The Future Role of Biofuels in Achieving American Energy Independence

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The Future Role of Biofuels in Achieving American
Energy Independence

• Christine Zeivel
• Energy Law
• Spring 2007
• Professor Bosselman

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What are Biofuels?

• a combustible fuel produced from any sort of
  vegetation (biomass)
• 3 MAIN TYPES
• Bioethanol
• Biodiesel
• Purified biogas

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Source Energy Information Administration
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History

• Production triggered by 1970s oil shocks
• Ethanol from sugarcane in Brazil
• Ethanol from corn in U.S.
• Grew rapidly until stagnation in 1990s
• Oil price increases after 2000 re-stimulated
  production

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Current Usage

• 2005 2 of global gasoline usage
• Ethanol Production
• 2000 4.6 billion gallons
• 2005 12.2 billion gallons
• Biodiesel Production
• 2000 251 million gallons
• 2005 790 million gallons

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Ethanol

• Mainly produced by fermenting sugar or starch
  portions of raw agricultural material
• Sugar (sugar beets, sugar cane)
• Starch (corn) converted into sugar
• Cellulose (trees grasses) more difficult to
  convert to sugar
• Sugar starch come from fuel or energy crops
  varying by region

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Ethanol Production Process

• Grind up feedstock so more easily quickly
  processed
• Sugar is dissolved out of the material
• Sugar fed to microbes that use it for food,
  producing ethanol carbon dioxide in the process
  
• Purify ethanol to desired concentration

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Current U.S. Usage

• Blended with gasoline (reduces mileage by 2 - 30
  mpg 29.4 mpg)
• E10 most common blend
• E85 requires Flexible Fuel Vehicle (FFV)
• E85 is a leading US alternative fuel
• 3.5 million autos that can run on E85 fuel
• apprx. 1000 public refueling sites
• 2004 3.4 billion gallons from 32 million tons of
  corn, 11 of harvest
• 2007 116 distilleries, 90 slated for
  construction
• 2 of transportation needs

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U.S. Ethanol Policy

• 51/gallon subsidy
• CAA 1990 amendments required sale of oxygenated
  fuels in areas with unhealthy CO levels
  increase
• E85 blends with higher concentrations of
  ethanol qualify as alternative fuels under the
  EPA of 1992

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Illinois Ethanol Policy

• Sales use taxes dont apply to ethanol-blended
  fuels (containing between 70 and 90 ethanol)
  sold between July 1, 2003, and December 31, 2013.
  
• Will apply to 100 of proceeds from sales made
  after.
• 35 ILCS 120/2-10 35 ILCS 105/3-10

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Chicagoland Area E85 Pumps
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Advantages of Ethanol

• Less toxic, less risk from spills
• Carbon Neutral same amount of CO2 emitted is
  absorbed during growth process
• Easily integrated into current transportation
  system
• can blend up to 10 w/ gasoline (E10)
• Modified engines (FFVs) can take up to 85
  ethanol (E85)

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Advantages of Ethanol

• Energy efficient yields 25 more energy than
  used in corn production
• growing corn, harvesting, distilling into ethanol
• Decreased fossil energy input
• Gasoline 1.23 million BTU/ I million BTU
  delivered
• Ethanol .78 million BTU/ 1 million BTU delivered

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Future of Ethanol

• Industry set for 160 increase in next 2 years
• 116 existing U.S. ethanol-fuel distilleries
• use 53 million tons of corn
• capacity to produce more than 5.6 billion gallons
  annually.
• 80 refineries are under construction 7 are
  expanding
• Boost demand to 139 million metric tons of corn
• add more than 6 billion gallons of capacity when
  complete
• USDA predicts corn acreage will increase more
  than 15 in 2008 than in 2007

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Is Ethanol the answer?

• CATO Institute
• "Ethanol will not lead to energy independence. If
  all the corn produced in America in 2005 were
  dedicated to ethanol production (and only 14.3
  of it was), U.S. gasoline consumption would have
  dropped by only 12. For corn ethanol to
  completely displace gasoline in this country, we
  would need to appropriate all U.S. cropland, turn
  it over to ethanol production, and then find 20
  more land on top of that."

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And on top of it.

• Average fill up of a 25 gallon SUV gas tank with
  ethanol requires same amount of grain as it takes
  to feed 1 person for 1 year.
• Every person in the US uses 500 gallons of
  gasoline per year.
• That means that every American would use enough
  gas to feed 20 people over the course of the
  year.
• There are 300 million people in the US, and 300
  million people, each using enough food to feed 20
  people to run their cars, would require enough
  grain to feed 6 billion people.
• So realistically, we are not discussing
  replacing 75 or 50 of our imported oil with
  biodiesel or ethanol period. It isnt possible.
  And if we are talking about a more realistic
  number, like 10-15, that can only happen with
  policy programs designed to create, encourage,
  and perhaps require conservation.

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But impact on other industries?

• USDA has said that meat supply will fall this
  year because of high cost of feed
• Beef, pork chicken is expected to decline by 1
  billion pounds
• Typically, meat production in the United States
  rises by about 2 a year, but pressure from
  American ethanol producers has sent the price
  soaring to 4 a bushel

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Biodiesel

• 2 methods utilized
• Fuel Neat biodiesel is 100
• Fuel additive Biodiesel blend is neat
  biodiesel blended with petrodiesel (Bxx)

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Biodiesel Production

• Made from
• straight vegetable oil
• waste cooking oil
• animal oil fat
• Transesterification process used to produce
  biodiesel by separating the glycerin from the fat
  or vegetable oil
• methyl esters (chemical name for biodiesel)
• glycerin (valuable byproduct usually sold to be
  used in soaps and other products)

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Biodiesel Basics

• Largest possible source of oils oil crops
• such as rapeseed, palm or soybean
• Soy driving force b/c capacity, surpluses,
  declining prices
• BUT expensive
• Currently, waste oils (grease) fats largest
  source because they are FREE
• Not just raw vegetable oil!
• Has to meet strict industry standards
• Have to register with EPA

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Algae Green Gold?

• Currently being developed
• 30 times more oil per acre than current crops
  used
• no sulfur
• non-toxic
• highly biodegradable
• not subject to a commodity risk as is crude oil,
  corn soybeans.

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Biodiesel is approved for use in U.S.

• Registered as a fuel fuel additive with the
  Environmental Protection Agency (EPA)
• Meets clean diesel standards established by the
  California Air Resources Board (CARB).
• Neat biodiesel designated as an alternative fuel
  by DOE DOT.
• Only alternative fuel to fully complete health
  effects testing requirements of 1990 Clean Air
  Act Amendments.

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U.S. Biodiesel Policy EPA of 2005

• Small Agri-Biodiesel Producer Tax Credit
• volumetric based income tax credit for the
  production of agri-biodiesel .10/gallon
  (biodiesel made from first-use vegetable oils and
  first-use animal fats)
• Alternative Fuel Refueling Infrastructure Tax
  Credit
• tax credit for installation of certain qualifying
  fueling infrastructure that dispense alternative
  fuel, including biodiesel blends B20 and higher.

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U.S. Biodiesel Policy

• Biodiesel Excise Tax
• Extends the tax credit for biodiesel producers
  established in 2004 through 2008.
• .50/gallon of waste-grease biodiesel
• 1.00 for agribiodiesel.
• If used in a mixture,
• .01/ percentage point of agribiodiesel used or
• .005/percentage point of waste-grease biodiesel.
  
• Consumer Credits
• Income Tax credit
• Credit for fed tax paid

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Illinois Biodiesel Policy

• Sales use taxes apply to 80 of proceeds from
  the sale of biodiesel-blended fuels made between
  July 1, 2003, and December 31, 2013.
• Sales use taxes dont apply to the proceeds
  from sale of biodiesel blends containing more
  than 10 biodiesel made.
• Taxes apply to 100 of the proceeds from sales
  made thereafter.
• 35 ILCS 120/2-10

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National Biodiesel v. Diesel Prices
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Current U.S. Usage

• 2005 EPA Act
• 75 million gallons (vs. 62 billion diesel fuel)
• Tripled in 1 year (25 million gallons in 2004)
• End of 2006
• 105 producing plants
• 77 more slated for construction in next 1 ½ years
• available at over 1,000 pumps

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Current U.S. Usage

• National Biodiesel Board predicts 150 million
  gallons in 2007
• More than 300 major fleets
• U.S. Postal Service
• U.S. Depts of Defense, Energy Agriculture
• Transit authorities, schools, parks

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Chicagoland Biodiesel Pumps
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Advantages of Biodiesel

• Safe to handle, store transport
• Less toxic, less risk from spills
• Higher flash rate safer in a crash
• Carbon Neutral - same amount of CO2 emitted is
  absorbed during growth process
• But other emissions during process
• 78 reduction in CO2 through life cycle
  (neat)
• 15 reduction in CO2 through life cycle (B20)
• 35 reduction in CO through life cycle

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Advantages of Biodiesel

• Reduces other pollutants
• 35 reduction in unburned hydrocarbons through
  life cycle smog ozone precursor
• 8 reduction in sulfur oxides acid rain
• 3 reduction in methane
• 32 reduction in particulate matter (PM10 68)
• 83.6 reduction in PM soot
• 79 reduction in wastewater
• 96 reduction in hazardous waste, but double
  non-hazardous waste

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Future of Biodiesel

• Most major car manufacturers offer FFVs running
  on E85 where it is popular
• Japan
• South Korea
• DaimenChrysler Volkswagon working on
  SunDiesel made from crops grown specifically
  for energy use (willow), waste wood other plant
  material
• GHG other pollutants reduced up to 90
• Manufacture cars as soon as tech developed to
  produce enough fuel

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Is Biodiesel the Answer?Case Study North
Carolina Zoo

• Fuel for trams, buses, trucks, tractors
  equipment
• Restaurants provide about 1500 gallons of used
  oil
• Current capacity can produce 1500 gallons of pure
  B100 or 7,500 gallons of B20 blend annually 
• Enough B20 to meet 40 of Zoo fuel demand. 
• Plans to increase the batch size add 2nd
  reactor tank will increase output to 17,000
  gallons of B20 to meet 100 of Zoo diesel fuel
  needs
• As production capacity increases, the Zoo will
  need to obtain additional waste oil from local
  restaurants

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Is Biodiesel the Answer?

• It would be very ambitious to produce the amount
  of diesel used on the farm
• That would require all of the vegetable oil
  currently produced in the U. S. about 15 of
  our total production land area.
• It would in fact be very ambitious to have even a
  0.5 billion gallon per year biodiesel industry
• This would be only 1.5 of our on-highway diesel
  fuel or less than 1 of our total fuel oil and
  kerosene use
• would require
• all of the surplus vegetable oil (0.13 bil.
  gal.),
• 1/2 of the used oil (0.17 bil. gal.), and
• all of the oil which could be produced on the 37
  million acres of idle crop land (approx. 0.3
  billion gal.) or the equivalent by displacing
  current crops

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Biogas

• Composed of 60 methane
• Purified or refined biogas has 85-96 methane
• Sources wet biomass
• Landfills methane collection
• Water sewage treatment plants
• Gas from biomass (fermentation of organic wastes)
• Animal manure
• Industrial organic wastes

Biogas Pump in Sweden
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Biogas Production

• Bacteria in bio-degradation of organic material
  under anaerobic (without air) conditions.
• Digester heats agitates to produce anaerobic
  conditions
• Small Scale v. Large Scale
• Methanogens (methane producing bacteria) help
  degrade organic material generates biogas
• Purified Biogas is passed through a gas
  purification system which removes excess moisture
  hydrogen sulphide

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Small Energy Uses

• fuel to run power generators, boilers, burners,
  dryers or any equipment using propane, gas or
  diesel.
• requires minor adjustments to run on biogas
• electricity can be used to power small appliances
  lights
• dual-fuel generator that permits the use of
  conventional diesel fuel with or without biogas
  (good if biogas shortage)

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Animal Manure Plant Residue
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Industrial Organic Waste
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Integrated biogas plant for treatment of 500
peoples dung waste built in China 2005. The
biogas is provided as fuel for a restaurant.
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Natural Gas Substitute

• Substitute or combined with natural gas
• Can be used in natural gas vehicles if upgraded
  to 85 methane
• When used alone, faster breakdown of parts
  engine overheating
• Injected into natural gas grid
• if injected close to the production site (low
  pressure network) it can only be used locally
• for high pressure injection the installation need
  special infrastructures

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U.S. Biogas Policy

• AgSTAR Program
• voluntary effort jointly sponsored by the U.S.
  EPA, U.S. Dept of Agriculture, U.S. Dept of
  Energy.
• encourages the use of methane recovery (biogas)
  technologies at the confined animal feeding
  operations that manage manure
• Biogas Production Incentives Act of 2007
• Proposed by Senator Ben Nelson of Nebraska of
  Larry Craig of Idaho
• Providing biogas producers with a tax credit of
  4.27 for every million British thermal units
  (Btu) of biogas produced

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U.S. Biogas Usage

• Most of the methane from wastes is allowed to
  escape into the atmosphere
• about 100 dairy farms
• few pig farms
• some landfills
• few municipal sewage treatment plants
• 125 operational digester systems
• methane emission reductions of approximately
  80,000 metric tons
• energy generation of about 275 million kWh.

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Reduces Waste?

• the amount of waste going in the digester is
  almost to amount coming out
• BUT quality of the waste is altered for the
  better
• less flies smell (90)
• better fertilizer
• organic load reduced
• less polluting
• Waste coming out of digester can be separated
• compost solid part
• use liquid part as fertilizing irrigation or to
  be treated further for rejection in nature

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Other Advantages of Biogas

• savings for farmers
• transforms the manure/slurry into a high quality
  natural fertilizer while reducing
• energy expenses
• Reduces GHGs - CO2 neutral
• Very low particulates emissions
• NOX Reductions (50 compared to diesel)
• possibilities of pathogen reduction through
  sanitation

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Is Biogas the Answer?

• 1998 U.S. DOE study concluded that in the U.S.,
  it is feasible to capture use over 1/3 of the
  biogas potential from landfills, animal waste
  sewage equivalent to 6 of all the natural gas
  used in the U.S.
• If all of this were used in transportation, it
  would displace 10 billion gallons of gasoline per
  year
• If all this biomethane were used in vehicles,
  this would reduce GHGs by 500 million metric tons
  of CO2 per year (removing emissions equivalent to
  90 million light-duty gasoline vehicles off the
  road)

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The Problem of Energy Dependence

• U.S. oil imports increased 1100 since 1960
• Production simultaneously declining
• Consumes 25, produces 3
• 20 million barrels/day
• Imports 13 million barrels/day (over 60 used)
• By 2025, DOE predicts 26 million barrels/day
• importing 70

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Why is Energy Dependence Bad?

• Oil-market rollercoaster ride
• Greatly impacts foreign policy decisions
• More than 30 of U.S. energy needs 50 of
  petroleum needs depend on
• unstable countries
• undemocratic countries
• overtly hostile countries
• Funds development of weapons of mass destruction?
• Undermining fight against terrorism?

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Its the Economy, stupid

• 232 billion/year ( 450,000/minute)
• 49.1 billion/year to protect oil flows in
  Persian Gulf countries (doesnt include second
  Iraq war)
• 159.1 billion/year lost in GNP
• 3 oil shocks between 2 2.5 trillion
• 828,400 U.S. jobs
• 9/11 200 billion
• Bin Laden has publicly indicated that World Trade
  Center attacks were a response to the U.S.
  occupation of Saudi Arabia. American military
  presence in Saudi Arabia existed to defend the
  house of Saud, an undemocratic regime that
  guarantees the United States access to Saudi
  Arabian oil.

Actual cost of refined oil from Persian Gulf
10/gallon
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So Can Biofuels Lead the U.S. to Energy
Independence?
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Not so much.

• At 6,000 barrels of fuel per square mile per
  year, you will not get a substitute for petroleum
  
• In fact, to replace worldwide petroleum use with
  biofuel you would have to consume 10.8 million
  square miles of farmland with the highest
  yielding biofuel crops there are only 5.8
  million square miles of farmland on earth.

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Another View NRDC Study

• Aggressive action to develop biofuels between now
  and 2015 would position America to produce, by
  2050, the equivalent of more than 3 times as much
  oil as we currently import from the Persian Gulf
  (includes cellulosic)
• If combined with better vehicle efficiency
  smart-growth urban planning, biofuels could
  virtually eliminate our demand for gasoline by
  2050

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But should we? Parting thoughts

• Market volatility (weather, pests, etc)
• Food for fuel? Already struggling to feed 6.5
  billion ppl
• Increase in crop prices
• poorest people in the world already spend 50 or
  more of their income on food, already
  experiencing 25 rise in grain prices
• Environmental disadvantages
• Economic pressures to clear land pose major new
  threat to plant animal diversity
• Current biofuel production practices increases
  soil water depletion desertification
• Possibly lead to animal cruelty?