NYT: A Fine for Not Using a Biofuel That Doesn’t Exist

[PeterMP]

you are overlooking this case does not focus on corn ethanol(nor sugar cane since we discourage that)

http://online.wsj.com/article/SB1000...158115782.html
One reason the mandates can't be met is the half-dozen or so companies that received the first round of subsidies to produce cellulosic fuel never got off the ground. Some 70 million gallons, or 70% of the cellulosic supply to meet the 2010 mandate, was supposed to come from Alabama-based Cello Energy. Incredibly, those projections were made before Cello had built its plant to produce the fuel and before the technology was proven to work.

In 2009 a jury in a civil fraud case ruled that Cello had lied about how much cellulosic fuel it could produce. Some of the fuel that Cello showed to investors was derived from petroleum, not plants. The firm produced little biofuel and in October 2010 it declared bankruptcy.

It gets worse. Because there was no cellulosic fuel available, oil companies have had to purchase "waiver credits"—for failing to comply with a mandate to buy a product that doesn't exist. In 2010 and this year, the EPA has forced oil companies to pay about $10 million for these credits. Since these costs are eventually passed on to consumers, the biofuels mandate is an invisible tax paid at the gas pump.

1. I've differentiated between cellulose ethanol and food stock ethanol and sugar based ethanol in every post that was relevant, including the above post and the posts with the studies I've posted based on cellulose ethanol.

2. Cello was in trouble before the mandate was in place. They were in trouble partly because there was no demand for their product (and because of bad managment, but pointing to them and claiming that it can't work is like pointing to AMC and claiming it isn't possible to make cars and a profit).

3. Your post has nothing to do with the ability of mandates to generate demand. Again, Brazil did it through mandates. At the same time, we couldn't have because we don't have the sugar ag to do it, but as the links I've included indicate, the technology has changed. The current studies indicate that we are AT LEAST at the break even point (again, see the links I posted).

4. Your post repeats the claim that the penalty will affect prices, which Predicto debunked in this thread a year ago and is based on economic ideas that were discarded over 100 years ago.

[twa]

1. I've differentiated between cellulose ethanol and food stock ethanol and sugar based ethanol in every post that was relevant, including the above post and the posts with the studies I've posted based on cellulose ethanol.
.

Brazil has significant cellulose ethanol production?

The Cello link matters because it illustrates the billions the govt has poured into cellulose facilities and continues to .,,,,including loan guarantees.,,,,,yet no real production

If there was a product it would be bought instead of companies paying fines and purchasing credits(and costs passed on to consumers)

your studies are worth about as much as Cellos promises

[PeterMP]

Brazil has significant cellulose ethanol production?

The Cello link matters because it illustrates the billions the govt has poured into cellulose facilities and continues to .,,,,including loan guarantees.,,,,,yet no real production

If there was a product it would be bought instead of companies paying fines and purchasing credits(and costs passed on to consumers)

your studies are worth about as much as Cellos promises

1. No, but they don't need to, but that doesn't mean today we aren't in the same place that Brazil was over a decade ago where they needed government mandates to move to extensive use of ethanol as automobile fuel. You said that government mandates can't drive demand. The fact of the matter is that they can.

2. There's no evidence it would be bought and that industry wouldn't just pay the fine, continue to legally evade the fine and/or push for low requirements keeping demand and therefore prices and production low.

3. Why? Because they don't agree with your pre-determined opinions and "facts"?

And just to be clear other cellulose ethanol production facilities are coming on-line.

http://www.bloomberg.com/news/2012-1...ants-open.html

We'll see what the oil industry does, pay the fine, try and evade the fine w/o buying (much (i.e. lobby for reduced requirements) ethanol, or buy the ethanol.

[twa]

1 I mentioned Brazil operates under different conditions, a major two being the sugar cane we discourage and of course the EPA (the plants there would never pass their standards).,you can throw in the different type govt for good measure

2 why would the industry not buy it? (lobbying against it is a very different matter,and well within their rights,as was suing for relief)

3 Because they have a history of exaggeration (much like the global warming crowd)

I'm well aware of the other plants, in fact I mentioned the loan guarantees they got since the Green weenies don't put their money up.

[PeterMP]

1 I mentioned Brazil operates under different conditions, a major two being the sugar cane we discourage and of course the EPA (the plants there would never pass their standards).,you can throw in the different type govt for good measure

2 why would the industry not buy it? (lobbying against it is a very different matter,and well within their rights,as was suing for relief)

3 Because they have a history of exaggeration (much like the global warming crowd)

I'm well aware of the other plants, in fact I mentioned the loan guarantees they got since the Green weenies don't put their money up.

1. To the over all point, it doesn't matter. Brazil completely shows that you can drive ethanol production increases and demand via government regulations and mandates, yes or no? Your statement that government mandates can't drive demand was before the mention of the Brazil in this thread. I brought up Brazil to show your statement was wrong.

Here are the key points:

A. At the time that Brazil introduced government mandates there was no large scale ethanol production for automobiles in the world, much less Brazil. Based on the ag industry they had in place, it was possible for ethanol to be cost competitive with oil, BUT ethanol wasn't substantially more advantagegous at only a cost level to cause the ethanol industry to grow and displace the oil industry. To help the ethanol industry, the Brazilian goverment put in mandates.

B. This all started over 30 years ago, and in that time research on ethanol production (including from cellulose) and refining have been on going. At this point in time, studies show we are in a similar place to where Brazil was, but we can use cellulose based ethanol. However, like in Brazil, there isn't enough of a difference for the market ONLY to drive the change. Government mandates will likely be needed.

If cellulose ethanol production is close to being competitve with oil (which the studies I posted show it is), is the market likely to drive a switch to ethanol based on free market principles?

Can US goverment drive a switch, like Brazil did, through the use of mandates?

Easy yes or no questions.

2. It isn't uncommon for companies to pay fines rather then comply with government regulations if they deciede they can make more money the other way. This happens in every big regulated industry that I know of, including the fossil fuel industry.

3. Do you really want to talk about the research and loan guarantees and other things the US government has done over the last 80 years to get the US oil industry where it is today. Even though US oil production doesn't actually seem to affect prices.

http://thinkprogress.org/climate/201...ubbornly-high/

"“There’s not a lot of companies that would stay with something this long. Most companies would have given up,” he said, crediting founder George Mitchell as a visionary who also got support from the government at key points.

“The government has to be involved, to some degree, with new technologies,” Steward said."

Oh, he's talking about things that have benefited the fossil fuel industry, not alternative energies.

And this has been happening for a VERY LONG TIME with respect to the fossil fuel industry.

OOPS! That might not have been a topic you wanted to bring up!

**EDIT**
And just to be clear, this doesn't have much to do with climate change. Other studies show that net climate change impact for things like cellulosic ethanol don't do much because of things like land use changes and energy needed to produce ethanol (which mostly comes from natural gas (and yes, if you are wondering from an economic and energetic stand point, it would also make more sense to simply convert cars to take natural gas, in addition, you can more easily get more enery out of cellulose material by burning it so doing that and converting it into electricity is more effecient. Of course, then you have other issues with the existing infrastructure and car manufactures.)).

From a general environmental, economic, and national security stand point, I think it makes sense to diversify our energy sources/needs. Just like it did for Brazil, who made the change for essentially no environmental reasons.

[twa]

You keep using a country with a NOC(nationalized oil co) and a very different govt as a example

I admit it would be easier if we could order everyone to do whatever we wanted....you might not like the orders though

the Cello example I mentioned was years ago(and they were not the only company subsidized) ,how long before significant production shows up?....the excuses only get you so far


add
Would you favor the Brazilian program of govt set prices with ethanol guaranteed at 65% of the cost of gas?

would that be possible here?

[PeterMP]

You keep using a country with a NOC(nationalized oil co) and a very different govt as a example

I admit it would be easier if we could order everyone to do whatever we wanted....you might not like the orders though

the Cello example I mentioned was years ago(and they were not the only company subsidized) ,how long before significant production shows up?....the excuses only get you so far


add
Would you favor the Brazilian program of govt set prices with ethanol guaranteed at 65% of the cost of gas?

would that be possible here?

I think it is completely compatible with our form of government. Both the oil and ethanol industry are clearly inter-state commerce and even international commerce and are both already heavily regulated as such through the inter-state commerce clause. Congress also clearly has the ability to tax and both industries already clearly have taxes specific to them in operation.

The only issues appears to be that Congress didn't give the EPA the authority to have a tax with respect to reaching this mandate and as the EPA is part of the executive branch this represents a tax w/o Congressional approval (because there is not enough cellulose ethanol there is no way for the oil industry to avoid it so it is a tax and not a fine or a penalty). It seems a simple a change in the law so that there is a tax associated with not using cellulose ethanol in the case that there is not enough cellulosic ethanol to cover the mandate would fix the problem.

I think that's completely reasonable based on our current government.

Obviously, the size of the mandate and the amount the tax is would be issues, but if cellulose ethanol is close to being cost competitive, I think that would be pretty managable unless the oil industry really decides to dig in their heels (which they might).

And no, I don't think it makes sense to have the guarantee that it is 65% the costs of gas.

Brazil is also trying to do other things in terms of the global price of sugar and ethanol and support their ag industry that we don't need to do. We need to give something that has a historical disadvantage that is near close to being equal a little push so that it gain a reasonable market share to help over come that historical disadvantage. If we do that, I suspect the free market might take over. We can certainly give the push, and then take stock of the situation before going forward.

I suspect it will start paying of in 2013 as the new cellulose ethanol plants discussed in the link I already provided come on line.

How many years did the government fund research on fracking and deep sea drilling and drilling in Arctic conditions before they started to pay off?

**EDIT
But it also has to be clear that we are serious about giving it a real push. This can't be something if after 2 years, it doesn't work, we throw up our hands and walk away because then the oil industry is going to call that bluff.

[twa]

I would think the mandated lower consumer price did as much for Brazils ethanol program as anything

I hope you are right about the new plants coming on-line being feasible, but I've heard that tune many times over the years

like Cello and this one
http://www.wired.com/wired/archive/14.10/ethanol.html
My Big Biofuels Bet
The road to energy independence starts in a cornfield in Nebraska. Venture capitalist Vinod Khosla explains why he’s betting on biofuels.

[PeterMP]

I would think the mandated lower consumer price did as much for Brazils ethanol program as anything

I hope you are right about the new plants coming on-line being feasible, but I've heard that tune many times over the years

like Cello and this one
http://www.wired.com/wired/archive/14.10/ethanol.html
My Big Biofuels Bet
The road to energy independence starts in a cornfield in Nebraska. Venture capitalist Vinod Khosla explains why he’s betting on biofuels.

I'm pretty sure that the policy was implemented w/o the 65% guarantee and that didn't come along until the 1980's when oil prices droppped. That also happened to coincide with increases in global demands of sugar that drove up ethanol pricess too (before the use of HFCS became wide spread).

And I'm pretty sure it hasn't been much of an issue for them since them, except for years when they have a bad crop.

In general, Brazil uses it as a method to even out the price of sugar and ethanol based on the crop. In good years, the shift more to cars and less to export so that the price doesn't drop too much.

**EDIT**
I suspect that long term electricity is going to win for the most part. Battery technology is going to get better. This year some of the patents on the NiMH battery that powered the GM electric car are going to expire and every year after that more patents are going to expire. Our ability to store it and transmit are only improving and everything (gas, oil, coal, solar, biomass, nuclear, geothermal, whatever) can be fed into it. It is already going to every house and business.

I'll honestly be surprised if in 25 years the intersections in towns where there is a "gas" station at every corner aren't gone. Heavy trucks and the like will still use something else, but for most passenger cars, I think that's where it ends up.

[HaveFaith]

I didn't say it was up to commercial production. However, the oil companies have had almost 5 years to move further down that road, and I suspect that they 1) have had difficulties getting there and 2) haven't felt the need to try very hard. Both of those things.

I don't get why all of the hate towards the oil company for having the best known product on the market. How many of you have been really mad at Dell for their inability to make a better refrigerator?

To those of us who say that "Big Oil" is not interested in alternative energy, a question.
Do you think that a company would be interested in being the world market leader in a new product that much of the world would greatly value and gladly pay for? Every CEO I know would run from that as fast as they could lest they be cast as part of the "evil rich"

[PeterMP]

I don't get why all of the hate towards the oil company for having the best known product on the market. How many of you have been really mad at Dell for their inability to make a better refrigerator?

To those of us who say that "Big Oil" is not interested in alternative energy, a question.
Do you think that a company would be interested in being the world market leader in a new product that much of the world would greatly value and gladly pay for? Every CEO I know would run from that as fast as they could lest they be cast as part of the "evil rich"

CEOs make bad decisions otherwise RCA would still be the leading company in delivering music and Kodak would still be the leading camera producer.

[twa]

I still want my flying car Peter
a lot of trucking and heavy equipment are going NG from what I gather

the price controls were put in when the national ethanol program was instituted from what I remember,along with requiring the NOC to buy it and subsidies/loans to farmers and suppliers

interesting they are drilling for oil though, gotta pay all them subsidies somehow