What's ahead for biofuels -- more barriers or more blender pumps?

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Oct. 1, 2014 - Up against the 10 percent “blend wall” which limits its market, the ethanol industry is screaming for relief. It wants its oil-industry competitors to provide consumers with more choice, allowing drivers to fill up with EPA-approved-for-all E15 (15 percent ethanol) rather than just E10.

Even better for the ethanol industry's expansion hopes, blender pumps everywhere would provide blends all the way up to E85, which the nation's 12 million flex-fuel cars can use.

But Growth Energy CEO Tom Buis explained in an Agri-Pulse interview that thanks to the “monopolistic” oil industry, fewer than 100 of the nation's 135,000 retail gas stations offer E15 today. He says that even though E15 can be provided using existing pumps which offer E10, typically major oil companies tell gas stations “You can't advertise higher blends, you can't put them under our canopy.” This barrier has prompted some gas stations to buy out oil-company contracts so they can sell E15. Scott Zaremba, for example, paid $380,000 to Phillips 66 to get out of his contract and rebranded his seven Kansas gas stations from Zarco 66 to Zarco USA.

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To provide consumers with greater choice, Growth Energy, the American Coalition for Ethanol, the Renewable Fuels Association, and the National Corn Growers Association have launched a “Prime the Pump” checkoff program to promote E15 and higher blends and to help retailers buy new pumps.

To help drivers find biofuels pumps, the Energy Department is pitching in with its Alternative Fuels Data Center, which includes a searchable map of more than 15,000 alternative fueling stations coast to coast. There's also a cell phone app to find the nearest pump.

Buis insists that “all the ethanol industry wants to be able to do is compete.” He says this currently means competing “against a monopolistic oil industry that controls what the consumer is offered at the pump.” So along with other efforts, Buis says Growth Energy has asked the Obama administration to launch anti-trust investigations.

Renewable Fuels Association (RFA) President & CEO Bob Dinneen warns that lowering the renewables mandate as the EPA proposed last November “will reverse a lot of the progress that we've made with renewable energy in this country.” Just the uncertainty about reducing the RFS requirement, he tells Agri-Pulse, “has stifled investment in new technology and impacted growing demand for E85 and E15.” He says that the nearly year-long RFS battle means “the oil companies win just by having the fight because they are creating this atmosphere of uncertainty that investors loathe.”

Now that EPA has proposed reducing RFS requirements based on oil industry concerns, Dinneen points out that “The oil companies tried to get infrastructure and demand as part of the legislation in 2005 and again in 2007 and Congress did not provide it. EPA is trying to accomplish for the oil companies what the oil companies were not able to do legislatively. . . Ethanol is the lowest-cost transportation fuel on the planet today. We ought to be looking to build that marketplace opportunity, not to accommodate oil companies just because they find it inconvenient to use ethanol.”

National Biodiesel Board CEO Joe Jobe tells a similar story. He said that in response to consumer demand, Oklahoma-based Love's truck stops with 320 locations in 39 states now offer biodiesel “in virtually all of their retail locations nationwide, with no changes to their infrastructure, including storage, blending, and distribution equipment.” With more than 1,000 retail locations selling biodiesel blends today, Jobe worries most about the federal Renewable Fuel Standard (RFS) and the EPA's controversial proposal to reduce the RFS biofuels mandate.

Jobe explains that the seven-year-old RFS “was a landmark energy policy aimed at diversifying the transportation energy portfolio and at dramatically reducing transportation greenhouse gas emissions. 

“After a very bumpy start, the RFS program had finally hit its stride overcoming start-up obstacles and stimulating demand, investment, and innovation. The biodiesel industry grew to just over a billion gallons in 2012 then to just under 2 billion gallons consumed in 2013. Production, construction, and investment along with a rural renaissance were fully under way. The program had proven successful. Then, inexplicably, the EPA issued a proposed rule which called for across-the-board cuts to the program. For the last year this disastrous proposal has plunged and held the biodiesel industry into uncertainty and instability. This unnecessary uncertainty has greatly harmed everyone in the biodiesel industry.” 

Purdue University Professor Wally Tyner tells Agri-Pulse that one barrier to biofuel's growth is the fact that for ethanol “most of the pumps are in the Midwest and most of the flex-fuel cars are on the East and West coasts, so it's going to be very hard to grow E85 if we don't get more pumps on the coasts.”

He sees another barrier in a shortage of the railcars needed to ship ethanol. He notes that the oil industry is outbidding ethanol for railcars and that  environmental groups continue to block new pipelines which can move oil more safely than railcars. Moving more oil by pipeline would free up railcars for ethanol which can't be pipelined due to corrosion problems.

Fleet-Based Alternative Fuel Vehicles in Use 1995-2011

Source: Federal Energy Information Administration's Alternative Fuel Vehicle (AFV) Data

Note: The number of AFVs in use has been increasing steadily during the past 15 years, largely due to federal policies that encourage and incentivize the manufacture, sale, and use of vehicles that use non-petroleum fuels. AFVs in widest use today are those that run on E85, propane, compressed natural gas, and electricity.

Tyner insists he's got no inside information on whether the EPA will raise its proposed volume requirements for the 2014 Renewable Fuel Standard. But he expects EPA to announce a revised RFS soon which is “more favorable toward biofuels than EPA's original (proposal) was.”

Rather than blame a lack of blender pumps or the RFS, Tyner says the “the real barrier to biofuels is economic, not government at this point, or Congress, or the oil industry.” He says what's needed is to get prices right throughout the ethanol supply chain to “give consumers an incentive to use their flex-fuel cars to buy E85.”

Looking into the future, beyond corn ethanol and E85, Tyner sees biofuels' future in drop-in fuels - “green bio-gasoline, green diesel, and green jet fuel from cellulosic feedstocks” - which can fit with the oil industry's existing infrastructure, including pipelines. He says the secret to expanding biofuels now is “getting cellulosics moving.” He says the good news is that the U.S. Navy has signed contracts to buy cellulosic drop-in jet fuel, based on the Navy's determination to reduce its dependence on foreign oil.

“On the ground, you've got electric cars and compressed natural gas possibilities, but in the air, if you want to be greener, the only thing you've got is biofuels,” Tyner said. “So I see aviation, both military and civilian, as being the real bright spot in the future for biofuels and that all has to be drop-ins.” While cellulosic drop-ins aren't competitive yet without the subsidies that USDA and DOE have provided for the Navy contracts, Tyner expects these contracts to launch a learning curve that will lead to making cellulosics competitive.

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