FarmPolicy

September 23, 2019

Biofuels; Climate Change Issues; EPA Developments; Animal Agriculture; and Political Notes

Biofuels

DTN writer Todd Neeley reported yesterday that, “Recent tough economic times have altered the landscape of the U.S. ethanol industry.

“Plants shut down, many filed bankruptcy, and opportunistic companies such as Valero Energy Corp. bought up plants and helped put a charge into a struggling industry in 2009.

However, sources in the ethanol industry believe the economy will continue to improve.”

The DTN article noted that, “‘Generally speaking, I think there is guarded optimism towards 2010, more towards the price of oil,’ said Donna Funk, a certified public accountant with Kennedy & Coe in Wichita, Kan., which provides consultation services for about 10 ethanol plants. ‘If oil prices and ethanol demand stay close to today’s (early December) price and demand levels, I think plants feel they are in a good position.’

“As of Dec. 29, 2009, crude oil hovered near $80 a barrel — a fairly favorable price for ethanol. The industry has seen some profit margin return.”

Mr. Neeley pointed out that, “Since December 2009, 17 plants have come back online, according to the Renewable Fuels Association (http://www.ethanolrfa.org). This comes after more than 1.7 billion gallons of production capacity went idle in 2008.

In December 2008, there were 172 plants in production, compared to 189 as of Dec. 29, 2009. In addition, RFA lists another 11 plants as under construction.”

Yesterday’s article indicated that, “In 2010, the ethanol industry will continue to push the U.S. Environmental Protection Agency to allow E15 and to reconsider including international indirect land use change in the low-carbon fuel standard — two issues that could determine the fate of the industry.”

More specifically on the E15 issue, Jim Snyder reported yesterday at The Hill’s Energy and Environment Blog that, “Boaters, automakers, oil executives, gas station owners and others are expressing their collective concern that the Environmental Protection Agency stands ready to approve higher ethanol levels in gasoline.

“The Alliance of Automobile Manufacturers, American Petroleum Institute, Boat Owners Association of the United States, Outdoor Power Equipment Institute and other groups said EPA should base its decision on a ‘complete and sound scientific record.’ They want the Energy Department to spend all of the $15 million recently appropriated to study the issue before a final decision is announced.

“Ethanol can’t exceed 10 percent of total fuel content now. But ethanol producers have pressed the administration and Congress to raise that level to 12 or 15 percent. The 10 percent cap creates a ‘blend wall’ that effectively caps ethanol production and discourages investment in follow-on biofuels that promise greater environmental benefits than corn-based ethanol, the industry contends.”

Mr. Snyder added that, “EPA has told Growth Energy, the ethanol trade group that had petitioned the agency to raise the limit, initial tests have shown higher ethanol levels were safe. But the agency deferred a final judgment on E-15, so called because the fuel could be 15 percent ethanol, until additional tests from the Energy Department.”

Reuters writer Tom Doggett reported yesterday that, “The Environmental Protection Agency said last month it needs more time to decide on a industry request to boost the level of ethanol in gasoline to 15 percent from 10 percent, but indicated it would likely approve the higher fuel blend for new American cars.

“Gasoline approved to have a higher volume of ethanol would help absorb the annual increase in ethanol supplies required by Congress in its attempt to reduce U.S. petroleum imports. The higher blend would help the U.S. ethanol industry, which was hard hit in 2008 by the economic downturn and a drop in crude oil prices to nearly $30 a barrel. Many companies were forced into bankruptcy and some production capacity was also idled.

“Crude oil prices CLc1 have since rebounded to above $80.

The EPA plans to make a final decision on so-called E15 gasoline by mid-June.”

In a separate look at economic and political issues impacting biofuels, Ann Davis reported yesterday at the Environmental Capital Blog (The Wall Street Journal) that, “The corn ethanol industry, while still wounded, is enjoying profit margins not seen since 2006. The $4.17-a-bushel price of corn, ethanol’s main feedstock and biggest cost, remains far below its 2008 highs of nearly $8. Government subsidies are intact. There are fewer players – after several high profile bankruptcies – competing to produce government-mandated quantities to blend into the fuel supply. Higher crude-oil prices also translate into a higher selling price for ethanol, since it is a gasoline substitute. Valero Energy Corp. turned a small profit from its corn ethanol business in the third quarter.

“By contrast, rainy weather has decimated sugar crops in Brazil and helped sugar prices more than double to about 28 cents a pound, a 29 year high, from 12 cents a year ago.

New Energy Finance, which tracks investments in alternative energy, says Brazilian ethanol makers are struggling both with high costs and a revaluation of the local currency that has made their output less competitive. Exports to the U.S. didn’t look good before, because of protectionist policies favoring Big Corn, but they look terrible now. New Energy says 10 Brazilian ethanol producers have filed for bankruptcy since the onset of the financial crisis. Companies are combining, handing equity stakes to lenders, and hunting for scarce investors.”

Ms. Davis noted that, “Biodiesel is on thin ice, too. This much-smaller industry has had trouble attracting—and keeping–government support, unlike ethanol. And it is competing in a dramatically depressed market for traditional petroleum-based diesel that hasn’t recovered nearly as much as gasoline. Most biodiesel refineries have stopped production.”

In more detail with respect to biofuels issues in Brazil, Bloomberg writers Katia Cortes and Lucia Kassai reported yesterday that, “Brazil, the world’s biggest maker of sugar cane-based ethanol, may cut the mandatory amount of the biofuel mixed into gasoline next week after rain hindered harvesting, Agriculture Minister Reinhold Stephanes said.

“The government is considering cutting the mandatory ethanol content from 25 percent as early as Jan. 11, Stephanes told reporters today in Brasilia. He declined to say what the new percentage may be.

“‘We may have to change the mix of ethanol into gasoline because we had a problem with too much rain slowing the harvest,’ the minister said.”

Meanwhile, a news release issued on Wednesday by Growth Energy stated in part that, “Growth Energy, the coalition of U.S. ethanol supporters, responded today to an inaccurate report, financed by Chevron and published by oil industry associates at Rice University. The report mischaracterizes ethanol’s ability to create jobs, cut greenhouse gas emissions and lessen America’s dependence on foreign oil.

“In specific responses to media inquiries, Growth Energy pointed out:

“- The conclusions in the Baker Institute report – to continue our nation’s addiction on dangerously expensive, high-carbon foreign oil – are in direct contradiction with the conclusions of numerous independent, government and academic reports, including the Oak Ridge National Laboratory, the Department of Energy, the University of Nebraska, the Windmill Group, and others.

“- From job creation to eliminating 13 million tons of greenhouse gas emissions and the need to import more than 320 million barrels of oil annually, ethanol’s positive impact on the United States is undeniable.”

Climate Change Issues

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Scientists who study climate change have written American Farm Bureau Federation President Bob Stallman asking to meet over AFBF’s ‘inaccurate and marginalized stance’ challenging the science on climate change and the choice of a climate-change critic as a speaker at Farm Bureau’s annual meeting, which begins Sunday in Seattle.

Mr. Clayton noted that, “A spokeswoman for the American Farm Bureau Federation stated that Stallman was traveling Thursday and the organization would not be able to respond until at least Friday. Farm Bureau’s annual convention is being held Sunday through Wednesday in Seattle.

“Farm Bureau has been opposed to climate legislation in Congress that would work to reduce greenhouse-gas emissions through cap-and-trade, which would cap emissions and establish a trading program for emission allowances and offsets. Farm Bureau’s campaign is ‘Don’t CAP Our Future,’ which is being highlighted at the AFBF convention.”

Meanwhile, Amy Harder reported yesterday at the National Journal’s Energy and Environment Blog that, “Jonathan Lash, president of the environmental group World Resources Institute, said today that a potential amendment from Sen. Lisa Murkowski, R-Alaska, that would block the EPA from regulating greenhouse gases won’t be a ‘proxy’ for climate change legislation in the Senate, but that ‘it will certainly be seen as a test.’

“Speaking to reporters after a briefing today at the National Press Club, Lash said that a number of senators are adamantly against the EPA regulating greenhouse gas emissions but still support passing comprehensive climate change legislation. And those senators, he said, could be ‘tempted to vote for the Murkowski amendment.’

“Murkowski’s office has not said when the senator, the top Republican on the Energy and Natural Resources Committee, will file the amendment.”

With respect to the EPA’s endangerment finding, Julie Harker reported yesterday at Brownfield that, “South Carolina Senator Lindsey Graham stressed the need for legislative solutions for climate change to prevent EPA from ultimately calling the shots.” The Brownfield item noted that, “Graham is working with Senators John Kerry [D-Mass.] and Joe Lieberman [I-Conn.] on compromise legislation to reduce greenhouse gas emissions by up to 17 percent by 2020, allowing for offshore oil drilling and increased nuclear power incentives.”

And Suzanne Goldenberg, writing yesterday at the Guardian Online, provided an interesting perspective on U.S. domestic variables in the climate debate in an item titled, “US climate change legislation Q&A: what will happen in 2010?”

In international developments on the climate issue, Bloomberg writer Gaurav Singh reported yesterday that, “India will go ahead with its plans to combat climate change without waiting for global finance as nations prepare for fresh talks after failing to agree on a binding global treaty at Copenhagen last month.

“‘We’ve got to do what we’ve got to do,’ Jairam Ramesh, environment minister in the world’s fourth-biggest polluter from burning fossil fuels, said in an interview in New Delhi today. ‘I don’t see India’s climate change program being driven by international finance. International finance has its supportive role to play, it doesn’t have a lubricating or a catalytic or a start-up role.’

“The Copenhagen Accord set a Jan. 31 deadline for rich nations to specify 2020 emission targets and poorer countries to state actions being taken to curb greenhouse gases. The agreement also pledges $100 billion a year by 2020 for developing countries to adapt and mitigate the effects of climate change.”

The Bloomberg article added that, “Australia, Canada, Papua New Guinea and the Maldives have told the United Nations Framework Convention on Climate Change that they support the Copenhagen Accord, John Hay, the spokesman of the UN agency, said yesterday. Cuba is the only nation so far to say it doesn’t want to be associated with the plan.”

Washington Post writer Steven Mufson reported yesterday at the Post Carbon Blog that, “Three weeks after the Copenhagen conference ended with a lot of fingers pointed at China and no binding accord, Beijing leaders are pushing ahead anyway with plans to restrain carbon emissions and boost energy efficiency.

“They have made amendments to renewable energy laws to promote more renewable energy, ordered the State Grid to buy renewable energy, and vowed to close down another 10 gigawatts of inefficient coal-fired power plants in 2010 even though the country has already met the five-year plan target for closing such plants. (The plan expires at the end of this year.)

“‘The Chinese came back and set about doing exactly what said they would,’ said Deborah Seligsohn, a Beijing-based climate expert with the World Resources Institute.”

Bloomberg writer Tara Patel reported yesterday that, “France’s planned tax on carbon emissions would have ‘disastrous consequences’ for refineries that are already struggling financially, a trade group said.

“‘Applying a new carbon tax would endanger a number of French refineries,’ the Union Francaise des Industries Petrolieres, or UFIP, said in a statement. ‘This will lead to direct and indirect job losses and force the country to import products from countries that don’t have carbon taxes.’

“The levy, based on a carbon price of 17 euros ($24.35) a metric ton, would cost refineries 300 million euros a year, according to UFIP’s estimates. France has 12 plants, half of which are owned by Total SA.”

EPA Developments

In other news, Juliet Eilperin reported in today’s Washington Post that, “The Environmental Protection Agency proposed stricter limits Thursday on the amount of pollution-forming ozone allowed in the air, significantly tightening rules the Bush administration had set for the nation’s most widespread air pollutant.

“The new rules, which must undergo 60 days of public comment before becoming final, would help determine the quality of the air Americans will breathe for at least a decade. The change, which represents only the third time in nearly 40 years that the standards have been toughened, could cost industry billions, while preventing thousands of premature deaths a decade from now, the EPA maintains.

“The stricter standards would limit ozone in the air to 60 to 70 parts per billion for any eight-hour period, down from 75 ppb. Although the percentage change sounds small, Thursday’s move ensures that state and local governments would face a much stricter air quality test in the years ahead.”

The Post article added that, “The American Petroleum Institute, which represents the nation’s oil and gas industry, issued a statement saying the move ‘lacks scientific justification,’ because the EPA acknowledges that recent scientific studies on smog’s health effects are no different from the research on which the Bush administration based its 2008 ruling.

“‘To do so is an obvious politicization of the air quality-standard-setting process that could mean unnecessary energy cost increases, job losses and less domestic oil and natural gas development and energy security,’ the institute said.”

Animal Agriculture

Reuters news reported yesterday that, “The World Organization for Animal Health (OIE) is to study the impact of meat output on climate change in the light of debate about meat’s contribution to greenhouse emissions, the Paris-based body said on Thursday.

“The initiative, which will be the OIE’s first on an environmental issue, follows requests from its member countries to look at a question that has prompted calls to eat less meat.”

In other news regarding animal agriculture, Philip Brasher reported yesterday at the Green Fields Blog (The Des Moines Register) that, “The Humane Society of United States is pressuring supermarket giant Kroger Co. to sell only cage-free eggs under its private labels. The group, which owns 193 shares of Kroger stock, has filed a shareholder resolution urging the company to consider going to cage-free eggs. The resolution is to be taken up at the company’s next annual meeting.”

A news release issued yesterday by USDA stated that, “Agriculture Secretary Tom Vilsack said today that USDA has already made more than $175 million in disaster payments to America’s livestock producers after implementing two new programs in 2009, demonstrating USDA’s commitment to rapidly meeting the goals of Congress and providing farmers and ranchers with timely and effective disaster assistance.

“‘America’s farmers and ranchers deserve efficient and effective assistance programs to help get through natural disasters,’ said Vilsack. ‘While the previous ad hoc disaster assistance too often was too little, too late, because we were able to get these new programs up and running quickly, we are already beginning to achieve Congress’ goal of helping producers recover losses rapidly and more thoroughly.’

“Under the standing provisions of the Livestock Indemnity Program (LIP) and the Livestock Forage Disaster Program (LFP), authorized in the Food, Conservation and Energy Act of 2008 (Farm Bill), producers are better able to recover from their losses stemming from 2008 and subsequent disasters. The 2008 Farm Bill provisions replace previous ad-hoc disaster assistance programs and are funded through the Agricultural Disaster Relief Trust Fund.”

Political Notes

Larry J. Sabato, the Director of the University of Virginia’s Center for Politics, noted yesterday that, “Looking just at the Senate, Democrats can now be fairly certain they aren’t going to have 60 seats anymore come 2011. Actually, [Sen. Chris Dodd’s (D-Conn.)] drop-out may save a seat for them, if state AG Richard Blumenthal steps into Dodd’s shoes as the party nominee. But [Sen. Byron Dorgan’s (D-N.D.)] seat is a goner as long as Gov. John Hoeven (R) runs. Sen. Michael Bennet (D-CO) is very shaky. Also in serious to deep trouble: Sen. Blanche Lincoln (D-AR), Sen. Harry Reid (D-NV), Sen. Arlen Specter (D-PA), and the Democratic open seats in Delaware and Illinois. Democrats may not lose all of these seats, but some defeats are probable. Republicans now seem likely to keep most, but not necessarily all, of their open seats (Kentucky, Missouri, New Hampshire, and Ohio), plus their two endangered incumbents, Richard Burr (R-NC) and David Vitter (R-LA). A multi-seat gain for the GOP in the Senate is now the best bet.”

Keith Good

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