Wesley Clark publishes book, ‘Don’t Wait for the Next War’

In Arkansas, Digest contributing editor Wesley Clark published his new book, “Don’t Wait for the Next War”. Clark comments: “I’ve been working it for five years, or, maybe, my whole life. Its an effort to frame the challenges we face, and offer a way forward, at least, to give us a chance.  Our great nation, mankind’s best hope for human dignity and freedom, is adrift without a compelling strategy or narrative. In Asia, Europe and the Mideast today our vision for the world is challenged. And there are long term, corrosive threats like cyber security, financial system stability, and climate change. We cannot just react to every crisis. We must have a strategy. That’s why I wrote the book.

Clark adds: “It’s time for our nation to come together again. None of us likes the awful divisive politics, the vacuous news cycles, or the sense that the country is somehow losing its global leadership. I wrote the book to try to help us see the big picture, and pull together for our common good. And for what we represent for mankind.”

More on the story.

NDAA passes out of committee, bad news for biofuels?

In Washington, the House Armed Services Committee voted on the National Defense Authorization Act of 2015 (NDAA) and passed it out of committee, pending consideration by the full House of Representatives and the Senate. There are two provisions in the legislation related to biofuels: The Defense Department would be exempt from energy efficiency measures and metering efforts identified in the Energy Independence and Security Act of 2007. Currently DoD must reduce energy use in its domestic facilities and encourage energy efficiency efforts. Also, the DoD cannot build a biofuel facility without Congressional approval. Some lawmakers are concerned DoD plans to purchase or refurbish a biofuel facility.

More on the story.

Benjamins for Biofuels in the 2015 Obama Budget: The Digest’s 7-Minute Guide

benjaminsbioenergy1-125x125Vitally interested in President Obama’s proposed 2015 budget and the 411 on grants, incentives, tax credits, loan guarantees and R&D support — but haven’t got the time to read all 1653 glorious pages?

Try the Digest’s 7-Minute Guide.

In Washington, President Obama outlined his $3.9 trillion budget proposal for 2015, with a focus on tax structure, as the nation lurches towards end-of-year Congressional elections.

Though numerous agencies and departments have a role in developing the bioeconomy, the opportunities lie primarily in the Agriculture, Energy and Defense budgets — with the triad of USDA, DOE and the Navy taking the lead on development and deployment of biofuels, and with USDA and DOE supporting development of other biobased products (such as chemicals) that reduce foreign oil dependence. The Administration also pursues development of the sector through tax policy — notably, investment and production tax credits.

There are a lot of programs. We’ve summarized the major activities and opportunities in this 7 Minute Guide — and we’ve added some industry reaction so that you can see how leadership sees the wins and losses adding up.

Agriculture

The Bottom Line: USDA takes the lead on deployment and commecialization, and as Agriculture Secretary Tom Vilsack said at the 2014 Commodity Classic: “”Bottom line is we’re going to continue to help this industry as best we can, advocate for it, and trust that EPA at the end of the day makes the right set of decisions.”

Biomass Crop Assistance Program (BCAP)

BCAP provides incentives to farmers, ranchers and forest landowners to establish, cultivate and harvest eligible biomass for heat, power, biobased products, research and advanced biofuels. Crop producers and bioenergy facilities can team together to submit proposals to USDA for selection as a BCAP project area. BCAP has been extended through 2018 and is funded at $25 million per fiscal year.

Feedstock Flexibility Program (FFP)

FFP is continued through fiscal year 2018. Congress authorized the FFP in the 2008 Farm Bill, allowing for the purchase of sugar to be sold for the production of bioenergy in order to avoid forfeitures of sugar loan collateral under the Sugar Program.

Rural Energy for America Program (REAP)

This program provides loan guarantees and grants to farmers, ranchers, and small rural businesses to purchase renewable energy systems and make energy efficiency improvements. The budget requests discretionary funding of $5 million for grants and $5 million for loan guarantees to support $47.3 million in guaranteed private lending.

Biomass Research and Development

The program provides competitive grants for research, development, and demonstration to encourage innovation and development related to biomass, and improved commercialization of biobased products and energy. USDA and the Department of Energy jointly administer the program. In 2015, mandatory funding for the program is $3 million.

Biobased Markets Program

Authorized in Section 9001 of the Farm Bill, this program promotes the BioPreferred label for government and consumer adoption of biobased products, and has a $3 million proposed budget in FY 2015.

The Commodity Credit Corporation: Bio-Based Fuel Production

Section 5(e) of the CCC Charter Act authorizes CCC to take action to increase the consumption of agricultural commodities by “…aiding in the development of new and additional markets, marketing facilities, and uses for such commodities.” Under this authority, CCC will make available up to $170 million to subsidize the production of bio-based jet fuel. Because there is no existing viable commercial source for the large-scale production of such fuel, CCC has entered into an agreement with the Department of Energy and the Navy to assist in the development of this product. The Defense Logistics Agency will award the contract at the end of FY 2014 or beginning of FY 2015. CCC expects to outlay $60 million for this purpose in 2015.

Agricultural Research Service (ARS)

ARS has active research programs directed toward 1) improving the efficiency and reducing the cost for the conversion of agricultural products into biobased products and biofuels; 2) developing new and improved products for domestic and foreign markets; and 3)providing higher quality, healthy foods that satisfy consumer needs in the United States and abroad.

Noninsured Crop Disaster Assistance Program (NAP)

NAP has been expanded to include buy-up protection, similar to buyup provisions offered under the federal crop insurance program. Producers may elect coverage for each individual crop between 50 and 65 percent, in 5 percent increments, at 100 percent of the average market price. Producers also pay a fixed premium equal to 5.25 percent of the liability. NAP coverage is expanded to include crops grown expressly for the purpose of producing a feedstock for renewable biofuel, renewable electricity, or biobased products.

Department of Energy

The Budget provides $2.3 billion for the Office of Energy Efficiency and Renewable Energy (EERE) to accelerate research and development (R&D), build on ongoing successes, increase the use of critical clean energy technologies, and reduce costs further. Within EERE, the Budget increases funding by 15 percent above 2014 enacted levels for sustainable vehicle and fuel technologies, by 39 percent for energy efficiency and advanced manufacturing activities, and by 16 percent for innovative renewable power projects such as those in the SunShot Initiative to make solar power directly price-competitive with other forms of electricity by 2020. The Budget provides funding within EERE to help State and local decision-makers develop policies and regulations that encourage greater deployment of renewable energy, energy efficiency technologies, and alternative fuel vehicles.

Bioenergy Technologies Office

The Budget proposes $253 million at DOE to develop and demonstrate conversion technologies to produce advanced biofuels, such as “drop-in” replacements for gasoline, diesel, and jet fuel. In addition, the Budget invests $2 billion over the next 10 years from Federal oil and gas development revenue in a new Energy Security Trust that would provide a reliable stream of mandatory funding for R&D on cost-effective transportation alternatives utilizing cleaner fuels such as electricity, homegrown biofuels, renewable hydrogen, and domestically produced natural gas that reduce U.S. dependence on oil.

This program funds RD&D projects to advance biofuels technologies and to validate and assist in the commercialization of integrated biorefinery technologies that will help transform the nation’s transportation sector. The program’s activities include the development of biomass conversion technologies to produce a variety of biofuels, bioproducts, and biopower. The program also works to evaluate environmentally sustainable feedstocks and to develop economically viable feedstock logistics systems to sustainably supply the biofuels industry. With the completion of the program’s technology development for cost-competitive cellulosic ethanol, the program is now partnering with the private sector to demonstrate economic viability at larger scales. It is also developing follow-on technology for more infrastructure- compatible biofuels, such as bio-based gasoline, diesel and jet fuel. This work is coordinated closely with the Departments of Agriculture and Defense.

Advanced Research Project Agency – Energy

For necessary expenses in carrying out the activities authorized by section 5012 of the America COMPETES Act (Public Law 110–69), as amended, $325,000,000, to remain available until expended: Provided, That $29,250,000 shall be available until September 30, 2016, for program direction.

Title 17 Innovative Technology Loan Guarantee Program

The Loan Programs Office (LPO) will consider and coordinate Departmental action on all loan guarantee applications submitted to the DOE under Title 17 of the 2005 Energy Policy Act.

Section 1703 of that Act authorizes the Department to provide loan guarantees for projects in categories including renewable energy systems, advanced nuclear facilities, coal gasification, carbon sequestration, energy efficiency, and various other types of projects. These projects must avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; employ new or significantly improved technologies compared to commercial technologies in service in the United States at the time the guarantee is issued; and offer a reasonable prospect of repayment of the principal and interest on the guaranteed obligation. DOE has been implementing Section 1703 of this program under authorizing law that allows borrowers to pay the credit subsidy costs of these loan guarantees (“self-pay” authority).

For necessary administrative expenses to carry out this Loan Guarantee program, $42,000,000 is appropriated, to remain available until September 30, 2016: $35,000,000 of the fees collected pursuant to section 1702(h) of the Energy Policy Act of 2005 shall be credited as offsetting collections to this account to cover administrative expenses and shall remain available until expended, so as to result in a final fiscal year 2015 appropriation from the general fund estimated at not more than $7,000,000.

Defense

The Defense Production Act Title III office has requested $22 million in authority for FY 2015. The mission of the Defense Production Act (DPA) Title III Program is to “create assured, affordable, and commercially viable production capabilities and capacities for items essential for national defense.” On June 27, 2012, the Defense Production Act Title III Program published a Funding Opportunity Announcement for an “Advanced Drop-in Biofuels Production Project.” The Announcement requests proposals from domestic sources to execute the project, focused on the creation of an economically viable production capacity for advanced drop-in biofuels.

Tax action: cellulosic ethanol, biodiesel

Brooke Coleman, Executive Director of the Advanced Ethanol Council (AEC), highlighted a proposed multiyear extension of the tax credit for cellulosic biofuels, that he said “would help put the United States at the forefront of the global race to commercialize cellulosic biofuels. The expiration of this credit in 2013 came right at the time when the cellulosic biofuel industry was breaking through at commercial scale. Reinstating the provision will ensure that the next wave of commercial cellulosic biofuel plants will be built by Americans on American soil.

Coleman added: “We also strongly support the President’s proposal to tackle the issue of oil subsidies, which for decades have been driving investment away from the renewable fuel sector. Doing away with decades-old subsidies to oil and gas will not hurt those industries given their maturity and wealth, but will send a clear signal to the marketplace to invest in innovative, low-carbon alternatives to petroleum. It is this type of budget package that will create new jobs in new industries in the coming decade, and put the United States in the best position to succeed when it comes to developing next generation fuels.”

On the oil & gas subsidies, Caren Benjamin, Executive Director, Americans United for Change said, “We are elated that the President has renewed his commitment to doing away with billions of dollars in pointless subsidies for big oil that shortchange investment in cleaner burning, cheaper renewable fuels of the future.  100 years of Big Oil tax breaks is more than enough – especially for an industry that made $100 billion in profits last year and pays very little taxes in return.  To be consistent with the President’s budget, the EPA should also reconsider its plan to give a back door subsidy to Big Oil by gutting the Renewable Fuel Standard.  It’s a proposal that runs totally counter to the President’s strategy to address climate change by supporting clean energy — because a weak RFS means less incentive for innovation in cleaner burning, next generation renewable fuels and guarantees a greater use of dirty fossil fuels.”

At the same time, Iowa Renewable Fuels Association Policy Director Grant Menke cautiioned, “While we are pleased the President seeks to reinstate the cellulosic biofuel tax credit and several other important tax incentives, we are disappointed he did not include the biodiesel tax credit among these extensions.  As America’s leading advanced biofuel, biodiesel has made great strides in production, distribution, and use.  However, faced with the enduring effects of the petroleum industry’s continuous Century of Subsidies, reinstating the biodiesel tax incentive is a vital part of leveling the energy playing field and allowing true consumer fuel choice.”

Hey kids! Read all 1635 pages of the Budget! It’s fun!

The detailed budget is here.

US House amendment would block DOD from non-petroleum fuel purchases

In Washington, while the House’s energy committee was hearing testimony regarding the Renewable Fuels Standard, an amendment to the defense spending bill was approved by voice vote that would block the DOD from purchasing most biofuels, going so far as to include any “non-petroleum” fuel. Politico says it doesn’t expect the measure to pass the Senate or conference committee. An amendment was also approved prohibiting federal agencies from purchasing fuels with higher GHG emissions than fossil fuels.

Fulcrum BioEnergy: The Digest Interview

Fulcrum-plantA signature developer of fuels from municipal solid waste lands a high-profile grant from DoD for a drop-in military biofuels project.

The technology, the economics, the progress – CEO Jim Macias and VP Ted Kniesche update the Digest.

For much of the past two years, the intriguing projects of Fulcrum BioEnergy have been advancing to a great extent in stealth mode — partly owing to SEC regulations on communications during the period when Fulcrum was exploring an IPO – partly to keep public attention focused on its signature municipal solid waste (MSW) to-ethanol first commercial project near Reno, Nevada.

So it caught both industry and the public by surprise when Fulcrum was announced as one of the three recipients of an Air Force grant, under the Defense Production Act, aimed at developing plans for a drop-in military biofuels plant, capable of making both marine diesel and jet fuel, which would supply sub-$4 biofuels to the DoD.

We spoke about the new project this week — and on Fulcrum’s overall progress — with CEO Jim Macias and VP Ted Kniesche.

BD: How did the aviation project originate?

Fulcrum CEO Jim Macias

Fulcrum CEO Jim Macias

JM: Over the past past year, we’ve making advancements on integration of plant design. We’ve been focused on the demonstration of the integration of our technology taking us all the way from MSW to fuels, at our demo plant in Durham. But we have other technologies, and see other opportunities. And there is a lot of market pull from customers looking for drop-in fuels. Jet fuel is in big demand, with airlines eagerly pushing for it. So, we added on a Fischer-Tropsch design as a complement, yet quite different, to our alcohol to ethanol capability.

 

The technology of sub-$4 jet fuel

BD: Tell us what you can about the technology solution.

JM: We have a tubular reactor design. Probably not the most long term cost effective, but reliable and predictable, and that’s important now. So we have our MSW system, and our gasification technology and scrubbing systems, and then the FT process to produce jet fuel and diesel from the gas stream.

BD: That’s a remarkable size for F-T technology. Usually, those systems are built at massive scale to get the economies of scale needed. How is this different?

JM: But, let’s start with the cost issue. Our feedstock cost gives us the flexibility, and the operating cost margins. It’s a game changer. You’re right, the FT technology that’s out there is large-scale, and there have been efforts to scale it down. We took a fresh approach, rather than trying to scale down an existing system. For example, the tubular reactors rather than the slurry bed reactor. The other technology is tougher to scale up or down. We built full scale reactor tubes with all the heat and chemistry components, and then found some designs and technology for the fuel upgrading, to crack the FT liquids and turn it to distillate.

Fulcrum-process

BD: Oxygen and hydrogen needs?

JM: We need oxygen for the gasification, but we have all the hydrogen we need for the fuel conversion with our existing technology and the gas stream. That’s made it easier to go multiple fuels, either ethanol alcohols or distillates, because we can precisely control the hydrogen ratio.

The Economics of sub-$4 jet fuel

BD: So you have multiple fuel capabilities. How does it compare on cost to your ethanol process?

JM: The economics are very similar, in fact a little better. The front end of the plant – the MSW sorting,
gasification, and gas scrubbing are all the same. It’s different on on the FT process – little less costly, because the ethanol process requires higher pressures. We’ll produce at well less than a dollar a gallon for jet fuel, given our feedstock cost.

Fulcrum-advantage

BD: That’s on the operating cost (opex) side. What about capex? You were at around $173 million for the first 10 million gallon ethanol project at Reno.

JM: It’s about the same. Less than 200 million for the 10 million gallon plant, and a little over 300 million for a 30 million gallon plant.

BD: Will you be able to produce any fuel at any plant, or will you put in specific technologies at a given project?

JM: For each plant you have to decide which of the different paths you’ll take, and go alcohol or distillate, because the economics aren’t there to do noth at a single small refinery. But you can have diesel or jet produced via the distillate route.

The risks of a downselecting process

BD: Ted, you’ve been on point through this DoD selection and bidding process. How did you look at the risk of getting into a project where there’s a downselect before commercial scale grants would be given, and there’s a risk there. And, we understand, the DoD would have the option not to pursue with any of the phase one recipients, but go another direction entirely in phase two.

Fulcrum VP Ted Kniesche

Fulcrum VP Ted Kniesche

TK: Our understanding is that you have to be involve in some way in the phase one process, you need to be in the program in some way to advance through to phase two. We think as well that it helps to go through phase one, to get the credibility that comes from being closely evaluated. As far as phase 2, it’s a competitive downselect process, but we are confident that we will be far enough along that we’ll be highly competitive. This is a grant to do the engineering and finalize the design. We’re happy to get the matching funds for the plant and for the acceleration it provides to our program.

Future sites

BD: Jim, the public focus has been on your Sierra project near Reno, but in this DoD award there was a specific reference to Fulcrum Brighton Biofuels, which is a Colorado project. Tell us about your project roadmap.

JM: In the DOD grant weren’t required to identify a site. That’s appropriate, because you want to be able to decide the site in the plan, based on engineering. As far as our overall program, the first is the Sierra project near Reno. The second is Brighton, just northwest of Denver. The third is Toronto, then Seattle, and then San Francisco. All of these are planned to be near the metro areas.

Fulcrum-feedstock

The jet market

BD: Looking at the broader demand for aviation fuels and your interest in producing jet fuel, how do you see the market right now?

JM: Jet fuel opens up a whole new market for us. There is a tremendous appetite for competitive biojet. It’s a big uncontrollable cost for them.

BD: Are these strictly customer relationships and offtake agreements, or strategic relationships?

JM: In offering a low cost options to an airline, we have talked to customers that they may also be interested in helping us accelerate our program as strategic investors, to get access to low cost and low carbon fuel sooner.

BD: Is the interest more from domestic airlines, or international carriers who may have more exposure to carbon regulations, for example the European Emissions Trading Scheme.

JM: It’s both, but it’s fair to say it’s more international interest than domestic.

Fulcrum’s path to commercialization: IPO’s , financing and more

BD: When last we spoke, the company was aiming to close up financing for the first commercial plant in the first half.

JM: We’re in the document closing phase. With the situation in the capital markets the past few years, there’s more more diligence than ever, and it takes longer to do everything, But we’ll have it completed in the third quarter.

Fulcrum-progress

BD: One of your strategic suppliers and investors, Waste Management, had been trimming some investments.

JM: Waste Management, as an investor wants to see performance and commitments like anyone else. And like any investor they are going to rationalize the portfolio from time to time. But we are very pleased with the relationship. As with Waste Connections.

BD: You withdrew your S-1 registration statement for the IPO recently. What was the thought process there?

JM: After the Facebook IPO, the markt changed. Some of our underwriters said it was a short term problem, but we weren’t going to be able to wait and hope, so we moved back to working with strategics and have had some good success there. We got commitments and are closing on those, and that has allowed us to proceed with the plan without having to wait.

BD: Future plans?

JM: We still follow the public market closely and want to be ready should our investors want to take advantage on an IPO window opening up. But keeping the S-1 up to date, and needing to make progress with our private investors, we decided it was better to restart the process later than rather than constantly updating an S-1. It was more logistics than a conscious decision about an IPO — we plan to go when we feel the market is receptive.

The Renewable Fuel Standard embroglio

BD: Back to the ethanol side. Lots going on. The blend wall, E15, E85 maybe making a bit of a comeback, pushback on the Renewable Fuel Standard. How does that market look to you these days?

JM: Personally, I have not lost any enthusiasm for ethanol. Even at E10, its a large market and there is tremendous upside potential through the blend wall.

BD: RFS?

TK: RFS is doing what it was designed to do. It’s driving pressure. Forcing companies to buy alternative fuels, and bringing investment into the sector, because investors need to know there will be a market. All the RFS noise is not good for investor confidence, but we expect it will continue to be there. It could be flex-fuel vehicles and E85, or it could be E15, but we think that the market will continue to expand beyond the debate around the blend wall.

JM: As soon as breakthroughs come along. Whether it is INEOS Bio, or us, or Enerkem or another one of the companies in the space. As soon as people see that the technology works at scale, there is going to be too much demand for domestic renewable fuels that compete on both a price and environmental basis. The barriers are going to come crashing down. But it has to be about economic sustainability and not just carbon.