Today in Biofuels: Transportation energy now #1 US issue; UK retreats, Sweden affirms on biofuel targets

Top Story:

John Mizrock, principal deputy assistant secretary to the U.S. Office of Energy Efficiency and Renewable Energy, said that transportation energy is now “the No. 1 issue” facing the United States and its economy, and the US will spend “more than the rest of the world combined in developing alternative fuels.” Mizrock added that “the U.S. economy is completely dependent on transportation. The US owns 25 percent of the global car and truck fleet is in the US. Nazeer Bhore, Senior Technology Advisor to Exxon Mobil, told the same SAE conference attendees that the world will require 40 percent more energy in 2030 than 2005, and that the scale of the energy needs made certain that biofuels cannot replace oil.

Producer News:

In Kansas, Gateway Ethanol has defaulted on a construction loan for its new plant in Pratt. The default notice required immediate repayment of $53.4 million outstanding on the note. Gateway, which opened last October, shut down in February after facing higher feedstock prices.

In Missouri, Show Me Ethanol is still seeking $5.1 million to complete construction of its 55 Mgy corn ethanol plant in Carollton. The company, which expected to commence operations in the second quarter, is considering a shareholders rights offering for the remaining equity raise. Total plant construction costs are projected at $82 million.

In Maine, the University of Maine and Red Shield Environmental say that a $30 million grant from the US Department of Energy puts the financing in place to have their woodchip-based ethanol plant in operation in 2010.  The plant will be sited at the old Red Shield pulp mill, and local and state officials said that the new plant has the potential to revive the state’s pulp and paper industry.

International News:

In Sweden, the Minister for the Environment confirmed that Sweden would proceed as planned with ethanol despite a slowdown on biofuels advocated by the UK Prime Minister and the German  Minister for Economic Cooperation and Development.

In China, J.I.C. Technology said it would acquire a 55 percent stake in GeneHarbor for $2.22 million, and the two companies would construct a pilot cellulosic ethanol plant based on GeneHarbor’s genetic engineering technology. Following the pilot stage, the venture will commercialize the technology throughout Asia.

In England, prime minister Gordon Brown signaled a pullback on biofuels, saying it no longer fully supported the 10 percent European biofuel target because of the world food crisis. Food prices have recently risen an average of $1500 per household. A panel convened by the prime minister said that “We will review our approach to biofuels. We need to look closely at the impact on food prices and the environment of different production methods and to ensure we are more selective in our support. If our UK review shows that we need to change our approach, we will also push for change in EU biofuels targets.” The panel also pledged to seek G8 action on agricultural development, increased support for the World Food Program, research on increasing agricultural yields, and renewed emphasis on a WTO trade agreement that reduces agricultural subsidies and tariffs.

World Opinion:

Seeking alpha writes: “Drought in Australia cut global wheat production. Floods in Bangladesh affected rice. The world’s population is growing and demanding more and varied foodstuffs. Economic growth in countries such as China results in changing eating patterns. Traditional diets based on grain staples are expanding to include luxury items like beef and pork. …and then there is the ethanol and biofuel effect….the World Bank believes that biofuels are at least partially to blame for the world’s high food prices, and many others agree….If you just went by the headlines, you’d think that the solution to end world hunger is to stop making ethanol…a 2007 CARD study estimated that for every 30 percent increase in the price of corn, retail food prices increased by only about 1 percent….the WSJ reports on how biofuels are keeping oil and gas priced 15% lower than otherwise…So if you imagine a world with no ethanol, who’s to say food prices in developing countries might not be higher?”

The International Herald Tribune reported on a Friends of the Earth report: “Certification schemes being set up by South American countries to ensure sustainable production of sugar cane and soybean crops were not enough to prevent damage to the environment. It said such guarantees “fail to address the biggest problems” related with the expansion of cultivation of land currently covered by forests, or smaller farms.”

Research News:

A report by consulting firm LECG concluded that drivers are saving an average of 9.8 cents per gallon on gasoline, owing to the ethanol mandate, while the American Farm Bureau Federation released a report putting the savings at 10 cents per gallon, or $14 billion.

Policy and Policymakers:

In Missouri, the Missouri state house is holding hearings on a repeal of the state ethanol mandate that took effect in January. A repeal bill was introduced by Rep. Mike Dethrow, R-Alton, who voted for the mandate in 2006. He blamed the law of unintended consequences, and said that higher food prices were his concern now.

In Oklahoma, an amendment has been introduced in a state Senate bill to require labeling on fuel containing between 1 and 10 percent ethanol. Sen. Phil Richardson, R-Minco, author of the amendment, said that “In some older models, ethanol fuel can actually damage the engine, and we don’t want to force drivers to play Russian roulette with their cars.”

Consumer and Fleet News:

In California, NorthStar Moving company will convert its entire fleet to an undisclosed biodiesel blend.

Financial News:

The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, fell 1.89 percent to close at 130.42, on drops in agribusiness and ethanol stocks.  For the day, Archer Daniels Midland (ADM) fell 1.87 percent to $44.28, while Pacific Ethanol (PEIX) led a general decline among ethanol stocks, falling 8.01 percent to $3.33.  Among small caps, GeoBioenergy (BBOE.OB) rose 11.1 percent to $0.20.   Overall, declines led advances 3 to 1 for the day.