Biofuel Blitz

Farm Groups Push Biodiesel Tax Incentive

2009-11-05T08:44:00.000-08:00

WASHINGTON-(Farm Progress)--The biodiesel tax incentive is set to expire on December 31, 2009. The tax incentive is vital to the U.S. biodiesel industry and its extension is a top priority, reports the American Soybean Association.

If the biodiesel tax incentive is allowed to expire, the production and use of biodiesel in the U.S. will come to a halt, argues ASA. The economics of biodiesel at this stage will simply not work absent the federal tax incentive. ASA lobbyists say it is still unclear when, or if, Congress will act on tax legislation that addresses the biodiesel tax incentive.

Senators Maria Cantwell, D-Wash., and Charles Grassley, R-Iowa, have introduced S. 1589, the Biodiesel Tax Incentive Reform and Extension Act of 2009. This bill would extend the credit for five years and restructure it as a production excise tax credit. ASA has asked its members to contact their Senators to ask them to add their name as a cosponsor of S. 1589. Senator Dick Durbin, D-Ill., has already agreed to co-sponsor the bill.

Big Boys Developing Biofuel

2009-09-01T08:30:00.000-07:00

DECATUR, Ala.-(BeyondFossilFuel.com)--Two important energy developments have come about last month.

ExxonMobil, which is the largest oil company in the world, is devoting $600 million to the development of biofuels from algae. Half of the funds will go to a bioengineering startup called Synthetic Genomics Inc., founded by bioresearch pioneer J. Craig Venter.

DuPont Co. and British Petroleum will be partnering to make butanol which is a heavy alcohol made from biomass. Biomass is fermented to make the butanol. This has huge advantages over ethanol which is primarily made from corn. Biomass is basicly waste organic material that unlike corn is not consumed by people and animals making the feed stock tremendously cheaper. Unlike ethanol, butanol is compatible with the existing infrastructure of gasoline pipelines, trucks, pumps and tanks. Butanol is not subsided like ethanol.

Why Oil Still Has a Future

2009-09-01T08:27:00.000-07:00

NEW YORK-(Wall Street Journal)--On Aug. 28, 1859, in the backwoods of northwest Pennsylvania, the first successful oil well went into production in the United States, ushering in an energy revolution that would make whale oil obsolete and eventually transform the industrial world. Yet 150 years later, even as demand increases in developing countries, oil’s position in the global economy is being questioned and challenged as never before.

Why this debate about the single most important source of energy—and a very convenient one—that provides 40% of the world's total energy? There are the traditional concerns—energy security, diversification, political risk, and the potential for conflict among nations over resources. The huge shifts in global income flows raise anxieties about the possible impact on the global balance of power. Some worry that physical supply will run out, although examination of the world's resource base—including a new analysis of over 800 oil fields—shows ample physical resources below ground. The politics above ground is a separate question.

But two new factors are now fueling the debate. One is the way in which oil has taken on a second identity. It is no longer only a physical commodity. It has also become a financial asset, along with stocks, bonds, currencies and the rest of the world's financial portfolio. The resulting price volatility—from less than $40 in 2004, to as high as $147.27 in July 2008, back down to $32.40 in December 2008, and now back over $70—has enormous consequences, and not only at the gas station and in terms of public anger. It makes it much more difficult to plan future energy investments, whether in oil and gas or in renewable and alternative fuels. And it can have enormous economic impact; Detroit was sent reeling by what happened at the gas pump in 2007 and 2008 even before the credit crisis. Such volatility can fuel future recessions and inflation.

That volatility has become an explosive political issue. British Prime Minister Gordon Brown and French President Nicolas Sarkozy recently called in these pages for a global solution to "destructive volatility," although they added that there are "no easy solutions."

The other new factor is climate change. Whatever the outcome of the upcoming mammoth United Nations climate-change conference in Copenhagen this December, carbon regulation is now part of the future of oil.

But are big cuts in world oil usage possible? Both the U.S. Department of Energy and the International Energy Agency project that global energy use will increase almost 50% between 2006 and 2030—with oil still providing 30% or more of the world's energy.

The reason is something else that is new—the globalization of demand. No longer are the growth markets for petroleum to be found in North America, Western Europe and Japan. The United States has already hit "peak gasoline demand."

The demand growth has now shifted, massively, to the fast-growing emerging markets—China, India and the Middle East. Between 2000 and 2007, 85% of the growth in world oil demand was in the developing world. This shift continues: This year, more new cars have been sold in China than in the United States. When economic recovery takes hold, what happens in emerging countries will be the defining factor in the path for overall consumption.

There are two obvious ways to temper demand growth—either roll back economic growth, or find new technologies. The former is not acceptable. Thus, the answer has to lie in technology. The challenge is to find alternatives to oil that can be economically competitive—and convenient and reliable—at the massive scale required.

What will those alternatives be? Batteries and plug-ins and other electric cars—today's favorite? Advanced biofuels? Natural-gas vehicles? The evolving smart grid, which can integrate plug-ins with greener electric generation? Or advances in the internal combustion engine, increasing fuel efficiency two or three times over?

In truth, we don't know, and we won't know for some time. For now, however, it is clear that the much higher levels of support for innovation—and large government incentives and subsidies—will inevitably drive technological change.

For oil, the focus is on transportation. After all, only 2% of America's electricity is generated by oil. Until recently, it appeared that the race between the electric car and the gasoline-powered car had been decided a century ago, with a decisive win by the gasoline-powered car on the basis of cost and performance. But the race is clearly on again.

Yet, whatever the breakthroughs, the actual impact on fuel use for the next 20 years will be incremental due to the time it takes to get large-scale mass production up and running and the massive scale of the global auto industry. My firm, IHS CERA, projects that with aggressive sales volumes and no major bumps in the road (unusual for new technologies), plug-in hybrids and pure electric vehicles could constitute 25% of new car sales by 2030. But because of the slow turn-over of the overall fleet, gasoline consumption would be reduced only modestly below what it would otherwise be. Thereafter, of course, the impact could grow, perhaps very substantially.

But, in the U.S., at least for the next two decades, greater efficiency in the internal combustion engine, advanced diesels, and regular hybrids, combined with second-generation biofuels and new lighter materials, would have a bigger impact sooner. There is, however, a global twist. If small, low-cost electric vehicles really catch on in the auto growth markets in Asia, that would certainly lower the global growth curve for future oil demand.

As to the next 150 years of petroleum, we can hardly even begin to guess. For the next 20 years at least, the unfolding economic saga in emerging markets will continue to make oil a global growth business.

VIDEO: Ethanol Boom Affecting Farms, Gas Pump

2009-08-14T14:22:00.000-07:00

VeraSun Asset Sale Draws Plenty of Bidders

2009-03-18T06:10:00.000-07:00

WASHINGTON-(Farm Progress)--Wire reports issued late Tuesday report that Archer Daniels Midland Co. bid on some of bankrupt VeraSun Energy Corp.'s ethanol plants, but in the end didn't buy. ADM declined to say which of the 17 VeraSun facilities it bid on.

A VeraSun spokesperson apparently didn't disclose results of the auction, which began Monday and continued into Tuesday because the event drew multiple bidders - according to reports. A report on the auction is expected in the bankruptcy court later today.

Valero Energy Corp., an independent refiner, placed a public bid for five assets, but there's no word on the results of that effort.

VeraSun filed for Chapter 11 bankruptcy last October, as the result of what many observers call a poorly executed risk management strategy. The assets for sale in the effort have drawn a lot of interest due to their low price. The floor bid for assets from Valero were about 50 cents per gallon of ethanol production capacity - which is about a quarter of the plants' original production cost.

In a separate press report, there's word that ADM is also looking at purchasing the Brazilian ethanol group Unialco, along with a mill belonging to Da Mata. ADM has not commented to the media on this move, but at least one shareholder at Unialco says a memorandum of understanding has been signed in that deal.

A potential Brazilian ethanol capacity purchase would still face the import tariff stumbling block of a 54-cent-per-gallon charge. Some observers say the news of the ADM move may be wishful thinking for Unialco shareholders.

Another Ethanol Producer on Financial Ropes

2009-03-17T06:03:00.000-07:00

WASHINGTON-(Farm Progress)--Ethanol maker Aventine Renewable Energy Holdings, Pekin, Ill., says this week that it has defaulted on some debt payments and could be seeking Chapter 11 bankruptcy protection, according to wire service reports.

Shares for the company fell to 12 cents on the news, and the company reports it is working to raise more capital. In addition, it is seeking equity financing or a buyer for all or part of the company, but will choose bankruptcy if those efforts fail.

VeraSun, a larger ethanol maker, slipped into bankruptcy last fall. The challenge is shrinking ethanol margins as gasoline prices have fallen. And despite the renewable fuel standard, the price for the renewable fuel hasn't kept pace with production costs.

The company reported a fourth-quarter loss of $36.9 million compared to a profit of $3.3 million a year earlier. The company reports it does not have the cash to make a $15 million interest payment, or to pay more than $24 million it owes a builder for plant construction. Sales at the company rose $537.2 million.

Interior Secretary Orders Renewable Energy Projects

2009-03-16T06:06:00.001-07:00

WASHINGTON-(Farm Progress)--Secretary of the Interior Ken Salazar has issued a Secretarial Order making the production, development and delivery of renewable energy top priority for the Department of the Interior. While signing the order, the Secretary said, "With job losses continuing to mount, we need to steer the country onto a new energy path. One that creates new jobs, and puts America out front in new, growing industries.

The order also establishes an energy and climate change task force that will identify specific zones on U.S. public lands where Interior can facilitate a rapid and responsible move to large-scale production of solar, wind, geothermal, and biomass energy. Salazar said they will assign a high priority to identifying renewable energy zones and completing the permitting and appropriate environmental review of transmission rights-of-way applications.

Interior manages one fifth of the country's landmass, over 1.7 billion offshore acres, and lands with some of the highest renewable energy potential in the nation. Interior's Bureau of Land Management has identified about 21 million acres of public land with wind energy potential in the 11 western states and about 29 million acres with solar energy potential in the six southwestern states. There are also 140 million acres of public land in western states and Alaska that have geothermal resource potential.

Corn and Ethanol Industries Fire Back Following Ethanol Attacks

2009-02-13T06:08:00.000-08:00

WASHINGTON-(Farm Progress)--Earlier this week a coalition represented by the Environmental Working Group and the Grocery Manufacturers Association made claims that ethanol causes more environmental harm than good, and requested a freeze by the federal government on the current levels of the Renewable Fuels Standard.

National Corn Growers Association President Bob Dickey says the groups are just trying to stir up fear and that ethanol is having a positive impact environmentally and economically. He says science has backed that up time and time again including in a study released by the University of Nebraska earlier this year that shows the many benefits of ethanol.

"Ethanol use today reduces greenhouse 59% compared to gasoline," Dickey says. "The production and use of 6.5 billion gallons of ethanol in 2007 replaced 228 million barrels of imported oil valued at $16 billion. Ethanol experts expect those numbers to grow and ethanol has also provided more than 260,000 jobs across the economy."

Dickey also cited a report released in January by the Keystone Alliance that farmers are producing more corn in a more sustainable way, which dispels claims that ethanol is hurting the environment and increasing food prices.

The coalition has been using a report released last week by the University of Minnesota to back their claims but after analyzing the report the Renewable Fuels Association says that these claims are based almost entirely upon insufficient and extremely uncertain analysis of potential land use changes.

"The finding that troubled us the most was that corn ethanol increases greenhouse gas emissions compared to gasoline based on the fact that large amounts of CRP land are going to be needed to satisfy increased demands for corn," said RFA Vice President of Research and Analysis Geoff Cooper. "We certainly don't agree with that assumption and believe that we are not going to need substantial new amounts of land. The increases in corn demand resulting from ethanol are going to be met through higher yield per acre."

If the authors' assumed land use change emissions are removed from the analysis, the paper suggests average corn ethanol reduces greenhouse gases by 30% compared to gasoline and advanced corn ethanol reduces GHGs by 46%.

"Our position has been and continues to be that the analysis around land use change is very much flawed and very much in its infancy," Cooper says. "So to assign emissions from potential land use changes to the ethanol lifecycle is disingenuous. Until we have better models and better methods for more accurately measuring land use change, we should not be rushing to judgment on what the emissions associated with land use change truly are."

Ultimately the University of Minnesota paper relies on debatable methodologies for which no consensus exists, fails to make appropriate comparisons between ethanol and gasoline, and fails to provide important details on key assumptions so Cooper says it should be seriously questioned and require careful scrutiny.

Valero Gets Corny, Plans to Buy VeraSun's Ethanol Plants

2009-02-09T11:53:00.001-08:00

SAN ANTONIO, Texas-(Salon.com)--Massive oil refiner Valero Energy has been taking stakes in biofuel startups over the last year, including algae fuel maker Solix Biofuels, and cellulosic ethanol maker ZeaChem.

But now the company has a different sort of biofuel assets in mind - not next-gen technology, but the corn ethanol plants of bankrupt ethanol producer VeraSun.

VeraSun said late Friday that it is in the process of selling all of its assets to Valero for $280 million.

Click HERE for the full story.

Ethanol Production Will Have To Increase To Meet Government Mandates

2009-01-20T06:23:00.000-08:00

AMARILLO-(TAMU)--Ethanol plant construction has come to a halt, but the mandates by government are not declining, which could mean prices could jump again. Producers should prepare for round two, a Texas AgriLife Extension Service specialist said.

"Expanded ethanol production is probably a given; however, the pace is expected to slow due to capacity limits and policy," said Dr. Steve Amosson, AgriLife Extension economist.

The president-elect and U.S. Secretary of Agriculture are both big supporters of renewable fuels, Amosson said. President-Elect Barack Obama has stated, "I have established a goal to have 60 billion gallons of our fuel come from sustainable, affordable biofuels in 2022..."

The reality right now is that nationwide 213 ethanol plants were in production or under construction in September 2007, with many more on the drawing table, he said.

Nine months later, some of the plants that were under construction have come into operation, but no new plants have started construction.

Bill Tierney, former Kansas State University grain marketing economist and former head of the U.S. Department of Agriculture wheat and feedgrains forecasting division in Washington, D.C., said the global "credit crisis" came at just the right time to stop the U.S. ethanol industry from seriously overbuilding capacity relative to the market share.

"In early August 2007, the industry was well on its way to overbuilding, much as the U.S. biodiesel industry already has," Tierney said.

The credit crisis and declining ethanol margins dried up financing for 11 billion gallons of "probable" projects, he said.

"Ethanol production is and will continue to suffer from growing pains," Amosson said.

Recent analysis shows that ethanol plants are losing money given the current prices of ethanol and distiller's grains by-products, after taking into consideration the cost of the primary inputs natural gas and corn, Amosson said. However, he said, considering oil prices are expected to start going back up and "we may be falling below producing enough ethanol to meet the amount necessary to meet the renewable fuel standards, ethanol prices should rise."

The energy bill signed into law in December 2007 requires 36 billion gallons of ethanol to be available for use by 2022, Amosson said. Twenty-one billion gallons is supposed to come from feedstocks other than corn.

The problem, he said, is that cellulosic ethanol production is not even expected to get off the ground until 2015 or after, and then it takes time to ramp up the industry.

"The renewable fuel standards will not hold up - it can't," Amosson said.

The renewable fuels standard mandate enacted under the Clear Air Act applies to blenders but has never been enforced, he said. The Environmental Protection Agency is the enforcement arm.

According to the standards, 11.1 billion gallons of ethanol nationwide, or 10.21 percent of the national energy supply, must come from renewable fuel this year, Amosson said. The amount gradually steps up from there.

Penalties for blenders not meeting the mandates include having to return any profit from non-renewable fuels and a fine of $25,000 per day, he said, so that may be enough incentive to keep them moving in that direction.

One bushel of corn will produce 2.8 gallons of ethanol and 17 pounds of dried distiller's grains, Amosson said.

"I thought distiller's grain prices would go down, but last year Europe had a disaster in their wheat," he said. "While they wouldn't import any of our GMO (genetically modified) corn, they still used our distiller's grains for feed and that is why we didn't see the decrease."

Amosson said distiller's grain prices could be expected to start falling, making them more attractive for livestock rations and that should increase their usage.

At the same time, the limit on corn-based ethanol and the growth in yields will eventually cap corn prices, he said.

(Source: Texas A&M Ag Extension.)

Modified Plants May Yield More Biofuel

2009-01-14T06:37:00.000-08:00

UNIVERSITY PARK, Penn.-(PSU Extension)--Plants, genetically modified to ease the breaking down of their woody material, could be the key to a cheaper and greener way of making ethanol, according to researchers who add that the approach also could help turn agricultural waste into food for livestock.

Lignin, a major component of woody plant material, is woven in with cellulose and provides plants with the strength to withstand strong gusts of wind and microbial attack. However, this protective barrier or "plastic wall" also makes it harder to gain access to the cellulose.

"There is lots of energy-rich cellulose locked away in wood," said John Carlson, professor of molecular genetics, Penn State. "But separating this energy from the wood to make ethanol is a costly process requiring high amounts of heat and caustic chemicals. Moreover, fungal enzymes that attack lignin are not yet widely available, still in the development stage, and not very efficient in breaking up lignin."

Researchers have previously tried to get around the problem by genetically decreasing the lignin content in plants. However, this can lead to a variety of problems -- limp plants unable to stay upright, and plants more susceptible to pests.

"Trying to engineer trees without lignin is like trying to engineer boneless chicken," said Ming Tien, professor of biochemistry, Penn State. "It just doesn't make sense."

Carlson, Tien and postdoctoral associate Haiying Liang use a different genetic approach. Instead of decreasing the lignin content, they are trying to modify the connections in lignin, without compromising either the biosynthesis of lignin or the structural rigidity of the plant.

The Penn State geneticists and biochemists took a gene from parsley and engineered it into a poplar tree. This gene produces a protein that inserts itself between two lignin molecules when the lignin polymer is created.

"Now we have a lignin polymer with a protein stuck in between," explained Carlson, who, along with Tien and Liang, has filed a provisional patent on the approach. "When that occurs, it creates a type of lignin that is not much different in terms of strength than normal lignin, but we can break open the lignin polymer by using enzymes that attack proteins rather than enzymes that attack lignin."

These enzymes that attack proteins are already used widely in the laundry detergent industry and are commercially readily available, added Carlson.

The genetic modification does not appear to weaken the plants, and the transformation may have turned them into more efficient sources of ethanol.

"When we looked at the first generation of modified plants we noticed that the lignin content has not changed," said Tien, whose work is funded by the U.S. Department of Energy. "We haven't done a fitness test yet but we did see an increase in the yield of sugars for converting into ethanol."

The researchers also may have stumbled on an unexpected side benefit.

One of the problems with forage crops such as ryegrass and clover is that they have too much lignin, which can cause ruminants like cows to get sick. Their digestive enzymes go into overdrive to break down the lignin, creating a lot of gas and digestion problems for the animals.

"All animals produce enzymes in their digestive process that break down amino acids and small proteins that can be absorbed by the intestine," said Carlson. "If this technology were to be transferred to alfalfa or hay or such cattle feed, it might make it easier for the cows to break down the lignin through their own enzymes."

Carlson added that the technology could potentially be transferred to other biomass crops and even help turn agricultural waste products found on farms into animal feed. But the modified plants will require federal approval before they can be commercialized.

Is Biodiesel Capable of Meeting RFS Shortfall?

2009-01-12T06:09:00.001-08:00

WASHINGTON-(Farm Progress)--There is skepticism that there might be a shortage of renewable fuel available to meet the 2009 RFS requirement. In response, the National Biodiesel Board says it is confident the U.S. biodiesel industry is fully capable of meeting any RFS shortfalls that are not filled by the domestic ethanol industry. For 2009, 10.5 billion gallons of renewable fuel must be entered into commerce.

According to Manning Feraci, NBB’s Vice President of Federal Affairs, in 2008 alone, the U.S. biodiesel industry produced nearly 700 million gallons of biodiesel, which equates to 1.05 billion ethanol equivalent gallons for purposes of the RFS.

Currently, there are 176 plants in operation with the capacity to produce more than 2.61 billion gallons of biodiesel. This capacity has added jobs and $4.287 billion to the Gross Domestic Product; displaced 38.1 million barrels of petroleum; generated $866.2 million in tax revenue for federal, state and local governments; and reduced greenhouse gas emissions by 11.28 tons, the equivalent of removing 980,000 vehicles from U.S. roads.

Whatever Happened To The Move Toward Cellulosic Ethanol?

2009-01-09T06:03:00.000-08:00

URBANA, Ill.-(UI Extension)--There is no secret that when corn becomes too high priced or there is an insufficient supply, ethanol will be refined from cornstalks, switchgrass, miscanthus, wood chips, potato peels or some other form of low value biomass. The bugs are being worked out of the processes, but since it is all in the experimental stage, what will be the financial support for the biomass ethanol industry to start up and go on line toward full scale production? Has the economy threatened such a start up industry? You and a lot of other farmers want to know when to deliver a truckload of corn stalks.

USDA grants in the past year provided over $10 million to speed up the cellulosic ethanol research, and some pilot plants are operating. But economist Cole Gustafson at North Dakota State University says financial constraints will interfere with the transition from experimental to commercial operation. His analysis casts doubt on the availability of industry capital and the uncertainty in the U.S. financial markets.

And he thinks Brazil and Mexico will be in a position to capture a share of the cellulosic ethanol market.

Gustafson says the U.S. ethanol industry expanded rapidly with the help of federal mandated production goals and low cost corn, generating financial benefits for local and state economies. But he says research has shown that as local ownership declines by one percent, one less job is created in a local community.

When corn-based ethanol plants were at their peak of profitability in 2006, $2.25 per gallon was returned to investors, who had invested about $1 per gallon of capacity to build the plant. But he says those margins have steadily declined since mid-2006 as more ethanol reached the market and more ethanol plants competed for local corn. Gustafson says when plant margins diminish, external capital sources are no longer interested in the investment. He points to the decline and bankruptcy of Verasun Energy, and says some firms will struggle in the best of times and with capacity at 62%, new firms will have limited incentives to begin producing ethanol.

Additionally, Gustafson says construction costs have risen to $2 per gallon of capacity, tax credits and subsidies for ethanol are increasingly uncertain, public concerns over water consumption by ethanol plants, credit limitations placed on ethanol plants, and the emphasis being placed on development of technology for cellulosic ethanol have all converged as threats to the expansion of the corn-based ethanol industry. Despite the challenges, the financial stability of the ethanol industry remains solid, and one lender which has financed 44 ethanol plants says only 3 of them were in poor financial health.

Parallel to the industry’s challenges, the collapse of the international credit markets has resulted in some uncertainty, but the ethanol industry had halted expansion in summer due to high corn prices, so the failure of international financial markets had little impact. The economist says most plants had alternative lines of credit to use when commercial paper markets dried up.

Gustafson says the cellulosic ethanol plants will be eligible for a 50% tax credit, and they will become commercially viable in the next couple years. While rising construction costs are a problem, they are doubly difficult for cellulosic plants that cost twice as much to build as corn ethanol plants. However, the value of the ethanol will increase along with the nation’s path to reduce its carbon footprint, and cellulosic ethanol may command a premium price, if the carbon value can be calculated.

Summary:

The ethanol industry is in a transition phase from corn to cellulosic feedstocks, but at the same time there is a lack of capital available from investors to help it advance, and funding arrangements over the past several years have not allowed the industry to build any equity in its plants. Uncertainties in the ethanol industry include continuation of the tax credits and other subsidies, as well as the difficulty in establishing values for carbon trading that could potentially benefit cellulosic ethanol. The Wall Street turmoil is an additional challenge that could subdue the economic performance of the country for the next decade. Part of the solution will be the rising value of the dollar, which will increase importation of foreign refined ethanol. Mexico and Brazil have announced substantial expansion plans for sugar-based ethanol that will help the US meet its mandate for 36 billion gallons of renewable fuel production per year.

(Source: Stu Ellis, http://www.farmgate.uiuc.edu)

EIA: U.S. Will Fail to Meet Biofuels Mandate

2009-01-07T07:28:00.000-08:00

WASHINGTON-(ENN)--The United States will fall well short of biofuels mandates on the uncertain development of next-generation fuels made from grasses and wood chips, the government's top energy forecasting agency said.

Click HERE to read the story.

Switchgrass Used to Fuel Power Plant

2008-12-22T06:03:00.000-08:00

LEXINGTON, Ky.-(UK Extension)--Officials from East Kentucky Power Cooperative and the University of Kentucky recently demonstrated switchgrass' feasibility as an alternative energy form as it was combined with coal to generate electricity at East Kentucky Power's Spurlock Station in Maysville.

This was believed to be the first time switchgrass was used as fuel for a power plant in Kentucky.

The switchgrass was mixed with the coal feedstock, replacing 1 to 2 percent of the coal normally used. East Kentucky Power will continue to study switchgrass' energy potentials, and could possibly increase the percentage of switchgrass used to 3 to 10 percent.

"We want to find out if switchgrass can be a viable supplemental fuel for our power plants," said Bob Marshall, president and CEO of East Kentucky Power. "This test will provide valuable information about how burning switchgrass affects our plant's fuel-delivery systems, boilers and emissions."

The test is part of an innovative four-year pilot project conducted by UK's College of Agriculture to determine if switchgrass can be grown sustainably and economically in Kentucky. A grant to the Kentucky Forage and Grassland Council from the Kentucky Agricultural Development Board is funding the project.

"The switchgrass burn, which was made possible by an investment from the Kentucky Agricultural Development Fund, will provide valuable information that could enhance Kentucky's agricultural opportunities outlined in my recently released seven-point energy plan," said Gov. Steve Beshear. "Energy-related research and development through public and private partnerships should be expanded throughout the state."

"This is just another example of how the college is working to develop a variety of technologies for alternative energy uses," said Scott Smith, dean of the College of Agriculture. "We appreciate our partners, East Kentucky Power Cooperative and the Governor's Office of Agricultural Policy, working with us toward this goal."

UK researchers are working with 20 farmers in northeast Kentucky to evaluate options for planting, growing, harvesting, transporting and processing the switchgrass. Each farmer manages a five-acre plot that UK forage specialists helped them establish.

"I think it's going to be a viable crop for all of us," said Greg Webb, a producer in Lewis County. "It won't replace tobacco, but it will help."

The forage specialists believe that if this project is successful, switchgrass could provide a great opportunity for producers in this area to diversify their agricultural operations as well as generate additional income.

"As people drive around northeastern Kentucky, they see a lot of land that lays fallow, and those are acres that have great potential for switchgrass production because it grows well even on marginal soils. We don't even have to take acres out of forages for cattle production," said Tom Keene, UK hay marketing specialist. "The opportunity is there."

"Kentucky farmers successfully producing switchgrass opens up tremendous opportunities for them in the emerging biomass market," said Ray Smith, UK forage extension specialist. "While further research is needed to determine the economic returns to producers, this project is allowing Kentucky farmers to be at the forefront of this movement."

Seven plots were established in 2007, and the remaining 13 were planted in 2008. The switchgrass was planted during the spring and matured until the first killing frost. After that frost, the plots were mowed, and the switchgrass was baled like hay. About 70 tons of switchgrass were harvested this fall. The bales were transported to Spurlock Station, where UK representatives used a tub grinder to further process the switchgrass for handling by the power plant's coal conveyer system.

One of Spurlock Station's generating units-the Gilbert # 3 unit-features circulating fluidized bed (CFB) technology that allows it to burn a wide range of fuels, including switchgrass. In April, EKPC plans to bring online a second unit at Spurlock Station featuring this technology. EKPC's proposed Smith CFB #1 unit at Smith Station in Clark County also is planned to feature this technology.

VeraSun Leaves Corn Farmers In Limbo As Ethanol Industry Founders

2008-12-19T06:30:00.000-08:00

BROOKINGS, S.D.-(Dow Jones)--For many American farmers, once-lucrative corn shipments to ethanol plants run by VeraSun Energy Corp. (VSUNQ) are now in limbo.

Farmers like Mark Kuhn and Ron Litterer have no idea if the ambitious biofuels producer currently in Ch. 11 bankruptcy reorganization will honor their delivery contracts. Even worse, the farmers can't sell that corn elsewhere - at least for now.

VeraSun's plight, emblematic of the U.S. ethanol business, is hurting corn production and prices. The situation is likely to ripple through America's heartland and keep corn prices at depressed levels, market sources say.

This is putting financial stress on some farmers, who had planned to sell most of their corn to VeraSun and plow the cash from those expensive contracts into mortgage payments on their farms or equipment.

Also in jeopardy are small grain-elevator operators, who buy corn from farmers, store it, and contract to sell it to ethanol producers.

"This puts people in a terrible bind," said Kuhn of Charles City, Iowa, where VeraSun runs a plant. "There is so much uncertainty with the contracts and how they will be dealt with. We're being held hostage."

Kuhn, also an Iowa state legislator, holds a contract to sell VeraSun corn for $6.03 a bushel.

But the fate of his contract - and others that stretch as far out as 2011 - won't be known until 10 days prior to the scheduled delivery date. At that time, VeraSun can opt to buy the corn at the original price or cancel the contract, according to a recent Delaware court ruling.

"We want VeraSun to operate and for the producers to make the best of a bad situation," said Litterer, who grows corn on a 1,000 acre farm in Greene, Iowa, and also serves as chairman of the National Corn Growers Association.

He still has a contract to sell 15% of his crop to VeraSun in March.

Payday Gone

Farmers once believed a big payday was coming. This past summer, corn was trading at historic highs on U.S. grain exchanges, climbing close to $8 a bushel. But corn prices have plunged since then, with corn now fetching around $3.30 a bushel.

"What [farmers] had counted on for their income is just gone," said Darin Newsom, grains analyst at market-researcher DTN Ag in Omaha, Neb.

Before the company went bust, VeraSun had signed many deals to buy the corn between $5 and $7 a bushel. One contract was even inked for $7.70 a bushel, according to farmers.

VeraSun has "no intention of honoring some of these contracts," claims Keith Bolin, who runs the American Corn Growers Association and grows corn in Illinois.

VeraSun didn't respond to questions for this story.

At a Dec. 2 court hearing in Wilmington, Del., Bolin and Kuhn said VeraSun's lead bankruptcy attorney told them that the ethanol maker doesn't intend to buy corn above the current spot market price. Since the court hearing, Kuhn said negotiations to get the farmers released from the contracts have stalled.

The next court date is set for Jan. 8.

At least 124 farmers, known as the VeraSun Corn Suppliers, are still on the books to deliver the ethanol producer corn after January. It is believed there are many others.

To its credit, VeraSun has given some of its corn suppliers a chance to resell their bushels elsewhere. So far, the company has cancelled delivery contracts through Jan. 31 for eight of its plants in Minnesota, Nebraska, and South Dakota.

Those farmers likely will get a lower price for their corn.

"Sellers are sitting back looking for lower prices," DTN's Newsom said. "They are not pushing for huge amounts of corn."

Ethanol Industry's Toll on Corn

VeraSun was the largest publicly-traded, stand-alone ethanol maker before it filed for bankruptcy Oct. 31. The Brookings, S.D., company, started in 2001, has been one of the key beneficiaries of U.S. policies designed to encourage the use of alternative fuels.

A lucrative initial public offering helped fund its rapid expansion, including the acquisition of rival U.S. BioEnergy. But the bets VeraSun made on corn when prices were high soured, the company swallowed too much debt and ran into cash problems.

It's not alone: Five smaller ethanol producers are in bankruptcy, too.

Those left standing include privately held Poet LLC; Cargill; giant Archer Daniels Midland (ADM); Aventine Renewable (AVR); and Pacific Ethanol (PEIX).

The industry's plight has already taken a toll. In its most recent report, the U.S. Agriculture Dept. slashed its estimate on corn used for ethanol by 300 million bushels to 3.7 billion bushels. It cut its forecast for the average farm price of corn to a range of $3.65 to $4.35 a bushel, from $4 to $4.80.

VeraSun's 16 ethanol plants have the capacity to take 624 million of corn bushels a year, state legislator Kuhn said. But just a small number of those plants are currently in operation as the producer seeks to secure more permanent bankruptcy financing.

As it tries to climb out of bankruptcy, VeraSun faces another important task: mending relationships with corn farmers who championed the ethanol business long before VeraSun ever processed the grain for use at the gas pumps.

"[VeraSun's] speculation has brought millions of dollars of losses to family farmers in the Midwest," said Bolin. "VeraSun has done more damage to the ethanol industry than those that dislike and despise it."

Biofuel Economics: Future Of Renewable Energy Is Secure

2008-12-19T06:24:00.000-08:00

FARGO, N.D.-(NDSU)--On Dec. 11, the California Air Resources Board passed sweeping new legislation that secures the future of renewable energy. As part of the scoping plan that implements the goals established in their 2006 Global Warming Solutions Act, new key provisions include:

* 33 percent of all energy must come from renewable sources by 2020.

* New homes built after 2020 must be energy self-sufficent.

* Greenhouse gas emissions must be reduced to 1990 levels.

What is especially noteworthy is the economic climate in which this legislation was passed. Generally, California is regarded as being the epicenter of housing problems. Moreover, the state's slowing economy has resulted in a $48 billion budget deficit. One would think the state would delay implementation of these standards until financial prosperity is restored.

However, financial analysis of the proposal shows net economic gains. Savings from reduced spending on energy will translate into increased spending on other consumer goods and services and lead to economic expansion. Implicit in this assumption is that higher energy prices will lead to energy efficiency and the creation of renewable energy sources at lower cost. It is estimated that energy savings of $20 billion annually will be realized. Of this, gasoline consumption is expected to fall by 25 percent, or 4.6 billion gallons. The state still will consume 13.66 billion gallons. If one-third of this will be supplied from renewable sources, this represents a demand of 4.55 billion gallons, or about half of what the U.S. is presently producing.

A key driver underlying this plan is the reduction in greenhouse gas emissions. The study assumes that carbon sequestration is worth $10 a ton. This aligns with key legislation passed last December that seeks to reduce the carbon footprint of all transportation fuels by 10 percent in 2012.

As one of the more western ethanol-producing states, North Dakota has a competitive advantage in supplying renewable energy to California. Any renewable energy provided must demonstrate carbon reduction. This can be a challenge with coal-fired ethanol plants because ethanol produced in these facilities has only a slightly smaller carbon footprint when compared with gasoline. Using reclaimed heat from a coal-fired electrical power plant provides greater reduction, but that depends on how the carbon credit is shared between the power and ethanol plants. A number of ethanol plants are exploring the merits of supplementing their coal with biomass.

(Source: Cole Gustafson, Biofuels Economist, North Dakota State Ag Extension.)

Ethanol Bailout? Environmental, Watchdog, & Food Industry Groups Respond

2008-12-18T06:33:00.000-08:00

WASHINGTON-(AgNetwork)--This week it was reported that the Renewable Fuels Association had suggested, both to Capitol Hill staff and members of President-Elect Barack Obama's team, a variety of proposals to aid the ailing ethanol industry, including a $1 billion short-term credit facility and a $50 billion federal loan guarantee program. In response, the following statements were issued by various members of the Food Before Fuel coalition.

"A lot of industries lost money, closed plants and laid off workers when our government's ethanol policies drove corn prices to record highs this summer. In fact, the poultry and livestock industry probably suffered far more financially than the corn ethanol industry. To bail out the corn ethanol industry while ignoring other rural industries harmed by high corn prices and the sagging economy would be insulting and insensitive. The best course of action would be for Congress to revisit the renewable fuels policies that caused this disaster, but in all events it must give equal consideration to everyone affected by its corn ethanol policy." - Joel Brandenberger, president, National Turkey Federation

"The ethanol industry's claim that a bailout for their industry is justified by the creation of "green jobs" is truly a case of "green wash." The net energy yield of corn-based ethanol is marginal at best. Corn ethanol has been shown to contribute to carbon emissions, ground level ozone and water pollution. From the enormous amount of water it takes to create the fuel to the fossil fuels that run most ethanol plants, ethanol's environmental impact has been shown to be detrimental to our nation's soil, air and water - and to our planet's climate. It contributes to both soil erosion and water pollution. Virtually every major environmental organization in the world has come out against policies that expand the use of corn ethanol. " - Lester Brown, president and founder of the Earth Policy Institute

"Since corn ethanol boosters have never known a day when they weren't benefiting from government largesse, it's sadly predictable that their response to times of economic distress is to push for more handouts rather than consider reality-based business models. Ethanol lobbyists won't call their latest loan and mandate schemes 'bailouts,' but after seeing so many other interests line up for federal cash recently, taxpayers know when they're being shaken down. Americans should be outraged that yet another industry, especially one that is already dependent on the government, has the gall to ask them for even more of their hard-earned money." - Andrew Moylan, government affairs manager, National Taxpayers Union

"America needs to shift its energy policy away from biofuels like corn ethanol that drive up food prices and harm the environment toward second generation solutions that don't pit our need for fuel against our need for affordable food. An additional $50 billion in government support for the corn ethanol industry will only calcify the status quo and reduce the urgency for innovation." - Scott Openshaw, communications director, Grocery Manufacturers Association

"The ethanol industry has taken taxpayer subsidies for more than 30 years and is still not economically viable. The U.S. needs to move to the next generation of biofuels and other alternative energy sources that do not pit our energy needs against our need for affordable food. Corn based ethanol is a major contributor to higher food prices and continuing down this path will further burden America's consumers who are already struggling to put food on the table. Our investment in alternative energy sources should be directed toward truly sustainable solutions for the 21st century, not failed ideas from the 20th."- J. Patrick Boyle, President and CEO of the American Meat Institute

"For thirty years the corn ethanol industry has received billions in government subsidies. For this heavily subsidized industry to now come to Washington, hat in hand, to encourage Congress to provide over $50 billion in additional taxpayer support is way beyond the burden that taxpayers should have to bear. If anything, it is time for Congress to demand that the ethanol industry wean itself from government support and begin to compete in the market on its product's merits. The ethanol industry's hope for a bailout re-confirms the conclusion that too much corn being diverted to ethanol in too rapid of a time is a very unfortunate path to be pursuing. In these difficult economic times and market conditions for most users of corn, it is a time to tighten one's belt." - Bill Roenigk, senior vice president and chief economist, National Chicken Council

MSU Students Lay Waste to 'Biomass-as-Fuel' Obstacle

2008-12-12T06:24:00.001-08:00

STARKVILLE, Miss.-(MSU Extension)--Plant waste offers a nearly unlimited supply of raw material for biofuel production, but the substance that stands in the way of its use is the same one that makes the plants stand.

The substance in question is lignin, a biopolymer that gives plant cells their structure and resistance to degradation. Mississippi State University biological engineering undergraduates Caleb Dulaney and Sam Pote are determined to help the world rethink biomass possibilities "one cell at a time" with their research on isolating a naturally occurring enzyme that initiates lignin breakdown.

The two students won a bronze medal in November for their work at the 2008 International Genetically Engineered Machine, or iGEM, competition among 84 universities held at the Massachusetts Institute of Technology in Cambridge. MSU's team competed in the energy category. Student teams that earn a bronze, silver or gold medal also receive the honor of entering their research into the Registry of Standard Biological Parts.

"This honor recognizes our team's accomplishment," said MSU biological engineering professor Filip To, one of the team's faculty advisers. "It shows we have a presence and strength in this new knowledge of synthetic biology and it means that our students are as world-class in their fields as those at many elite schools with strong financial backing."

The cellulose and hemi-cellulose in plant cells can be converted to sugar for making ethanol. However, these materials cannot be accessed without breaking down the lignin. Many manufacturers are unwilling to perform the process needed to break down lignin in biomass because it is costly and complex.

While some food crops, such as corn, soybeans and sugar cane, provide materials for making ethanol and other biofuels, using these important commodities to make biofuel puts a strain on the world's food supply.

"The problem with the current way of making ethanol is that resources are limited," said Dulaney, a senior from Collinsville. "The plant matter left over after harvesting can provide an almost unlimited resource for biofuel manufacturing."

Harsh chemicals are needed to break down lignin and the process is complicated. The chemical residues only add to the overall waste disposal problems that industries deal with.

"If an accelerated biological process to break down lignin were possible, there would be less of a problem for the environment," Dulaney said.

Dulaney received a fellowship from the MSU Shackouls Honors College to work on a research project as a member of the MSU Synthetic Biology Team. The team, which also included Pote, a Starkville junior, and MSU biochemistry professor Din-Low Ma, had a goal of isolating an enzyme-producing gene in white-rot fungi that initiates lignin breakdown.

"Dr. To heard about the iGEM competition four years ago, and he talked with several students before he went to MIT to observe," Pote said. "He brought back several ideas, and we talked about participating in the event."

MSU sent student teams to the competition in 2006 and 2007. The 2006 team won honorable mention for investigating the use of Escherichia coli, or E.Coli, to make a hydrogen detector. The 2007 team won a bronze medal for its investigation in tracking abnormal cell growth by marking a substance called eubiquitin.

After considerable discussion with advisers, the two students decided to research alternative material sources for biofuel for the 2008 competition. The white-rot fungus, often found on rotting wood, contains a peroxidase enzyme that contributes to lignin breakdown. Two other enzymes complete the process.

"We chose lignin-degrading peroxidase because it initiates the breakdown," Dulaney said. "The other enzymes break away the lignin from the plant material and further break up the material."

The first step of the research was to isolate the enzyme-producing gene. The second was to introduce the gene into E. coli to reproduce it. Dulaney and Pote enlisted the help of graduate students Robert Morris and Meng-Hsuan "Victor" Ho to accomplish this goal.

"We were looking for a natural and environmentally friendly way to break down the lignin at a faster rate," Pote said. "Our work on the project allowed us to isolate the gene, slice out the DNA and basically have the bacteria eat the lignin."

The students said they enjoyed the research because they were able to focus on the engineering of a biological process, a concept both wanted to master.

"Our research project is definitely an indication that science and industry are giving more thought to moving away from petroleum-based energy," Pote said. "We feel like we have taken our first step to make people aware of the possibility."

Promoting Increased Biofuel Production Globally

2008-12-08T06:28:00.001-08:00

WASHINGTON-(Farm Progress)--A recent conference hosted by Brazil brought more than 70 countries together to advance biofuel production around the globe and discuss the beneficial impacts. The U.S. delegation was lead by Ag Secretary Ed Schafer, who highlighted the fact that Brazil and the U.S. are leading the way each in their own niche; the U.S. with corn-based ethanol and Brazil with biofuels made from sugar. However Schafer says diversifying the feedstocks is recognized as critical as the world moves toward second-generation biofuels.

"As we look beyond sugar and corn into the cellulosic efforts it is important for us to remember that this technology is going to allow energy independence for developing countries, for small countries that don't have energy that import it and that are dependent on others," Schafer says. "What comes from energy independence, which is also better for the environment, it creates economic activity in rural areas. So farmers and landowners can take advantage of this new technology, create energy independence through biofuels and increase the opportunities to make money on their own farms. It increases investment, increases economic activity; this is good all the way around for the world and Brazil and the United States are going to lead the way."

Schafer says he believes that the sharing of technologies and ideas among nations is vital in the feedstocks diversification process.

"You have different resources in different countries. You have different resources in different regions. It might be wood chips here, it might be cover grass here, it might be a short-season growth product here," Schafer says. "So I think what's important is for the 70 plus countries is to say here's what we have available for resources for us, how can that technology be tailored to work locally."

Biofuel Moves Away From Food Crops

2008-12-04T06:14:00.000-08:00

AMSTERDAM, Netherlands-(AP)--In future years, we may look back at the Great Mexican Tortilla Crisis of 2006 as the time when ethanol lost its vroom.

Right or wrong, that was when blame firmly settled on biofuels for the surge in food prices. The diversion of American corn from flour to fuel put the flat corn bread out of reach for Mexico's poorest.

Two years later, the search is on for ways to keep corn on the table rather than in the gas tank. Moving away from food crops, the biofuel of the future may come from the tall grass growing wild by the roadside, from grain stalks left behind by the harvest, and from garbage dumps and dinner table scraps.

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VeraSun Cancels U.S. BioEnergy Corn Contracts

2008-12-03T06:16:00.000-08:00

WASHINGTON-(Farm Progress)--VeraSun Energy announced Tuesday that nearly all contracts to buy corn for its U.S. BioEnergy ethanol plants through Jan. 15, 2009 would be canceled.

During a bankruptcy hearing, VeraSun lawyer Felicia Perlman said that contracts for plant in Welcome, Del. would be cancelled through Jan. 31, 2009. However the Marion, S.D. U.S. BioEnergy plant was not included in the planned cancellations. The eight U.S. BioEnergy plants were acquired by VeraSun earlier this year.

The bankruptcy court approved a measure that would allow VeraSun to cancel corn contracts 10 business days before delivery.

Last month VeraSun decided not to honor corn purchasing contracts at several of its locations, instead offering spot market prices to producers. According to attorney Joe Peiffer, who represents farmers engaged in contracts with the ethanol producer, VeraSun does not anticipate accepting corn contracts for any plant that are locked in above the current market price.

Peiffer says that company has designated a point person that producers can bring contracts to for decisions on whether or not the contracts will be honored.

Biodiesel Sold Overseas Still Gets U.S. Tax Credit

2008-12-01T13:23:00.000-08:00

WASHINGTON-(Houston Chronicle)--Federal subsidies to the U.S. biodiesel industry were supposed to help wean the nation from foreign oil, and a new law in 2009 will bolster the effort, but the money has fueled a controversial side business.

Domestic producers of the renewable fuel have been selling huge quantities of biodiesel in Europe and in other foreign markets, where prices are often better, and then receiving a $1-per-gallon tax credit from Uncle Sam.

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