Senate energy committee explores biofuel infrastructure expansion

(published by Ethanol Producer magazine, written by Kris Bevill)

The Senate energy committee held a two-hour hearing April 7 to discuss proposed legislation to expand the domestic biofuels market, but expanded its scope through testimony and committee member questions to cover nearly every major issue related to biofuels production and market expansion.

Committee Chairman Jeff Bingaman, D-N.M., expressed cautious optimism for biofuels expansion during his opening statement. While domestically produced biofuels “are the best near-term option for replacing oil,” he is concerned that infrastructure built to support biofuels will become obsolete when drop-in fuels such as algae-based biocrude or biobutanol are ready for the market.

Sen. Tom Harkin, D-Iowa, testified in support of the Biofuels Market Expansion Act of 2011, a bill he co-sponsored that would mandate flex-fuel vehicle production, require one half of all U.S. gas stations to install at least one blender pump by 2020 and offer a federal loan guarantee for a biofuels pipeline. He reminded committee members that ethanol is a viable fuel replacement now, whereas drop-in fuels will not be commercially ready for perhaps 20 years. “By all means, we should continue apace with the development of drop-in fuels, but this is not an either-or proposition,” he said. “Until drop-in fuels are commercially viable, we should continue to support ethanol.”Senate energy committee explores biofuel infrastructure expansion.

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Our Take:
Ethanol is an excellent customer of the railroads, but the question of how well the rail companies treat ethanol is a key element in the quest for biofuels pipelines to the East and West Coast.

It may be a bit of a shaggy dog, but some say that in the back rooms, the rail companies cut deals with the oil companies who supply their diesel–in exchange for cut rate fuel for their engines, these rail companies, it is rumored, willfully delay the arrival of rolling stock for ethanol pick ups, or delay their arrival at fuel terminals, as a discouragement to discretionary blending of ethanol.

This may or may not be happening, but it is prudent not to let the fox guard the hen house. Giving the ethanol industry direct control of the transportation of its product will make the ethanol marketplace more efficient, and the main beneficiary will be the customer. The ethanol supply at retail sites will be more plentiful and cheaper.

As to the other aspects of Harkin’s proposal, it must be said that the oil rich areas of the world are in political freefall. Consequently, the price of oil has skyrocketed, and the pump price of gasoline approaches $4. Some experts say it could hit $5 at the height of the driving season (Memorial Day Weekend). The fact is, that without the changes Harkin proposes, American drivers live with a 90-percent gasoline mandate. Implementing universal blender pump technology and flex fuel equipment (as Brazil has done) will put the choice of fuel in the hands of the consumer. The fuel system modification for flexible fuel vehicles would cost about $100 per auto. Though blender pumps are a capital intensive proposition, the fact that they would sell all blends of ethanol would make them more immediately profitable for the station owners than stand alone E85 dispensers.

Cellulose-based ethanol waits in the wings. In order to win financing and bank underwritten debt, in order to build their plants and start producing their advanced biofuel, they need to show they have a market. Simply put, cellulose ethanol will not have a market until blender pumps and flex fuel engines make E15 and higher intermediate blends a choice available to a much broader segment of American drivers. Blender pump installation will not prevent development of drop-in fuels. The drop in fuels can go right into the underground storage tanks that currently hold gasoline to feed into the blender pumps.

The answer for America’s energy future is not either/or, but rather, it is all of the above. If we pursue all these solutions, we will rid ourselves more quickly of the shackles of our foreign energy addiction.


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