‘Climate of Opportunity' evident at NEC

By Holly Jessen | March 16, 2010
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Bob Dinneen, president and CEO of the Renewable Fuels Association, painted a picture of an industry rebounding from recession in his remarks to the 1,300 people who attended the National Ethanol Conference held Feb. 15-16 in Florida. "Over the past decade—and especially over the past year—we have taken everything that the economy and all our adversaries could throw at us," he said, "and we're still standing—strong, united, and focused on the future." Despite a difficult economy, the ethanol industry grew by 15 percent last year and saw 14 plants reopened, eight plants started and capacity increased by 1.5 billion gallons, he reported. The industry continued to provide jobs, reduce greenhouse gas emissions and reduce oil imports. Still, Dinneen's optimism was tempered by the challenges facing the industry. "We must break through the blend wall, we must address questions about ethanol's carbon footprint, and, most importantly, this year we have to extend the tax incentive and the offsetting secondary tariff for ethanol fuels," he said.

With the NEC being held just only two weeks after the renewable fuels standard (RFS2) final rule was released, speakers addressed its impact in several presentations. Indirect land use change (ILUC) modeling used in the final rule did improve the outlook for biofuels, although many were very disappointed it was included at all. RFS2 was "fundamentally flawed by the slavish devotion to the ill-conceived notion" of ILUC, Dinneen said. Conference-goers also learned more about the U.S. EPA's new system, the Web-based EPA Moderated Transaction System, which is expected to be easier to use and reduce errors in tracking renewable identification numbers needed for RFS2 compliance.

In another presentation, six companies reported progress towards commercial-scale cellulosic ethanol production facilities in a panel moderated by U.S. DOE spokesperson Valri Lightner, who restated the agency's support, specifically pointing to the loan guarantee program the department plans to use to support mainly cellulosic ethanol projects. "Those efforts are moving a little more slowly than we first anticipated," she admitted.

A brief synopsis of the six reports given illustrated the pace of project development:

>Range Fuels Inc., Soperton, Ga., construction completion February 2010
>Verenium Corp., Highlands County, Fla., break ground 2010, production 2012, second site in development
>Abengoa Bioenergy, Hugoton, Kan., break ground 2010, production 2012
>Mascoma Corp., Kinross, Mich., currently in design engineering and permitting
>Coskota Inc., southwest U.S., working on financing
>Iogen Corp., sites selected, next step financing

Speaking on oil investment in ethanol, Tom McKinlay, senior vice president of manufacturing for Murphy Oil USA, gave a thought- and laughter-provoking presentation. Before coming to the NEC, he said, he didn't realize foreign oil was more feared than the EPA. "We don't fear foreign oil," he added. "Foreign oil is not bad. … Canada looks fairly cuddly from where I stand." Murphy Oil believes the ethanol industry will, after a period of volatility, grow dramatically. Last fall the company purchased one of the bankrupt VeraSun facilities, a 110 MMgy ethanol plant in Hankinson, N.D. "Ethanol is cheap gasoline, that's why we're in ethanol," he said, adding that the company is proud to be in the business. Still, McKinlay firmly stated that the answer is not ethanol—it's actually foreign oil, which will continue to make up the bulk of fuel in the United States.

Several speakers addressed the blend wall. Cliff Cook, senior vice president of supply, distribution and planning for Marathon Petroleum Company LLC, said he didn't believe the public wanted or was ready for E85 or blender pumps. Later, Karl Doenges, executive director of Protec Fuel Management, said E85 is critical for going beyond the blend wall, and said it's a misconception that E85 is a lower value product. It might have to be priced lower but that doesn't mean the bottom line will be lower, as market forces such as rising oil prices and RFS2 will establish demand. "The room for growth is phenomenal and that will continue to accelerate," he said. With the Big Three automakers pledging to make half their vehicles flex fuel by 2012, there's a big need for more E85 infrastructure particularly in states such as California and Florida, where the majority of flex-fuel vehicles (FFV) are located, but few E85 stations exist. In some areas, Doenges said, there are 800 FFVs to one E85 station. Thirty-six billion gallons of biofuels can't be met by E10, E15 or likely not even blending, Dinneen said in his address. "We must also prime the pump for continued market development in higher ethanol blends and E85 by dramatically expanding the availability of blender pumps."

General Motor's Tom Stephens also talked about infrastructure needs. The vice chairman of global product operations for GM said the company strongly supports blender pumps. Today, 66 percent of E85 fueling stations are located in the Midwest, where only 19 percent of FFVs are, he said. GM doesn't believe there is one silver bullet and is interested in other alternative fuels, electric vehicles and hydrogen although it does believe liquid fuels, including ethanol, are the most cost-effective, near-term solution. "The promise of biofuels is real and it's all our job to get the job done," he said.

Another notable moment at the conference was when Ron and Diane Fagen received RFA's first-ever membership award, recognizing their contribution to the industry for their leadership in plant construction.