By
John Lindt
Pixley - With all the state's biofuel plants sitting idle, a signal the recession may be ending for California's ethanol makers is rising from Pixley.
“We will be the first to re-open in the state,” likely by the end of July, says Walt Dwelle, partner in Calgren Renewable Fuels that owns an ethanol production plant in Tulare County. Because margins in the business have improved, “I would expect most of the plants would be producing again by the first of the year.”
The 50-million-gallon plant was shut down in January not just because it was losing money but because the year-old facility needed some fixes said Dwelle who heads Nella Oil, an independent oil company in the state.
After some arbitration, the contractor
agreed to build in more evaporation capacity and has been working to do
that for the past three months, says Dwelle. With this and additional
retrofits, the plant is expected to produce “up to spec,”
explained Dwelle, making two by-products that will be more valuable –
distillers grain fed to dairy cattle and now more corn oil pulled out
that can be sold for chicken feed.
After a six month layoff, staff at the Highway 99 plant will again be
back at 42.
The fixes will make the refinery more
efficient as well as “decrease its carbon footprint,” said
Dwelle – a measure that is becoming increasingly important.
Dwelle says with so many ethanol plants shut down nationwide, gasoline
suppliers which must meet a 10.1 billion renewable fuel mix with gasoline
this year are blending at a rate of just 9.5 billion and now have bid
up the market price of the corn-based motor fuel.
“We've seen about a 15 cent per gallon improvement in recent months,” says Dwelle, even as gas prices have spiked up and corn has gone down.
“That increases demand by oil
companies to blend ethanol because it's cheaper.”
Dwelle says the state's oil refiners must go to a 10 percent blend of
ethanol in our fuel in California by the end of this year – up from
5.7 percent now. “Chevron has started blending at 10 percent already
in some locations,” he said. That additional demand will increase
the need for ethanol in California by 600 million gallons, he notes.
Also boosting demand is the building of more E-85 stations with about 20 now clustered in the Sacramento area, including two owned by Nella Oil.
Indirect Land Use
The knock against ethanol has revolved around supposed negative effects of the fuel and how it is made. Critics have argued corn ethanol raised food prices even though studies have shown most commodity prices increases last year had more to do with speculation than production. Corn prices ballooned to $8 a bushel from $3. “Look at oil that went to $147 per barrel and down to $35 this year when the bubble burst,” said Dwelle. University studies have shown that corn ethanol has only a small affect on food prices.
Another knock against ethanol is the charge that producing the fuel in some parts of the world helps cut down the rainforests even though the fuel produces 40 percent fewer greenhouse gases than gasoline.
On this issue, the state ARB has put forward a plan to penalize corn ethanol by 30 percent because some corn grown on land in Brazil could lead to deforestation – reducing the scrubbing ability of trees to clean the air. Even though this is no longer happening in Brazil and none of California's ethanol comes from there, says Dwelle, the ARB's plan wipes out 30 percent of the credit, reducing the supposed greenhouse benefit for corn ethanol made in the state to just 10 percent for future blenders who must soon offer cleaner-burning motor fuels.
A signal that this “indirect land use” argument may not hold up nationwide comes in recent days in the House that just narrowly passed a new climate-based energy bill that postpones any penalties over corn ethanol's supposed land use affects for at least five years.
The bill requires the U.S. to get 6 percent of its electricity from renewable fuels by 2012 with 20 percent by 2020. U.S. greenhouse gas emissions would need to be cut 17 percent below 2005 levels by 2020 and down 80 percent by 2050. Cleaner producers can sell credits to polluters implementing market incentives to reduce climate change – so-called “cap and trade.” Supported by Obama, the legislation is now headed to the Senate where it will likely pass with modifications, say sources.
Cow Power
To make the Pixley plant even more efficient and reduce its carbon footprint another shoe size, Dwelle says the company plans to connect the Highway 99 plant by pipeline to nearby dairies to substitute cow biomethane instead of natural gas to fire the boilers. “We've signed up two large dairies but we need more” to make it happen.
Dairy industry rep Michael Marsh quipped at a biomethane conference the other day that the whole thing “smells like an opportunity.”
Dwelle says all of the Pixley fuel production goes to Kinergy Inc. that supplies refiners in the state. All the local ethanol will go to Valley blenders in Bakersfield and Fresno. “It doesn't make sense to haul it a long way.”
Kinergy is affiliated with Pacific Ethanol of Sacramento that has shuttered two plants of its own in the state and is going through a bankruptcy proceeding.
No word on how Pacific Ethanol will come out of bankruptcy, but Dwelle speculates that he would not be surprised if one of the oil companies like Valero ended up with the west coast plants including Madera and Stockton.
Another plant in Keyes owned by Cilion is shut down as well. In Goshen, the Altra Biofuels plant – the first in the state – is less likely to fire back up until margins improve more because it is considered less efficient than the larger, newer plants that were built from scratch.
Dwelle says motorists who have seen a price spike at the pump for gasoline in recent months may be in for some relief this summer with a drop in wholesale price levels in the past few days.
“Oil refiners are running at just 85 percent of capacity in the state,” he said, and consumers aren't buying gas at these high prices.
Dwelle notes another trend – diesel is now 13 cents cheaper than unleaded – the opposite it was in the past year when diesel prices were higher than gasoline.
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