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Today in Biofuels: Ethanol tax credit to drop to 45 cents in US; Brazil’s president says “Stop your hypocrisy” over tariffs; Peru attacks foreign ethanol, OKs local plant

April 28, 2008

Top Story:

In Washington, the tax credit for ethanol is ready to drop from 51 cents per gallon to 45 cents and a special tax credit will be developed for second-generation biofuels, after a compromise was reached in the long stalled Farm Bill between Senate and House negotiators. The bill contains $900 million for biofuels development, $900 million for nutrition programs aimed to offset higher food prices, while land stewardship programs would received an additional $4 billion, and specialized crops $1.35 billion.

Producer News:

In New York, Oppenheimer & Co. analyst Joseph A. Gomes Jr. said that overcapacity in the ethanol sector will begin to ease in the fall. He said that  “the difficult near-term operating environment resulting in limited upside to near-term operating results caused by rising corn prices and a glut of capacity supply. Corn prices are more difficult to get a handle on in terms of where they will go in the longer term.” Ethanol stocks were up sharply in Friday trading on the news.

In Illinois, the 54 Mgy Center Ethanol plant in Sauget is accepting grain deliveries. The plant, which commenced construction in 2006, is expected to commence ethanol production shortly.

In North Carolina, Iredell County Superior Court judge Judge John Holshouser Jr.  will rule this week on an injunction requested by opponents of a local farmer’s biodiesel production plans. The McLain farm received the OK from Iredell County Commissioners in August 2007, and a Superior Court Judge Kim Taylor ruled in McLain’s favor after local residents sued. The residents group is now suing to have an injunction placed on construction until an appeal can be heard in the case.

International News:

In Germany, Choren Industries opened what it called the world’s first biomass-to-liquid (BTL) plant. a 5 Mgy plant utilizing the Carbo-V process, in Freiburg, Saxony. The company said it would take up to 18 months to reach full productivity at the plant. The Carbo V process is a gasification process in which biomass is gasified at high heat, and carbon monoxide and hydrogen are converted into synthetic diesel fuel. The fuel is chemically equivalent to conventional diesel fuel; however it is produced from renewable biomass. Choren is studying the construction of a 71 Mgy commercial scale plant in Brandenburg.

In Brazil, President Luiz Inacio Lula da Silva called on industrial nations to “stop your hypocrisy”, and drop agricultural tariffs on Brazilian ethanol to save the Doha round of world trade talks. The Doha round, launched in 2001, has failed to produce an agreement because of disputes between developed and undeveloped countries over agricultural subsidies and tariffs. Lula said it was “inconceivable” that developed nations have blamed biofuels for higher global food prices while tariffs are in place. “The world does not produce biofuels and has 800 million people who go to sleep hungry. “Those who criticize biofuels have never criticized the price of oil. The developed world imports oil with no tariffs, yet they place an absurd tariff on Brazilian ethanol,” he said.

In Peru, Peruvian president Alan Garcia said that the country is a victim of the ethanol industry, which he said increased food prices. “It’s creating very serious problems for countries that have to import these products. We believe there are alternative energies that do not put the world’s food in danger,” said Garcia. Meanwhile, his government gave the green light to a Maple Energy ethanol project in the Peru. Maple Energy said it intends to raise $20 million through a private placement to finance ethanol development and oil exploration projects in Peru. Proceeds from the financing, the company said, would be used to acquire an additional 3.1 percent of Aguaytia Energy and finance its proposed ethanol plant.

In the Czech Republic, Environment Minister Martin Bursik of the Green Party announced an $18 million second generation biofuel project in Lovosice, in Bohemia that would be completed by 2012. The plant would be developed by state oil company Cepro and would be financed by the government, sales of the heat by-product, and EU subsidies. The plant, the minister said, would use environmentally-certified feedstock and meet the EU standard of a minimum 35 percent reduction in greenhouse gas emissions.

World Opinion:

The Ottawa Citizen editorializes: “Using food to produce fuel is hardly a crime against humanity…But credible economists like Princeton’s Paul Krugman do fear that corn-based ethanol production is “a really bad policy.”…Biofuel production alone has not created the food crisis. Other factors, such as higher demand for grain to feed livestock in China, a multi-year drought in Australia and market speculation have all contributed. Still, the federal government’s wholehearted embrace of biofuels may be based on false premises. Ensuring that southern Ontario farmland remains committed to food production rather than biofuel production is not in itself going to help feed the world’s hungry, but it is a step in the right direction.

The Executive Intelligence Review wrote: “On Aug. 4, 1994, Al Gore cast the crucial vote which set the United States on the road to taking food out of the mouths of millions, by using food for fuel. His vote…to break a 50-50 tie…killed an anti-ethanol measure sponsored by two Democratic Senators, Bill Bradley of New Jersey and Bennett Johnston of Louisiana…The New York Times reported, “With a tie-breaking vote by Vice President Al Gore, the Senate today … voted 51-50 to table an amendment that would have denied financing to the [Environmental Protection Agency] to carry out a rule guaranteeing renewable fuels a 15% share of the lucrative fuel oxygenate market in 1995. That share rises to 30% in following years….Tabling the [Bradley/Johnston] amendment in effect kills it and clears the way for E.P.A. to carry out its program.”…Speaking Dec. 1, 1998 at the Third Annual Farm Journal Conference, Gore said, “I was also proud to stand up for the ethanol tax exemption when it was under attack in the Congress—at one point, supplying a tie-breaking vote in the Senate to save it.”

Research News:

In California, Silicon Valley magnate Thomas Quinn has backed a company that says it has developed a $10,000 E-Fuel 100 MicroFueler that will allow consumers to make ethanol at home for $1 per gallon.  The machine converts sugar and some household waste into ethanol. Quinn, who backed the Wii motion sensor, told the International Herald Tribune that that “It is going to cause havoc in the market and cause great financial stress in the oil industry.” The company has not made clear its plan to acquire low cost feedstock, but said it can use Mexican sugar not fit for human consumption at 88 percent off the retail price.

Policy and Policymakers:

In Texas, Governor Rick Perry has requested a 50 per cent waiver from the federal renewable fuel standard as a response to rapidly rising food prices. “We appreciate the good intentions behind the push for renewable fuels,” Perry said in a statement. “In fact, we’re diversifying our state’s energy portfolio at a rapid rate, but this misguided mandate is significantly affecting Texans’ family food bill. There are multiple factors contributing to our skyrocketing grocery prices, but a waiver of RFS levels is the best, quickest way to reduce those costs before permanent damage is done.”

Consumer and Fleet News:

In California, actor and activist Sean Penn announced plans to lead a biodiesel-powered, 300 person, 1800 mile caravan from California to New Orleans. The Dirty Hands caravan will leave Southern California today, arriving in New Orleans on May 4 in time for the New Orleans Jazz Festival. The actor said that caravan participants will volunteer for local organizations along the way to New Orleans.

Financial News:

The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, gained 2.72 percent to close the week at 131.05 Friday, on gains in agribusiness and ethanol stocks.  For the day, Archer Daniels Midland (ADM) rose 2.56 percent  to $47.31, while Aventine Renewable Energy (AVR) rallied 10.15 percent to $4.45.  Among small caps, Environmental Power (EPG) rose 4.08 percent to close at $4.34.  Overall, advances led declines 2 to 1 for the day.

  • Brazilian president: “The developed world imports oil with no tariffs, yet they place an absurd tariff on Brazilian ethanol”
    • In Brazil, President Luiz Inacio Lula da Silva called on industrial nations to "stop your hypocrisy", and drop agricultural tariffs on Brazilian ethanol to save the Doha round of world trade talks. Th...
  • Brazil on verge of WTO complaint against US over ethanol tariffs
    • Brazil is readying its challenge of US ethanol tariffs at the Wolrd Trade Organization. The 54-cent tariff is said by the Brazilians to be an illegal tariff under WTO rules. Unica has been working wit...
  • Maple Energy increases investment in Peru sugarcane ethanol plant to $222 million
    • In Peru, Maple Energy announced that it would increase investment in its Peru sugarcane ethanol plant to $222 million, to allow for increased cane processing and steam generation equipment. The projec...
  • Ethanol tax credit to drop to 45 cents per gallon in Farm Bill compromise
    • In Washington, the tax credit for ethanol is ready to drop from 51 cents per gallon to 45 cents and a special tax credit will be developed for second-generation biofuels, after a compromise was reache...
  • Pure Biofuels completes expansion at 10 Mgy biodiesel plant in Peru
    • In Peru, Pure Biofuels said that it had completed expansion construction at its 10 Mgy InterPacific Oil biodiesel plant, and the company expects to commence operations at the expanded 10 Mgy capacity ...
  • Pure Biofuels to convert to jatropha for its 52.5 Mgy biodiesel plant in Peru
    • In Peru, Pure Biofuels said that it would convert its feedstock mix to 80 percent jatropha by 2015, and said that it had established a jatropha nursery that will add up to 1,000,000 new jatropha plant...

    Written by Jim Lane · Filed Under The Daily Biofuel Summary 

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