you succeed with traditional technology and I loose with something new, than hammer on me all you want…I can take the heat…but I will keep trying.

    Just to reiterate, I don’t criticize failure. As I have said many times, that is to be expected. I get critical when I am forced to help subsidize the failure that resulted from someone hyping technology that did not deliver per the hype. There are many cases where someone attempted something and failed. You won’t find my criticisms of those people — except when there was more involved than simply trying and failing.

    RR

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  70. By Wendell Mercantile on August 17, 2011 at 1:55 pm

    Rufus~

    Forget that flex-fuel vehicle parked in your drive, here’s the car I can’t wait to see you driving: Tiny block of thorium could power your car forever

    [link]      
  71. By Walt on August 17, 2011 at 2:12 pm

    Robert Rapier said:

    Just to reiterate, I don’t criticize failure. As I have said many times, that is to be expected. I get critical when I am forced to help subsidize the failure that resulted from someone hyping technology that did not deliver per the hype. There are many cases where someone attempted something and failed. You won’t find my criticisms of those people — except when there was more involved than simply trying and failing.

    RR


     

    There is a balance here that is necessary to consider.  I have always called it the need to have a passion and belief in one’s product or service vs. those who take other people’s money to hype some sort of exit strategy from the deal.  The most hype I see come from engineers, and what I mean by that word in the context of my criticism are financial engineers.  You can call them entrepreneurs and let engineers off the hook, but some of the brightest engineers I’ve met are chemical engineers and mostly overly cautious.  My criticism is directly at the new brand of financial engineers who several years ago started cooking the books with quarterly reports, then burying problems in footnotes and now they package utter garbage to make it look like prime rib.  I have a real distrust and disguist for these engineers who are flocking out of wall street and the VC community into main street.  Not a week goes by that some engineer wants to show me how to package technology into the market.  It is just hype.  What I want to see is basic equipment costs and at 10-15% margin of error for honest mistakes…not S-1 filings where you cannot see anything except for tens of millions of annual losses and lots of spoke filled market projections.  I hope there would be some agreement as to those who promote the hype or even something bordering on a scam vs. those who honestly endeavor to bring passion and honest labor to problems which may or may not be solved without a public or private belief it is possible…technically and financially.

     

    This is all I will say.  I keep intending to walk away from the blog, but leading up to the election it is getting harder to not voice concern about what Wall Street (in my opinion) is doing to the global market, and how their influence in Washington is going to have all of us middle class living in even more frustration.

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  72. By russ on August 17, 2011 at 3:01 pm

    Walt – To mix engineers with the financial shysters you are talking about is dishonest – just a way to weasel out of the arguement?

    There is no such thing as a ‘financial engineer’.

    [link]      
  73. By paul-n on August 17, 2011 at 3:25 pm

    RR wrote;

    And that wasn’t my point either. I am all for equal treatment for methanol, but I also prefer transparency. If there was simply a direct credit for methanol, I don’t believe you would see the kind of thing that Walt is describing here.

    I agree that transparency is the key, and missing ingredient here.  I am being slightly facetious, effectively saying that the methanol production is just as “opaque” as ethanol, so it might as well get the same ridiculous credit in the mandated market.

    I welcome the idea of simple and transparent systems.   As Wendell says, they all become so complex like the tax code that you have to hire a professional to understand it for you, after the gov hired professionals to write it in the first place, and then they hire more professionals to track/audit/verify it.  For any thermodynamic process where you have so much/many parasitic loss, you will not have an economic process.

    Yet government loves creating these complex systems – it just can;t help itself, each extra little bit/clause/exemption is a bone thrown to satisfy some special interest group, and the end result is almost unworkable and does not achieve what was desired – a real example of the “camel is a horse designed by committee” 

    I look forward to your post on this!

    [link]      
  74. By biocrude on August 17, 2011 at 3:43 pm

    @ Walt, that makes sense now that you explain that said biodiesel producers have changed their business model to rerefine glycerin and extract one of the high value alcohols (methanol) out of it, and purify the glycerin as well.  If you can’t get your glycerin under 1% methanol content, it isn’t worth much. On the other hand, if you can distill it, clean it up and get it certified as Pharmaceutical grade, now you are talking good money for that glycerin.  Take it up one more notch, and get it blessed Kosher, and you are really cooking!   But, if this was a biodiesel plant, and they were selling the methanol they recovered would be ridiculous as it is used in the process as both you and RR know.

     

    Speaking of methanol, where’s Wendell?  Methanol is used in the production of biodiesel and you love methanol and diesel engines, my question for you is are you currently using a biodiesel blend in your TDI?  Not that your TDI isn’t awesome enough on it’s own, but it would be way better with a little biodiesel in ‘er.  Rufus has E85 in his FFV…

     

     

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  75. By biocrude on August 17, 2011 at 3:47 pm

    @ Wendell and RR, 

    Something that I saw today and got me thinking was that the US Government has actually subsidized petroleum infrastructure in the USA during WW II.  FDR helped build pipelines from Texas and Oklahoma to the East Coast and big refineries because German U-boats kept sinking oil tankers at sea.  

    Thoughts?  

    Quasi source here

    “Throughout WW II, product systems grew rapidly along the eastern seaboard. 48 US oil tankers were sunk in the early stages of the war showing the US vulnerability to such attack. This quickly led to the expansion of land based large diameter pipelines carrying crude oil and products from areas such as Texas and Oklahoma to East Coast consumer states.

    Near the end of the war, pipeline regulation became the responsibility of the US Interstate Commerce Commission who introduced the notion of reasonable returns in the 8 percent to 10 percent range.”

    [link]      
  76. By biocrude on August 17, 2011 at 3:52 pm

    O/T but, Michelle Bachmann has the energy understanding of a kindergartner.  I can already see the headline: Donald Trump replaces Steven Chu as Secretary of Energy… 

     

    2011-08-17 02:30:58 EDT

    ***BACHMANN VOWS AS PRESIDENT TO LOWER GASOLINE BELOW
    $2/GAL

       At a campaign
    event earlier today, Michele Bachmann vowed that if elected president, she
    would ensure that gasoline prices fell to below $2/gal.

       The Republican
    presidential candidate, fresh off of her win from the Iowa Straw Poll, told a
    crowd in Greenville, S.C., that the day that Barack Obama became president,
    gasoline prices averaged $1.79/gal. “Look at what it is today,” she
    told the crowd, according to several news reports. “Under President
    Bachmann, you will see gasoline come down below $2 a gallon again. That will
    happen,” she said.

       According to
    OPIS data, in association with Wright Express and AAA, the average price for a
    gallon of gasoline is currently $3.584/gal. Also using OPIS data, on Jan. 20,
    2009 — Obama’s first day in office — the average price of gasoline was
    $1.843/gal.

       Bachmann didn’t
    provide details on how she would lower the price of gasoline, which is tied to
    the price of oil.

       However,
    according to information on Bachmann’s campaign website, the major reason for
    the run-up in U.S. gasoline prices “is this administration’s determination
    to lock up and raise the price of America’s abundant energy resources,” by
    blocking oil drilling. “The government has conservatively estimated that
    America’s offshore reserves alone include approximately 86 billion barrels of
    recoverable oil and 420 trillion cubic feet of natural gas.

    Many of these resources are off limits due to various
    moratoria and restrictions, many of which President Obama previously pledged to
    lift,” her website explained.

       “As
    president, I will work to lift the restraints that keep America from energy
    security. I will fight to increase access to the billions of barrels of oil and
    trillions of feet of natural gas on the Outer Continental Shelf and reverse the
    administration’s ‘permatorium’ in the Gulf of Mexico,” Bachmann added on
    her website.

       –Rachel Gantz, rgantz@opisnet.com

    [link]      
  77. By Wendell Mercantile on August 17, 2011 at 4:01 pm

    FDR helped build pipelines from Texas and Oklahoma to the East Coast and big refineries because German U-boats kept sinking oil tankers at sea. Thoughts?

    I’d say that was a smart move. One of the reasons we built the Interstate highway system was also to be able move material rapidly in a crisis.

    [link]      
  78. By Walt on August 17, 2011 at 4:07 pm

    russ said:

    Walt – To mix engineers with the financial shysters you are talking about is dishonest – just a way to weasel out of the arguement?

    There is no such thing as a ‘financial engineer’.


     

    http://en.wikipedia.org/wiki/F…..ngineering

    http://www.ieor.columbia.edu/p…..index.html

    http://www.haas.berkeley.edu/MFE/

     

    I don’t care how you define it.  What I care about is those who publicly represent themselves as financial engineers.  My point was that it is growing and growing rapidly.  I should clarify as well I’ve seen also some inferior chemical engineers as well, and so it was not a sweeping statement that will only puff up some who think all chemical engineers are brilliant and all financial engineers are “financial shysters”.  That was not the point.

     

    I’m outa here.  I have a lot of pipe to bend next week, and code to help develop for new controls in the field.  I’m just a weasel and need out.

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  79. By rrapier on August 17, 2011 at 4:10 pm

    Biocrude said:

    @ Wendell and RR, 

    Something that I saw today and got me thinking was that the US Government has actually subsidized petroleum infrastructure in the USA during WW II.  FDR helped build pipelines from Texas and Oklahoma to the East Coast and big refineries because German U-boats kept sinking oil tankers at sea.  

    Thoughts? 


     

    I agree that petroleum has been subsidized in many ways. Tomorrow I will have a post on a different model for subsidizing biofuels.

    “Under President Bachmann, you will see gasoline come down below $2 a gallon again. That will happen,” she said.

    Wouldn’t it be nice if politicians were held accountable for making ridiculous claims like this? She has never struck me as the brightest bulb in the box.

    RR

    [link]      
  80. By rrapier on August 17, 2011 at 4:17 pm

    Walt said:

    I hope in your book you do get to disclose the plants you are building and the technology you have developed that is economically viable.  I know you have been at this for several years, and I for one am very excited to see the revealing of all your hard work.  Indeed, it will be mind blowing I’m sure as the market needs your technology solutions to get us on the right path.


     

    By the way, I have pointed this out before, but maybe you have never seen it. One of the things that we do is very public, but it’s all in German. My boss owns this company, which has partnered with Volkswagen to put miniature CHP plants in people’s houses:

    http://www.lichtblick.de/h/index.php?s=1

    It’s all in German, but if you read a little German you can get an idea of the plants that are being built and the technology being developed.

    RR

    [link]      
  81. By mac on August 17, 2011 at 6:13 pm

    CHP from scavenged heat losses ? Probably far more economical than binary heat transfer from geothermal wells and probably far less expensive.

    Bravo !!

    [link]      
  82. By OxyMaven on August 17, 2011 at 10:09 pm

    Just a couple of observations on the original post:
    BIO sent a letter to Bush in Jan 2007 recommending the cellulosic mandated volumes in the RFS2 be raised to 3 bil gallons in 2016 vs the RFS1 mandate of 250 mil gal in 2013. Congress eventually increased the final RFS2 to 4.25 bil gal in 2016.

    How accurately EPA estimates annual cellulosic production is important for future years. A $6 mil ‘penalty’ isn’t horrible in 2011, although it is unnecessary. But, for example, the 2022 mandate is for 16 bil gal of cellulosic. So that would mean an average of about 2 bil gal year of new capacity is needed if large scale development begins in 2014. That means every year, EPA will somehow have to evaluate maybe 40-60 or more new plants that are expected to begin production and figure out how much they might actually produce in their initial year of operation. Clearly they could easily be making ‘mistakes’ of $200 mil or more in their estimates of annual production capacity, and that is not a trivial penalty to gasoline blenders. I’m not suggesting I think that we’ll see 40-50 new plants in any year any time soon, but the potential is there for this to be a very onerous and undeserved penalty.

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  83. By Wendell Mercantile on August 18, 2011 at 12:12 am

    …my question for you is are you currently using a biodiesel blend in your TDI?

    Biocrude,

    No, I’m not. There are no filling stations around here that sell it. I did fill up with bio-diesel once when traveling through Pennsylvania — it worked fine.

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  84. By JP on October 1, 2011 at 9:06 pm

    Robert Rapier said:

    Another Year, Another Chapter

    In what is becoming an annual ritual, the EPA is once more scaling back the cellulosic ethanol mandate for 2012. The 2007 Energy Independence and Security Act mandated that we would use 100 million gallons of cellulosic ethanol in 2010, 250 million gallons in 2011, and 500 million gallons in 2012. I said quite explicitly from the start that this was wishful thinking, and that there was practically zero chance of meeting these mandates. In one article, I wrote:

     


     

    Ahh, but here’s the savior: http://www.fulcrum-bioenergy.c…..index.html  Smile

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  85. By Walt on October 3, 2011 at 10:00 am

    Here comes the real muscle to “jump start” more ethanol subsidies:

     

    —————————

    That is the purpose of the United States Energy Security Council,
    a bipartisan group introduced to the public last week in Washington,
    which includes former Secretary of State George P. Shultz and two former
    secretaries of defense, William J. Perry and Harold Brown, as well as
    three former national security advisers, a former C.I.A. director, two
    former senators, a Nobel laureate, a former Federal Reserve chairman,
    and several Fortune-50 chief executives (including a former president of
    Shell Oil North America, John D. Hofmeister).

    The time has come to strip oil of its strategic status. We owe it to those who lost their lives on 9/11 and in its aftermath, and to those whose fate still hangs in the balance.

    ————————–

     

    http://www.openfuelstandard.or…..tandard%29

     

    Watch the money that gets poured into one technology that converts CO2 into methanol…and watch who push that agenda.  It won’t be all just about more ethanol subsidies as the power lobbies are gathering steam with a new fuels plan.  They know that cannot get any more money from the government without the Open Fuel Standard Act passed to access the fuels market…ethanol cannot be used for chemicals.  It is the only option to get more fuels for corn growers/ADM and Silicon Valley funded cellulosic technologies.

     

    I’m in favor of the act to mandate choice to consumers and spending the $100 per car to make them flex fuel capable, but what I oppose is choosing one technology over the other for government funding even if the technology does not work or is not competitive.

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