Beijing Shougang LanzaTech New Energy Science & Technology Company Earns Roundtable on Sustainable Biomaterials (RSB) Certification

http://www.einnews.com/pr_news/175535517/beijing-shougang-lanzatech-new-energy-science-technology-company-earns-roundtable-on-sustainable-biomaterials-rsb-certification

LanzaTech's Joint Venture With Shougang Jingtang Iron and Steel United Company and the Tang Ming Group, Earns First-Ever RSB Certification for Waste-Gas to Biofuel Process

WASHINGTON, DC and BEIJING, CHINA -- (Marketwired) -- 11/05/13 -- Beijing Shougang LanzaTech New Energy Science & Technology Co., Ltd. and the Roundtable on Sustainable Biomaterials Services Foundation, the implementing entity of the RSB, announced today that Beijing Shougang LanzaTech New Energy Science & Technology Co., Ltd. has earned RSB's sustainability certification for the joint venture's facility that converts waste steel mill gases to sustainable biofuels.

The RSB is a global sustainability standard and certification system for biofuels and biomaterials production. The facility, which utilizes LanzaTech technology, is the first RSB-certified biofuel plant in China, and the first of its kind anywhere to receive this key certification for industrial carbon capture and utilization.

"The joint venture uses a process that creates a sustainable biofuel and does so by efficiently reusing greenhouse gases that would have otherwise been released into the atmosphere," said Peter Ryus, RSB Services' CEO. "This solution, which does not impact the food chain or land use, meets the RSB principles and practices and serves as an example of how continued innovation in the industry will lead to sustainable biofuels in the future. We are honored to be working with LanzaTech and their joint venture partners on greenhouse gas reduction and global sustainability improvements."

RSB certification shows the joint venture's commitment to environmental improvements through a novel biological approach that converts waste carbon emissions from steelmaking into biofuels and chemicals. Using the RSB methodology and assumptions based on commercial production, it is estimated that ethanol from the process may reduce life cycle greenhouse gas emissions by 60 percent compared to petroleum fuels.

In addition, the joint venture partners anticipate that the process will improve local air quality by materially reducing nitrogen oxide (NOx) and particulate emissions. The technology has the potential of making a significant global impact by reusing up to 150 million tonnes of CO2 from the global steel industry alone.

The use of novel gas fermentation technology to convert industrial waste gases into biofuels is aligned perfectly with the RSB Principles and Criteria, which go beyond greenhouse gas emissions reductions to focus on economic and social sustainability. By using a widely available waste resource located in areas typically unsuitable for agriculture, LanzaTech's process reduces overall emissions without negatively impacting the food chain or causing land use changes. By enabling the production of fuels from available steelmaking waste, Beijing Shougang LanzaTech New Energy Science & Technology Co., Ltd. will help China balance economic growth with sustainability, as well as increase its supply of domestic biofuels.

RSB certification provides assurance that biofuels and biomaterials deliver on their promise of sustainability. Beijing Shougang LanzaTech New Energy Science & Technology Co., Ltd. chose to work with RSB because of its rigorous sustainability standard, auditing approach, and its broad acceptance. The RSB standard provides a comprehensive approach that incorporates the standard with other operational, management and physical standards such as ISO risk management and environmental management to ensure every base is covered.

"The RSB certification is an incredibly important step for the development of our commercial production facilities which we expect to bring online in 2014," said Dr. Jennifer Holmgren, CEO of LanzaTech. "In addition, we trust this certification will help accelerate the acceptance of biofuels made through carbon capture technologies and serve to showcase the possibilities opened up by thinking of carbon emissions as an opportunity, not just a problem."

RSB is a preferred standard of major airlines globally, including LanzaTech's partner Virgin Atlantic and the Sustainable Aviation Fuel Users Group, an aviation industry-led coalition that is supporting the development, certification, and commercial use of lower carbon renewable fuels, derived from sustainable sources.

Virgin Atlantic President Sir Richard Branson previously described the LanzaTech process as "one of the most exciting developments of our lifetime and a major breakthrough in the war on carbon." Reflecting on this latest development, he says "RSB's certification of the Beijing facility is a crucial step to ensure this revolutionary new fuel will meet the highest possible environmental standards and will result in a radical reduction in our carbon footprint."

Virgin Atlantic Chief Executive Craig Kreeger notes: "Our partnership with LanzaTech is a key part of our Change is in the Air sustainability program. Beyond our significant fleet upgrades and our comprehensive fuel efficiency programme, this breakthrough opportunity to pioneer away from fossil fuels offers us the best possible chance of substantially reducing the carbon emissions associated with our flying programme. Key to that has always been ensuring that any new fuel meets the highest possible sustainability standards, and we view RSB as the gold standard scheme to help us to achieve this. We're excited and committed to help hasten the day when we are using LanzaTech's RSB-certified fuel to power our aircraft."

The audit summary report is available on the RSB website, www.rsbservices.org. The audit was conducted by SCS Global Services (SCS), www.scsglobalservices.com, a leading global provider of third-party environmental and sustainability certification, auditing, testing, and standards development for nearly 30 years.

About LanzaTech

LanzaTech is a leader in gas fermentation technology. It provides novel and economic routes to fuels and high value chemicals from waste gas streams. LanzaTech's unique process provides a sustainable pathway to produce platform chemicals that serve as building blocks to products that have become indispensable in our lives such as rubber, plastics, synthetic fibers and fuels.

LanzaTech's technology solutions mitigate carbon emissions from industry without adversely impacting food or land security. With commercial facilities in China slotted for construction in 2014, LanzaTech, a company founded in New Zealand, is now a global organization. More information is available at www.lanzatech.com.

About Shougang Group

Shougang Group is a large enterprise group founded in 1919. While Shougang's main business is iron and steel, the Group is also engaged in mining, machinery, electronics, construction, real estate, services and international trading. Shougang has made great progress, especially since economic reforms began in China 30 years ago.

Entering the new century, the steel industry is facing unprecedented pressure and challenges, as well as unprecedented development opportunities. Shougang has created a first class iron and steel enterprise by actively promoting optimization of the industry's structure, promoting continuous innovation and pioneering new product development and production processes. Shougang has also changed its traditional product line to produce high-grade sheet metal, an historical change. In the past thirty years, Shougang steel's production capacity has increased from 1.79 million tons to 12.19 million tons and sales income has increased from 1.443 billion yuan to 132 billion yuan. The Group has paid more than 57.66 billion yuan in tax revenue and has made a significant contribution to the development of the modern Chinese iron and steel industry. More information is available at http://www.shougang.com.cn/shougang_cn_web/
 
About Tang Ming Group 

Tang Ming Group Ltd was established in November 1999. It was successfully formed into a corporation with China Shougang Group in 2003 to establish Shougang Tangming (Auckland) Corporation Ltd. In 2011, Beijing Shougang LanzaTech New Energy Science & Technology Co., Ltd was established in Beijing.

About RSB Services
The Roundtable on Sustainable Biomaterials (RSB) certification system helps farmers, feedstock processors and biomaterial producers prove their sustainability to the world. Certified entities demonstrate that their operations comply with ambitious yet practical safeguards, including the protection of natural or rare ecosystems, food security, and respect for human rights to land, water and decent work conditions, and the management of water resources. With unmatched NGO support, global market compatibility across all feedstocks, practical guidance and tools for an ongoing sustainability system, RSB Services Foundation, the implementing entity of the RSB, helps companies manage their risk and increase shareholder and consumer confidence through the certification of their businesses. More information about RSB certification can be found at www.rsbservices.org. 

Media Contacts:
John Williams
Scoville PR for LanzaTech
jwilliams@scovillepr.com
+1-206-625-0075

Helena Kennedy
Director of Communications at RSB Services Foundation
hkennedy@rsbservices.org
+1-703-725-4626

Chevron Defies California On Carbon Emissions

http://www.bloomberg.com/news/2013-04-18/chevron-defies-california-on-carbon-emissions.html

By Ben Elgin & Peter Waldman - Apr 18, 2013 12:01 AM ET


Chevron Corp. (CVX) helped write the first-in-the-nation rule ordering reduced carbon emissions from cars and trucks. Its biofuels chief spoke at the ceremony where California Governor Arnold Schwarzenegger signed the executive order in 2007, the same year the oil company pledged to develop a gasoline replacement from wood.

Now Chevron is leading a lobbying and public relations campaign to undercut the California mandate aimed at curbing global warming, two years after the state started phasing it in. Research on commercially viable climate-friendly products has come to naught, stymied by the poor economics of coaxing hydrocarbons from plants’ stubborn cell walls, according to Chevron officials.

 

An employee works on a Chevron Corp. sign at a gasoline station in San Francisco, California. Like other major investor-owned oil companies, Chevron and ExxonMobil accept climate-change science and acknowledge carbon emissions contribute to global warming. Photographer: David Paul Morris/Bloomberg 

April 18 (Bloomberg) -- Chevron Corp. helped write California's first-in-the-nation law ordering reduced carbon emissions from cars and trucks. Now Chevron is active in lobbying and public relations efforts to undercut the mandate. Bloomberg's Kevin Thrash reports. (Source: Bloomberg)

 

“We’ve looked at 100 feedstocks, 50 conversion technologies, worked to shape this law the best we can, and we have not come up with a solution to be able to comply,” said Rhonda Zygocki, Chevron’s executive vice president of policy and planning, in a Feb. 4 talk at the Commonwealth Club in San Francisco. Rick Zalesky, the Chevron official who celebrated the order’s signing with Schwarzenegger, was blunt last June when he declared the low-carbon standard “not achievable.”

While still promoting its commitment to renewable energy, the second largest U.S. oil company quietly shelved most of its biofuels work in 2010, according to internal documents and former Chevron officials. It decided products with potential returns of at least 5 percent weren’t enough for a multinational used to margins triple that, said Paul Bryan, a former vice president of biofuels technology.

Cutting Funding 

“The best outcome for the oil companies is if nothing changes,” said Bryan, who left Chevron in 2010 after 15 years. “You can make money today making advanced biofuels -- you just won’t make as much money as the oil companies would like.”

Chevron’s switch is part of the fossil fuel industry’s hardening line against efforts to supplant petroleum in the $500 billion U.S. transportation fuels market.

ExxonMobil Corp., the largest U.S. oil company, has also retreated from a biofuels effort. It slashed funding for research into making the fuel from algae, according to former employees involved in the project, and with Chevron is pressing California to postpone the low-carbon standard. In Europe, meanwhile, carbon credits for December plunged to an all-time low yesterday, making it cheaper for companies to buy the right to emit more carbon dioxide gas under the European Union’s system for controlling global warming.

‘Shockingly Small’

Like other major investor-owned oil companies, Chevron and ExxonMobil accept climate-change science and acknowledge carbon emissions contribute to global warming. They say they’re pushing back against the California rule because it demands technology that may not be available for years, and will cost jobs and send pump prices soaring if not rewritten.

The oil industry is lobbying to stop other states from following California. All the while, oil companies are dedicating few resources to the advances in biofuels they talk about needing to make, said Mary Nichols, head of the California Air Resources Board, which enforces the carbon rule.

“It’s shockingly small given their profitability,” Nichols said. “We’re dealing with companies with revenues in excess of the state of California.”

San Ramon, California-based Chevron had its second most profitable year in 2012, posting net income of $26.2 billion on $222.6 billion in sales, the vast majority from petroleum. California’s revenue in fiscal year 2012 was $87.8 billion.

Doomed Project

The company touts its biofuels program on its Facebook page and website. “It’s time oil companies get behind the development of renewable energy,” a headline on the website says. The text says a joint venture with Weyerhaeuser (WY) Co., Catchlight Energy LLC, is “working to commercialize advanced biofuels made from forest-based biomass.”

While Catchlight still exists, Chevron and the forest products company three years ago scratched a plan to spend more than $400 million and build commercial plants by 2014, according to an internal Catchlight business plan.

The plants were expected to generate a profit of 5 percent to 10 percent, according to Bryan and other former Chevron officials -- short of the average 17 percent the company earns on capital investments, including oil and gas exploration and production, for which it has budgeted $33 billion this year.

The Catchlight plan was doomed when management decreed biofuels had to compete with fossil fuel projects for funds, said Bryan, a lecturer in chemical and biomolecular engineering at the University of California at Berkeley. He said he left Chevron, taking a severance package during a staff downsizing, because he didn’t believe the company was committed to biofuels.

Too Ambitious

Chevron was optimistic when it worked on the low-carbon fuel standard with Schwarzenegger’s team in 2007, said Desmond King, president of Chevron Technology Ventures, which oversees emerging technologies. Former biofuels chief Zalesky, now the company’s general manager of crude and manufacturing strategy, was among several Chevron officials who helped craft the rule.

As the company put theory into practice, trying to make a propellant out of wood’s sugar-rich fibers, it realized the rule was too ambitious, King said. The research didn’t lead to anything that would be commercially viable, he said.

Even a 10 percent potential profit wasn’t attractive because the average payback from other projects is so much higher, he said. “It’s hard for Chevron to make major investments in anything that would be dilutive to its return,” he said. “It all comes down to getting good enough returns for our shareholders.”

Algae Fuel

Spending on biofuels has shrunk, he said, declining to give details. A leading producer of geothermal energy, Chevron expects to spend about $2 billion between 2012 and 2014 on renewable energy and energy efficiency, according to Morgan Crinklaw, a company spokesman.

To try to make algae fuel, Irving, Texas-based ExxonMobil said it would spend up to $600 million and hired Synthetic Genomics Inc. in 2009 to identify and modify algal strains that yield high amounts of oils. The oil company promoted the work in ads with a scientist saying, “We’re making a big commitment to finding out just how much algae can help to meet the fuel demands of the world.”

Research hit a snag in 2011 when a strain that made enough oil in a California greenhouse to meet a required milestone in the contract failed to perform in a pond at an ExxonMobil facility in Texas, according to J. Craig Venter, Synthetic Genomics’ chief executive officer and co-founder and one of the first scientists to sequence the human genome.

Long Term

ExxonMobil recast the contract, leading to layoffs of more than half the Synthetic Genomics employees working on biofuels for the oil company, according to former managers and scientists involved in the project. The effort now focuses on long-term research and development rather than commercial production, said Heather Kowalski, a spokeswoman for La Jolla, California-based Synthetic Genomics.

Charles Engelmann, a spokesman for ExxonMobil, declined to discuss details of the partnership or comment on the company’s opposition to the low-carbon rule’s timeline.

That’s being targeted by Fueling California, an advocacy group whose major funder is Chevron and that spent more than $327,000 in 2011 and 2012 lobbying on fuel and transportation policies, according to state disclosure forms.

The Air Resources Board’s Nichols said regulators haven’t been swayed by the arguments, among them that the economy will suffer if implementation of the rule isn’t delayed. “At this point we’re not seeing any need to change course,” she said.

Corporate Representatives

Both Chevron and ExxonMobil help finance the Houston-based Consumer Energy Alliance, which runs ad and Web campaigns warning low-carbon mandates could cost hundreds of thousands of jobs. After the alliance lobbied in New Hampshire last year, lawmakers passed a law prohibiting the state from participating in any low-carbon fuel program without legislative approval.

In January, the Washington-based American Legislative Exchange Council, which writes bills it recommends to legislators, endorsed a measure based on the New Hampshire law that it’s urging other states to adopt.

The council is made up of lawmakers and corporate representatives. Company memberships cost from $7,000 to $25,000 annually, and those that belong include ExxonMobil, the coal concern Peabody Energy Corp. and Koch Industries Inc., a chemical, textile, trading and refining conglomerate whose co- owners, Charles and David Koch, have supported the Tea Party.

Front Line

The council opposes government dictating Americans’ fuel choices, said Todd Wynn, director of the energy, environment and agriculture task force at the group. It also encourages legislators to repeal mandates -- which exist in 29 states -- requiring renewable energy from solar, wind and other sources to be part of the electric power mix.

This year, 30 bills to kill or weaken renewable rules have been considered in 16 states, according to the North Carolina Solar Center in Raleigh, which tracks such measures. None have passed so far.

California, the most populous state, is the front line: Emission controls enacted there since 1966 have been models for federal car-pollution and miles-per-gallon rules.

The state began to phase in the low-carbon standard in 2011. When it’s fully in effect in 2020, greenhouse gas emissions associated with transportation fuels are supposed to be 10 percent less than they were in 2010.

Transportation Mix

The state’s 32 million vehicles consume 15 billion gallons of gasoline each year, according to state data, and emit 160 million metric tons of greenhouse gases annually, 36 percent of all such emissions in California.

Right now, the state is on track to achieve the goal, according to Stanley Young, a spokesman for the Air Resources Board. Neither the agency nor Chevron and ExxonMobil will disclose how the companies are complying with the rule.

The U.S. government first spurred interest in biofuels, after President George W. Bush signed laws in 2005 and 2007 ordering more non-petroleum ingredients in the fuel supply.

The laws required refiners, importers and blenders to put 16.6 billion gallons of renewables into the mix by 2013. At least 1 billion gallons would have to come from cellulosic biofuels, which, unlike the widely used ethanol supplement derived from corn, are harvested from non-food crops, including switch grass and woody debris.

Fading Appetite

To meet its obligations, Chevron in 2008 teamed up with Weyerhaeuser to start Catchlight. Its goal was 17 plants by 2029, making 2 billion gallons annually, with spending of $370 million by 2013, according to a Catchlight business plan.

“There was a lot of enthusiasm that we would move forward on a path to develop something significant,” said Denny Hunter, Catchlight’s chief technology officer in 2008 and 2009 and a former vice president of technology for pulp, paper and packaging at Federal Way, Washington-based Weyerhaeuser.

Chevron’s appetite for biofuels began to fade after about a year, according to Hunter, Bryan and other former officials affiliated with Catchlight. A key reason, they said, was the shrinking federal cellulosic biofuels directive.

The laws Bush signed instruct the U.S. Environmental Protection Agency to adjust requirements based on supplies, which have never reached the goal. The EPA’s cellulosic biofuels mandate for 2013 is 99 percent below the original target.

‘No Urgency’

Chevron’s biofuels plan wound up in the cross-hairs of cost analysts in 2009 when they determined it would be a better bet to buy renewable fuel credits rather than keep trying to make the product, according to Bryan and two other former employees who asked not to be identified because they were discussing confidential company information. Credits, purchased from the government or producers who exceed low-carbon obligations, allow non-reducers to abide by clean fuel regulations.

After the cost analysts’ report, the Catchlight budget was stripped of money for plants, said Hunter, the former chief technologist who said he retired in 2009 because he was unhappy with the joint-venture’s direction. Chevron “no longer wanted to be a leader in biofuels,” he said.

In April 2010, Chevron and Weyerhaeuser told Catchlight to ratchet back, according to an internal business plan that set the 2013 budget at $8.9 million -- 98 percent lower than previously envisioned.

The Catchlight board said in the plan there was “no urgency” to commercialize and that, “in the absence of mandates,” the first plant “should be driven by financial returns.” The return on the investment would have to “meet or exceed” 20 percent, according to the plan.

‘Technical Winner’

That shocked scientists who were confident they’d come up with a process that would work, called solvent liquefaction, according to Jim Stevens, a chemist who researched technologies for 29 years at Chevron before being laid off in December 2010.

They’d constructed a contraption the size of a Winnebago that used a chemical solvent to turn woody biomass into fuel. It began producing in February 2010. “This was a real technical winner,” Stevens said.

Catchlight roughed out the numbers for a $504 million solvent liquefaction plant producing 92 million gallons a year at a cost of $2.18 a gallon, according to a 2010 internal report that laid out the technical and economic prospects for producing biofuels on a commercial scale. Making gasoline costs between $2 a gallon and $2.75 a gallon when oil prices are $70 a barrel to $100 a barrel, according to another Catchlight document.

‘Still Learning’

The joint venture never performed final tests on the biofuels process, Stevens said. “They just quit trying.”

Chevron hasn’t stopped working on developing biofuels products, according to Crinklaw, the company spokesman.

Taxpayers will help pay for future solvent liquefaction research. It will be conducted at Iowa State University with a $3.5 million federal grant covering 80 percent of the costs, and Catchlight the rest.

Catchlight is also supplying wood chips to Pasadena, Texas- based KiOR Inc., a biofuels producer that announced its first shipment of cellulosic diesel in March. Chevron has a contract to purchase some of KiOR’s renewable fuels. Weyerhaeuser is happy with the joint venture’s status, said David Godwin, vice president of minerals and energy products.

In October 2010, six months after Chevron and Weyerhaeuser put the brakes on at Catchlight, Chevron ran television and print ads about its work on non-petroleum fuels. “Something’s got to be done. So we’re doing it,” the ads said. “We’re not just behind renewables. We’re tackling the challenges of making them affordable and reliable on a large scale.”

Chevron officials didn’t respond to questions about the advertising campaign.

“We remain interested in the solvent liquefaction technology but, like other biofuels production technologies, it is early in its development, and we’re still learning about it,” Crinklaw said in an e-mailed statement. “Unfortunately, the technology hasn’t advanced as quickly as we hoped.”

To contact the reporters on this story: Ben Elgin in San Francisco at belgin@bloomberg.net; Peter Waldman in San Francisco at pwaldman@bloomberg.net
 
To contact the editor responsible for this story: Gary Putka at gputka@bloomberg.net

KiOR announces cellulosic diesel shipment, 2012 financial results

http://www.biomassmagazine.com/articles/8745/kior-announces-cellulosic-diesel-shipment-2012-financial-results

By Erin Voegele | March 19, 2013

• 
  KiOR Inc. converts biomass into renewable diesel and gasoline products.
  KiOR Inc.

On March 18 KiOR Inc. announced the initial shipment of cellulosic diesel from its commercial-scale plant in Columbus, Miss. On the same day, the company reported financial results for the fourth quarter of 2012 as well as the entire fiscal year. According to the financial release, KiOR recorded its first revenues since inception during the fourth quarter 2012.

Fred Cannon, KiOR’s president and CEO, called the cellulosic diesel shipment a major step forward for his company, the biofuels industry, and the renewable fuels sector. “With first production at Columbus, KiOR has technology with the potential to resurrect each and every shut down paper mill in the country and to replace imported oil on a cost effective basis while creating American jobs,” he said. “This facility demonstrates the efficacy of KiOR's proprietary catalytic biomass-to-fuel process with the potential to deliver cellulosic gasoline and diesel to the U.S. We are proud to be making history in Mississippi. The technology is simply scalable and we believe sufficient excess feedstock exists in the Southeast alone to build almost fifty KiOR commercial scale facilities."

Cannon added that the U.S. EPA’s recent actions to qualify cellulosic gasoline for the renewable fuel standard (RFS) market and increase the gasoline blend rate to 25 percent have de-risked KiOR’s business strategy and created a market for the company’s hydrocarbon fuels that is nearly twice the size of the current ethanol market.

During the fourth quarter of 2012, KiOR posted a net loss of $29.7 million, compared to a net loss of $27 million during the prior quarter. Net loss for the full year was $96.4 million, compared to a net loss of $64.1 million in 2011.

KiOR recorded its first revenues since inception during the final three months of 2012. The $87,000 in revenue is attributed to the sale of blended cellulosic diesel from the company’s research and development facility. The fuel was blended with fossil diesel. The cost of revenue for the quarter was $68,000, and related to the first sale, including production, shipping and blending costs.
During a call to discuss the results, Cannon noted his company faces three primary risks: technology scale-up risk, regulatory risk, and financial risk. Since the last financial update was made in November, Cannon said KiOR has made substantial progress in addressing all three risks.

“A mitigation of scale-up risk due to commercial production of cellulosic gasoline and diesel at Columbus is a remarkable achievement by the KiOR team,” he said. “ In four years we have successfully achieved a 20,000 ton scale up in our proprietary biomass to fuels technology from proof of concept in our pilot plant to our demonstration plant and now to our first commercial scale facility at Columbus.”

While KiOR had previously stated it expected commercial shipments of biofuels to commence in late 2012, Cannon noted the company encountered unexpected startup issues unrelated to its technology, but has since overcome those normal startup issues and proven that KiOR’s biomass-to-fuels technology works at commercial scale. “In fact, we know now that our technology performs better in terms of quality as it is scaled,” he continued. “From very good oil at the very small pilot plant to even improved quality oil at the demo and now to our best ever quality oil made at Columbus. So high in quality we’re converting over 90 percent of our oil from Columbus into transportation fuel.” The conversion rate for conventional crude oil is only about 70 percent, he added.

Regarding regulatory risk, Cannon said that the EPA’s recent pathway rulemaking was the last hurdle to KiOR’s ability to fully participate in the mandated RFS2 market. “What this means is that every gallon of cellulosic gasoline and diesel that comes out of KiOR’s Columbus facility and all our future facilities will generate 1.5 or 1.7 cellulosic grams per gallon, which unlocks significant additional value for KiOR relative to nearly all other renewable fuel companies,” he said.

Cannon also spoke about EPA’s approval of an increased Part 79 registration for blending KiOR’s cellulosic gasoline at levels up to 25 percent. “At a 25 percent blend, KiOR has a 33 billion gallon per year domestic market for its cellulosic gasoline. This is more than the entire RFS2 renewable volume obligation in 2022. By comparisons, this is double the size of the ethanol market and without any blend wall limitations,” Cannon continued.

During the call, Cannon also addressed two factors he said KiOR believes will de-risk its funding risk. First, he said, is the achievement of milestones. Second, he continued, is flexibility. “In our experience, one of the best ways to drive value in any financing process, whether debt or equity, is to have the flexibility to raise financing when the market allows a company to maximize the value for its existing shareholders,” he said, noting that Alberta Investment Management Co. and Vinod Khosla have agreed to amend the loan agreement KiOR signed last year in order to give the company flexibility it needs from a liquidity perspective to drive financing for the Natchez facility.

“Specifically, we have increased the potential launch under the agreement from $75 million of current principal to $125 million, with affiliates of Vinod Khosla committed to funding that additional $50 million upon request from the company,” Cannon continued. “If funded, this additional funding would automatically convert into equity in connection with future financing for the Natchez project, which further enhances our flexibility going forward.”

Biofuels Digest’s 10-Minute Guide to Obama’s New Energy Policy

http://www.biofuelsdigest.com/bdigest/2013/03/18/biofuels-digests-10-minute-guide-to-the-obama-administrations-new-energy-policy/

Jim Lane | March 18, 2013 

 

Major push from Obama on energy. 

 

From DOE: “Liquid fuels demand can be sufficiently reduced so that biomass can meet all liquid fuel needs.”

 

What’s up? What is an Energy Security Trust, anyway? The Digest’s 10-Minute Guide tells all.

 

In an address at the Argonne National Laboratories on Friday, President Obama said:

“You see, after years of talking about it, we’re finally poised to take control of our energy future.  We produce more oil than we have in 15 years.  We import less oil than we have in 20 years…But the only way we’re going to break this cycle of spiking gas prices for good is to shift our cars and trucks off of oil for good.  That’s why, in my State of the Union Address, I called on Congress to set up an Energy Security Trust to fund research into new technologies that will help us reach that goal.

“I’m proposing that we take some of our oil and gas revenues from public lands and put it towards research that will benefit the public, so that we can support American ingenuity without adding a dime to our deficit…devising new ways to fuel our cars and trucks with new sources of clean energy – like advanced biofuels and natural gas – so drivers can one day go coast-to-coast without using a drop of oil.

“And in the meantime, let’s keep moving forward on an all-of-the-above energy strategy.  A strategy where we produce more oil and gas here at home, but also more biofuels and fuel-efficient vehicles; more solar power and wind power. We can do this.”

A companion study released the the Department of Energy was, in its way, more ambitious and more specific: “TEF does not project that all liquid fuels will be eliminated from the future transportation sector, but rather that demand can be sufficiently reduced so that biomass can meet all liquid fuel needs.”

The Energy Security Trust. Is it a new idea? 

No. In his 2013 State of the Union address, President Obama called on Congress to create an Energy Security Trust Fund, which would free American families and business from painful spikes in gas prices. The President’s plan builds on an idea that has bipartisan support from experts including retired admirals and generals and leading CEOs, and it focuses on one goal: shifting America’s cars and trucks off oil entirely.

 

How does it work?

Over 10 years, the Energy Security Trust will provide $2 billion for critical, cutting-edge research focused on developing cost-effective transportation alternatives. The investments will support research into a range of technologies – things like advanced vehicles that run on electricity, homegrown biofuels, and domestically produced natural gas. It will also help fund a small number of real-world experiments that try different transportation techniques in cities and towns around the country using advanced vehicles at scale.

 

Does it involve new taxes?

No. The funding will be provided by revenues from federal oil and gas development, and will not add any additional costs to the federal budget.

 

President Obama’s complete remarks are where?

They’re here.

 

Does the White House’s have a short take on the Energy Security Trust?

Yep. Here you are.

 

What is the Transport Energy Futures (TEF) study?

It’s a new study from the U.S. Department of Energy, the National Renewable Energy Laboratory, and Argonne National Laboratory that finds the United States has the potential to reduce petroleum use and greenhouse gas (GHG) emissions in the transportation sector by more than 80% by 2050 – and proposes pathways towards that goal.

 

What is the strategy?

• Stopping Growth in Transportation Sector Energy Use
• Using More Biofuels
• Expanding Electric and Hydrogen Technologies

 

What’s the overall 15-point Obama Energy Strategy, again?

1. Challenges Americans to double renewable electricity generation again by 2020.
2. Directs the Interior Department to make energy project permitting more robust.
3. Commits to safer production and cleaner electricity from natural gas.
4. Supports a responsible nuclear waste strategy.
5. Sets a goal to cut net oil imports in half by the end of the decade.
6. Commits to partnering with the private sector to adopt natural gas and other alternative fuels in the Nation’s trucking fleet.
7. Establishes a new goal to double American energy productivity by 2030.
8. Challenges States to Cut Energy Waste and Support Energy Efficiency and Modernize the Grid.
9. Commits to build on the success of existing partnerships with the public and private sector to use energy wisely.
10. Calls for sustained investments in technologies that promote maximum productivity of energy use and reduce waste.
11. Leads efforts through the Clean Energy Ministerial and other fora to promote energy efficiency and the development and deployment of clean energy.
12. Works through the G20 and other fora toward the global phase out of inefficient fossil fuel subsidies.
13. Promotes safe and responsible oil and natural gas development.
14. Updates our international capabilities to strengthen energy security.
15. Supports American nuclear exports.

 

Where’s the Fact Sheet on that?

Right here.

 

Why the transport sector, specifically?

The transportation sector accounts for 71% of total U.S. petroleum consumption and 33% of U.S. total carbon emissions.

 

What are the 9 Interconnected reports that make up the overall TEF study?

1. Deployment pathways issues including the development of, transition to, and challenges of advanced technology
2. Non-cost barriers to advanced vehicles such as range anxiety, refueling availability, technology reliability, and consumer familiarity.
3. Opportunities to improve non-light-duty vehicle efficiency for medium- and heavy-duty trucks, off-road vehicles and equipment, aircraft, marine vessels, and railways
4. Opportunities for switching modes of transporting freight, such as moving freight from trucks to rail and ships.
5. Infrastructure expansion required for deployment of low-GHG fuels, including electricity, biofuels, hydrogen, and natural gas
6. Balance of biomass resource demand and supply, including allocations for various transportation fuels, electric generation, and other applications.
7. Opportunities to save energy and abate GHG emissions through community development and built environment strategies
8. Trip reduction through mass transit, tele-working, tele-shopping, carpooling, and improvement of vehicle performance through efficient driving
9. Freight demand patterns, including trends in operational needs and projections of future use levels.

 

How much biofuels use does the TEF study anticipate?

Up to 100 percent of fuel needs, if the US hits its 2050 fuel efficiency, hydrogen fuel, and electrification goals as well. Even at the EIA baseline projected fuel demand in 2050, biofuels could supply as much as 50 percent of the jet fuel market, and 30 percent of the gasoline and diesel markets if EERE biofuel technology goals are met. Getting to the point where biomass could provide 100 percent of vehicle liquid fuels requires reducing the need for fuel through the efficiency and demand management measures described above, including deployment of electricity or hydrogen fuel alternatives.

 

Will this require an avalanche of infrastructure?

Some. “While new fuel types require new infrastructure, the share of infrastructure cost within total fuel costs is very small (1.5-3 percent), and these costs can be made up for in fuel cost savings of more efficient advanced vehicles.”

 

Where can I start to dig deeper into the overall plan and the TEF study?

You can start here at the TEF home page.

 

Who was responsible for TEF?

TEF is a collaboration between EERE, the National Renewable Energy Laboratory (NREL), and Argonne National Laboratory (ANL). The project benefitted from the input provided by a steering committee that included some of the nation’s foremost experts on transportation energy from the Environmental Protection Agency (EPA), the U.S. Department of Transportation (DOT), academic researchers, and industry associations.

 

What is NEPA and what is happening there?

NEPA is the National Environmental Policy Act of 1970, a product of the Nixon Administration.

 

Er, Nixon? What’s new there?

The President’s strategy includes requiring federal agencies, under NEPA’s authority, to include climate change impact in reviewing proposed projects. For example — leases to drill for coal, or export coal to China, or construct oil pipelines like the Keystone XL pipeline, could be reviewed not only for air pollution and water fouling, but for overall greenhouse gas impact.

 

Are the changes in NEPA reviews ho-hum, or a big deal?

Big deal. Brendan Cummings, senior counsel for the Center for Biological Diversity told Bloomberg that the result will be “a major shakeup in how agencies conduct NEPA” reviews.

 

Does the President have this authority under NEPA?

Generally, yes. NEPA grants a right of Federal review of proposed projects for environmental impact — and climate change certainly falls broadly within that category. The devil is going to be in the details — after all, how much specific contribution to a problem like climate change be attributed to a single project?

 

Is a NEPA review capable of derailing a project?

No. A NEPA review is, at the end of the day, aimed at producing a thorough vetting process, rather than a specific outcome. Projects go through NEPA reviews — there is a robust commentary opportunity — but regulators, in the end, make decisions on permits. NEPA does establish a forum for introducing or reviewing data that will be used in a regulator’s decision — or, in lawsuits that may be filed to reverse a ruling.

 

Overall, is there going to be opposition from the right on the Energy Security Trust?

Forbes’ Houston-based energy columnist Christopher Helman writes: “This is a terrible idea — and a backdoor to the imposition of a nationwide carbon tax — that congress should not allow to pass.

“There is absolutely no reason why we need a dedicated Energy Security Trust to fund the national labs, or to fund any kind of alternative energy research. If congress wants to fund research it can pass a bill to fund research…Isn’t congressional appropriation how the federal government is supposed to pay for such stuff?

“Then consider that the Department of Energy has in recent years built up an insanely terrible record of wasting taxpayer money by directing funds to private companies, many of which have simply gone belly up (but not before paying lavish bonuses to executives).

 

Why is there opposition from the left?

Here’s some flavor. “This approach will only encourage more dirty energy production…[and] doesn’t create any additional cost for using fossil fuels, thus creating no incentive for firms to divert resources into safer, cleaner and more renewable sources of energy,” Tyson Slocum, director of Public Citizen’s energy program, told bizjournals.com.
 

KiOR ships first cellulosic diesel volumes from Miss. biorefinery

http://www.biodieselmagazine.com/articles/9006/kior-ships-first-cellulosic-diesel-volumes-from-miss-biorefinery

By Ron Kotrba | March 18, 2013

KiOR Inc. announced initial shipments of cellulosic diesel from its first commercial-scale facility in Columbus, Miss., where the company uses pine wood chips that previously fed a now-defunct paper mill to produce cellulosic gasoline and diesel fuels. The $213 million facility is scaled to process 500 bone dry tons of sustainably harvested woody biomass per day. It can produce more than 13 million gallons of gasoline, diesel and fuel oil blendstocks annually.

KiOR's renewable gasoline is also the first renewable cellulosic gasoline registered by U.S. EPA for sale in the U.S.

Condoleezza Rice, former U.S. Secretary of State and a current member of KiOR's board of directors, said, “KiOR is changing the American energy equation by innovating and commercializing an entirely new generation of hydrocarbon-based diesel and gasoline fuel. By making the promise of cellulosic fuels a reality, KiOR demonstrates that these fuels are an attractive option for lessening America's dependence on foreign sources of energy.”

Haley Barbour, former Governor of Mississippi, who was instrumental in attracting KiOR to Mississippi, said, “The shipment of this first fuel from KiOR's Columbus, Miss., facility is the culmination of a vision to establish Mississippi as the birthplace of the wood-to-fuels production technology. This progress highlights our highly skilled labor force, abundant natural resources and supportive government climate for innovative companies like KiOR seeking a home to expand their businesses. Mississippi has partnered with KiOR throughout this history-making project, contributing economic development support ranging from research and testing projects within our world class universities, to technical training within our superb community college system.”

“This is a major step forward for KiOR, the biofuels industry and the entire renewable fuels sector,” said Fred Cannon, KiOR's president and CEO. “With first production at Columbus, KiOR has technology with the potential to resurrect each and every shut down paper mill in the country and to replace imported oil on a cost-effective basis while creating American jobs. This facility demonstrates the efficacy of KiOR's proprietary catalytic biomass-to-fuel process with the potential to deliver cellulosic gasoline and diesel to the U.S. We are proud to be making history in Mississippi. The technology is simply scalable and we believe sufficient excess feedstock exists in the Southeast alone to build almost 50 KiOR commercial-scale facilities.”

The company plans to build a similar but larger facility in Natchez, Miss., scaled to process three times the woody biomass as the Columbus biorefinery.

Colonial Pipeline to ship biodiesel on Georgia line by end-March

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6267714

San Antonio (Platts)--18Mar2013/315 pm EDT/1915 GMT


Colonial Pipeline will begin shipping biodiesel blends on its pipeline to central and southern Georgia by the end of the month, the company said Monday, calling it a first for the nation's largest volume pipeline shipper of refined products.

The introduction of biodiesel into Colonial's system will occur near Griffin, Georgia, resulting in a blend of no more than 5% biodiesel suitable for trucking, farming and other diesel uses. The biodiesel will be stored in tankage owned by TransMontaigne Partners and injected into diesel as it flows through Colonial's pipeline.

Colonial officials said they have worked with the US Environmental Protection Agency for years on the project. Gwen Keyes Fleming, EPA regional administrator, commended Colonial for advancing biofuel growth along the busy I-75 corridor.

"It took longer than expected, but we're making it happen," Colonial CEO Tim Felt said at a news conference in San Antonio.

Colonial has a 1.272 million b/d gasoline Line 1 and 1.16 million b/d distillates Line 2 from Pasadena, Texas, to Greensboro, North Carolina, where they link up with a 945,000 b/d line into Linden, New Jersey.

The main distillates line allows renewable diesel, which is biodiesel that has been hydrotreated to kill any live agents in the fuel. But biodiesel had not been allowed due to the possibility it will trail back into the jet fuel stream, causing problems with airplane performance.

The 150,000 b/d Line 17, stub line off the main lines from Atlanta to Bainbridge, Georgia, does not carry jet fuel past Griffin, which is near Hartsfield-Jackson Atlanta International Airport, the world's busiest airport.

Felt said the company will learn from the project and may look at biodiesel injection into several other so-called stub lines in the future.

--Matthew Kohlman, matthew_kohlman@platts.com
--Edited by Katharine Fraser, katharine_fraser@platts.com 

Southern Research Institute (NC) Wins DOE Grant to Develop Biomass Liquification Process For Transportation Fuels Production

http://www.biofuelsjournal.com/articles/Southern_Research_Institute__NC__Wins_DOE_Grant_to_Develop_Biomass_Liquification_Process_For_Transportation_Fuels_Production-131092.html

Date Posted: March 14, 2013

Durham, NC—Southern Research Institute announced March 13 it has entered into a cooperative agreement with the U.S. Dept. of Energy to develop a mild liquefaction process that will economically convert biomass to petroleum refinery-ready bio-oils.

The process will convert biomass to stabilized bio-oils that can be directly blended with hydrotreater and cracker input streams in a petroleum refinery for production of gasoline and diesel range hydrocarbons.


“We hope the project will advance liquefaction by demonstrating cost-effective biomass conversion to stable bio-oils at mild conditions. Other liquefaction processes either use severe conditions or expensive catalysts to achieve stability,” said Santosh K. Gangwal, Ph.D., Southern Research principal investigator.

“We will also evaluate the suitability and process economics of directly blending our bio-oils with refinery hydrotreater and cracker streams for co-production of diesel and gasoline.”

Gangwal said co-processing of bio-oil with petroleum refinery streams can help refineries comply with new renewable fuels standards (RFS-2.)

The process will be evaluated and optimized using a continuous flow lab-scale biomass liquefaction system simulating the commercial embodiment of Southern Research’s liquefaction process.

Also a lab-scale reactor will be constructed and tested for hydrotreating and cracking the bio-oils to produce gasoline and diesel range hydrocarbons.

Southern Research is seeking a refinery partner who will help to further define bio-oil quality specifications that meet requirements for direct insertion at various points in the petroleum refining process.

Based on the experimental data, a technical and economic evaluation and life-cycle assessment of the process will be carried out.

Requirements for scale-up and commercialization of the liquefaction process will be determined.

“Development and commercialization of a cost-effective biomass liquefaction process using a high impact feedstock such as wood waste to produce renewable gasoline and diesel can reduce the nation’s requirement for importing oil from foreign countries, help to stabilize the prices at the pump, and lower the emission of greenhouse gases” said Tim Hansen, director of Advanced Energy and Transportation Technologies.

For more information, call 205-337-9634.

Hot sauce! 5 Lessons Louisiana can teach us about advanced bayoufuels

http://www.biofuelsdigest.com/bdigest/2013/03/07/hot-sauce-5-lessons-louisiana-can-teach-us-about-advanced-bayoufuels/

Jim Lane | March 7, 2013 

Louisiana — it’s as hot as cayenne pepper in biofuels capacity development, but there are cautionary tales hidden in the sauce.

 

When it comes to the first generation of ethanol and biodiesel-based biofuels, Louisiana didn’t figure much into the calculations — to date, there’s just the 5 million gallon (per year) Oswalt Bioenergy biodiesel plant in Lake Providence and the 15 Mgy Vanguard Synfuels in Pollock.

But since drop-in renewable fuels arrived, Louisiana hasn’t just been in the race, or near the front of the pack — it has become the Secretariat of project development — out in front by a mile. In all, more than 500 million gallons in advanced biofuels and chemicals project capacity announced — a 100-fold jump in the past five years.

Now — before booking your ticket down to Baton Rouge for the “renewable fuels forever” victory parade , let’s emphasize the phrase “project announcement”.

76 million gallons of that proposed capacity is currently completed (another 142 million expected to come online this year, and 50 million more in 2014, the rest we don’t have firm dates on as we await financing news). From that capacity, today, there’s not currently any commercial production — as Dynamic Fuels awaits better RIN price conditions (and the 1.5 mgy BP Biofuels plant in Jennings is a pilot plant used in research and development).

So, we can learn a lot down in the bayous about what works, and what’s problematic, in advanced biofuels development.

1. Smoke ‘em if you got ‘em

 

Louisiana has many blessings above and beyond Bourbon Street and cajun spices. Among them are an abundance of gases for sale — from hydrogen to natural gas; fats and greases from animal rendering, and a forestry sector that has fallen on tough times with the decline of newsprint. Buck Vandersteen, executive director of the Louisiana Forestry Association, spoke for a lot of these resources in observing, “We have to recognize our traditional industries and seek out new industries.”

The combination of rendering greases and hydrogen is, for now, the primary catalyst for growth — as Louisiana firms have perfected the art of purifying greases into renewable oils which are then hydrotreated to remove excess oxygen — voila, producing renewable diesel. Variations on this formula are the source of the Tyson-Syntroleum 75 million gallon plant in Geismar (Dynamic Fuels), the Valero-Darling 137 million gallon project in Norco (Diamond Green Diesel), the proposed Emerald Biofuels 85 million gallon project in Plaquemine, and the proposed D2 Renewable 150 million gallon project in Convent.

[Over in Pollock, Vanguard's been up to good things, too — introducing their own 2nd gen technology thermo-chemical solution (more about it here). Word is from Vanguard that they have the only catalyst that produces four non-sulfur alcohols simultaneously: 40% Ethanol, 40% Methanol, 15% Propanol and 5% Butanol. ]

In all, that’s just on 90 percent of the activity in the state. Most of the remainder comes from the Sundrop Fuels project near Alexandria. Using forest waste and hydrogen from natural gas, the plant will produce up to 50 MGy of renewable gasoline.  The biofuels plant will salvage wood waste in Central Louisiana and adjacent regions and also will extract hydrogen from abundant supplies of Louisiana natural gas, combining the hydrogen in a proprietary reactor with carbon extracted from wood waste. Construction is expected to be complete in 2014.


The projects pale with the scope of Sasol’s proposed $21 billion gas-to-liquids and ethane cracking plant proposed for Louisiana — but it goes to show you that there is nothing that stimulates activity more than an abundance of low-cost feedstocks.

2. In grease, color matters

 

White grease bad, yellow grease better, brown grease best.

Generally speaking, traditional biodiesel plants utilize choice white grease if they can utilize grease at all. Only a few companies have pioneered cost-effective technologies for making FAME biodiesel out of yellow greases — that been one of Renewable Energy Group’s great advantages, for example.

These days, white grease is expensive — and you don’t see much traditional biodiesel capacity being built in the bayous as a result.

Yellow greases — the economics used to be wonderful — now, not so much. Projects like Dynamic Fuels were based on those feedstocks — but these days, the price of the feedstock has made renewable diesel a tough economic proposition unless the RIN prices for renewable fuel credits, and other incentives like blenders credits, are available.

The next yellow grease project to come online will be Diamond Green Diesel, capable of producing over 9,300 barrels per day or 137 million gallons per year of renewable diesel on a site adjacent to Valero’s St. Charles refinery near Norco, Louisiana.  The facility will convert grease, primarily animal fats and used cooking oil supplied by Darling. Completion of the facility is expected to be imminent.


But the future may well be in brown grease – the really tough to use material – sludgy and klugy. That’s said to be the strategy for D2 Renewable, developing a 70 acre energy park, located in Convent, Louisiana.  The energy park will ultimately consist of five 30 million gallon refineries producing ASTM D 975 Renewable Ultra-Low Sulfur Diesel fuel.

3. RFS2 matters, RINs matter

 

As mentioned above, yellow grease is a tough business without good RIN prices and a strong RFS2 mandate to drive RIN values.

In December, Dynamic Fuels filed this with the SEC:

“The economics of the U.S. biomass based diesel industry are currently challenged by significantly lower RIN (renewable identification number) prices. D4 RIN prices averaged $1.39 for the first six months of 2012. As of December 10, 2012, the D4 RIN price was $0.56.   RIN prices at these levels have not been seen since the implementation of the RFS2 program by EPA in July of 2010.

“The regulatory framework underpinning biomass based diesel production remains intact.  The biomass based diesel mandate for 2013 is 1.28 billion gallons, or 28% above the 2012 mandate.  We expect markets to adjust positively in 2013 due to the higher mandate.”

Since then, Syntroleum has not indicated that they have re-started production.

4. Creative financing matters

Two of the most creative financing efforts in recent years are behind two of the next projects to come online in Louisiana.

Myriant’s Lake Providence, LA commercial plant will produce 30 million pounds of bio-succinic acid annually and construction is on-schedule for the planned commercial start-up in the first quarter of 2013.  Myriant is the first bio-based chemicals company to receive funding from USDA’s B&I Rural Development Loan Guarantee program — and a bond issue sold in by Stern Brothers.

As we wrote last June “We’re heard about the “3 Impossibles” for some time. Impossible to get a project without the term of the offtake being at least equivalent to the term of the debt. Impossible to get a project funded without the feedstock contracts covering the entire portion of the loan.

Impossible to get a project funded without the offtake 100% covered by contracts.

That may remain true for the bank side – but over here in bond world – the three Impossibles have been converted into the three “you’ll pay more, but it’s do-ables”. Here, there was first-timer risk.

Technology risk. Market risk. All absorbed in the rate.

Bonds are also expected to provide financing magic for Sundrop’s 50 million gallons renewable gasoline plant. Using forest waste and hydrogen from natural gas, their plant will produce up to 50 MGy of renewable gasoline.  The plant will cost $450 to $500 million to build and will be financed in part through the sale of tax-exempt Private Activity Bonds.

5. Long-term — diversify feedstocks

You’d think that with all that natgas, rendering grease and hydrogen that the state would rest on its laurels. Not so. In fact, the state has seen enough in the potential of renewables to double down on support for developing dedicated energy crops.

In January, the LSU AgCenter officially opened its pilot plant. The plant focuses on sweet sorghum, energy cane and other grasses to produce convertible sugars, fiber and bioproducts and can be scaled up to any capacity. The project is part of a larger USDA-funded five-year, $17.2 million grant.

Switchgrass is particularly in focus, as the grass is native to the Cajun prairie, and test plots are being co-planted with eastern cottonwood trees that could also be interesting feedstocks for the region.

The bottom line

The trend is clear. Assess immediate opportunities in abundant, low-cost feedstocks — but develop others with an eye on the future.

Be careful with technology development so that you can continue to access the lowest-cost feedstocks and use RINs as an equity sweetener for shareholders rather than as a necessary component of production – else you will see fits and starts in production, and costs will soar.

Above all, tap in to the bond market where possible and be as a creative in financing as you are in technology and feedstock. Put them all together — you might see a hundred-fold increase in capacity, as is expected for Louisiana — and ensure that that capacity once taken online, stays online.

EPA approves new cellulosic, advanced biofuel pathways

http://www.biomassmagazine.com/articles/8669/epa-approves-new-cellulosic-advanced-biofuel-pathways

By Erin Voegele | February 26, 2013

 

The U.S. EPA has published a new final rule, qualifying additional fuel pathways under the renewable fuel standard (RFS) for advanced biofuel, cellulosic biofuel and biomass-based diesel. The rulemaking covers two new feedstocks, camelina and energy cane. It also qualifies renewable gasoline and renewable gasoline blendstocks made from certain feedstocks as cellulosic biofuel.

Under the new rule, ethanol, renewable diesel (including jet fuel and heating oil) and renewable gasoline blendstock produced using energy cane feedstock can now qualify to generate cellulosic biofuel renewable identification numbers (RINs).

According to the EPA, for the purposes of this rulemaking, energy cane has been defined as a complex hybrid in the Saccharum genus that that has been bred to maximize cellulosic rather than sugar content.

Within the final rule, the EPA addresses several comments made by members of the public during the rulemaking process, including those related to invasiveness and land use change potential. The EPA states that energy cane does not raise significant concerns about the threat of invasiveness. Regarding land use change, the EPA specifies that energy cane is most likely to be grown on land once used for pasture, rice, commercial sod, cotton or alfalfa, which would have a less international direct impact than switchgrass because those commodities are not as widely traded as soybeans or wheat. “Given that energy cane will likely displace the least productive land first, EPA concludes that the land use GHG impact for energy cane per gallon should be no greater and likely less than estimated for switchgrass,” said the agency in the rulemaking.

According to the rule, EPA believes that cellulsoic biofuels produced from the cellulose, hemicellulose and lignin portions of energy cane will have similar or better lifecycle GHG impacts than biofuel produced from switchgrass.

Biodiesel and renewable diesel (including jet fuel and heating oil) made from camelina feedstock are now eligible for biomass-based diesel or advanced RINs. In addition, camelina-based naphtha and liquefied petroleum gas can qualify for advanced biofuel RINs.

While the EPA notes in the rulemaking that some parties submitting comments on the proposed camelina pathways expressed concern over the potential threat of invasiveness, the EPA states that it believes the production of camelina is unlikely to spread beyond the intended borders in which it is grown.

The EPA also specified that the crop is currently being grown on approximately 50,000 acres of land throughout Montana, Washington, North Dakota and South Dakota. Overall, the EPA estimates that approximately 9 million acres of land in a wheat/fallow rotation is available for camelina production nationwide.

“Current information suggestion that camelina will be produced on land that would otherwise remain fallow,” said EPA in the rulemaking. “Therefore, increased production of camelina-based renewable fuel is not expected to result in significant land use change emissions; however, the agency will continue to monitor volumes through EMTS to verify this assumption.”

Regarding renewable gasoline and renewable gasoline blendstocks, the rulemaking qualifies fuels produced from crop residue, slash, pre-commercial thinnings, tree residue, annual cover crops, and cellulosic components of separated yard waste, separated food waste and separated municipal solid waste (MWS). The rule also specifies that, when utilizing natural gas, biogas and/or biomass as the only process energy source, thermochemical pyrolysis, thermochemical gasification, biochemical direct fermentation, biochemical fermentation with catalytic upgrading can all be used with the listed feedstocks to generated fuel qualifying as cellulosic biofuel. In addition, any other process that uses biogas and/or biomass as the only process energy sources to convert the approved gasoline and renewable gasoline blendstock feedstocks into biofuel also qualifies for cellulosic RINs.

A full copy of the rulemaking is available on the EPA website.

The Compression Spread

http://www.biofuelsdigest.com/bdigest/2013/02/08/the-compression-spread/

 

Jim Lane | February 8, 2013 

 

You’ve heard about the crack spread, and the crush spread — as means to value oil refining and crop refining.

Let’s think about biomass densification and compression, and in that context, a little about KiOR.

You might have heard a little or a lot about KiOR — which is currently commissioning its first commercial-scale (11 million gallon) biofuels plant in Columbus, Mississippi.

Now, the oil industry might, via the American Petroleum Institute, be currently talking down the validity of the Renewable Fuel Standard — but it is not entirely clear that KIOR would have found the financing that it did without the EISA Act galvanizing investors into action.

KiOR’s secret sauce

 

Now, it is getting more clear — among all the glittering pieces of technology that the biofuels industry has developed — that the oil refining and marketing sector would really, really like to have invented KiOR’s BFCC unit — KiOR’s secret sauce.

What is a BFCC? It is a fluidized-bed catalytic cracker that works with biomass (in KiOR’s case, they are working now with southern yellow pine they expect to obtain at $72 per bone-dry ton).



Why is it coveted? It takes biomass, which has low density, and liquifies it into an intermediate with very high energy density — and does so at a transformatively low cost. That intermediate can be hydrotreated into an in-spec drop-in fuel — either in the gasoline range, or diesel, or even jet.

Why is that important? Because it is expected to be available at a lower cost than the marginal cost of oil production — when taken to an appropriate scale.

Equally importantly — because it is produced from renewable biomass — it can help de-carbonize an atmosphere that is producing increasingly wacky weather.

The marginal cost of producing oil

 

In a world where oil prices are highly volatile, one statistic for price prediction has held true for a long time — and that it is averaged cost of marginal production of oil for the world’s 50 largest public oil companies.

What exactly does ” the marginal cost of production” mean? It is the cost of exploring and capturing the last barrel of oil needed to meet overall global demand.

Bernstein Research circulated a note last year estimating that the marginal cost of production (for the top 50 public companies — note that some national oilcos have very different cost structures) increased by 229 percent between 2001 and 2010. Meanwhile, oil prices increased by 228%. Eureka — a driver of long-term oil prices.

It stands to reason. If the oil price falls below the marginal cost of production – production stalls until the price rises. That’s simple economics.

All that lovely Bakken crude

 

Further, it is not as easy as many suppose to disrupt that price with, for example, an explosion of oil production in the Bakken oilfields of North Dakota or the tar sands of western Canada. Bakken crude sells at a very deep discount, already, to Brent Crude — the spread has exceeded $30 per barrel at times.

That’s because of the lack of pipeline and railcar capacity to move it to international markets.

Which brings us back to KiOR — and the possibility that, long-term, the future of the company may focus less on building complete field–to-wheels fuel capacity via hydrotreating intermediates onsite, at its own facilities.

It has a future — perhaps a very big one— not so much as a supplier of finished fuels to its own customer base of fuel buyers, but as a supplier of crude-equivalent feedstocks to existing refinery infrastructure.

That’s where that $92 a barrel becomes important — not the $100-$115 retail value of the barrel, but the production cost of that barrel.

Recovering prehistoric algae as an energy business

 

You see, at the end of the day what you get from punching holes in the ground (i.e. oil exploration) is a well tapping into some prehistoric algae which — over 60 million years or so — has been transformed by Nature into crude petroleum and natural gas.

Nature made the biomass for free — via its own cocktails of carbon dioxide, water, and trace nutrients. Then, Nature conveniently densified the biomass for free, too. What we pay for is the harvest — it’s the energy equivalent of hunter-gatherer.

With a barrel of oil, you get around 5.8 million BTUs. That’s around $15.86 per million BTUs for the marginal cost of production.

In the case of KiOR, you have to pay for the biomass — the aforementioned $72 for each bone-dry ton. In that ton, you start with 14-20 million BTUs. So, you are paying $3.60-$5.14 per million BTUs for the wood.

The problem is, you can’t burn wood in a car engine — and even if you could, you think range anxiety for battery-electric vehicles is bad. Sheesh!

So, here’s the challenge, and here’s the prize, and a caveat.

 

Challenge? Densify the wood biomass into a crude-equivalent refinery feedstock for less than $12.72 per ton of biomass, including your operating and capital costs and your cost of capital.

Prize? Well, the International Energy Agency expects that energy demand will rise some 50 percent over the next 25 years — rising demand that you can serve.

Caveat? Lowest-cost producer wins. No one is likely to buy your $92 per barrel intermediate if there’s a $90 barrel available.

Catalytic fast pyrolysis

 

Where does this all lead us? In the case of making crude-equivalent intermediates — catalytic fast pyrolysis has emerged, of late, as the lowest-cost path towards answering that challenge. It is not entirely clear this class of technologies will actually reach scale — and reach the targeted costs — and find boatloads of affordable capital any time soon. But the signs are quite encouraging.

Catalytic fast pyrolysis — that’s what KiOR does. That’s why so many people watch their development with such attention. Why there is such an intense interest in their progress that media have been snooping around the plants, trying to get information on production prior to the company’s quarterly earnings call (earnings are expected to be reported March 25, according to NASDAQ).

Other paths to biofuels heaven

 

Nor is it entirely certain that crude-equivalent intermediates are the only viable path to market. For instance — there is the entire class of alcohol fuels, which are controversial in the US and the EU because of infrastructure issues, but are well-established in Brazil.

Crude-equivalent intermediates certainly are attractive — if one of your goals is to avoid finding out how much the oil & gas industry is willing to spend to send you to the devil, if you come up with a technological path to affordable meeting transportation fuel demand that doesn’t pass through oil refineries.

The oil industry’s anguish over alcohols is as profound as the Prohibition Party’s anguish used to be.

Back to KiOR

 

So — that brings us back to KiOR, and its prospects. We’ll know quite a lot more on the next earnings call. For now, they are in the business of making finished fuels and earning revenues from RINs and fuel sales.

For sure, right now they are proving the validity of their process to investors. One might speculate that they are also surrounding their IP — their secret sauce — with a complete path to market so that never become the captive of a refiner & marketer who can form a barrier to entry between their crude and the downstream gas station. With ethanol producers we have seen, ahem, where that can lead.

Long-term — we don’t see a process that can turn that much southern yellow pine (and other biomass, down the line) into sub-$92 crude-equivalent intermediates having a market cap of $584 million, as KiOR has today. If the technology does not work out — well, it’s not very valuable, is it? But if it does work out – as sports broadcaster Keith Jackson used to say “Whoa, Nelly!”.

Why? Looked at it as a technology that converts resources into proved reserves (valued at, say, $20 per barrel, or the spread between Brent crude and the marginal cost of production) – KiOR is valued at around 29 million barrels of oil. That’s the volume of oil you get from converting 400,000 tons of wood into oil refining intermediates.

But there’s a lot more wood out there.

The above-ground oil field a/k/a the US wood basket

 

The US Department of Energy, in their Billion Ton update study in 2011, estimated that there would be 120 million tons of wood biomass available, per year, at $80 per ton, that could be sustainably used for bioenergy. The figure declines to around 85 million tons at $40 per ton.

That’s a big spread.

So — in all things biofuel – keep that cost of densification very much in your mind.

The Compression Spread

 

In traditional oil and agricultural economics, we think about the the cost of liberating a known molecule. In the new bioenergy — getting biomass sufficiently densified, via technology instead of Nature — may open the door to ultra low-cost feedstocks and some amazing upside value for the liberators and their inventions.

That’s the compression spread.
 

Court blocks 2012 cellulosic biofuel target

http://newsandinsight.thomsonreuters.com/Legal/News/2013/01_-_January/Court_blocks_2012_cellulosic_biofuel_target/

1/25/2013 

By Ayesha Rascoe

WASHINGTON, Jan 25 (Reuters) - A U.S. federal court on Friday struck down a 2012 target for refiner use of cellulosic biofuels, but upheld the government's goal for use of other advanced fuels.

The divided ruling by the D.C. Circuit Court allowed oil refiners to claim a partial victory after fighting against U.S. renewable fuel targets. But it also gave hope to biofuel producers, who have been defending the mandates.

The American Petroleum Institute filed a lawsuit against the Environmental Protection Agency's 2012 target, requiring refiners to mix 8.65 million gallons of cellulosic biofuels into the U.S. gasoline and diesel.

Cellulosic biofuels are made from sources such as grasses, wood chips and agricultural waste.

When Congress passed the Renewable Fuel Standard in 2005 with the goal of reducing U.S. reliance on oil, it expected such fuels would make up a significant portion of its mandated use of 36 billion gallons of biofuel by 2022.

But development of the innovative fuel source has lagged and refiners argue they should not be punished for failing to use a fuel that is not commercially available.

Every year refiners have to prove they have used a certain amount of advanced biofuels or have bought credits representing use of the fuel by others in an open market. If they do neither they are subject to fines.

The court upheld API's case regarding the cellulosic goal, finding the EPA did not make a "neutral" assessment of the amount of cellulosic biofuels that would be produced last year.

"We are glad the court has put a stop to EPA's pattern of setting impossible mandates for a biofuel that does not even exist," said API Group Downstream Director Bob Greco.

API said refiners and importers would have had to pay over $8 million for credits to fulfill the 2012 mandate.

While an agency may set standards to promote future technology, in this case the court said there was no clear link between the regulations and the innovation.

"Apart from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry," the court said.

Still, the court rejected API's challenge to the government's decision not to lower its goal for use of advanced biofuels in general.

The court agreed with EPA's finding that other advanced biofuels, including imported sugarcane ethanol and biomass-based diesel, could make up for the shortfall in Congress' goal of 500 million gallons of cellulosic ethanol use in 2012.

EPA is reviewing the court's decision and "will determine its next steps," the agency said in a statement.

A coalition of biofuel groups said the court's ruling allows EPA to reinstate the target it had set, as long as the agency could provide information backing the agency's assessment at the time that the volumes were "reasonable achievable."

The court did not accept API's arguments that EPA had to use projections from the Energy Information Administration to set its goals and that the agency should not consider information from cellulosic biofuel producers.

"Although we disagree with the court's decision vacating the 2012 cellulosic volumes, today's decision once again rejects broad-brushed attempts to effectively roll back the federal Renewable Fuel Standard," said the coalition, which included Growth Energy and the Renewable Fuels Association.

(Additional reporting by Timothy Gardner)