Big Oil Fights Big Ag

By John Addison (2/9/10)

Americans are Spending 20 percent of their income on transportation. In the average two-car household it is often higher. Big Oil and Big Ag are fighting for their share of that money
Petroleum use has started to drop in the United States as we have fewer cars and more fuel efficient cars. The U.S. Department of Energy continues to report drops in refinery utilization due to weak demand for gasoline and diesel.

Ethanol and biodiesel further cut into oil profits. Big Oil is maneuvering to slow Big Ag from selling more biofuels. Big Oil giants include Exxon (XOM), Chevron (CVX), and Shell (RDS.A). Big Ag giants include ADM, Bunge (BG), and Cargill.

Industry leaders are trying to sound high-minded, not crude. No food fights. No fighting in the war room.

The latest EPA Renewable Fuels Standard will cause over 8 percent of our car and truck fuel to come from food crops in 2010. That lowers Big Oil’s sale of gasoline and diesel by 8 percent. That’s real money. Billions. The EPA does not require that the biofuel come from food, that’s just our only volume choice in 2010. Cellulosic and waste production is still at the expensive pilot stage. EPA talked tough in developing the new RFS, but in the end, gave the industry ways to qualify by making corn ethanol.

We need fuel from wood and waste, not food and haste. Big Oil may actually win the fight to stop using food crops with low-yields per acre, and help the transition to high-yield low carbon emission sources. The industry has invested over a billion dollars in advanced biofuels, algal fuel, and biotech ventures.

Exxon Mobil’s CEO Rex Tillerson famously referred to ethanol as “moonshine.” Now Exxon is investing $300 million in Craig Ventor’s Synthetic Genomics with plans to produce fuel from algae. BP Biofuels was voted 2009 Biofuels Corporation of the Year by the World Refining Association at its 4th annual Biofuels Conference. BP has poured hundreds of millions into basic biofuel research and into a variety of partnerships including biobutanol with DuPont and Virgin Fuels, and energy cane in the U.S. with Verenium. Shell has established a $12 billion sugarcane ethanol joint venture with Brazil’s Cosan (CZZ).

In the future, if biotech can deliver low-cost liquid hydrocarbons from biomass that can be profitably blended at the refinery, then Big Oil may partner with industrial agriculture. Valero (VLO), the largest refiner in the U.S. bought a number of ethanol plants at deep discounts from bankrupt VeraSun.

For now, both the petroleum producers and industrial agriculture want to control EPA regulation, federal tax breaks, and billions of federal funds. They also want greenhouse gas emissions measured their way. If growing more corn for ethanol and soy for biodiesel leads to rainforests being destroyed, then Big Oil favors that being included in biofuel emission lifecycle analysis. Big Ag is against such land-use analysisArgonne Lifecycle Presentation California Lifecycle with Land-use Studies
Renewable Fuels Standard.

EPA has finalized a rule implementing the long-term renewable fuels mandate of 36 billion gallons by 2022 established by Congress. The Renewable Fuels Standard requires biofuels production to grow from last year’s 11.1 billion gallons to 36 billion gallons in 2022, with 21 billion gallons to come from advanced biofuels. Increasing renewable fuels will reduce dependence on oil by more than 328 million barrels a year and reduce greenhouse gas emissions more than 138 million metric tons a year when fully phased in by 2022. For the first time, some renewable fuels must achieve greenhouse gas emission reductions – compared to the gasoline and diesel fuels they displace – in order to be counted towards compliance with volume standards.

Biomass Crop Assistance Program. USDA has proposed a rule for Biomass Crop Assistance Program (BCAP) to convert biomass to bioenergy and bio-based products. USDA provides grants and loans and other financial support to help biofuels and renewable energy commercialization. BCAP has already begun to provide matching payments to folks delivering biomass for the collection, harvest, storage, and transportation of biomass to eligible biomass conversion facilities.

Biofuels Working Group. In May, President Obama established the Biofuels Interagency Working Group – co-chaired by USDA, DOE, and EPA, and with input from many others – to develop a comprehensive approach to accelerating the investment in and production of American biofuels and reducing our dependence on fossil fuels. Today the Working Group released its first report: Growing America’s Fuel – a new U.S. Government strategy for meeting or beating the country’s biofuel targets. The report is focused on short term support for the existing biofuels industry, as well as accelerating the commercial establishment of advanced biofuels and a viable long-term market by transforming how the U.S. Government does business across Departments and using strategic public-private partnerships.

Frank Maisano, an energy specialist based in Washington D.C. at Bracewell & Giuliani, a law firm that represents refiners and cellulosic ethanol makers, gives this perspective: “The long-suffering lifecycle Greenhouse gas rule was released last week with great fanfare, including a call with Energy Secretary Chu, EPA Administrator Jackson, Interior Secretary Salazar and USDA Secretary Vilsack. It followed a meeting with the White House and highlighted several biofuels task force recommendations. Beyond confusing most reporters about EPA’s authority to go beyond the 2007 Energy law requirements for ethanol, the two takeaways seem to be EPA was giving in some (at least enough to placate Vilsack) on indirect land-use regulation of biofuels, and that the US is WAY behind its biofuels requirements in the same 2007 Energy law. Certainly, the coalition of enviro advocates, food groups, small engine groups and refiners were annoyed with the first point while ethanol supporters reluctantly said they could live with the EPA position. Ethanol emissions expert Tim Searchinger of Princeton may have said it best: “the numbers are inconsistent with the great bulk of analyses by others, which consistently find that emissions from indirect land use change for crops grown on productive land cancel out the bulk or all of the greenhouse gas reductions.” EPA’s Jackson said they weren’t messing with the equation to get to a specific result.”

Frank Maisano also summarized the following: “House Legislation to Limit EPA Authority, GHG Lifecycle Analysis –Last week, House Ag Chair Colin Peterson introduced legislation to prevent EPA from regulating GHGs, but added a twist: a provision blocking its land-use biofuels rule as well. This makes for an interesting dilemma should the two remain together, especially for members such as oil-patch Democrats that may want to block EPA authority on GHG regulation, but toughen land-use provisions to ethanol’s measuring stick. We shall see how this plays out. On the Senate side, Sen. Murkowski said she is likely to petition the Senate Environment and Public Works Committee by the end of February to force the release of her proposal to block the EPA from regulating greenhouse gas emissions. Murkowski now has 41 votes, including her own, supporting the resolution (S.J. Res. 26).”

Regulation that helps Big Oil and Big Ag is billions of tax breaks for exploration and for not growing crops. EPActs encourage government buying of flex fuel vehicles. No automaker, including the primary beneficiaries of the regulation GM and Ford, offer a flex fuel vehicle in the U.S. that can deliver 20 mpg (EPA combined) running on E85. No U.S. sold flex fuel vehicle does much better on gasoline. As the 4 million vehicles in federal, state, and local government fleets continue to add flex fuel vehicles, more gasoline and more ethanol must be purchased to deal with the poor mileage. In the end, it’s more taxpayer dollars going to Big Oil and Big Ag.

By John Addison. John Addison publishes the Clean Fleet Report and speaks at conferences. He is the author of the new book – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

7 replies
  1. Anonymous
    Anonymous says:

    The issue, for advanced biofuel, is whether the proper development of an advanced biofuel industry in the United States is even feasible when: (a) independent ethanol producers in the U.S. are at the mercy of volatile commodities markets for feedstock; and (b) the price of ethanol is controlled by the oil companies. Read “Independent U.S. Ethanol Producers Will Not Survive as Price Takers” on the following page :

  2. Anonymous
    Anonymous says:

    The US Government has spent over $2.5 billion dollars on algae research in the last 35 years and all we have to show for it are shelves full of useless patents. Algae have been researched at universities and in laboratories in the US for over 50 years, financed in significant part by government funds. One of the largest problems is that the research has been done in laboratories and at universities, using federal funds, and there is fear at that level that commercialization will ‘ruin it for them’. What it will ruin is the steady stream of ‘free’ money flowing from the DOE, NREL, the DOD, DARPA and other Washington-based agencies to University Row. It was most disconcerting to hear from more than one agency that the funds it awards are, by Congressional mandate, restricted to research. If we could invest one years’ worth of awards into commercialization instead of research, we could easily move this industry into commercialization. The research would be needed to improve technologies, but Microsoft and the American Petroleum Industry, among others, can confirm that this is a necessary component of any industry growth. According to my sources. another large problem is, in order to be a grant award recipient, the algae technologies must be investigated and approved by NREL, and that NREL is not particularly supportive of the private initiative. NREL is the same government agency that ran out of money and stopped the otherwise successful Aquatic Species Program after 18 years of federal funding. After the Consortium grant announcement, sources at various government agencies, including NREL itself, shared the fact that grants would only be awarded to proposed groups that included government agencies in their consortia. The truth of that statement lies in the fact that one of the groups that recently received an award is led by NREL and the other by the David Danforth Plant Science Center, and includes two national laboratories (one of which is also a participant in the NREL award) and 11 universities. According to its website, “Scientists at the Danforth Center receive more than half of their funding from federal agencies via competitive grant programs, with the rest of the funding coming from private companies and foundations. In addition to the USDA and the NSF, other federal granting agencies that fund research at the Center include the National Institutes of Health, the U.S. Agency for International Development, the U.S. Department of Energy, and the Environmental Protection Agency…”. In the last 2 years, it has received grants from the Department of Transportation and the National Sciences Foundation relating to biofuels, in addition to housing one of the DOE’s Energy Frontier Research Centers. Federal agencies are incapable of commercializing anything. The only ones that are even remotely designed to earn money are those that regulate the financial institutions, and we all know that the American banking system has failed us miserably. Until someone in Washington who has power and authority to stop this steady stream of funding to nowhere, listening as the algae researchers continue to claim that they are 3-5 years away from completing their research, it’s too expensive and they need more time and money, they will receive grant money from the DOE, NREL, DOD and DARPA. Nothing will ever get commercialized at the university level. Until there is an industry, there is no value to the results of the research. Until development of this industry is taken out of the hands of the research community, and put into the hands of the business, not corporate, community, this industry will never support reducing our dependence on foreign oil.

  3. Aureon Kwolek
    Aureon Kwolek says:

    EPA Analysis Way Off on Petroleum Fuel vs Biofuel“I don’t believe anyone, including the EPA, has a handle on how to measure ILUC at this time.” (Mike Green) Good Comment – So if EPA doesn’t have a handle on the unproven theory, then why are they using it in their final rules? EPA rules should only be based on hard facts, not flimsy assumptions that can’t be scientifically proven.EPA’s faulty international indirect land use change analysis is the crux of the issue. American Corn and soybean acreage is not displacing any other lands, here or anywhere else. Both of these crops fluctuate from year to year, in a balance of supply and demand. But for decades, the number of acres planted in the U.S. is roughly the same. There is No need to significantly increase corn or soy acreage. That would flood the market. We already have a surplus of corn and soybeans, and the yield per acre keeps going up. DuPont is projecting that corn yield will double by 2030, from the same number of acres. Nevertheless, the EPA is hell-bent on falsely penalizing American corn and soy crops – for expansion that will never happen and never cause deforestation in Brazil or anywhere else. To force this conjecture, the EPA applies the controversial land use change theory, that hundreds of scientists have discredited. In their preliminary rules, the EPA first claimed that American corn ethanol and Brazilian sugarcane ethanol Both had the same indirect land use change impact. Administrator, Lisa Jackson stated that there were “significant uncertainties” in the unproven theory. And then, several months later, she still included the unproven theory in her final rules. We discovered that the EPA had cut land use change for corn ethanol by 50%, and they cut land use change for Brazilian ethanol by a whopping 93%. So why were EPA numbers so far off in the first place?That ought to tell you something. They are uncertain about it – wildly uncertain. Because international indirect land use change can’t be scientifically proven. The EPA is simply throwing numbers around for land use change, in order to manipulate a false comparison between petroleum based fuel and biofuel, and another false comparison between American ethanol and Brazilian ethanol. And EPA still has it wrong. A new German study of potential land-use change, analyzing biofuel feedstock expansion in Brazil, claims just the OPPOSITE of what the EPA claims. The study, conducted at the University of Kassel, by David M. Lapola, is being published in “Proceedings of the National Academy of Sciences”. According to Lapola’s academic team, Brazil has set goals of their own for expanding cane-based ethanol and soy biodiesel production by 2020. And this is the driving force influencing deforestation in Brazil, not American biofuels. The study concluded that ALL Brazilian deforestation was caused by Brazilian industries, especially cattle ranching. Deforestation in Brazil caused by American crops – ZERO. Projected deforestation caused by Brazilian biofuel expansion in Brazil: Brazilian “Sugarcane ethanol and soybean biodiesel would be responsible for 41% and 59% of this indirect deforestation, respectively.” This is the reverse of what the EPA falsely claims in their final rules. Ignore EPA’s bogus indirect land use change penalties on corn ethanol, and its carbon footprint is 61% better than gasoline.

  4. Aureon Kwolek
    Aureon Kwolek says:

    This does not take into consideration that Gasoline emits Sulfurous Black Carbon Soot and is laced with a multitude of carcinogens, neurotoxins, and chemical additives – that ethanol does Not have. Here’s what gasoline contains:Aromatics – Benzene – which can actually kill you, and cause leukemia, especially in children. This includes toluene, ethyl benzene, meta-xylene, para-xylene, ortho-xylene ethyltoluene, trimethylbenzene. (2) Toxic olefins. (3) Dibromoethane (EDB). (4) N-Nitrosodiethylamine. (5) Ethylene dibromide. (6) Ethylene dichloride. (7) Toxic n-paraffins. (8) Toxic iso-paraffins: methylbutanes, methylpentanes, methylhexanes, dimethylpentanes, trimethylbutanes, trimethylpentanes. (9) Cycloparaffins: cyclopentane, methylcyclopentane, cyclohexane, methylcyclohexane. (10) Toxic metal deactivators, deposit modifiers, gum inhibitors, freezing point depressants, corrosion inhibitors, and dyes…and the list goes on.So EPA’s overall comparison between gasoline and ethanol, and between diesel and biodiesel, being based exclusively on carbon dioxide, is only a skeleton of what it should be. In their false comparison of petroleum based fuels vs biofuels, the EPA omitted perhaps the most important pollutant of all effecting climate change – Sulfurous Black Carbon Soot. New studies show that Black Carbon Soot may play a much bigger role in climate change than previously thought, perhaps even bigger than CO2. Biofuels are far cleaner in this respect. Ethanol’s faster flame speed and 30% higher octane speeds-up combustion and eliminates most of the unburned residues of these gasoline pollutants. Otherwise, you would be breathing them. That should be a credit factored into the ethanol footprint.The EPA is also distorting the carbon score of petroleum based fuels, by using an old, outdated baseline for crude oil extraction – based on the typical American oil well. EPA’s crude oil baseline does Not factor-in the more recent American consumption of “energy and pollution intensive” Canadian Tar Sands, which are also responsible for millions of acres of deforestation. Instead, EPA falsely blames biofuels for deforestation that was, in the real world, caused by something else. The EPA also does Not accurately account for foreign oil shipped thousands of miles burning dirty bunker fuel, and for energy intensive deep offshore oil wells. The EPA also fails to factor-in the environmental damage and the amount of petroleum based fuels we burn, in order to protect our foreign oil supply. According to a 2009 Rand Report, 15% of the entire U.S. defense budget, $50 to $100 billion a year, is spent to protect foreign oil fields, pipelines, oil facilities, and shipping lanes, etc. That represents a Huge amount of pollution emitted by dirty diesel fuel, jet fuel, and bunker fuel consumed by the military. This is part of the American crude oil supply chain. The EPA omits this to make petroleum based fuels, derived from foreign oil, look better than they actually are. In contrast, domestic biofuels are more localized, and they don’t need to be guarded with international military protection. For the comparative analysis of petroleum fuels vs biofuels, the craftsmanship that American Taxpayers are getting from the EPA is substandard – Not a fair and accurate comparison. EPA numbers on international indirect land use change for American corn ethanol and soy biodiesel – are fabricated. And the political agenda of the EPA, with its obsession with CO2, is one of omission and diversion – Not transparency.

  5. Aaron
    Aaron says:

    The EPA's new regulations are a step in the right direction, but the problem is that there are thousands of miles to go. Corn ethanol is not a solution and anyone should be able to see that from looking at the EPA's own calculations about Ethanol's green house gas reductions. After all, it takes 33 years just to break even on emissions when you take the entire life cycle into account. Here is a good article that talks about it from The Greener Trut h

  6. Betsy Ross
    Betsy Ross says:

    I want to share a video with you.
    As I watched it, one question ran through my head: Why do we continue to allow huge business to ruin our food production areas & our lives?
    If you think that the Gulf oil leak was bad, keep in mind that there is SO much that we don't find out about because it's kept OFF camera. Huge business keeps cameras out.
    Well, one little lady got in.
    Good for her!
    Watch the video near the bottom of this page in the Comments section—–>


  7. andymay82
    andymay82 says:

    I will agree to Aaron's comment. While EPA is walking in the right direction, it may need to do more to make any substantial improvement in alternate fuel market. Commercial feasibility of using ethanol as a mass fuel is another subject of concern.
    Andy May
    Fuel Cards Specialist

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