Biofuels score big, but can they cut oil imports?

Biofuels have stormed forward with a series of advances that could give the sometimes maligned alternative energy sector a major boost.

On the federal side, President Obama has allocated $510 million to produce the fuel for military jets and ships and commercial vehicles. And the Army has established the Energy Initiatives Office Task Force, which is charged with figuring out how to meet a 25 percent renewable energy goal by 2025.

A national security issue

Much of the task force's efforts could be directed to biofuels. Oil dependence has long been considered a national security issue. A 2006 report by the Council on Foreign Relations said the United States must manage the consequences of unavoidable dependence on foreign oil. “The longer the delay, the greater will be the subsequent trauma,” the report said.

This week, Obama emphasized the importance of biofuels to energy security, and Navy Secretary Ray Mabus said, "America's long-term national security depends upon a commercially viable domestic biofuels market."

But it won't be easy. Obama's plan is to produce 36 billion gallons of biofuel by 2022, with 20 billion gallons coming from advanced biofuels, 15 billion gallons from corn ethanol and one billion gallons from biodiesel.

Biofuel targets by the U.S. Environmental Protection Agency for 2012 are about 9 percent greater than the previous year and show a modest but increasing role for non-corn biofuels. The Energy Independence and Security Act of 2007 requires that a percentage of fuel sold in the country contain a minimum volume of renewable fuel.

What exactly is biofuel?

Biofuel is a pretty broad category that includes ethanol, biodiesel, cellulosic ethanol, gas-tank-ready isobutanol and, depending on how it's classified, algae fuel. But biofuel manufacture requires energy and, like petroleum products and coal, burning it creates greenhouse gases. Similar to natural gas, those emissions aren't as bad, but the distinction marks its green credentials with an asterisk.

Ethanol, which remains a widely used gasoline additive, may have lost some of the momentum it had five years ago, especially that derived from corn. However, research and development appear undeterred.

At the U.S. Department of Energy’s BioEnergy Science Center in Oak Ridge, Tenn., a team of researchers at believe they have "pinpointed the exact, single gene that controls ethanol production capacity in a microorganism." The discovery, officials say, could prove the missing link in developing biomass crops that produce higher concentrations of ethanol at lower costs.

“This discovery is an important step in developing biomass crops that could increase yield of ethanol, lower production costs and help reduce our reliance on imported oil,” said Energy Secretary Steven Chu in a statement.

New biofuel discoveries

Further underlining my premise for acceleration in biofuel development  is yet another announcement from the DOE, this time about two promising biofuel production methods. Both are referred to as "drop-in" biofuels technologies because they can directly replace or be used in lieu of gasoline, diesel and jet fuel without alteration to engines.

The National Advanced Biofuels Consortium, which received $35 million from the American Recovery and Reinvestment Act to accelerate biofuel development, selected the "technology pathways" for extra attention.

The consortium plans to develop the technologies to a "pilot-ready" stage over the next two years. One of the two methods focuses on converting biomass into sugars that can be biologically and chemically converted into a renewable diesel and is dubbed FLS, for fermentation of lignocellulosic sugars. The second, catalysis of lignocellulosic sugars, or CLS, focuses on converting biomass into sugars that can be chemically and catalytically converted into gasoline and diesel fuel.

Speed is important, partners needed

"Biofuels are an important part of reducing America's dependence on foreign oil and creating jobs here at home," Obama said, adding that the job requires partnering with the private sector to speed development.

Officials said that to accelerate the production of bio-based jet and diesel fuel for military purposes, Secretary of Agriculture Tom Vilsack, Secretary of Energy Steven Chu and Secretary of the Navy Mabus have developed a plan to jointly construct or retrofit several drop-in biofuel plants and refineries.

Oil remains the dominant player

The United States relies on imported oil for 49 percent of its fuel supply, but about half of that comes from the Western Hemisphere with Canada at the top with 25 percent, followed by Venezuela's 10 percent and Mexico's 9 percent, according to the U.S. Energy Information Administration. Some 12 percent of the nation's imports come from Saudi Arabia.

And while U.S. dependence on imported oil has declined since peaking in 2005, the cause can be traced to the recession, improvements in efficiency and various changes in consumer behavior, the EIA says. "At the same time, increased use of domestic biofuels (ethanol and biodiesel), and strong gains in domestic production of crude oil and natural gas plant liquids expanded domestic supplies and reduced the need for imports," officials say.

Undoubtedly that biofuel percentage will rise. The next decade will be the test.

At the Advanced Biofuels Markets exhibition and seminars Nov. 8 to Nov. 11, 2011 in San Francisco, the topic will be "How are we going to get from 6.6 million gallons in 2011 to 20 BILLION gallons in 2022?" It will be a good place to learn more than you wanted to know.

Photo: Courtesy

Ethanol Boost Leads To Planned Reopening of Stockton Plant

California's new budget provided a boost to ethanol projects, which means Pacific Ethanol, a producer of ethanol fuel, will reopen a plant in Stockton within 60 days.

The facility in Stockton could reopen in December. A plant in Madera also will reopen if market conditions allow, said Neil Koehler, president and CEO of Pacific Ethanol Inc.

The plants are coming back because the state budget approved Oct. 8 included the California Ethanol Producer Incentive Program, for which the two plants are eligible. In addition, the U.S. Environmental Protection Agency allows newer vehicles to use a blend of 15% ethanol and 85% gasoline. Previously, the mix was limited to 10% ethanol.

Whether that means, however, that more ethanol will wind up in the mix remains to be seen, as this report says. The vagaries of corn crop and prices also play strong roles.

The Stockton plant has a capacity of 60 million gallons. In Madera, the capacity is 40 million gallons. Koehler did not say how many jobs would be created when the plant reopens.

The company recently restructured financially after filing for bankruptcy protection, which allowed it to sell warrants and raise $35 million in cash, sell minority interest in an energy company for $18 million and retire $17 million in debt.

A dramatic drop in ethanol prices led to the bankruptcy filing, according to The Sacramento Bee.

Market for biomass energy to grow 18% in next decade, study says

Energy generated from agriculture waste, manure and other wastes and feedstocks should reach a market value of $53 billion by 2020, a study released today says.

Boulder, Colo.-based Pike Research in its report Biomass Markets and Technologies cited continued "significant investments" in biomass research and development and the pace of commercializing new technologies. Advances made in cellulosic ethanol, which can be made from relatively cheap to produce switch grass rather than corn, and algae are among those advances.

“Biomass will continue to be the leading source of renewable energy,” said Clint Wheelock, Pike Research managing director, in a statement. “While it does not have the celebrity appeal of solar, wind or other emerging technologies, biomass is an affordable and reliable form of power generation. In addition, we expect continued growth in the adoption of biofuels during the next decade, as well as a proliferation of bioproducts such as plastics and chemicals.”

That may be good news for Sacramento-based Pacific Ethanol, which has an idled plant in Madera County and whose stock is hovering around the 50 cents-per-share mark. The company is in Chapter 11 bankruptcy but reached an agreement with creditors in June and expects to restart its idled plants soon.

Biomass, as defined by Pike for the purposes of its report, also includes corn and grains, plants and forest resources, construction and industry waste, food industry wastes and municipal waste.

Wheelock said applications for biomass range from power generation to heating, transportation fuels, chemicals and plastics. He said development of the biomass industry is driven by government policies and mandates and, "while world governments are likely to back away from some of the aggressive targets set a few years ago, Pike Research anticipates that biomass will continue to be a significant focus for energy policymakers."

Photo: Courtesy Pike Research.

Pacific Ethanol expects to emerge from bankruptcy

A deal between Pacific Ethanol Inc. and its lenders will enable the Sacramento-based company to shed significant debt and move forward with bankruptcy reorganization, officials have said.

The Chapter 11 reorganization plan, approved by a judge in Delaware and expected to become effective at the end of the month, would eliminate about $290 million of debt and other liabilities and provide a line of credit of up to $15 million that could be expanded later, officials said Wednesday.

"New liquidity and low debt levels provided by the plan support our efforts to optimize operations at the two facilities currently running, and as market conditions permit, resume operations at the two idled facilities," said Neil Koehler, CEO and president, in a statement. "We are optimistic about the future of the ethanol industry and the success of our company.”

The idled plants are outside Madera and Stockton and are expected to restart production eventually. Three of the company's four plant shut down early last year. The company filed for bankruptcy protection in May 2009.

The Sacramento Bee's Dale Kasler reported today that Pacific Ethanol "fell victim to a dramatic drop in ethanol prices brought on by a glut in supply." He said prices for the fuel additive since "have recovered, production is perking up – and analysts say another glut is possible."

Under the plan, company said, ownership will be transferred but Pacific Ethanol will continue to staff, manage and operate its four manufacturing plants for a fee and profit sharing. The company also "will continue marketing ethanol for third parties as well as the ethanol" produced by the plants. Pacific Ethanol would have the option to purchase up to 25% of the new company.

Pacific Ethanol, which trades under PEIX on Nasdaq, closed at 79 cents per share, up 2 cents or 3.8 percent.

The San Joaquin Valley Clean Energy Organization is a nonprofit dedicated to improving our region's quality of life by increasing its production and use of clean and alternative energy. The SJVCEO works with cities and counties and public and private organizations to demonstrate the benefits of energy efficiency and renewable energy throughout the eight-county region of the San Joaquin Valley.

Cellulosic ethanol closer to commercial production?

Cellulosic ethanol, long hailed as a piece of the puzzle for helping the nation solve its energy woes, moved a step closer to commercial production with the opening of the ZeaChem Inc. plant this week in Boardman, Ore.

The plant initially will produce ethyl acetate, a precursor to cellulosic ethanol, company officials said in a statement. ZeaChem intends to add cellulosic production next year, using a U.S. Department of Energy grant.

Cellulosic is the next step in biofuel movement. The technology extracts and ferments sugars from such sources as trees and grasses to produce the alcohol. Commercial production of the more traditional ethanol -- made from corn -- has suffered some recent swings in the market.

Pacific Ethanol Inc. officials said in April that they hope the company's restructuring plan will enable it to gain enough liquidity to restart production at its ethanol manufacturing plants in Stockton and Madera.

Oregon Gov. Ted Kulongoski liked ZeaChem's plan. "ZeaChem’s biorefinery in Boardman is another example of our effort to attract green companies and advance the development of cellulosic ethanol as a viable renewable energy resource," he said. "Companies like ZeaChem will help drive Oregon’s economy in the 21st century as well as move us toward greater energy security and independence."