The Future Role of Biofuels in Achieving American Energy Independence

Christine Zeivel

Energy Law

Spring 2007

Professor Bosselman

What are Biofuels?

a combustible fuel produced from any sort of vegetation (“biomass”)

3 MAIN TYPES: Bioethanol Biodiesel Purified biogas

Source: Energy Information Administration

History

Production triggered by 1970s oil shocks– Ethanol from sugarcane in Brazil– Ethanol from corn in U.S.

Grew rapidly until stagnation in 1990s Oil price increases after 2000 re-stimulated

production

Current Usage

2005: 2% of global gasoline usage

Ethanol Production– 2000: 4.6 billion gallons– 2005: 12.2 billion gallons

Biodiesel Production– 2000: 251 million gallons– 2005: 790 million gallons

Ethanol

Mainly produced by fermenting sugar or starch portions of raw agricultural material– Sugar (sugar beets, sugar cane)– Starch (corn) – converted into sugar– Cellulose (trees & grasses) – more difficult to

convert to sugar

Sugar & starch come from fuel or energy crops varying by region

Ethanol Production Process

Grind up feedstock so more easily & quickly processed

Sugar is dissolved out of the material Sugar fed to microbes that use it for food,

producing ethanol & carbon dioxide in the process

Purify ethanol to desired concentration

Current U.S. Usage

Blended with gasoline (reduces mileage by 2% - 30 mpg = 29.4 mpg)

– E10 most common blend– E85 requires Flexible Fuel Vehicle (FFV)

E85 is a leading US alternative fuel 3.5 million autos that can run on E85 fuel apprx. 1000 public refueling sites

2004: 3.4 billion gallons from 32 million tons of corn, 11% of harvest

2007: 116 distilleries, 90 slated for construction 2% of transportation needs

U.S. Ethanol Policy

51¢/gallon subsidy CAA 1990 amendments required sale of

oxygenated fuels in areas with unhealthy CO levels = increase

E85 & blends with higher concentrations of ethanol qualify as alternative fuels under the EPA of 1992

Illinois Ethanol Policy

Sales & use taxes don’t apply to ethanol-blended fuels (containing between 70% and 90% ethanol) sold between July 1, 2003, and December 31, 2013.

Will apply to 100% of proceeds from sales made after.

35 ILCS 120/2-10; 35 ILCS 105/3-10

Chicagoland Area E85 Pumps

Advantages of Ethanol

Less toxic, less risk from spills “Carbon Neutral” – same amount of CO2

emitted is absorbed during growth process Easily integrated into current transportation

system– can blend up to 10% w/ gasoline (E10)– Modified engines (FFVs) can take up to 85%

ethanol (E85)

Advantages of Ethanol

Energy efficient – yields 25% more energy than used in corn production – growing corn, harvesting, distilling into ethanol

Decreased fossil energy input– Gasoline: 1.23 million BTU/ I million BTU

delivered– Ethanol: .78 million BTU/ 1 million BTU delivered

Future of Ethanol

Industry set for 160% increase in next 2 years 116 existing U.S. ethanol-fuel distilleries

– use 53 million tons of corn– capacity to produce more than 5.6 billion gallons annually.

80 refineries are under construction & 7 are expanding– Boost demand to 139 million metric tons of corn– add more than 6 billion gallons of capacity when complete

USDA predicts corn acreage will increase more than 15% in 2008 than in 2007

Is Ethanol the answer?

CATO Institute

"Ethanol will not lead to energy independence. If all the corn produced in America in 2005 were dedicated to ethanol production (and only 14.3% of it was), U.S. gasoline consumption would have dropped by only 12%. For corn ethanol to completely displace gasoline in this country, we would need to appropriate all U.S. cropland, turn it over to ethanol production, and then find 20% more land on top of that."

And on top of it….

Average fill up of a 25 gallon SUV gas tank with ethanol requires same amount of grain as it takes to feed 1 person for 1 year.

Every person in the US uses 500 gallons of gasoline per year. That means that every American would use enough gas to feed 20

people over the course of the year. There are 300 million people in the US, and 300 million people,

each using enough food to feed 20 people to run their cars, would require enough grain to feed 6 billion people.

“So realistically, we are not discussing replacing 75% or 50% of our imported oil with biodiesel or ethanol – period. It isn’t possible. And if we are talking about a more realistic number, like 10-15%, that can only happen with policy programs designed to create, encourage, and perhaps require conservation.”

But impact on other industries?

USDA has said that meat supply will fall this year because of high cost of feed

Beef, pork & chicken is expected to decline by 1 billion pounds

Typically, meat production in the United States rises by about 2% a year, but pressure from American ethanol producers has sent the price soaring to $4 a bushel

Biodiesel

2 methods utilized

Fuel – “Neat” biodiesel is 100% Fuel additive – “Biodiesel blend” is neat

biodiesel blended with petrodiesel (Bxx)

Biodiesel Production

Made from: – straight vegetable oil– waste cooking oil– animal oil & fat

Transesterification – process used to produce biodiesel by separating the glycerin from the fat or vegetable oil– methyl esters (chemical name for biodiesel)– glycerin (valuable byproduct usually sold to be used

in soaps and other products)

Biodiesel Basics

Largest possible source of oils = oil crops– such as rapeseed, palm or soybean – Soy driving force b/c capacity, surpluses, & declining

prices– BUT expensive

Currently, waste oils (grease) & fats largest source because they are FREE

Not just raw vegetable oil!– Has to meet strict industry standards– Have to register with EPA

Algae – “Green Gold?”

Currently being developed 30 times more oil per acre

than current crops used no sulfur non-toxic highly biodegradable not subject to a commodity

risk as is crude oil, corn & soybeans.

Biodiesel is approved for use in U.S.

Registered as a fuel & fuel additive with the Environmental Protection Agency (EPA)

Meets clean diesel standards established by the California Air Resources Board (CARB).

Neat biodiesel designated as an alternative fuel by DOE & DOT.

Only alternative fuel to fully complete health effects testing requirements of 1990 Clean Air Act Amendments.

U.S. Biodiesel Policy – EPA of 2005

Small Agri-Biodiesel Producer Tax Credit– volumetric based income tax credit for the

production of agri-biodiesel – $.10/gallon (biodiesel made from first-use vegetable oils and first-use animal fats)

Alternative Fuel Refueling Infrastructure Tax Credit – tax credit for installation of certain qualifying fueling

infrastructure that dispense alternative fuel, including biodiesel blends B20 and higher.

U.S. Biodiesel Policy

Biodiesel Excise Tax – Extends the tax credit for biodiesel producers established in

2004 through 2008. – $.50/gallon of waste-grease biodiesel– $1.00 for agribiodiesel. – If used in a mixture,

$.01/ percentage point of agribiodiesel used or $.005/percentage point of waste-grease biodiesel.

Consumer Credits– Income Tax credit– Credit for fed tax paid

Illinois Biodiesel Policy

Sales & use taxes apply to 80% of proceeds from the sale of biodiesel-blended fuels made between July 1, 2003, and December 31, 2013.

Sales & use taxes don’t apply to the proceeds from sale of biodiesel blends containing more than 10% biodiesel made.

Taxes apply to 100% of the proceeds from sales made thereafter.

35 ILCS 120/2-10

National Biodiesel v. Diesel Prices

Current U.S. Usage

2005: EPA Act 75 million gallons (vs. 62 billion diesel fuel) Tripled in 1 year (25 million gallons in 2004)

End of 2006 105 producing plants 77 more slated for construction in next 1 ½ years available at over 1,000 pumps

Current U.S. Usage

National Biodiesel Board predicts 150 million gallons in 2007

More than 300 major fleets – U.S. Postal Service– U.S. Depts of Defense, Energy & Agriculture– Transit authorities, schools, parks

Chicagoland Biodiesel Pumps

Advantages of Biodiesel

Safe to handle, store & transport Less toxic, less risk from spills Higher flash rate = safer in a crash

“Carbon Neutral” - same amount of CO2 emitted is absorbed during growth process

– But other emissions during process

= 78% reduction in CO2 through life cycle (neat)

= 15% reduction in CO2 through life cycle (B20)

= 35% reduction in CO through life cycle

Advantages of Biodiesel

Reduces other pollutants 35% reduction in unburned hydrocarbons through life

cycle – smog & ozone precursor 8% reduction in sulfur oxides – acid rain 3% reduction in methane 32% reduction in particulate matter (PM10 68%) 83.6% reduction in PM soot 79% reduction in wastewater 96% reduction in hazardous waste, but double non-

hazardous waste

Future of Biodiesel

Most major car manufacturers offer FFVs running on E85 where it is popular

– Japan– South Korea

DaimenChrysler & Volkswagon working on “SunDiesel” made from crops grown specifically for energy use (willow), waste wood & other plant material

– GHG & other pollutants reduced up to 90%– Manufacture cars as soon as tech developed to produce

enough fuel

Is Biodiesel the Answer?Case Study: North Carolina Zoo

Fuel for trams, buses, trucks, tractors & equipment Restaurants provide about 1500 gallons of used oil Current capacity can produce 1500 gallons of pure

B100 or 7,500 gallons of B20 blend annually  Enough B20 to meet 40% of Zoo fuel demand.  Plans to increase the batch size & add 2nd reactor tank

will increase output to 17,000 gallons of B20 to meet 100% of Zoo diesel fuel needs

As production capacity increases, the Zoo will need to obtain additional waste oil from local restaurants

Is Biodiesel the Answer?

It would be very ambitious to produce the amount of diesel used on the farm

– That would require all of the vegetable oil currently produced in the U. S. & about 15% of our total production land area.

It would in fact be very ambitious to have even a 0.5 billion gallon per year biodiesel industry

– This would be only 1.5% of our on-highway diesel fuel or less than 1% of our total fuel oil and kerosene use

– would require all of the surplus vegetable oil (0.13 bil. gal.), 1/2 of the used oil (0.17 bil. gal.), and all of the oil which could be produced on the 37 million acres of

idle crop land (approx. 0.3 billion gal.) or the equivalent by displacing current crops

Biogas

Composed of 60% methane Purified or refined biogas has

85-96% methane

Sources – “wet biomass”– Landfills – methane collection – Water sewage treatment plants– Gas from biomass (fermentation

of organic wastes) Animal manure Industrial organic wastes Biogas Pump in Sweden

Biogas Production

Bacteria in bio-degradation of organic material under anaerobic (without air) conditions.

– Digester: heats & agitates to produce anaerobic conditions – Small Scale v. Large Scale

Methanogens (methane producing bacteria) help degrade organic material & generates biogas

Purified: Biogas is passed through a gas purification system which removes excess moisture & hydrogen sulphide

Small Energy Uses

fuel to run power generators, boilers, burners, dryers or any equipment using propane, gas or diesel.

– requires minor adjustments to run on biogas

electricity can be used to power small appliances & lights

dual-fuel generator that permits the use of conventional diesel fuel with or without biogas (good if biogas shortage)

Animal Manure & Plant Residue

Industrial Organic Waste

Integrated biogas plant for treatment of 500 people’s dung waste built in China 2005. The

biogas is provided as fuel for a restaurant.

Natural Gas Substitute

Substitute or combined with natural gas – Can be used in natural gas vehicles if upgraded to

85% methane– When used alone, faster breakdown of parts &

engine overheating

Injected into natural gas grid– if injected close to the production site (low pressure

network) it can only be used locally – for high pressure injection the installation need

special infrastructures

U.S. Biogas Policy

AgSTAR Program– voluntary effort jointly sponsored by the U.S. EPA, U.S. Dept

of Agriculture, & U.S. Dept of Energy. – encourages the use of methane recovery (biogas)

technologies at the confined animal feeding operations that manage manure

Biogas Production Incentives Act of 2007– Proposed by Senator Ben Nelson of Nebraska & of Larry

Craig of Idaho– Providing biogas producers with a tax credit of $4.27 for every

million British thermal units (Btu) of biogas produced

U.S. Biogas Usage

Most of the methane from wastes is allowed to escape into the atmosphere– about 100 dairy farms– few pig farms– some landfills– few municipal sewage treatment plants

125 operational digester systems – methane emission reductions of approximately

80,000 metric tons– energy generation of about 275 million kWh.

Reduces Waste?

the amount of waste going in the digester is almost = to amount coming out

BUT quality of the waste is altered for the better – less flies & smell (90%)– better fertilizer– organic load reduced– less polluting

Waste coming out of digester can be separated– compost solid part – use liquid part as fertilizing irrigation or to be treated further for

rejection in nature

Other Advantages of Biogas

savings for farmers transforms the manure/slurry into a high quality

natural fertilizer while reducing energy expenses Reduces GHGs - CO2 neutral Very low particulates emissions NOX Reductions (50% compared to diesel) possibilities of pathogen reduction through

sanitation

Is Biogas the Answer?

1998 U.S. DOE study concluded that in the U.S., it is feasible to capture & use over 1/3 of the biogas potential from landfills, animal waste & sewage equivalent to 6% of all the natural gas used in the U.S.

If all of this were used in transportation, it would displace 10 billion gallons of gasoline per year

If all this biomethane were used in vehicles, this would reduce GHGs by 500 million metric tons of CO2 per year (removing emissions equivalent to 90 million light-duty gasoline vehicles off the road)

The Problem of Energy Dependence

U.S. oil imports increased 1100% since 1960

Production simultaneously declining

Consumes 25%, produces 3% 20 million barrels/day

– Imports 13 million barrels/day (over 60% used)

By 2025, DOE predicts 26 million barrels/day

– importing 70%

Why is Energy Dependence Bad?

Oil-market rollercoaster ride Greatly impacts foreign policy decisions More than 30% of U.S. energy needs & 50% of

petroleum needs depend on:– unstable countries– undemocratic countries– overtly hostile countries

Funds development of weapons of mass destruction? Undermining fight against terrorism?

It’s the Economy, stupid

$232 billion/year ( = $450,000/minute) $49.1 billion/year to protect oil flows in Persian Gulf countries

(doesn’t include second Iraq war) $159.1 billion/year lost in GNP 3 oil shocks = between $2 & $2.5 trillion 828,400 U.S. jobs 9/11: $200 billion

– Bin Laden has publicly indicated that World Trade Center attacks were a response to the U.S. “occupation” of Saudi Arabia. American military presence in Saudi Arabia existed to defend the house of Saud, an undemocratic regime that guarantees the United States access to Saudi Arabian oil.

Actual cost of refined oil from Persian Gulf = $10/gallon

So Can Biofuels Lead the U.S. to Energy Independence?

Not so much….

At 6,000 barrels of fuel per square mile per year, you will not get a substitute for petroleum

“In fact, to replace worldwide petroleum use with biofuel you would have to consume 10.8 million square miles of farmland with the highest yielding biofuel crops & there are only 5.8 million square miles of farmland on earth.”

Another View: NRDC Study

Aggressive action to develop biofuels between now and 2015 would position America to produce, by 2050, the equivalent of more than 3 times as much oil as we currently import from the Persian Gulf (includes cellulosic)

If combined with better vehicle efficiency & smart-growth urban planning, biofuels could virtually eliminate our demand for gasoline by 2050

But should we? Parting thoughts…

Market volatility (weather, pests, etc) Food for fuel? Already struggling to feed 6.5 billion ppl Increase in crop prices

– poorest people in the world already spend 50% or more of their income on food, already experiencing 25% rise in grain prices

Environmental disadvantages– Economic pressures to clear land pose major new threat to

plant & animal diversity– Current biofuel production practices increases soil & water

depletion & desertification – Possibly lead to animal cruelty?