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Today in Biofuels: $1.01 US tax credit for cellulosic ethanol proposed in Senate; Florida moves to E10; Brazil’s Brenco to raise $3.2 billion in IPO

April 29, 2008

Top Story:

A report from Raymond James analyst Pavel Molchanov said that “the reduction in the [ethanol] tax credit is not likely to have a direct impact on ethanol producer margins, if only because the economics of the credit are currently being captured in their entirety by the blenders.“  The Senate has proposed that the cellulosic ethanol tax credit be set at $1.01 per gallon, expiring in 2012. Commenting on the impact of the food-vs-fuel debate, Molchanov said ” The reduction in the tax credit for corn ethanol has been discussed in Washington before, and we do not view this decision as a direct response to the recent global food price escalation.  It is possible that the changing political landscape surrounding biofuels may result in this credit sunsetting altogether in 2010. The prospects of its extension will depend in part, on the trend of corn prices between now and then. More near term, at year-end 2008, the $0.54/gal ethanol tariff will expire unless extended.  As we noted on April 16, we believe that there is now at least a 50% chance that the tariff will in fact, be allowed to expire.”

Producer News:

In New York, Masada said it is awaiting a green light from the the city council of Middletown to proceed with a 10 Mgy waste-to-ethanol plant. The plant, which was originally proposed in 1996, has cost more than $40 million in its development phase, according to the Times-Record. The plant is scheduled for completion this December but the relationship between the city and Masada has deteriorated, with the city filing a lawsuit and Masada filing for arbitration.

The National Biodiesel Board is at a loss to explain skyrocketing soy prices. “It’s not following any linear economic path,” Amber Pearson, a spokesperson for the National Biodiesel Board, told news.com as soy prices have doubled in the past two years, to 60 cents a pound. The NBB said that numerous plants had been idled by high prices, while Fred Tennant of PetroAlgae said “The numbers are impossible.” The NBB is at a loss to explain why prices have risen so dramatically when available stocks of soy are close to all time highs. “”Maybe some of the (price increases) are due to speculations and futures markets,” Pearson said.

Indiana Ethanol Power has commenced contract negotiations with Lake County Solid Waste Management District for its proposed 20 Mgy waste-to-ethanol plant. The plant will use the GeneSyst process to convert solid waste to ethanol. Construction is expected to commence in 2008, and production in 2010.

International News:

In Brazil, Brenco said that it expects to raise $3.2 billion from an IPO no later than 2009, and will use the proceeds to construct 10 ethanol plants by 2015 with a planned capacity of 1 billion gallons per year. The company has invested more than $1 billion to date in the construction of four plants in Mato Grosso, Mato Grosso do Sul and Goias, from proceeds of private placements that have snagged investors such as Vinod Khosla, Ron Burkle, and Goldman Sachs. The company will construct a 650-mile pipeline from Mato Grosso to Santos in an additional $1 billion investment.

In Canada, the New Democratic Party leadership has proposed an amendment to Canadian biofuels legislation that would require a study on ethanol and food scarcity. The amendment is proposed to Bill C-33, itself an amendment to the Environmental Protection Act, that would require 5 percent of all fuel to come from biofuels by 2010. The legislation is supported by the Conservative and Liberal parties.

In Angola, Norwegeian oil company StatoilHydro announced a partnership with Sonangol to produce biodiesel, as soon as Angolan legislation clears the way for the venture.  Capacity and timelines were not disclosed; Statoil has been long active in Angolan oil exploration.

World Opinion:

The UN Special Rapporteur on the Right to Food, Jean Ziegler, described US and EU biofuels policy as a “criminal path.” The AP reported that  a transcript of a briefing to UN leaders, Ziegler said that “fuel policies pursued by the US and the EU were one of the main causes of the current worldwide food crisis.” The AP reported: “He also said that speculation on international markets was behind 30 per cent of the increase in food prices.  He said that companies such as Cargill, which controls a quarter of all cereal production, have enormous power over the market. He added that hedge funds are also making huge profits from raw materials markets, and called for new financial regulations to prevent such speculation.”  Reuters reported this morning that the UN and World Bank have set up a task force on global food prices, and warned countries not to hoard food.

From the Canberra Times: “The supposed crimes of biofuels are manifold. They’re behind soaring global commodity prices, the destruction of the Amazon rainforest, increased rather than diminished greenhouse gases, food riots in Haiti and Indonesian deforestation. Most of this, to borrow a farm image, is hogwash and bilge…If Asian rice prices are soaring, along with the global prices of wheat and maize, it’s not principally because John Doe in Iowa or Jean Dupont in Picardy has decided to turn yummy corn and beet into ethanol feedstock. Much larger trends are at work which dwarf the $US40 billion biofuel industry. I refer to the rise of more than one-third of humanity in China and India, the disintegrating dollar and soaring oil prices….Their demand for food staples and once unthinkable luxuries like meat is pushing up prices.”

Research News:

Monsanto will provide crop-testing, breeding and seed-production services to the Bioenergy Seeds & Feedstocks unit of Mendel Biotechnology in new partnership just announced. Mendel will apply the techniques to unique Chinese strains of miscanthus it owns, in hopes of introducing high yield biofuel miscanthus to the US market. Both Monsanto and BP own stakes in Mendel.

Policy and Policymakers:

In Florida, legislation is expected to come to a vote Friday mandating E10 throughout the state by the end of 2010. The 10×10 legislation may be unnecessary, according to local reports that pure gasoline will becoming difficult to find after ExxonMobil and BP commence selling E10 at their Florida stations next week. Shell commenced selling E10 in March, and Chevron will follow in July. Hess was the first major retailer to convert, making the switch late last year.

Consumer and Fleet News:

UK transport company H. Wragg Transport Ltd has converting its fleet of fifteen 44-tonne tractor units to Verdant Fuel, a canola-based fuel oil which achieves 70 percent reductions in greenhouse gas emissions. The “pure plant oil” was evaluated in a pilot test before full conversion. The trucks have been modified to hold secondary tanks, so that they start on conventional diesel and switch over during operation to running biofuels.

Financial News:

The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, gained 0.21 percent to close at 131.33, on gains in agribusiness offset by ethanol setbacks.  For the day, The Andersons (ANDE) rose 1.36 percent  to $46.25, while Pacific Ethanol fell 5.58 percent to $3.72 to lead the ethanol downtrend. Among small caps, Earth Biofuels (EBOF.OB) gained 13.81 percent to close at $0.0239.  Overall, advances and declines were even for the day.

  • Brazil’s Brenco projects $3.2 billion from IPO this year or in 2009
    • In Brazil, Brenco said that it expects to raise $3.2 billion from an IPO no later than 2009, and will use the proceeds to construct 10 ethanol plants by 2015 with a planned capacity of 1 billion gallo...
  • US Senate votes to extend renewable energy tax credit, eliminates Tyson-ConocoPhillips “cleaner diesel” credit
    • In Washington, the US Senate passed an $18 billion package to extend the renewable energy tax credit, worth $18 billion per year to wind, solar, geothermal and biomass producers; the bill also include...
  • US Senate passes $256 billion Farm Bill; includes cellulosic ethanol, other biofuels tax credits for farmers
    • The US Senate passed the $256 billion Farm Bill by a vote of 79-14. The bill includes tax credits for farmers involved in cellulosic ethanol or other biofuels production. The bill moves to a confer...
  • Senate Agricultural Committee approves $280 billion Farm Bill
    • In Washington, the Senate Agriculture Committee on Thursday approved its version of the five-year, $280 billion farm bill. The bill earmarks $1.3 billion for biofuels over the next five years, and ...
  • Coskata investigating $400 million, 100 Mgy cellulosic ethanol plant on US Suagr land in Florida
    • In Florida, US Sugar and the State of Florida are considering the location of Coskata's cellulosic ethanol plant at the sugar mills Clewiston facility. Coskata said that they hope to construct a $400 ...
  • Sen. Domenici proposes Farm Bill amendment with 15 bilion gallon ethanol mandate for 2015
    • Senator Pete Domenici (R- New Mexico) proposed an amendment to the 2007 Farm Bill mandating 15 billion gallons of ethanol usage by 2015. The Senator, the ranking Republican on the Energy Committee, sa...

    Written by Jim Lane · Filed Under The Daily Biofuel Summary 

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