Daily Biofuels Summary for September 27

Top Story: BusinessWeek ran a stinging article on the efforts of oil companies to slow the spread of E85. The article pointed out that, as fuel blenders, it is the oil industry that receives the 51 cent per gallon tax credit for ethanol. According to BusinessWeek, the industry - which did not request the subsidy - has been funding anti-biofuel studies, stimulating a food vs. fuel debate by suggesting that biofuels are driving up the price of food, and refused to launch E85 through their own brands — thereby forcing E85 to be distributed through independents.

The Business Week article said that the opposition from biofuels advocates was expected, but that Big Oil has earned the enmity of US automakers, who are pushing E85 for among other reasons, the potential of E85 to relieve them of a $100 billion investment in reaching tough CAFE emission standards. The article quoted Mark N. Cooper, research director at the Consumer Federation of America, in saying that Big Oil has “reacted aggressively against the expansion of ethanol production, suggesting that it perceives the growth of biofuels as an independent, competitive threat to its market power in refining and gasoline marketing.” The food vs. fuel debate picked up in June on the heels of a report released by the American Petroleum Institute that concluded that consumers would pay “$12 billion-plus a year more for food as corn prices rise to meet ethanol demand.”

Global Insights, which authored the report for API, said that the fact that API paid Global Insights to prepare the anit-ethanol report did not influence Global Insights’ decision to reach anti-ethanol conclusions.

Producer News: In Arizona, Arizona Public Service Company (APS) and GreenFuel Technologies will test using CO2 emissions from a coal-burning power plant to help grow algae that will be converted into biodiesel. The companies, successfully tested the proces at APS’ Redhawk natural gas power plant with productivity estimated at 37 times higher than corn and 140 times higher than soybeans….Pennsylvania Bio Diesel commenced production yesterday in Beaver County. The $15 million facility was officially opened by Pennsylvania Governor Ed Rendell, who this week began a new push for his Pennsylvania Biofuels Initiative….In Kansas, Sunflower Electric Power and Scoular officially ended their partnership to construct a 100 Mgy ethanol facility at the Sunflower Integrated Bioenergy Center in Holcomb. Scoular had announced its intention to build the plant in January, but did not give reasons for the change in plans.

International News: In Brazil, Brazilian state oil giant Petrobras announced plans to develop 20 sugar ethanol plants via multiple partnerships in Goias and Mato Grosso states and a partnership with Japanese trading company Mitsui. Each plant is projected to produce 50 Mgy of sugar ethanol and the first will be ready for operation in 2010….In Spain, Alcoholes Biocarburantes de Extremadura (Albiex) has commenced construction of a 29 Mgy corn ethanol plant near Badajoz, which will also produce 87,000 metric tonnes of distillers grains for livestock feed. Total plant investment is $59 million and plant is expected to open in 2009….In Sweden, the newly elected conservative Reinfeldt government has pledged to spend nearly $100 million on the development of biofuels. The government has signed technology partnerships with the US and Brazil in recent months regarding biofuel development. Already in Sweden, there is a $1500 rebate on the purchase of a flex-fuel vehicle and 40,000 cars on the road (1% market share) are flex-fuel. Biofuels are not taxed in Sweden….In the UK, FCL Biofuels and Portuguese biofuels company Prio will launch the Portuguese consumer biodiesel brand, PrioBio, in the UK on November 1. FCL Biofuel, expects to have more than 50 million gallons in biodiesel capacity in the UK by the end of the year and will double than by 2010….Kenya has established a national task force to report on opportunities for jatropha cultivation in the country’s arid regions. Jatropha, which requires less water and has a high oil content, is under consideration or cultivation in several sub-Saharan Africa countries including Angola, Mozambique and South Africa.

Research News: At a Detroit panel discussion titled “The Gasoline Engine Is Dead. Or Is It?” Siemens executive Michael Crane said “For the foreseeable future, the gasoline engine will continue to dominate.” “If I mow my lawn for one hour,” says Crane, “I’d produce more emissions than if I drove a new car from New York to Los Angeles.” An article on Cranes remarks in the National Review pointed out that Ford’s Durotech engine meets California’s zero-emissions standard as well as theToyota Prius hybrid….“Biodiesel is the rock star of fuels,” said Will Thurmond, author of Biodiesel 2020: A Global Market Survey, in a glowing review of biodiesel entrepreneurs and companies published by money.cnn.com. “The U.S. market for the combustible stuff has more than doubled every year since 2004 and will hit $1 billion this year. The number of retail pumps nationwide has grown from 350 in 2005 to more than 1,000 today. A couple of biodiesel IPOs are in the offing - and opportunities abound. It has moved from Woodstock to Wall Street,” the article stated. The article profiles the expected IPO of Renewable Energy Group, which controls 27% of US biodiesel production after being formed from an Iowa soybean farmer cooperative. REG expects to increase production to 240 million gallons by 2008. The article suggests that Imperium Renewables, in Washington State, the Paul Allen-backed venture, may also file an IPO. Imperium recently opened a 100 Mgy biodiesel facility in Washington and is securing feedstock from Washington state canola farmers.

Policy and Policymakers: In England, Shell UK chairman James Smith warned against imposing too many penalties on fossil fuels as a means of addressing emissions and climate change. “Wind farms are expensive, nuclear stations have difficulty dealing with waste, biofuels boost food prices and oil sands produce even higher emissions than oil,” Smith said. “Energy demand is going to continue to accelerate. If lawmakers reject some energy sources, we won’t get anything left.”…At the Clinton Global Initiative, primate scientist Jane Goodall said that crops growing for biofuels is damaging rain forests in Asia, Africa and South America and adding to the emissions blamed for global warming. “We’re cutting down forests now to grow sugarcane and palm oil for biofuels and our forests are being hacked into by so many interests that it makes them more and more important to save now,” Goodall said.

Financial News: The Biofuels Digest Indexâ„¢, a basket of 21 public biofuels stocks, rose 1.62% to 99.28 following a pummeling earlier in the week. The Index remains down for the week as a whole but has recovered substantially from big losses triggered by analyst downgrades on weak ethanol pricing and rising costs. Star performers were primarily among services companies, with Environmental Power (EPG) up 9.38% to $6.30 and Green Plains Renewable Energy up 4.57% to $10.71. Winners outpaced losers 3 to 1, with losses primarily occurring for microcap stocks, excepting MGP Ingredients down 4.6% to $11.62.