Fueling a Revolution

The theme and tenor of the American Coalition for Ethanol's 21st Ethanol Conference & Trade Show clearly signaled that the industry is determined to overcome challenging economic conditions, negative press and misinformation that has plagued the industry.
By Anna Austin and Erin Voegele | October 06, 2008
The 21st Ethanol Conference & Trade Show attracted nearly 1,200 attendees. The event was held Aug. 12-14 at the Qwest Center in Omaha, Neb. Nebraska Gov. Dave Heineman's enthusiastic welcome address at the conference's general session in which he expressed his support for the ethanol industry set the tone for the event. "The No. 1 issue is energy," Heineman said. "It is on the mind of every Nebraskan. It's on the mind of every American."

For more than 25 years, the federal government has talked about reducing our dependence on foreign oil without taking any real action, Heineman said. "It's time we did something," he said. "America needs leadership when it comes to energy, and ethanol is part of that future. We've got to quit talking, and start doing something to reduce our dependence on foreign oil."

Following Heineman's address three ACE representatives provided updates on the industry and their organization's initiatives. ACE President Bob Scott encouraged attendees to fight back against the proliferation of negative press. "Ethanol is the fuel of a revolution," Scott said. "We are the fuel for the revolution. We must continue to fight. We must fight hard."

Brian Jennings, ACE executive vice president, acknowledged that some people thought the event's theme, "Fueling Revolution," was too forceful. But the phrase accurately describes the current state of the industry, he said. "Let's face it," Jennings said. "We are underdogs. We are a grassroots coalition of farmers and ranchers, of entrepreneurs and investors, of ethanol producers and industry vendors who time and time again are out-spent, overlooked—recently relentlessly attacked—but, my friends, you keep going and you keep winning."

Jennings summarized some of the industry's accomplishments and encouraged attendees to support the industry by writing their governors, commenting on online articles, and contributing money to and voting for political candidates who support ethanol.

Midlevel blends was a popular topic at the event. Ron Lamberty, ACE vice president of market development, said ethanol blender pumps and midlevel blends are crucial to overcoming the blend wall and increasing the nation's ethanol consumption. He also addressed the need for U.S. EPA approval that would allow the use of midlevel blends in standard vehicles. "We think all cars can be more flexible," Lamberty said.

The conference also featured a panel discussion on innovations in corn-based ethanol production. National Corn Growers Association Chief Executive Officer Rick Tolman believes that corn growers can double current yields by 2030 without increasing planted acreage. He also pointed out that a significant amount of corn used for ethanol production re-enters the market as livestock feed. Rob Nelson, director of technology development for VeraSun Energy Corp., and Andy Zurn, engineering manager for Chippewa Valley Ethanol Co., participated in that panel discussion.

Revamping the RFS
The U.S. EPA's Paul Machiele received a warm welcome, a response likely generated from the agency's Aug. 7 denial of Texas Gov. Rick Perry's request for a 50 percent waiver of the renewable fuels standard (RFS).

Machiele, who has been with the EPA for more than 20 years and is currently director for fuel programs for the EPA's Assessment & Standards Division, touched briefly on the decision. After careful consideration of the 15,000-plus comments received—the EPA didn't take the situation lightly, he said. The decision was delayed because of the large number of staff members needed to sift through the comments, and because it was the first waiver requested since the original mandate was enforced.

Before getting into RFS 2, Machiele went through the details of the original RFS under the 2005 Energy Policy Act. "For RFS 2 we are planning to build on the foundation of RFS 1, continuing the RIN (renewable identification numbers) system, and other various design elements that we struggled to put into place with RFS 1," he said. He admitted that while there have been growing pains in implementing the new program so quickly, they are already beginning to lessen.

"There is now an extensive registration, record keeping and reporting system—if you are an ethanol producer then you know what I'm talking about," Machiele said. He added that along with the new standard, many other major modifications have been implemented. Despite the modifications, which have been challenging, Machiele said the value of the RINs have been positive. "The market is up and running, the RIN value has really escalated in the past few months and there is a really viable market." RINs are the serial numbers assigned by producers to each gallon or batch of renewable fuel produced. The EPA created the system to ensure RFS compliance. RINS can be acquired by blending renewable fuel or they can be purchased to meet blending requirements. Since the December signing of the Energy Independence & Security Act, RIN market values have risen from 0.25 cents per gallon to 5 cents per gallon, Machiele said.

While developing the RFS 2 rules has been quite similar to the construction of the RFS 1 policy, slightly different measures will be taken as it is further developed, Machiele said. "We plan to engage early and often with stakeholders throughout the process," he said. "The main change was the volume, but there are many new obligations and definitions." The new RFS raised the mandate to 9 billion gallons in 2008; the original policy required 7.5 billion gallons by 2012. "The world changed for us in December when Congress passed the new RFS 2 requirements," Machiele said. The EPA is currently evaluating implementation methods and will make the final RFS 2 rule by Dec. 19, which will be effective Jan. 1.

"What everyone mainly looks at is the volume requirement—36 billion gallons by 2022," Machiele said. "This is the main change. Also, there is not one standard, or two standards, but rather four. Within the 36 billion gallons, 1 billion has to be advanced biofuels, and also within that, 17 billion gallons of it has to be biomass-based diesel or cellulosic ethanol. So, they all count toward that total."

Machiele said that in addition to the larger mandate, there are a number of new obligations and definition changes. "Now, there aren't just gasoline requirements, but requirements for diesel fuel and refiners," he said. "There are new obligated parties and new customers for the new system. The most unique thing about the new rule is the renewable fuels must now be produced from biomass."

Machiele continued, "There is life-cycle GHG (greenhouse gas) thresholds, grandfathering provisions associated with that, and the new renewable biomass definitions." He pointed out that conventional biofuels, advanced biofuels, biomass-based diesel and cellulosic biofuel categories are now all required to meet the new GHG reduction thresholds. Under EISA, fuel life-cycle GHG assessments will be done, which are also called fuel cycle or wheel-to-wheel analyses. The impacts of each fuel throughout its life cycle will be assessed, including indirect emissions such as those generated from land-use change. Production and extraction of feedstocks, feedstock transportation, fuel production and distribution, and tailpipe emissions will also be considered.

The EPA will continue discussions with stakeholders and worldwide industry groups, and work on a number of drafts prior to the submission of the final proposal. Some of those discussions will focus on modeling framework that captures both domestic and international agricultural sector changes and their GHG emission impacts. The agency will collaborate with experts to improve understanding of agricultural nitrous oxide emissions, develop country specific GHG emissions factors associated with land-use change and agricultural practices, and update petroleum baselines and renewable fuel production process data.

Every three years the EPA will report to Congress on the RFS impacts. "We will also be doing studies on how these biofuels affect our air quality as a result of these different blend-level requirements," Machiele said.

Midlevel Blends
Minnesota Department of Agriculture senior market specialist Ralph Groschen, National Renewable Energy Laboratory project leader Steve Przesmitzki, and Lamberty launched the midlevel ethanol blends panel on the final day of the conference.

According to Groschen, Minnesota currently produces three times more ethanol than the state can use. To increase ethanol consumption in his state and in the country the E10 blend wall must be overcome, he said. Before that can happen the EPA has to sign off on midlevel blends. Groschen presented information on the process that is required to gain EPA approval for E20 and outlined the five kinds of data that must be generated, including information on material compatibility, vehicle drivability, vehicle exhaust emission, health effects and durability or mileage. Groschen said Minnesota's push for E20 approval could benefit the ethanol industry on a national level because EPA approval of a new fuel will not be state specific.

The EPA is the biggest hurdle that must be overcome to get a new fuel approved for use," Przesmitzki said. "Their responsibility is to protect the air quality in the United States, and any program for any fuel has to go through EPA to prove that it is substantially similar to a certification fuel," he said. Przesmitzki explained that approval of E10 was different because it was done under old rules, while E20 approval falls under a new standard. Before the fuel is approved, it has to be proven that air quality will not be impacted by increased ethanol blends.

According to Przesmitzki, the U.S. DOE predicts the E10 market will be saturated by 2013. Two paths can be taken to meet the RFS: quickly expanding the market for E85 or certifying a midlevel ethanol blend. Although the DOE supports expanding the use of flexible-fuel vehicles (FFVs), it is unlikely that the market could grow quickly enough to keep pace with current RFS targets. Only about 6 million of the estimated 220 million vehicles on U.S. roads today are FFVs. Even if automakers push to make 50 percent of their sales FFVs, that would only account for 7 million more on the road each year. These statistics make it unlikely the RFS could be met with increased E85 usage.

That being said, midlevel ethanol blends are the likely path to increased ethanol consumption. Przesmitzki summarized various studies currently being conducted on midlevel ethanol blends. He explained that priority has been given to the study of small engines for two reasons. First, it is much easier to detect a change in emissions when working with a small engine when compared with automobile engines. Second, small engines are more affordable to purchase and test than automobiles. However, he assured attendees that testing is also being done on vehicles.

According to Przesmitzki, the DOE should soon be issuing an interim report on small, nonroad engines. He also shared some of the preliminary results of a study the national labs have been undertaking using 16 vehicles. He said that they have experienced some decrease in fuel economy, some higher exhaust temperatures and higher catalyst temperatures. So far, the effects have been seen in seven of the 16 vehicles tested. Przesmitzki also addressed the suggestion that FFVs are equipped with the same parts as regular vehicle engines, by assuring attendees that that many engine parts are significantly different.

The 22nd ACE Ethanol Conference & Trade Show will be held Aug. 11-13 in Milwaukee, Wis.

Anna Austin and Erin Voegele are Ethanol Producer Magazine staff writers. Reach them at aaustin@bbiinternational.com or (701) 738-4968 and evoegele@bbiinternational.com or (701) 373-8090.