One of the Decade's Biggest Examples of Wasteful Government Spending

http://moneymorning.com/2012/08/31/one-of-the-decades-biggest-examples-of-wasteful-government-spending/

August 31, 2012

 

By David Zeiler, Associate Editor, Money Morning

In February we told you that despite nearing $15 trillion in debt - now close to $16 trillion - the U.S. government decided to spend $592,000 last year to figure out why chimpanzees throw poop.

Now we've discovered yet another example of wasteful government spending that has burned up more than $1.5 billion of your tax dollars - with nothing to show for it.

We're talking about the fruitless pursuit of a biofuel known as cellulosic ethanol, surely one of the greatest government boondoggles of the past decade.

Cellulosic Ethanol Production: What You're Paying For

Both Republican and Democratic administrations have showered companies with grants and loan subsidies with the goal of turning materials like wood chips and switch grass into an ethanol fuel that could be used in automobiles.

 

 The 2007 Energy Independence and Security Act was so optimistic government spending could jump-start this unproven technology that it projected annual cellulosic ethanol production of 250 million gallons by 2011, 500 million gallons by 2012, and 1 billion gallons by 2013.

For good measure, the law also required oil refineries to buy the cellulosic ethanol to mix with their gasoline products, just as they do now with corn-based ethanol.

But five years and more than $1.5 billion later, cellulosic ethanol production is just a drop in the bucket.

Literally.

Until this year, no cellulosic ethanol had been commercially produced. So far this year, the sum total is 20,000 gallons produced in April (none was produced in May or June, the latest months for which data is available). 

 

That amounts to 0.04% of 2012's quota. 

Meanwhile, the government keeps throwing more tax dollars into the black hole of cellulosic ethanol, hoping someone will figure it out.

The Costly Dream of Cellulosic Ethanol 

 

Back in 2007, about a half-dozen companies received most of the initial wave of government spending to launch cellulosic ethanol production.

One company, Range Fuel, received a $76 million grant from the Energy Department and an $80 million loan guarantee from the Agriculture Department. Range's factory was supposed to process wood chips into 10 million gallons of ethanol a year.

The Range plant never produced any ethanol. Forced into liquidation, the Georgia factory was sold in January for $5.1 million.

Another company, Cello Energy, received no government money but was key to the EPA's rosy estimates of cellulosic ethanol production. Cello was projected to supply 70 million gallons in 2010, about 70% of that year's mandate. The company declared bankruptcy in 2010 without producing a drop.

The government brushed off those failures and instead turned its funding machine up a notch.

Last September, the Energy Department loaned Spanish-based Abengoa Energy $134 million to build a cellulosic ethanol plant in Kansas. Abengoa was also a recipient of a $76 million grant from the DOE back in 2007. 

The Energy Department said in December it would provide up to $80 million to help Mascoma build a cellulosic ethanol facility in Kinross, MI.

And just last week the Department of Agriculture announced a $99 million loan guarantee to Italian-owned Chemtex to build a plant in Sampson County, GA.

While it's possible the newer projects might bear fruit, it sure looks like the government is wastefully throwing good money after bad.

Forced to Buy a Biofuel That Doesn't Exist

Despite the lack of commercially available product, however, the Environmental Protection Agency (EPA) requires the oil companies to buy a fixed amount each year or pay a fine via "waiver credits."

Last year the EPA lowered the cellulosic ethanol requirement by nearly 98% to 6.6 million gallons. But with zero gallons available to purchase, the oil companies were forced to pay a $6.8 million penalty.

"As ludicrous as that sounds, it's fact," Charles Drevna, president of the National Petrochemicals and Refiners Association, told Fox News. "If it weren't so frustrating and infuriating, it would be comical."

For 2012, the EPA has lowered the requirement from 500 million gallons to 8.65 million gallons. However, with just 20,000 gallons produced so far, it looks like oil companies will again pay millions in penalties - for not buying something that's just plain unavailable.

"Congress subsidized a product that didn't exist, mandated its purchase though it still didn't exist, is punishing oil companies for not buying the product that doesn't exist, and is now doubling down on the subsidies in the hope that someday it might exist," scolded a Wall Street Journal editorial. "We'd call this the march of folly, but that's unfair to fools."

Why Cellulosic Ethanol Has Flopped

Turning grass and wood chips into a renewable fuel source sounds like a great way to reduce the country's dependence on fossil fuels, but making it a reality has proven very, very difficult.

Compared to corn-based ethanol, cellulosic ethanol is much more complicated to produce and costs about twice as much.

While cellulosic ethanol has existed in the laboratory for decades - the Germans first created it in 1898 -- the mass production riddle has remained unsolved.

That's also why relatively few private investors have gotten on board.

"It is expensive and it's difficult to do and it's relatively untried on a commercial scale," Ned Stowe, policy associate for the pro-renewable energy think tank, the Environmental and Energy Study Institute, told the Tampa Bay Times. "For private investors, it's seen as a risky venture because of the technological unknowns."

Solutions to those issues still may not make cellulosic ethanol viable as a significant fuel source.

Just to replace 10% of annual U.S gasoline consumption - about 13.4 billion gallons - cellulosic ethanol factories would need to process enough biomass each year to fill a line of semi-trucks stretching to the moon.

Last fall, the National Academy of Sciences weighed in with a report on the struggles of cellulosic ethanol. The main issue, NAS said, is "the high cost of producing cellulosic biofuels compared with petroleum-based fuels, and uncertainties in future biofuel markets."

In short, cellulosic ethanol isn't yet cheap enough relative to gasoline to make it a practical fuel option.

So, given the obvious futility of making this particular biofuel work, why does the government keep wasting money on it?

Politics, of course.

The government's generosity has helped the overall ethanol industry become a $42 billion behemoth that also happens to employ about 90,000 Americans. And farmers have become very fond of the various government subsidies they receive for growing ethanol "feedstock" such as corn.

"Ethanol would likely disappear from the market place absent federal subsidies and mandates," Sterling Burnett, senior fellow at the National Center for Policy Analysis, told Forbes. "Like so much of the federal pork bestowed upon special interests, ethanol is bad for the economy, bad for consumers and bad for the environment."

 

Plant Gene for Improved Biofuel Processing

http://www.thebioenergysite.com/news/11541/plant-gene-for-improved-biofuel-processing

Tuesday, August 28, 2012

 

US - Since 2007, researchers at the BioEnergy Science Center, one of three Department of Energy-funded research centres, have partnered to figure out how to break down plants so that they easily release the simple sugars that can be processed into biofuels. It’s a breakthrough that could make biofuels cost competitive with gasoline. 

 

Now, University of Georgia researchers, who are part of the team, have taken an important step toward that goal by identifying a previously uncharacterized gene that plays a major role in cell wall development of Arabidopsis plants, a discovery that promises to help turn plants into biofuel more efficiently.

The team of researchers found that the gene GXMT1 is responsible for directing a key step in the development of the plant polymer xylan, a principal component of cell walls in woody biomass that make it resistant to biofuel conversion.

“Our goal is to figure out how the plants make this polymer,” said William York, the study’s principle investigator and faculty member in the UGA Complex Carbohydrate Research Center.

“If we can manipulate that process, we can change how plants make their cell walls, which could make them easier to turn into liquid fuel.”

As a member of the BioEnergy Science Center, York joins multidisciplinary, multi-institutional research teams pursuing the fundamental scientific breakthroughs needed to make the production of cellulosic biofuels derived from non-food plant fiber cost effective on a national scale.

York explained that the problem with many biomass plant candidates is not that they are difficult to grow or harvest, but that they are difficult to process. In order to make biofuels, processing facilities use microbes to ferment the naturally occurring plant sugars into ethanol and other valuable products, much in the same way distilleries make alcoholic beverages.

But plants have evolved powerful defenses against the microbes researchers use to break down biomass for fermentation. This research demonstrates that manipulation of biomass structure at the molecular level could yield a crop that is more easily converted into biofuel.

“We want to develop strains of plants that are strong and grow well but break down easily when we want them to,” said York, who is also a professor of biochemistry and molecular biology in the UGA Franklin College of Arts and Sciences and a member of the UGA Bioenergy Systems Research Institute.

In their paper, published in the Proceedings of the National Academy of Sciences, the researchers identified a mutant GXMT1 plant that produces structurally modified xylan that is more easily released when the biomass is treated with hot water. The release of xylan during this treatment will ultimately make it easier for microbes to digest the woody fibres and convert them to ethanol.

If researchers can find ways to capitalise on this mutant version of the plant and alter this gene without compromising the structural integrity of the wood, they can begin the process of developing plants specifically designed for biofuel conversion.

While the development of efficient biofuels is a major driving force behind their work, this research also contributes significantly to the understanding of basic plant development.

Before their discovery, GXMT1 was categorized in scientific literature as a protein of unknown function, but it is now the first enzyme shown to catalyze the formation of methyl-glucuronic acid, a key structural component of xylan in plant biomass.

Ultimately, York and his collaborators hope that their research will open the door to new ways of manipulating plants and making them more useful to humans.

“We use plants for everything: We eat plants, we build our homes out of plants, we make all sorts of things with them,” York said.

“If we can change them, we can make them easier to work with.”

Other UGA researchers on the study were primary authors Breeanna R. Urbanowicz and Maria J. Pena and co-authors Jason Backe, Malcolm A. O’Neill, Alan G. Darvill, Supriya Ratnaparkhe and Harry J. Gilbert. Collaborators and co-authors from BESC were Hongjia Li and Charles Wyman of the University of California Riverside and Marcus Foston and Arthur J. Ragauskas of the Georgia Institute of Technology.

TheBioenergySite News Desk

Wadley grant to fund recycled wastewater for biomass plant

http://chronicle.augusta.com/latest-news/2012-08-28/wadley-grant-fund-recycled-wastewater-biomass-plant

By Rob Pavey, Staff Writer

Tuesday, Aug 28, 2012 4:11 PM

The city of Wadley, Ga., will receive a $1,518,152 loan from the Georgia Environmental Finance Authority to develop infrastructure for a planned biomass plant that would burn wood products and shredded tires to make electricity.

The loan would finance a system to recycle treated wastewater from the city’s wastewater treatment plant, including 35,000 linear feet of 8-inch forcemain to deliver 100,000 gallons per day of treated effluent to the North Star Renewable Energy plant.

Wadley will pay 1.82 percent interest on the 20-year loan. It received a 1 percent interest rate reduction because the project will help conserve water.

The $70 million North Star plant would burn about 133,500 tons of forest products and about 38,500 tons of shredded tires per year to create about 24 megawatts of power.

Other recipients of GEFA grants announced Tuesday were the cities of Ashburn, Cuthbert, Jasper, Jeffersonville and Sylvester.

The authority manages Georgia’s Clean Water State Revolving Fund, a federal loan program that provides low-interest loans to fund wastewater infrastructure and water pollution reduction projects.

Georgia Voices: Biofuel research hopes growing at UGA Read more: The Marietta Daily Journal - Georgia Voices Biofuel research hopes growing at UGA

http://mdjonline.com/view/full_story/19948527/article-Georgia-Voices--Biofuel-research-hopes-growing-at-UGA?instance=secondary_story_left_column

by The Columbus Ledger-enquirer

 

August 28, 2012 01:10 AM

 

The United States’ ethanol experiment has met with only limited success at best. Our increasingly critical need for alternatives to fossil fuels has been a case of good intentions that haven’t, or at least haven’t yet, worked out the way we’d like.

The drawbacks are familiar. Most ethanol is now made from corn, the growing of which is an energy-intensive process. It’s almost the definition of a Catch-22: A substance distilled to create energy takes a lot of energy — i.e., other fuels — to make. It’s like a joke about a guy who eats to get the strength he needs to work off what he ate.

As if that weren’t enough of a challenge, corn-based ethanol also takes a lot of water. At a time when much of the country, including many corn-growing regions, is suffering from prolonged rainfall shortages and in some cases severe drought, a water-intensive process is as problematic as an energy-intensive one.

The difficulties of synthesizing corn-based ethanol have, not surprisingly, drawn fire from both thoughtful critics and usual-suspect hecklers. But somewhere between stubbornly plugging away at a process that costs at least as much as it yields, and surrendering to perpetual petrofuel addiction and the political and economic ransom — domestic as well as foreign — we will have to pay as a consequence, there must be some fertile middle ground.

Researchers at the University of Georgia may be close to finding it. A report by Susan Mittleman on Georgia Public Broadcasting and transcribed on the Public Broadcasting Atlanta website (pba.org) describes a promising new process for making ethanol and other biofuels from vegetation common to this area, such as switchgrass and pine or poplar trees. The idea of making fuel from biomass is not new. But like corn-based ethanol, fuel synthesized from biomass has so far been too expensive to make it practical. The difference, as UGA geneticist Janet Westpheling explained, is genetics — manipulating the DNA to make breaking down the raw materials cheaper and easier.

“Part of the conversion of really tough wood stuff like that,” Westpheling explained to GPB, “is that plants have evolved over millions of years to not be degraded by bacteria and the soil. But we work on bacteria that can eat the stuff … These organisms can do that without enzymes, without pre-treatment, which means they can do it economically.”

The other huge advantage, she said, is that such plants are plentiful in the Southeast and are “naturally drought resistant.”

We’re still a long way from being able to tell the Middle East to take its oil and … well, sell it elsewhere. But we’re getting just a little closer.

UPDATE 2-Georgia, New Mexico join call for end to US ethanol rule

http://www.reuters.com/article/2012/08/21/usa-ethanol-georgia-idUSL2E8JL4KZ20120821?rpc=401

Tue Aug 21, 2012 4:28pm EDT
 

* Poultry, cattle states say ethanol raising feed costs
* EPA mulling suspension of ethanol mandate
* Ethanol mandate is already flexible, says corn sector

By Patrick Rucker

WASHINGTON, Aug 21 (Reuters) - Two U.S. states that depend on the livestock industry are adding their voices to a string of states asking Washington to ease pressure on corn prices by suspending rules that send a large share of the crop to produce ethanol.

Georgia, the center of U.S. poultry production, and New Mexico, with its large cattle industry, this week asked federal officials to suspend a program that encourages converting corn into ethanol fuel.

Roughly 13 billion gallons of ethanol are due to be blended with gasoline this year under a federal renewable fuels mandate meant to bolster domestic energy sources. The rules can be waived under a formal appeal from a state to the U.S. Environmental Protection Agency.

Livestock farmers complain that demand for ethanol wrongly diverts a large share of the feed corn they need and drives up prices already inflated by a long dry season.

Poultry farmers in Georgia are spending about $1.4 million more in feed costs per day due to the drought and ethanol rules, Georgia Governor Nathan Deal wrote in a letter to the EPA that seeks a waiver of the ethanol mandate.

But corn farmers note that about a third of the ethanol-distilled corn becomes livestock feed and that the mandate has other built-in flexibilities that could be tried before shelving the program.

"Ignoring (these facts) exaggerates the impact of ethanol on corn supplies," said Matt Hartwig, a spokesman for the Renewable Fuels Association.

But livestock industry organizations are demanding total relief from the mandate.

The head of the National Chicken Council, Mike Brown, said a "full, one-year waiver" is needed to keep high corn prices from devastating the poultry industry.

In recent weeks, six states have urged the EPA to suspend the ethanol mandate, although not all of the states have formally petitioned the agency.

The EPA said on Monday that it would had begun weighing the requests to waive the mandate.

"New Mexico's agricultural economy is primarily composed of dairy and range livestock production," Governor Susana Martinez wrote in a letter to the EPA this week. "I urge you to consider granting an immediate waiver."

Ethanol is strongly supported by the renewable-fuels lobby and by lawmakers and farmers in the U.S. corn belt.

The EPA has until around mid-November to decide on the waiver requests, meaning the agency could wait to rule on the contentious issue until after national elections on Nov. 6.

The agency will collect comments from the public for 30 days as it attempts to gauge what effects the mandate will have on the economy.

After rejecting a petition from Texas Governor Rick Perry in 2008, the EPA said waiver requests have to prove that the mandate itself is the cause of severe economic harm to a region and not just a contributing factor.

Answers for your biofuels questions: Coskata, LanzaTech, butanol

http://www.biofuelsdigest.com/bdigest/2012/08/05/answers-for-your-biofuels-questions-coskata-lanzatech-butanol/

Jim Lane | August 5, 2012 

 

Here in Digestville, we debut this week a content collaboration with Consumer Energy Report, a must-see content site that we recommend you check out and bookmark. Twice a month, we’ll check in with CER and excerpt their latest and greatest – including contributions from CER and Energy Trends editor and noted biofuels commentator Robert Rapier.
In our first collaborative, RR answers some questions from readers. One is on Lanzatech, and the other is about the feasibility  of filtering for butanol separations. The questions were slightly edited for brevity.

Q. I am interested if the decision by Coskata shall flow on to Lanzatech and their purchase of Range Fuels in regards to ethanol?

We are currently developing a project that incorporates a number of pieces, however we are considering the use of natural gas as a dual feedstock to produce critical volume likely producing methanol as a fuel and chemical base. Our view is to follow the lead by China and to develop technologies and processes around methanol to fuel. Currently we are are undertaking research and developing a possible business model.

Do you think we are going to see a vhs (ethanol) vs beta (methanol) situation develop in the future?

RR answers: Lanzatech has technology that was close to Coskata’s technology, so this is certainly a good question. In my opinion, Lanzatech is going to have a tough time making cost-competitive ethanol for many of the same reasons that caused Coskata to shift to natural gas. If you don’t want to make a full commitment to natural gas, I think a low-risk approach (but probably higher capital) is the one you describe in which you would have a capability of feeding natural gas into the process.

Natural gas should work fine in Lanzatech’s process, and would certainly be a lower capital option than wood waste. I know they would ideally like to process waste streams that contain a lot of carbon monoxide, but they are going to need the capability of building greenfield plants that provide their own feedstock. Natural gas could be a path forward.

As far as ethanol versus methanol, in my view methanol and di-methyl-ether (DME) produced from methanol are likely to gain a stronger foothold in China before they do so in the U.S. The U.S. agricultural lobby has not looked favorably upon methanol in the U.S., and I believe they will fight hard to keep it out of the fuel supply and protect ethanol’s market share. After all, there is already a large supply of cheap methanol in the U.S. and approximately none of it ends up in the fuel supply. I don’t expect that situation to change soon, but if you are thinking about China as a target market then your chances may be better there.

Q: This may be a dumb question (chemistry is not my area), but has anyone looked at simply filtering the butanol from the water?  What are the relative molecular sizes?

RR answers: This particular issue is in reference to the energy-intensity of separating a solution containing low levels of butanol. For reference, I have written in some detail about this issue in Butanol 101 .

It’s not a dumb question; in fact membranes can be used to separate butanol from water. The membranes I am familiar with don’t work on the basis of size differences (although some gas membranes do) but rather the relative polarity of butanol and water. Since butanol is a less polar molecule than water, some membranes such as polydimethylsiloxane (PDMS) that present a hydrophobic surface allow butanol to migrate into the membrane while excluding water.

This sort of separation can allow low-concentration butanol that is generally produced from biological processes (perhaps 2% to 6% butanol) to concentrate up to above the phasing concentration (~8% for n-butanol). Once the phasing concentration is reached, the energy requirements are far lower because the mixture separates into a butanol-rich phase containing maybe 20% water and a water-rich phase containing about 8% butanol. Therefore, instead of distilling off a mixture of 95% water and 5% butanol — which is extremely energy-intensive — you would distill a mixture that contains only 20% water.

The disadvantage is that the total costs of operating a membrane system are still not cheap. Chemical companies that produce billions of gallons of butanol each year are well aware of such systems, and have taken a look at the economics many times. But a fundamental difference between the petrochemical process and the biological process is that the former does not have to remove copious amounts of water as is the case in the latter. Therefore, the economics may be more compelling to utilize membranes for those pursuing the biological route.