Can Ethanol Reduce American Oil Dependence?

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Dosen't 36 billion gallons of biofuel a year equate to about 12% of current yearly oil consumption in the US?

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Peru's fledgling ethanol industry eyes growth

LIMA, Oct 21 (Reuters) - Energy companies, gobbling up land and pouring money into projects along Peru's northern coast, are betting they can leverage the country's impending access to U.S. markets to make it an important producer of sugar cane-based ethanol.

So far, eight companies have invested some $480 million to develop the popular alternative fuel in Peru. Most intend to export it to the United States, the world's largest ethanol consumer, which will give Peruvian ethanol imports free entry starting next year, a trade benefit over Brazilian fuel.

"There are a lot of reasons why an ethanol project in Peru makes sense," said Rex Canon, head of Maple Energy, a U.S.-based group with a $220 million facility in Peru. "It's arguably the best place in the world to grow sugar cane."

Peruvian-grown sugar has one of the highest yields in the world, nearly double the global rate. Canon said Maple's Peru yields top 150 tonnes per hectare, versus the global average of around 85 tonnes per hectare.

Cane can be planted and harvested year-round on the desert coast, which allows for constant processing, smaller industrial facilities, and, historically, had helped to make Peru a major sugar producer.

Output dropped drastically after Gen. Juan Velasco, a dictator, led a massive land reform effort in 1969. Ever since, Peru has been a net importer of sugar, though in recent years the crop has made a bit of a comeback.

This year, producers hope to produce some 910,000 tonnes of sugar, which is close to Peru's domestic demand. Analysts predict production will likely keep climbing as consumption booms and the need for ethanol expands.

By 2010, Peruvian gasoline is required to contain at least 7.8 percent ethanol. Unless the country can ramp up production, it will need to start importing the fuel, from places like neighboring Brazil.

THE ECONOMIC CRISIS

Brazil is the world's largest producer of sugar cane-based ethanol. It feeds its own market and exports to countries like the United States, which charges a 54-cent-per-gallon tariff on imports.

Ethanol from Peru, under a free-trade agreement set to start in January, will have free access to U.S. markets, making the country an attractive place for cane investors.

Brazilian companies are in talks with roughly 10 Peruvian sugar growers, according to Miguel Vega, president of the Peru-Brazil Chamber of the Commerce, who declined to give names.

"This kind of negotiation started more than a year ago. These things take time," he said.

Vega stressed Brazilian companies are more interested in providing technologies and entering joint-venture agreements than in buying land. He said they have their sights set on markets in North America and developing ones in Asia.

Still, whatever ethanol projects might be in motion, the global credit crisis could threaten to undo or delay them.

Freddy Flores, head of Peru's ethanol association, APPAB, said the country's fledging sector will likely face setbacks, but remained optimistic about Peru's long-term potential.

"It's obvious the availability of financing from abroad will suffer some pressure," he said. "We hadn't exactly built the U.S. financial crisis into our estimates."

Large-scale projects could also face opposition from the government, which has been lukewarm about promoting ethanol investments, Flores said. Earlier this year, when food prices were high, Peru's president said he would prioritize food over fuel production.

But, despite the challenges, Maple Energy said it was investing in Peru because it believes the country has a bright future in ethanol.

Last year, the company bought some 12,000 hectares (30,000 acres) in northern Peru, where it plans to plant sugar cane and construct a distillery, power plant and port additions.

"We're building a whole new industry here," Maple's Canon said. "And believe me, we won't be the only ones developing an ethanol project in Peru." (Editing by Walter Bagley)

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USDA, industry meet on aid to ethanol, rural cos
Reuters
Monday, October 27 07:58 pm

U.S. Agriculture Secretary Ed Schafer assured meat, dairy and poultry groups on Monday that a loan guarantee program for rural businesses was not being used as a special bailout for struggling ethanol makers. Skip related content

Schafer met industry representatives in response to a letter last week in which the groups said it would be unfair to provide federal loan guarantees to ethanol makers because they agreed to pay high prices for corn, the feedstock used by ethanol plants, before recent market declines.

The letter was signed by the American Meat Institute, National Cattlemen's Beef Association, National Chicken Council and five others.

"We assured them that this was a long-standing program they could use to help finance rural America. Some of those may be ethanol facilities," Schafer told reporters.

USDA has said any rural business, including ethanol plants, are eligible to receive up to $25 million in loan guarantees as long as they meet certain financial requirements.

The company that wants a loan under the 35-year-old program must find a local bank willing to make the loan, which is then guaranteed by the government.

Schafer said 48 ethanol facilities have been given loans under this program, including 13 in the last two years. He told the industry members the loans were also available to many of their members as well.

A spokesman for one of the industries represented at the 30-minute meeting welcomed the visit with the secretary.

"It was a good meeting, open and honest," said a representative from the poultry industry.

"(Schafer) said they were not proposing some specific programs for ethanol," he added.

The poultry official said the groups talked about higher feed costs impacting the industry. Despite being large users of grain and facing high feed costs, they have been told to expect no aid.

(Reporting by Christopher Doering and Charles Abbott; editing by Jim Marshall)

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EU biofuel data change angers environmentalists
Reuters
Wednesday, October 29 12:49 pm

European biofuels could receive a boost from a change in the way the European Union calculates their impact on the environment, a document shows, angering environmentalists who think they do more harm than good. Skip related content

The European Council document seen by Reuters on Wednesday also annoyed European biodiesel producers who see a bias toward bioethanol.

New figures on how biofuels can help cut greenhouse gas emissions in the fight against climate change follow swiftly after the European Parliament proposed clamping down on their use, fearing negative side effects such as deforestation.

The EU's final stance will be decided in negotiations in coming weeks between the European Parliament and member states, who are discussing the new data this week.

"The timing and lack of transparency surrounding these new figures raises serious questions about how the biofuel lobby has been able to influence the debate," said Nusa Urbancic of environment group T&E.

The European Union's executive has proposed that 10 percent of all road transport fuel comes from renewable sources by 2020, as it seeks to heed U.N. warnings that climate change will bring more extreme weather and rising sea levels.

Much of that 10 percent would come from biofuels, creating a huge potential market that is coveted by exporters such as Brazil, Malaysia and Indonesia, as well as EU farming nations.

But environmentalists charge that biofuels made from grains and oilseeds have pushed up food prices and forced subsistence farmers to expand agricultural land by hacking into rainforests and draining wetlands.

DEFORESTATION

The European Parliament has responded by agreeing to limit fuels from food such as Brazilian sugar to 6 percent of EU fuel.

It has demanded that from the outset biofuels cut greenhouse gas emissions by 45 percent compared to petrol and diesel, an increase on the 35 percent saving originally proposed by the European Commission, which would have ruled out some EU biofuels.

Member states are now considering reclassifying European biofuels to give new values for the greenhouse gas savings they can achieve, according to the European Council document.

Among the new figures, sugar beet ethanol is given a new greenhouse gas saving of 52 percent, up from 35 percent in the European Commission's initial calculations, bringing it back into line with parliament's recommendation.

"This has been done without any transparency," said a spokeswoman for European Biodiesel Board. "Maybe this can be used as a starting point, but in no way can this be used in the longer term without more scientific work and input from biofuels producers."

T&E's Urbancic said the figures appeared to ignore the damage biofuels can cause by using vegetable oils that would otherwise have been used in foods -- thereby creating fresh demand that encourages farmers to expand farmland into forests.

"The Commission and Council are still ignoring the absolutely critical issue of indirect land use change," she said. "They are being selective about the science they take on board."

(Reporting by Pete Harrison, Editing by Peter Blackburn)

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U.S. ethanol profits fall on higher corn costs

NEW YORK, Oct 31 (Reuters) - Average U.S. ethanol distiller profits remained miserable for the week ending Thursday as prices rose for corn, the main input for making the alternative motor fuel in the United States, analysts said.

"If you're lucky, you're even," and not operating a distillery that's been losing money to make the fuel, said Ron Oster, an analyst at BroadPoint Capital in St. Louis.

Average U.S. distillers were making about flat to positive 10 cents per gallon for the week ending Thursday, about 10 cents less than levels last week, analysts said.

December corn futures <CZ8> on the Chicago Board of Trade closed at about $4.09 a bushel on Thursday, up about 19 cents from the previous week.

Poor margins were not the only troubles for many ethanol producers.

"In addition to the difficult margin conditions, many ethanol companies have really shot themselves in the foot with some costly hedges," Oster said.

VeraSun Energy Corp , the largest publicly traded ethanol producer, told its lenders and bondholders it is preparing to file for bankruptcy on Friday, according to a Wall Street Journal report.

The company's shares have plummeted from a year high of about $17 to under $1 this week. The company had recently put itself up for sale due to costly corn contracts.

Ethanol prices rose a bit over the week as gasoline demand recovered slightly on weak prices for the conventional fuel. In the Midwest <ETHANOL/US>, spot ethanol was $1.78 a gallon, up about 9 cents.

But the gains were not enough to surpass the higher corn costs.

Slim profits amid volatile corn prices have led to delays and other problems for producers this month. Aventine Renewable Energy Holdings Inc said it would delay the start-up of its Aurora West ethanol plant in Nebraska until the second quarter of next year. It had been scheduled to open in the first quarter.

The government reported late this month that ethanol production in August, the latest month for which statistics were available, rose 1 million barrels from the previous month to 20.1 million barrels.

Even so, U.S. capacity to make ethanol is growing, which has helped weigh on margins. U.S. ethanol capacity has jumped 60 percent since last year to nearly 11.2 billion gallons per year, which could keep a lid on margins until transportation bottlenecks are eased. [Please click on [ID:nN20582484].

Average margins should range from positive 25 cents to negative 25 cents per gallon for the next six to 12 months amid shipping constraints and ample supply, analysts have said.

The ethanol crush spread was about 30 cents a gallon, using the formula of the Midwest ethanol price, minus the corn price divided by 2.8. Operating costs such as natural gas prices and overhead trim the crush spread by about 25 cents per gallon. Producers that sell the animal feed dried distillers' grains can improve their margins.

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U.S. biofuels sector sees ally in Obama

WASHINGTON/NEW YORK, Nov 5 (Reuters) - U.S. biofuel makers, struggling to make a profit at a time of tumbling oil and gasoline prices, look upon President-elect Barack Obama as a staunch ally for growth.

Obama, a Senator from Illinois, the No. 3 U.S. ethanol producer, has pledged to expand federal mandates requiring the blending of biofuels into gasoline to 60 billion gallons annually by 2030, up from the current requirement of 36 billion gallons per year by 2022.

He would also accelerate the development of cellulosic ethanol, to be made from switchgrass and poplar trees, to 2 billion gallons by 2013.

Time will tell if those goals are achievable, with fears of an ethanol supply glut already helping to batter shares in producers.

But it is a show of support in the face of recent opposition from foodmakers and livestock producers. They tried earlier this year to scale back the mandates, claiming ethanol, which is mainly made from corn in the United States, was helping to spike food prices.

"I think Obama sees this as an industry that is evolving and he wants to assure that the evolution can continue," Bob Dineen, the president of a Washington-based ethanol industry group, the Renewable Fuels Association, said in an interview.

"That means that you don't walk away from the existing industry."

Biofuels makers also take heart in Obama's overall alternative energy plan to create a $150 billion fund for investments over the next 10 years and create 5 million jobs, which could eventually benefit ethanol companies that are struggling.

Last week the largest publicly traded U.S. producer, VeraSun Energy Corp , filed for bankruptcy protection. Two other big producers, Pacific Ethanol and Aventine Renewable Holdings Inc , have seen their share prices plunge about 80 percent since their year highs.

BLEND WALL

Obama's plan may get help from other winners in Tuesday's election. Voters in Minnesota reelected Democrat Collin Peterson, the House Agriculture Committee chairman, who advocated programs in the 2008 farm law that will encourage commercial development of cellulosic ethanol.

Peterson also supports boosting the content of ethanol in gasoline to 15 percent from 10 percent. "Obama would be supportive of whatever we (Congress) come up with," Peterson said in an interview with Reuters.

Ethanol output, running at a rate of 10 billion gallons a year, is approaching a "blend wall" --where production equals the legal limit for use. U.S. ethanol output has tripled since 2003 and, at latest count, equaled 10 billion gallons a year.

Obama himself had said late in the election campaign that he may have to scale back some of his alternative energy plans. And ethanol's problems may go beyond the ability of anyone in the nation's capital to quickly fix them.

"The problems that the industry is dealing with right now go way beyond politics," said Pavel Mulchanov, an analyst at Raymond James & Associates in Houston. He said it will be tough for Washington to fix the credit crunch and gyrating prices of commodities like oil and corn.

But support for biofuels is widespread as it has the potential to boost other sectors.

"What is good for biofuels is good for much of agribusiness -- particularly elements leveraged to the crop sector, such as farm equipment, seed developers and others," said analyst Mark McMinimy of Stanford Washington Research. "And, in this sense, the election outcome may be the gift that keeps giving for biofuels and crop-related industries."

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US ethanol industry could face more bankruptcies

NEW YORK/LOS ANGELES, Nov 3 (Reuters) - More U.S. ethanol distillers may be forced to seek bankruptcy protection if they fail to keep costs down as the industry gets squeezed by oil refiners and gyrating corn costs alike.

VeraSun Energy Corp , the largest publicly traded U.S. ethanol company with 14 distilleries across eight states, said on Friday it was seeking bankruptcy protection. The South Dakota-based company took a beating after locking in costly contracts for corn, the main feedstock for making the alternative motor fuel in the United States.

Another ethanol company, Gateway Ethanol LLC, declared bankruptcy early last month, and several other small players did so late last year amid a stubborn supply glut of the fuel.

"The short answer is yes," Raymond James analyst Pavel Molchanov said when asked if he expected to see more bankruptcy filings in the ethanol industry. "There may well be further bankruptcies depending on how long the current downturn in the ethanol market lasts."

U.S. capacity to make ethanol has jumped 60 percent as the government has set blending mandates and given producers incentives in an effort to begin to wean the country off foreign oil. Capacity is already higher than the government's mandate of 11.1 billion gallons for next year.

How the ethanol industry fares in the next few months could help determine whether the next U.S. president will expand mandates and incentives for ethanol or remove them and let the industry survive or fall on its own.

In the meantime, Wall Street is watching the money it has invested in ethanol companies dry up.

Shares of Aventine Renewable Holdings Inc , which closed on Monday at $2 on the New York Stock Exchange, have lost 85 percent of their value since hitting a 52-week high of $13.65 in December. Pacific Ethanol shares are down 90 percent since their year high of $9.88 in December, and closed at 99 cents Monday on Nasdaq.

VeraSun's 9.875 percent notes due in 2012 last traded at about 41 cents on the dollar, yielding 40 percent, while its 9.375 percent notes due in 2017 traded at about 7.5 cents on the dollar on Friday, according to Thomson Reuters data.

Some of VeraSun's biggest bondholders include Lord Abbett, Pioneer, AEGON, Western Asset Management, AIG Global Investment Group and MacKay Shields, according to Thomson Reuters.

LITTLE CONTROL OVER PRICES

A key challenge for the industry is that distillers of renewable fuel have "little or no control" over the cost of their major input, corn, or the price at which they can sell ethanol to oil refiners, said Joseph Gomes, an analyst at Oppenheimer & Co in New York.

The fuel makes up only about 6 percent of the overall gasoline supply.

Corn prices shot to nearly $8 per bushel over the summer and have since dropped to nearly half that. Gasoline costs, on the other hand, have tumbled as crude fell from a high near $147 a barrel in July to about $64.

The other large publicly traded U.S. ethanol companies, Aventine and Pacific Ethanol, can survive this year's dismal profit margins by getting costs in control, said Gomes.

He said if companies delay the opening of new plants, profit margins could begin to improve. Aventine, for example, pushed back the opening of its Aurora West plant in Nebraska until the second quarter of 2009 instead of the first quarter.

Companies will also have to hedge corn costs and manage liquidity better, he said.

Aventine and Pacific did not return phone calls seeking comment on cost controls.

Not everyone agreed that the health of the industry was in danger. Dan Basse, president of at AgResources Co in Chicago, said mandates to blend ethanol were not going away any time soon, and distillers were getting the best margins they've had all year as corn costs drop.

Jeff Broin, the chief executive of privately held Poet, the largest U.S. ethanol company, said in an interview that many ethanol producers can profit "indefinitely" even if crude oil prices fell to $40 to $50 a barrel.

Another ethanol industry executive who did not want to be named said that as oil refiners begin to find it economical to use ethanol in their default blend of gasoline they will take more of an interest in keeping ethanol companies healthy.

In addition, as the credit crunch cancels plans for new plants, demand could quickly come back into equilibrium with supply.

"In the longer term, the future of the industry should remain pretty bright," said Gomes. "The question is, can all these companies get to the longer term?"

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Mexico keen to test biofuels but hurdles persist

HOUSTON, Nov 10 (Reuters) - Mexico's ambitious plans to have biofuels one day meet a tenth of its gasoline demand are threatened by heavy regulations in the fuel and farm sectors, government and industry officials said on Monday.

Government gasoline subsidies reduce the attractiveness of biofuels, especially as no subsidies are offered to biofuels producers or users, ethanol backers said.

While state oil company Pemex is about to start testing ethanol-blended gasoline, officials admitted the government has yet to produce a detailed policy on biofuels.

"There are a lot of challenges ahead and we don't have a framework for the industry. These steps are meant to prepare the ground for growing biofuels," said Rodrigo Favela, deputy planning director for Pemex's oil refining and marketing unit.

Pemex will market ethanol-blended fuel at two test service stations later this month and will introduce a blend of 6 percent ethanol in gasoline sold in the western city of Guadalajara by the end of 2010.

By slowly expanding its use of ethanol blends, Pemex hopes to gradually roll out biofuels across the country, Favela told a Platts conference on the Mexican energy sector.

President Felipe Calderon said on Monday during a visit by his Colombian counterpart Alvaro Uribe that the two countries are considering opening a biofuel plant in the southern Mexican state of Chiapas.

Mexico is seen as a potentially major producer of biofuels, given its excellent agricultural climate and shortfall in oil refining capacity which sees it import large volumes of fuel.

Industry experts say Mexico could one day consume more than 1 billion gallons of ethanol a year if it reaches its goals.

Its proximity to the United States -- the world's biggest ethanol consumer -- and its membership in the North American Free Trade Agreement, or NAFTA, which would allow it to avoid US tariffs on ethanol are seen as further strengths.

But ethanol backers say prohibitions on using food crops such as corn and government-mandated prices for sugar that are far above world market prices are major obstacles.

Mexico's fragmented and relatively underdeveloped agriculture sector is also seen as a barrier.

"I don't think it will be very easy to scale up the ethanol industry in Mexico," said Luis Lazaro, business director for Mexican firm Thaes which plans to build a plant that would turn sweet sorghum into ethanol in southeast Mexico.

Thaes opted for sweet sorghum, a crop not commonly grown in Mexico, after rejecting sugar cane as too expensive. It is now working to convince farmers to grow the crop, Lazaro said.

Pemex plans to spend up to $30 million over the next two years to modify its distribution terminals in Guadalajara and gasoline blending facilities at its nearby Salamanca refinery as it prepares for the pilot project.

The company plans to blend 52 million gallons per year of ethanol into Guadalajara's gasoline. If successful, it will add ethanol blending to the Monterrey and Mexico City markets, Favela said. Pemex also plans to blend small amounts of biodiesel into diesel fuels sold in Monterrey in December as part of a separate feasibility study.

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Beaker Fuel
Designer biofuels looked great at $140 oil. How about $65?
24 November 2008
Forbes

Designer biofuels looked great at $140 oil. How about $65?

Dartmouth college engineering professor Lee R. Lynd hit upon an unlikely source of transportation fuel three decades ago: bacteria from compost heaps. While working on a farm one summer, he became fascinated by how the bacteria could degrade all sorts of plant matter and produce heat. He envisioned creating designer bacteria that could digest fibrous plants and spit out barrels of fuel. But when he tried to convince venture capitalists in the early 1990s to form a company based on the idea, he got nowhere. Gas was cheap and renewable energy, a backwater. One government agency rejected his grant proposal five years in a row. "People said, 'You seem like a bright guy. Why are you in this dead field?'" says Lynd.

These days Lynd's basement lab is bustling with activity as grad students brew plant-eating bacteria in glass fermenters filled with brownish liquid. Another 70 researchers work down the road in Lebanon, N.H. at the biofuels company he founded, Mascoma. It has snagged $100 million in funding from investors including General Motors and Marathon Oil, plus millions more in government grants, and aims to produce ethanol from wood chips in 2009 using genetically engineered bacteria.

"This will be a transformative technology," boasts Lynd, 50. He foresees a vast network of biofuel farms and refineries spread across the country a few decades from now. Lynd is a practicing acolyte of the renewability religion: He drives a Prius, heats his house with wood he cuts himself and generates most of his home's electricity with photovoltaics.

The limitations of corn-derived ethanol have sent biotech researchers scrambling to devise new biofuels from agricultural waste, algae and other sources that are cheaper, more abundant and don't compete with the food supply. Ethanol producers used 23% of our corn crop last year to make 5% of our car fuel supply. Says gene hunter turned biofuel researcher Craig Venter: "We can't have fuels competing with food. It is already a semidisaster, and it is only going to get worse." People in the corn ethanol business disagree.

Scientists like Lynd are trying to convert any type of plant matter, not just sugar, into liquid fuels. With exotic gene-engineering techniques, they are breeding crops that could thrive on marginally arable land and are contemplating farms of bioengineered algae. Using all of a plant might produce four times as much fuel per acre as current biofuels. With better technology, "One percent of the surface of the Earth could produce all the transportation fuel that the world needs," says biochemist Chris R. Somerville, who heads BP's $35 million (annual budget) biofuels research center at UC, Berkeley. Adds University of Massachusetts microbiologist Susan Leschine: "Biomass is the only source of liquid fuels that can replace petroleum."

Venture capitalists poured $637 million into biofuels in 2007, up from almost nothing in 2004, says PricewaterhouseCoopers. Big companies like Chevron and Royal Dutch Shell are investing. Spurring them on is the government, with grants for construction of new biofuel plants, plus big per-gallon subsidies. "There are so many people that this almost feels like the oil land rush of the mid-1800s," says Joe R. Skurla, who is leading a $140 million joint venture between DuPont and Danisco to produce cellulosic ethanol. Predicts MIT chemical engineer Gregory Stephanopoulos: "This will be a $150 billion industry."

Living up to the hype will require some serious feats of industrial engineering. Making ethanol from sugar is a straightforward fermentation. Converting biomass to fuel is not. Cellulose, the fibrous stuff that holds plants together, resists breakdown into simple sugars. Methods for doing so using heat, acid and enzymes are complex and expensive. No U.S. company makes cellulosic fuel on a commercial scale today.

To find a better way, some biotech researchers are going back to nature to optimize obscure microbes that break down plant matter. Lynd is focusing on Clostridium thermocellum, one of the most efficient cellulose eaters known. This bacterium can quadruple its mass eating cellulose in only eight hours, producing ethanol as a by-product. Lynd wants to supercharge its ethanol yield by subtracting genes that make unwanted by-products. This will be tricky. Genetic engineers have been so focused on medical applications that little work has been done to develop tools to insert genes into anaerobic microbes. But Lynd plans to do it in two years. He has already engineered another bacterium that digests the plant component hemicellulose and spits out ethanol.

Lynd's friendly competitor is U Mass' Leschine, whose group found an ethanol-spewing bacterium near the Quabbin Reservoir a decade ago. She didn't know what she had until, in the lab, it started devouring the filter paper it was growing on. She founded SunEthanol after she couldn't get oil companies interested. It plans build a pilot plant by 2011.

Coskata, a two-year-old company in Warrenville, Ill. whose angel is General Motors, rashly claims it can extract ethanol from garbage for $1 per gallon. This does not represent a gold mine. The figure ignores capital costs, and it is equivalent (given ethanol's lower energy content) to gasoline costing $1.50 a gallon, which is about what gasoline is worth before taxes and markups are added.

Coskata's means of production is a bacterium discovered on the bottom of a pond in Oklahoma. The recipe calls for heating biomass to 1,800 degrees Fahrenheit, forming a mix of carbon monoxide and hydrogen. Cooled gas is passed over the microbe, which converts it to ethanol. It won't be known whether this process is economical until Coskata builds some plants. That is supposed to happen by 2012.

But why bother with ethanol at all? Amyris, a biotech firm in Emeryville, Calif., and LS9, in South San Francisco, aim to engineer microbes that will produce longer-chain hydrocarbon molecules like those found in gas and diesel. What makes this possible is a radical new biotech process called metabolic engineering that replaces whole swaths of genes inside microbes to turn them into tiny chemical factories. A few years ago Amyris engineered yeast to produce a malaria drug now being developed by Sanofi-Aventis. In the course of this medical discovery researchers realized that one molecule the yeast makes is related to diesel fuel. Since then they have tinkered with dozens of genes to optimize fuel production. The Amyris fermentation lab smells like a bakery. Inside the steel fermenters, puddles of oil float to the top.

Across the bay LS9 has rejiggered the bacterium E. coli to produce a diesel-like product. Both firms aim to produce for $60 a barrel. "We make no-compromise biofuels" that will work in existing cars and pipelines, says Amyris cofounder Neil Renninger. His first plant, under construction with a partner in Brazil, will produce diesel from sugarcane starting in 2010. The method could be combined with future refineries that will turn cellulose into sugar.

Trees and sugarcane aren't the only things that use the sun's rays to turn carbon dioxide into fuel. Algae can do this. Craig Venter's company, Synthetic Genomics, is modifying algae (which naturally produce diesel-like oils) so that the oil is more accessible and more plentiful. The firm has engineered algae that secretes fuel to simplify the collection process. He envisions putting high-tech algae farms next to oil refineries, factories or power plants and diverting the smokestack CO2 onto the algae. Oil could be continuously extracted. "This is my plan to replace the global petrochemical industry," Venter says grandly.

Range Fuels, a company in Broomfield, Colo., plans to open a plant next year that will use heat and catalysts, but no bugs, to turn cellulose into ethanol. Bio-free approaches might prove to be better, says U Mass chemical engineer George Huber.

High-tech visions like these face daunting hurdles moving into the commodity world of energy. With oil prices plummeting, biofuels firms could be priced out of business before they start. None of the methods have proved themselves commercially, and capital costs of building new plants will be high.

Cornell University ecologist David Pimentel is a perennial skeptic. The biofuel fixation is "a bit foolish" and "just not logical," he says. Why? Biofuels are an inefficient way of harnessing solar energy, given the complexity of processing plant material. When he first studied the matter in 1980, "It didn't add up," he says, "and it still doesn't. At the very best, biofuels will be a minor contributor."

Now it is beginning to dawn on environmentalists that biofuels are a mixed blessing. In an April 2006 FORBES column Peter Huber argued that the discovery of an economic method of turning cellulose into transportation fuel would be a disaster for the world's jungles, since then people living near them would have a powerful incentive to chop them down.

Princeton University research scholar Timothy Searchinger says that when productive land is used for fuels in one place, crop prices will rise, driving others to clear land somewhere else to replace it. Since forests hold carbon, the net effect is to boost greenhouse gases, he calculated in the journal Science, contradicting earlier studies that found ethanol had a lower carbon footprint. "You can make as much biofuel as you want if you are willing to drive up crop prices four- or sixfold" and don't care about global warming, he says. Biofuels come out greenhouse-gas-positive if they're made from waste or grown in unproductive areas, he points out.

Dartmouth's Lynd fights back: "There is a big spectrum between the biofuels on the ground now and the ones that could exist someday," he says. One possibility is dual-use land, with a summer food crop and a winter fuel crop. He figures that between cellulosic technology, high-yield energy crops and more efficient cars, we might one day grow most of our fuel on only 50 million acres, a plot the size of Nebraska.

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Higher yields mitigate US ethanol land needs : study

WASHINGTON, Nov 12 (Reuters) - Higher corn yields and more efficient ethanol plants will reduce the amount of U.S. land needed to supply the burgeoning fuel ethanol industry, a trade group report said on Wednesday.

A study commissioned by the Renewable Fuels Association said an additional 6.6 million acres of corn will be needed by 2015 to meet targets for ethanol use. Other analyses have suggested as much as 13 million acres would be needed.

"Moving forward, more pronounced gains in productivity promise to mitigate the need for large amounts of new agricultural lands," said the report, based on work by Informa Economics, a consulting firm.

Corn yields would rise to 182.5 bushels an acre by 2015, Informa said, and ethanol makers would get 2.9 gallons from each bushel. The conversion rate now is 2.8 gallons per bushel.

This year, corn yields are forecast at 153.8 bushels an acre. The U.S. Agriculture Department and a University of Missouri think tank, the Food and Agricultural Policy Institute, estimate 2015 yields at 169 bushels an acre.

The additional corn plantings could be land shifted from crops less in favor, such as cotton in the U.S. South, or fallow land, such as the Conservation Reserve, said the RFA report.

If the feed value of ethanol co-products like distillers grains is counted, it reduces by one-third the amount of additional land needed for ethanol, said RFA.

U.S. ethanol production is forecast to increase 1.5 billion gallons to 10.5 billion gallons in 2009, and rising to 15 billion gallons a year by 2015 to comply with federal law.

            U.S. land and corn for ethanol
                  2007/08  2008/09  2015/16  2015/16
                      RFA     USDA      RFA    FAPRI
 Ethanol output-A   8,575     11.2     15.0     14.6
 Corn to ethanol-B   2.97     4.00      5.1      5.3
 Corn yield (bu/ac)   N/A    153.8    182.5    168.6
 Land for ethanol-C  21.6     28.6     28.2     34.6

A-billions of gallons. B-billions of bushels. C-millions of acres.

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Ethanol industry faces falling prices, questions of overbuilding
16 November 2008

INDIANAPOLIS (AP) - Midwest ethanol producers are facing falling prices, a tight credit market and possible overbuilding -- which raises questions about whether the industry is in a temporary slump or a severe downturn.

The cost of corn, a major raw ingredient of ethanol, has swung wildly this year, The Indianapolis Star reported. Meanwhile, the price of ethanol has fallen from nearly $3 a gallon in June to nearly $1.50 in October. And some say the industry has overbuilt itself, glutting the market for now.

The problems have caused some ethanol producers to see shrinking profits and falling stock prices. Other companies have scrapped projects.

"There's a little bit of a shakeout going on, but that's to be expected," said Mark Walters, director of biofuels programs for the Indiana Corn Marketing Council. "What it means is the industry is maturing. The euphoria is over."

On Friday, Aventine Renewable Energy Holdings said it would slow construction of a plant in Mount Vernon, Ind. and delay the opening for about nine months. That plant had been scheduled to open early next year.

Company spokesman Les Nelson said the margins in the ethanol business today are nearly break-even.

"We need to make sure we have liquidity in our business," Nelson said.

In 2005, Indiana wanted to jump into the ethanol industry. The state had just one ethanol plant at the time and wanted to compete with Iowa, Illinois and other Midwestern states.

The state offered $16 million in tax incentives to kick-start the industry, and more than 40 plants were envisioned for Indiana.

"I think there certainly was excessive optimism," said Chris Hurt, an agricultural economist at Purdue University. "There was a lot of talk and a lot of interest. But the vast majority of those projects did not go ahead."

About 20 ethanol plants never made it off the drawing board, but 11 plants are up and running in Indiana today.

Several ethanol companies have taken hits because of recent problems, and some fear a slumping economy will make things worse.

"I think it's going to be really difficult to make money in ethanol in the next year," said Wally Tyner, an energy economist at Purdue University.

[Inconfidente]

Ethanol saved Brazil during the 70's World Oil Crisis. From that time to now Brazilians use more and more ethanol. Despite Petrobras new discoveries of oil in Brazilian shore Brazil uses more ethanol than gasoline.

[Tri-ring]

Originally Posted by Fred_

Ethanol saved Brazil during the 70's World Oil Crisis. From that time to now Brazilians use more and more ethanol. Despite Petrobras new discoveries of oil in Brazilian shore Brazil uses more ethanol than gasoline.

I understand why Brazil pursued ethanol as an alternative energy source but it also triggered the erosion of Amazon rain forest.

[Inconfidente]

Originally Posted by Tri-ring

I understand why Brazil pursued ethanol as an alternative energy source but it also triggered the erosion of Amazon rain forest.

Dude, seriously this is the most common mistake that foreigners do about the theme.

The area used for ethanol is too far from Amazon. We plant cane in southeastern Brazil, mainly in São Paulo state. Ethanol has nothing to do with Amazon deforestation.

[hkskyline]

So does that mean the Amazon climate is not suitable to grow crops used to make ethanol?

[Inconfidente]

I don't know. Maybe because I've never seen someone trying to do this (use Amazon to plant cane). Actually Amazon's soil is not suitable for almost anything. I guess nobody tried this before, there is a lot of space in Brazil to do this and Amazon is too far for being a good place for ethanol producers invest (economicaly saying).

[Tri-ring]

When dicussing bio-ethanol almost everyone forgets about the domino effect in crop management.
The present crop land producing sugar canes would be used for some other eatible crop product if not for bio-ethanol but if you need X amount of land to maintain bio-ethanol production and another x amount of land of land to harvest eatible crops to sustain the population but you are short then people will naturally reclaim new land for crop usage.

[Inconfidente]

I don't know about other countries but there are many lands in Brazil that are not being used for absolutely nothing just for speculation. That's the real problem and after that if you really believe that still is a problem try to check out for the price of food in Brazil even considering population's profit.

Yes, the best way of getting energy is the hydrogen but once is not completely suitable economicaly in large scale let's use something greener. Don't you think?

[hkskyline]

U.S. ethanol sector pushes automakers for support

WASHINGTON, Nov 25 (Reuters) - Ethanol industry groups on Tuesday urged U.S. auto executives to support increasing the ethanol-to-gasoline blend rate when they return to Capitol Hill next week to seek federal aid.

General Motors Corp , Chrysler LLC [CBS.UL] and Ford Motor Co have asked Congress for $25 billion to save their businesses. Before they receive any money, however, lawmakers want the companies to lay out their strategies for developing more fuel-efficient cars and maintaining long term viability.

In a letter to the top U.S. auto executives, ethanol trade groups said the companies should use their aid proposals as an opportunity to throw their support behind increasing the U.S. ethanol-to-gasoline blend rate to 15 to 20 percent and aggressively pursuing flex fuel vehicles.

"By taking these proactive steps, you can lead the world-wide effort and demonstrate to the Congress and the American people that the American auto industry is committed to moving in the right direction," said the groups, including Growth Energy, National Farmers Union and the American Coalition for Ethanol.

The U.S. government currently restricts the ethanol-to-gasoline blend rate to 10 percent, but ethanol groups said this limit is "stifling development and growth" of the industry.

Federal law requires the use of 9 billion gallons of renewable fuels this year, 10.5 billion gallons in 2009, eventually rising to 36 billion gallons by 2022.

The ethanol industry, facing its own obstacles, needs the support of the auto industry for the United States to reach these goals and for the biofuel sector to thrive, said Kevin Book, an energy analyst with Friedman, Billings, Ramsey and Company, Inc.

With falling gasoline prices hurting ethanol producers' profits, Book said it is in the interest of the ethanol groups to avert a standoff with auto companies over blend rates.

"If ethanol can negotiate a continued partnership, then it won't become a zero sum game later on in the political process," he added.

[hkskyline]

WVU studies old mine sites for switchgrass farming
Friday November 28, 12:09 pm ET
By Vicki Smith, Associated Press Writer

MORGANTOWN, W.Va. (AP) -- For now, they amount to little more than snow-dusted stubble on 30 otherwise barren acres. But in Jeff Skousen's mind, the switchgrass seeds planted on three former strip mines will someday be 3- to 10-foot-tall fields, swaying in the breeze and ready to be turned into fuel.

And if all the pieces fall into place -- a big 'if,' he admits -- the vision will be repeated on thousands of acres across West Virginia, with abandoned and reclaimed coal mine sites finding new life as farmland.

Switchgrass and its energy-producing potential are hot topics among researchers nationwide. At Oklahoma State University, for example, the federal government is investing $20 million in research on how best to convert it and other grasses into biofuel.

Skousen, a soil science professor at West Virginia University, has a more narrow focus: Can the slow-starting switchgrass take hold on mine sites that are often stripped of topsoil, eroded and acidic, or loaded with rocks?

"We have thousands or tens of thousands of acres that are just sitting there," he says. "In general, the principles are sound. It's just a matter of whether we can make it happen. Will the coal companies adopt it? And will we be able to find the people to harvest it and make it their livelihood?"

Switchgrass fields could even create jobs for residents who could help compact the plant material, turn it into pellets or build refineries.

But that's getting ahead of himself, he says: "We first have to demonstrate we can do it."

Using a $40,000 grant from the governor's office, WVU and the state Department of Environmental Protection targeted three reclaimed, 10-acre sites for planting in May: the former Magnum Coal Co. Hobet 21 mine near Madison in Boone County; a former Coal-Mac Inc. mine near Holden in Logan County; and a former mine site now owed by the Upper Potomac River Commission near Piedmont in Mineral County.

Surface mines can range from 1,000 to 12,000 acres and often have roads, water, utilities and even possible sites for ethanol processing, says the DEP's Ken Ellison, director of the Division of Land Restoration.

But to know if they're feasible farm lands, the state needs research.

WVU's Water Research Institute will manage the project. Skousen, Travis Keene and their fellow scientists will monitor growth for three years, then harvest and assess switchgrass' fuel-making potential.

At each site, they expect to learn something different. The Piedmont site, where sewage and paper-mill sludge were dumped for years, promises the best fertility, Skousen says. But it also has weeds that can choke out the switchgrass.

Abandoned mine lands might be acidic, eroded and barren, so switchgrass could help reclaim them. Their soils, however, may not be fertile and may require much more preparation. Reclaimed lands might require less preparation work because coal operators have restored the topsoil.

But regardless of whether a site is abandoned or reclaimed, there is another problem. An abundance of rocks could make harvesting impossible, or at least expensive.

The challenges don't end there.

While studies have shown the net energy yield of switchgrass ethanol is about six times better than corn ethanol, there is no consensus on how best to covert it into sugars for fuel. Nor are there commercial-scale refineries or a distribution network for the fuel once it's made.

Because switchgrass has a much lower energy potential than coal, Skousen says it won't be economically feasible to ship it far. That means refineries will have to be close to the fields.

"We're a little concerned," he says, "but that's a problem everywhere."

Still, he says, this is a possibility worth exploring.