Press release:

RFS program not working needs overhaul

Bill Bush | 202.682.8114 | bushw@api.orgShareThis

WASHINGTON, August 8, 2012 – API Downstream Group Director Robert Greco told reporters this morning that the nation’s renewable fuel standard program isn’t working and needs to be revamped and better managed to ensure its long term viability:

    “The RFS program has been the most important mechanism for bringing biofuels into the nation’s energy mix. But it is being undermined by impractical requirements and bad agency decisions.

    “The biofuels volume requirements established by Congress will soon push concentrations above the safe E10 level. Volumes will grow from more than 13 billion gallons this year to 36 billion gallons in 2022.

If the RFS is fully implemented, it would raise the per gallon ethanol concentration in gasoline to an average exceeding 20 percent.

    “To increase the amount of biofuels blended in gasoline, EPA has approved the sale of E15 for a portion of the nation’s vehicle fleet. It approved E15, even though it knew or should have known of the existence of compatibility problems and even though it knew engine testing was ongoing.

    “EPA also has still not resolved the problem of fraudulent renewable fuel credits purchased by some refiners. EPA told refiners the bad credits were the companies’ problem and they’d have to purchase more RINs, potentially adding more costs to making gasoline. This is a problem the agency could have, and should have, fixed by now. Instead, the situation has introduced uncertainty in the RINs market and hurt some smaller biofuels producers.

    “Finally, EPA continues the bizarre requirement that refiners blend cellulosic ethanol into gasoline, even though no one is producing any for commercial use. Nevertheless, EPA has ruled that refiners must purchase credits for this non-existent fuel. Requiring refiners to pay for a fuel that doesn’t exist is regulatory absurdity. It drives up costs and does nothing to increase use of biofuels. It may even undermine public confidence in the RFS program itself.”

API represents more than 500 oil and natural gas companies, leaders of a technology-driven industry that supplies most of America’s energy, supports 9.2 million U.S. jobs and 7.7 percent of the U.S. economy, delivers more than $86 million a day in revenue to our government, and, since 2000, has invested more than $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.

The Renewable Fuels Standard, Ethanol, and the U.S. Corn Crop

Press release:

For Immediate Release
August 1, 2012

The Renewable Fuels Standard, Ethanol, and the U.S. Corn Crop

Mr. President,

The President and CEO of Smithfield Foods, Larry Pope, took to the opinion pages of the Wall Street Journal again to blame all that ails him on the Renewable Fuels Standard.

Some may recall that he did the same thing back in April of 2010 when commodity prices were rising.  At that time, he perpetuated a smear campaign and blamed ethanol in an attempt to deflect blame for rising food prices while boosting Smithfield’s profits.  And now he’s at it again.

I may start referring to Mr. Pope as Henny Penny from the children’s folk tale Chicken Little.  Every time Smithfield has to pay a little more to America’s corn farmers to feed his hogs, Mr. Pope starts up with the same argument that the sky is falling and it’s all ethanol’s fault.

Mr. Pope’s opinion piece in the Wall Street Journal might lead some to believe that he’s very knowledgeable about the ethanol industry.  But there are many areas where he’s not.  He continues to perpetuate the myth that ethanol production consumes 40 percent of the U.S. corn crop.  Mr. Pope states, “ethanol now consumes more corn than animal agriculture does.”

Everyone with a basic understanding of a livestock farm, a corn kernel or an ethanol plant knows that’s not true.  According to USDA, 37 percent of the corn supply is used in producing ethanol. But the value of the corn does not simply vanish when ethanol is produced.  One-third of the corn re-enters the market as a high value animal feed called dried distillers grains.

I would imagine that millions of hogs raised by Smithfield every year are fed a diet containing this ethanol co-product.  Mr. Pope appears unaware of its existence.  When the distillers’ grains are factored in, 43 percent of the corn supply is available for animal feed.  Only 28 percent is used for ethanol.

This is the inconvenient truth for ethanol detractors.  They prefer to live in a bubble where they believe that ethanol is diverting corn from livestock use.  That’s just not the case.

Mr. Pope also proclaims, “Ironically, if the ethanol mandate did not exist, even this year’s drought-depleted corn crop would have been more than enough to meet the requirements for livestock feed and food production at decent prices.”

I’d like to ask Mr. Pope, why do you think that is?  Why did farmers plant 96 million acres of corn this year?  Why have seed producers spent millions to develop better yielding and drought resistant traits?  The answer is simple:  Ethanol.

If not for ethanol, farmers wouldn’t have planted 96 million acres of corn this year.  Without ethanol, I doubt we’d have seen investment in higher yielding and more drought tolerant corn plants.

I’m sure Mr. Pope is an intelligent man.  But he’s woefully uninformed on the issue of what the ethanol industry and the demand for corn has done for the size and genetic improvement of the corn crop.

It’s easy to understand Smithfield’s motive.  They benefit from an abundant supply of corn, just not the competing demand for it.  What is Smithfield’s primary problem?  Again, the answer is simple:  cost and profit.  They still want to pay $2 for a bushel of corn.

This is an important point that I hope people understand.  For nearly 30 years, until about 2005, companies like Smithfield had the luxury of buying corn below the cost of production.  Corn prices remained at about $1.50 to $3.00 a bushel for nearly 30 years.  Farmers routinely lost money.

The federal government then provided economic support for the farmers.  Producers like Smithfield had the best of both worlds.  They were able to buy corn below the cost of production, and let the federal government subsidize their business by guaranteeing a cheap supply of corn.

In the view corporate livestock producers, subsidies are just fine if they allow them to buy corn below the cost of production.  Anybody could look like a genius with that business model.

Mr. Pope also continues to overstate the impact of corn prices on the consumer.  Agriculture Secretary Vilsack recently stated that farmers receive about 14 cents of every dollar spent on food at the grocery store.  Of that, about three cents is the value of the corn costs.

A research economist at the USDA recently stated that a 50-percent increase in the price of corn will raise the total grocery shopping bill by about one percent.  To put it in perspective, the value of corn in a four-dollar box of corn flakes is about ten cents.

Mr. Pope also exaggerated the impact of ethanol on food prices in 2010, and he’s doing it again today.  He’s using the devastating drought to once again undermine our nation’s food, feed and fuel producers.  And he’s doing it to make more money.

Repealing the Renewable Fuels standard won’t bolster Smithfield’s profits.  Because of the flexibility built into the renewable fuels mandate, a waiver won’t significantly reduce corn prices.

A recent study by Professor Bruce Babcock at Iowa State University found that a complete waiver of the Renewable Fuels Standard might reduce corn prices by only 4.6 percent.  The report states, “The desire by livestock groups to see additional flexibility in ethanol mandates may not result in as large a drop in feed costs as hoped.”  And, “…the flexibility built into the Renewable Fuels Standard allowing obligated parties to carry over blending credits from previous years significantly lowers the economic impacts of a short crop, because it introduces flexibility into the mandate.”

The drought is enormous in both scale and severity.  But we won’t know the true impact until September, when the harvest begins.  The latest estimates from USDA indicate an average yield of 146 bushels per acre.  That would result in a harvest of 13 billion bushels.  This would still be one of the largest corn harvests.

I would suggest that those claiming the sky is falling withhold their call for waiving or repealing the Renewable Fuels Standard.  It’s a premature action that will not produce the desired result.  And it would increase our dependence on foreign oil and drive up prices at the pump for consumers.

Press release:

Unworkable RFS law needs overhaul, API tells Congress

Bill Bush | 202.682.8114 | bushw@api.orgShareThis

WASHINGTON, July 10, 2012 – API President and CEO Jack Gerard told a congressional subcommittee today that while America’s Renewable Fuels Standard law had increased use of ethanol and other biofuels, implementation of the law’s requirements was becoming increasingly difficult and could hurt consumers. The volume requirements in the law could soon require concentrations of ethanol in gasoline above levels known to be safe.

    “This would present an unacceptable risk to American car owners, who have invested billions of dollars in vehicles that were designed, built, and warranted to operate on a maximum 10 percent ethanol blend,” Gerard said in testimony delivered to the House Subcommittee on Energy and Power. “It also would put at risk billions of dollars of gasoline station equipment in thousands of retail outlets across America, most owned by small independent businesses.

    “Biofuels are now in almost all gasoline. While API supports the continued, appropriate use of ethanol and other renewable fuels, the Renewable Fuels Standard law has become increasingly unrealistic, unworkable, and a threat to consumers. It needs an overhaul.”

    Almost 15 billion gallons of biofuels will be blended in transportation fuels this year, and that number must double by 2020 under the law’s requirements.

    Gerard said he also was concerned that EPA had insisted the industry pay penalty fees to the agency for failing to blend cellulosic ethanol in gasoline, even though no cellulosic ethanol is commercially manufactured. “Mandating the use of fuels that do not exist is absurd on its face and inexcusably bad public policy,” Gerard said. He also called on EPA to resolve the problem of fraudulent renewable fuel credits, which have been sold to refiners under a program created by EPA.

    API represents more than 500 oil and natural gas companies, leaders of a technology-driven industry that supplies most of America's energy, supports 9.2 million U.S. jobs and 7.7 percent of the U.S. economy, delivers more than $86 million a day in revenue to our government, and, since 2000, has invested more than $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.

Executive Summary; Algal Biofuels Roadmap

On December 9 and 10, 2008, the National Algal Biofuels Workshop was held in College Park, Maryland.  In May, 2010, a report based upon the workshop called National Algal Biofuels Technology Roadmap was published.  Below is the Executive Summary of the Roadmap.



"Developing the next generation of biofuels is key to our effort to end our dependence on foreign oil and address the climate crisis – while creating millions of new jobs that can’t be outsourced
— Secretary of Energy Steven Chu at the White Houseceremony on May 5, 2009, announcing $800 million in new biofuel research activities"

In recent years, biomass-derived fuels have received increasing attention as one solution to our nation’s continued and growing dependence on imported oil, which exposes the country to the risk of critical disruptions in fuel supply, creates economic and social uncertainties for businesses and individuals, and impacts our national security. The Energy Independence and Security Act of 2007 (EISA) established a mandatory Renewable Fuel Standard (RFS) requiring transportation fuel sold in the U.S. to contain a minimum of 36 billion gallons of renewable fuels, including advanced and cellulosic biofuels and biomass-based diesel, by 2022. While cellulosic ethanol is expected to play a large role in meeting the EISA goals, a number of next generation biofuels show significant promise in helping to achieve the goal. Of these candidates, biofuels derived from algae have the potential to help the U.S. meet the new RFS while at the same time moving the nation ever closer to energy independence. To accelerate the deployment of advanced biofuels, President Obama and Secretary of Energy Steven Chu announced the investment of $800M in new research on biofuels in the American Recovery and Renewal Act. This announcement included funds for the Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy’s (EERE) Biomass Program to invest in the research, development, and deployment of commercial algae-to-biofuel processes. Additional funding is being directed to algae-to-biofuel research both in EERE and other government agencies and programs.

The term algae can refer to microalgae, cyanobacteria (the so called “blue-green algae”), and macroalgae (or seaweed). Under certain conditions, some microalgae have the potential to accumulate significant amounts of lipids (more than 50% of their ash-free cell dry weight). These characteristics give great potential for an immediate pathway to high energy density, fungible fuels. These fuels can also be produced using other algae feedstocks and intermediates, including starches and sugars from cyanobacteria and macroalgae. In addition to fungible biofuels, a variety of different biofuels and products can be generated using algae precursors.

There are several aspects of algal biofuel production that have combined to capture the interest of researchers and entrepreneurs around the world. These include:

1) high per-acre productivity, 2) non-food based feedstock resources, 3) use of otherwise non-productive, non-arable land, 4) utilization of a wide variety of water sources (fresh, brackish, saline, marine, produced, and wastewater), 5) production of both biofuels and valuable co-products, and 6) potential recycling of CO2 and other nutrient waste streams.

The DOE-supported Aquatic Species Program, an effort undertaken from 1978 to 1996, illustrated the potential of algae as a biofuel feedstock. Much has changed since the end of the program. Rising petroleum prices and a national mandate to reduce U.S. dependence on foreign oil, provide environmental benefits, and create economic opportunities across the nation have renewed interest in developing algal feedstocks for biofuels production.

While the basic concept of using algae as an alternative and renewable source of biomass feedstock for biofuels has been explored previously, a scalable, sustainable and commercially viable system has yet to emerge. The National Algal Biofuels Technology Roadmap Workshop, held December 9-10, 2008, was convened by DOE-EERE’s Biomass Program. The two-day event brought together more than 200 scientists, engineers, research managers, industry representatives, lawyers, financiers, and regulators from across the country to discuss and identify the critical challenges currently hindering the economical production of algal biofuels at commercial scale.

This document represents the output from the Workshop, supporting scientific literature, and comments received during a public comment period. The Roadmap document is intended to provide a comprehensive state of technology summary for fuels and co-products from algal feedstocks and to document the feasibility and techno-economic challenges associated with scaling up of processes. This document also seeks to explore the economic and environmental impacts of deploying algal biomass production systems at commercial scale. By documenting the challenges across the algal biomass supply chain and highlighting research and coordination needs and gaps, this document will serve to guide researchers and engineers, policymakers, federal agencies, and the private sector in implementing national research, development, and deployment efforts.

In summary, the Roadmap Workshop effort suggests that many years of both basic and applied science and engineering will likely be needed to achieve affordable, scalable, and sustainable algal-based fuels. The ability to quickly test and implement new and innovative technologies in an integrated process will be a key component to accelerating progress.