After years of existing largely as an environmentalist’s fantasy, commercial production of biofuels for the world civil aviation industry is slowly becoming a fact, with production starting up across three continents.

The leading contenders for biofuel feedstocks are jatropha and camelina, both of which have their fervent supporters. While currently neither is capable of production at a price approaching that of Jet A1 civil aviation fuel derived from hydrocarbons, research and extensive investment are nevertheless investigating the possibilities.

While little is certain in the emerging picture, it is increasingly clear that despite the United States being one of the leading producers currently of renewable energy in the form of ethanol, that the United States nevertheless will be an also-ran in these developments.

In January 2010 Qatar Airways revealed plans to work with Airbus and other Qatari state entities to draw up “a detailed engineering and implementation plan for economically viable and sustainable biofuel production.” At an event marking the launch of the Qatar Advanced Biofuel Platform consortium, airline chief Akbar al Baker hailed its European project partner as “more proactive than Boeing in experimenting with alternative fuels.”

Fast forward to this March, when a European consortium of Airbus, Romanian state-owned airline Tarom, Honeywell’s UOP and CCE (Camelina Company España) announced plans to establish a bio-fuel production center in Romania to manufacture civil aviation fuel, using camelina as a feedstock.

Farther east, last month China National Petroleum Corp. announced that it had delivered 15 tons of jatropha oil to help Air China operate the country’s maiden biofuel-powered test flight, tentatively scheduled for later this year. According to a posting on its website, CNPC, Asia’s largest oil producer, is proving that it has the ability to produce biofuel from non-grain feedstocks to clean up the environment.

On Monday, Mozambique’s Agencia Informacao Mocambique news agency announced that Sun Biofuels Mozambique, a subsidiary of U.K.-based Sun Biofuels, has exported the first batch of 30 tons of jatropha oil produced from its fields in the central Mozambican province of Manica to Germany’s Lufthansa airline.

The biggest single impetus to the development of biofuels for civil aviation occurred on 8 June, when the international standards certifying body ASTM International announced its approval of its BIO SPK Fuel Standard, to be made official later in the year, allowing the use of hydro-treated renewable jet (HRJ) Jet A-1 fuel in commercial aviation.

Currently these biofuels are “drop ins,” and must be blended in a 50-50 mixture with Jet A-1 fuel derived from traditional fossil fuel kerosene.

The biggest single independent meant at present to a wide scale production of jet biofuel is its inordinate cost. Biojet fuel delivered last year to the U.S. armed forces for evaluation cost more than $70 a gallon to produce, a price which obviously makes it at present supremely uncompetitive with fuel derived from traditional hydrocarbon sources. Supporters of biofuel production argue that processing costs will decrease in direct proportion to rising volumes of production.

Both Brazil and the United States have viable biofuel production in the form of ethanol, in the case of Brazil derived from sugar cane, in the United States, produced from corn.

Ironically it is the very success of this production in the United States that will limit the near term growth of an alternative renewable fuels industry, because the ethanol lobby has ensured the farmers not only receive significant subsidies, but crop insurance as well, neither of which is available to other farmers wishing to dabble in the production of biofuel from camelina or other assorted feedstocks. These limitations exist despite the fact that the U.S. is the world leader in camelina research.

What is clear at this juncture however is the fact that renewable biojet fuels have been certified, and furthermore, that production is beginning, albeit at on a limited scale with relatively high production costs.

As noted earlier in this article, a critical momentum is building on three continents to advance production of biofuels, and when major players such as Airbus become involved, the viability of such projects is no longer in question, only the timeline. Last but not least, an additional benefit of biofuels in a world concerned about global warming and emissions of greenhouse gases is that biofuels reduce carbon emissions by jet aircraft by up to 80 percent.

The technology is in place, the product has been certified, and at the end of the day, one is talking about an agricultural product which, depending on where it is sown, can produce one or even two harvests a year.

While discussion rages about the production of biofuels in poorer nations having the possibility of diverting land needed for food production, in terms of energies impact on the environment, biofuels are certainly more benign than other more traditional forms of energy as evidenced in the 2010 BP Gulf of Mexico oil spill, or more recently, in the March nuclear debacle in Japan.

Written by John Daly Wednesday, 27 July 2011.

Biofuels are clean, green, and… for the moment, expensive. By. John C.K. Daly of OilPrice.com.

Out-of-state investors already own a majority of projected ethanol and biodiesel production in Iowa and they’re likely to acquire more.

Though farmers triggered much of the state’s ethanol boom, plants primarily controlled by out-of-state or foreign investors account for at least 57 percent of Iowa’s renewable fuels, an analysis by The Des Moines Sunday Register shows.

“Big money wants to own ethanol because it’s liquid fuel,” said Barry Ellsworth, the Las Vegas investor who founded Green Plains Renewable Energy. The company is building ethanol plants in Shenandoah and Superior. “I looked at it and said, ‘Where can I make the most money?’ Iowa was the best state to work with and they had the cheapest corn.”

Iowa leads the nation in renewable fuels production with a capacity soon to reach 3.2 billion gallons of ethanol and biodiesel combined.

Outside investment is likely to grow even if the industry consolidates — and many believe that is a good thing.

Iowa can remain the leader in renewable fuels, “but it’ll take a lot of cash to do that,” said Dave Nelson, an Iowa farmer who is chairman of the Midwest Grain Processors cooperative. Last year, the cooperative sold 60 percent of its Lakota ethanol plant to Global Ethanol, an Australian company backed by a bank founded in South Africa, for $100 million.

Does it matter who owns Iowa’s biofuels?

Studies show local ownership assures more dollars churn through Iowa communities. A plant with 75 percent local ownership pumps three times more money into area household incomes as a plant with 25 percent local ownership, according to a 2006 study by Iowa State University economists.

“Instead of the one guy who works at the ethanol plant going to the hardware store or the lumber store, you’ll have a bunch of people who have money to spend at the hardware store, and the car dealership, and for putting up a new house,” said Chris Petersen, president of the Iowa Farmers Union.

In addition, experts and advocates say local investors who resist the temptation to sell might fare better in the long term. More young people may be drawn into farming and reap the benefits of their families’ investments over time.

All plants, regardless of ownership, will put money into the community through payroll, supplies, taxes and buying farmers’ grain. Profits vary, as do payments to investors.

At Lincolnway Energy in Nevada, annual payroll is $2 million, and last year’s investor returns totaled about $6.4 million. Lincolnway is owned primarily by Iowans.

The argument for outside ownership?

An Iowa-owned plant may put more dollars into local pockets, but the state will have more plants overall if it draws investors from other states and nations.

The change in ownership of many Iowa biofuels plants is a switch from a few years ago. Cargill and Archer Daniels Midland built the first ethanol plants in the 1980s, then farmers were largely responsible for growth in the late 1990s and early 2000s. That’s when farmer cooperatives, such as Quad County Corn Processors in Galva and Little Sioux Corn Processors in Marcus, built plants, in part to secure a market for Iowa grain.

Then investments reached beyond farmers to local business owners, retirees and wealthy individuals, but remained mostly Iowan.

The ownership base shifted again when Wall Street stepped in with interest from private equity groups, venture capitalists, hedge funds and other public companies. Foreign firms with ties to Australia, India and Israel also are buying into Iowa.

Recent drops in ethanol profits – far from last summer’s highs – slowed investment and made some speculators more selective. But industry experts say the money is still coming in.

Main Street to Wall Street

Of the 52 Iowa biofuels plants in operation or under construction at the beginning of 2007, 26 were under the control of primarily local owners. Most leaders of those plants say they’d like to keep Iowans at the helm, but they can’t offer a guarantee.

One way ownership transfers from Main Street to Wall Street is when an outside company makes shareholders an offer, and they to vote whether to sell. That’s how Global Ethanol took over the Midwest Grain Processors plant.

“They dangled those dollars,” said Dennis Barnes, a fourth-generation farmer in Britt. “They all jumped at it.”

An original investor with 6,600 shares in Midwest Grain Processors worth $10,000 would have made $32,000 after the sale. Shareholders kept their same number of shares, and more shares were issued to give Global Ethanol its 60 percent ownership.

The value of the original shares have increased from $1.50 to almost $4, Nelson said. But Barnes, who was among the 33 percent of voters who didn’t want to sell to Global Ethanol, believes investors could have reached bigger profits had they done it themselves.

Jeff Altena, chief financial officer for Siouxland Energy & Livestock Cooperative, which owns an ethanol plant in Sioux Center, also believes that if investors are patient, they likely will realize a larger return on their investment than if they sell now.

“Our theory has been … to remain a producer-owned cooperative, to make that money, and have that money stay on the farm instead of getting sent to New York,” Altena said.

The Siouxland plant’s debt is paid off and investors have received a nearly 200 percent return on their initial $3,350 per share investment, Altena said. Those returns add up to millions of dollars in the local economy.

Barnes bought grain bins with the money he earned from the stock sale and dividends, he said.

Dale Swanson, a Nevada farmer who invested in Lincolnway with his two sons, said their returns have gone back into the community. They buy groceries in Nevada and they patronize the local John Deere dealership.

“Lincolnway’s a good deal. It’s a very good deal for the community and it’s a very good deal for the farmers, and … it’s a very good deal for the people who invested in it,” he said.

Swanson said he believes Iowans should own their ethanol plants. “I would not want to see somebody else get control of them and lose those benefits.”

Share the risk, share the profits

Monte Shaw, executive director of the Iowa Renewable Fuels Association, doesn’t worry about local ownership as long as the plants remain profitable.

“Every ethanol plant chews up Iowa corn and that helps the entire economy,” Shaw said.

“Is there any sign out there that locally owned plants can’t make it? There’s absolutely no sign of that. Given that, am I going to be upset if ADM adds capacity? It’s a great investment for Iowa.”

Nelson, chairman of Midwest Grain Processors, which sold to Global Ethanol, said Iowans lack the money needed to fulfill the state’s ethanol potential. As the industry tests new methods of producing renewable fuels, taking that financial gamble alone would be unwise, he said.

In addition, lenders have been less willing to support plants with unproven technology.

“To share the risk, we’re going to have to share the profits,” Nelson said.

Larger investors bring with them leverage that translates into savings, Nelson said. For example, joining Global Ethanol let the plant buy corn well into 2008 at prices far below $4 a bushel.

“Our senators, governors and legislators have been crying for decades that we need to get outside investment,” he said. “Now … we’re getting criticized for it, and that’s not fair.”

Private equity investing in Iowa went from $185 million in 2002 to $1.1 billion in 2006, much of that a result of renewable fuels. But Iowa still ranks near the bottom for overall venture capital funds.

Erik Straser, a venture capitalist with Mohr Davidow Ventures in Menlo Park, Calif., has been made several trips to the Midwest recently.

“This is the chance for the agrarian heart of the country to recapture a lost significance,” he said. “If your No. 1 goal is to impact 100 square miles, that’s something that could be accomplished on a regional basis.

“If your mission is to have one in every five pumps in America be E85, the partners that will help you do that will be national-scale partners.”

Currently, fewer than 1 percent of gas stations in America offer E85.

Volatile industry yields short-term pains

Companies that want to be ethanol partners have pulled back some since last summer’s gold rush, when profits were sky high by the Fourth of July.

It’s been volatile in the industry since then. Ethanol profits peaked at $2.50 a gallon on June 20. In February, they had dropped as low at 1.3 cents per gallon. As of mid-April, they rose to 45 cents, said Rick Kment, an analyst at DTN, a market research firm in Omaha. Corn, the main ingredient in ethanol, rose from $2.29 a bushel June 20 to $3.60 on April 11, and was nearly $4 earlier this year.

Two companies — Hawkeye Renewables and Global Ethanol — tried to go public last year, but pulled their offerings after a rise in corn prices and a drop in fuel prices made ethanol less attractive. Stocks in existing public companies, such as VeraSun Energy, Xethanol, and Green Plains Renewable Energy are priced significantly lower than what they were last summer.

Some analysts have downgraded the outlook for renewable fuels because of concerns about oversupply.

“Over time, it will wash out as do a lot of oversupply situations,” said Brian Allingham, an associate with Norwest Equity Partners of Minneapolis, which invested $31 million in two Iowa plants built and operated by Broin Companies, now known as Poet. “We’re still positive on the long-term aspect. There will be some short-term pain as that oversupply issue comes online and the demands are not there.”

At the same time, as investors seek new projects, some existing plants are exploring ways to make themselves more attractive to buyers, either by expanding, taking over a smaller plant, adding new technologies, or offering different types of byproducts, such as using corn oil extracted from ethanol to make biodiesel.

Stephanie Moline, executive vice president of corporate banking at First National Bank of Omaha, said some smaller plants are selling shares and talking about pooling ethanol so they can obtain better prices from buyers. They’re also considering selling land that’s ready for construction.

Cash in now or hold for the long term?

Moline is among the many industry experts who predict the industry will consolidate in the next year or two, possibly through a mix of publicly traded companies and private equity investors.

A few larger existing ethanol companies are already “lining up the war chest on the acquisition trail,” she said.

Bruce Rastetter, CEO of Hawkeye Renewables, said consolidation and transition to a publicly traded company gives shareholders a great opportunity to turn their investment into cash that “they won’t have today in a single plant.”

Hawkeye’s two plants in Fairbank and Iowa Falls annually produce 215 million gallons of ethanol. The company’s output could double when plants in Menlo and Shell Rock are built. The company is interested in acquiring more plants someday, Rastetter said.

Thomas H. Lee Partners, a private equity firm in Boston, owns a majority of the shares in the Iowa-based company.

It’s common for investment groups such as Thomas H. Lee Partners and Goldman Sachs & Co. – which made news last summer when it invested in a Canadian ethanol company – to buy out or invest heavily into companies and then take them public.

That’s also the plan for Iowa venture capitalist and philanthropist John Pappajohn, who is trying to raise $800 million from Wall Street to fund Countryside Renewable Energy. Countryside plans to buy existing ethanol plants in Iowa and other Midwestern states, then take the company public, said David Kolsrud, a Minnesota consultant working with Pappajohn.

Board members of several plants say they routinely get offers from investors, larger companies, hedge funds and others. Shareholders have rejected some offers because they just weren’t lucrative, but good offers got canned as well because the owners didn’t want to sell.

“Over time, the companies that desire to be larger will be larger, either by acquisition or by construction,” said Rick Brehm, general manager of Lincolnway Energy.

“Who are the companies who may be consolidating? Who knows who might come out of the blue and be a consolidator in this industry?”

The industry still has room for the traditional farmer-owned cooperatives producing 50 million gallons, despite the move to larger companies and bigger plants, according to Moline.

Farmers benefit from selling both corn and ethanol because if corn prices fall, ethanol profits might go up. Farmer-owned plants also will stick around because most farmers, unlike hedge funds or other Wall Street dealers, won’t bail if their earnings drop from 40 percent to 7 percent.

Long term to a hedge fund is five years. Long term to a farmer is generations.

SOURCE: DESMOINES REGISTER

The awards, first established in 2008, recognize excellence in the research, development and commercialization of biofuels, renewable chemicals and bio-based products. The awards are voted by the Biofuels Digest editorial board, based on nominations submitted by the Digest’s readership.

This year’s honoree for Company of the Year, went to Solazyme. “Solazyme made the decision several years ago to grow heterotrophic algae in the dark and harvest renewable oils – and have become the unquestioned leader in the quest to make an integrated biorefinery commercially successful in the production of renewable oils for fuels, foods and other bio-based products,” noted Digest editor Jim Lane. “Along the ways they’ve racked up an impressive array of partners, and won contracts to supply biofuels to the US Department of Defense. More importantly, in every way, they have personified throughout their organization what it means to be an advanced bio-based company – in the ways that they have triumphed, and in the ways they have faced adversity.”

The award for Product of the Year (fuels) went to Amyris for its farnesane molecule, which it is now producing in Brazil. Made by adding hydrogen to farnesene (itself produced via Amyris’s novel modified yeast fermentation technology), it can be utilized as a drop-in replacement for fossil-based diesel fuels.

Product of the Year (renewable chemicals) went to OPX Biotechnology for its work in reducing the production cost of bioacrylic by more than 85 percent in its pilot production process, using sugars and syngas as feedstocks.

Product of the Year (bio-based products) went to Genencor for its development of bioisoprene and, in partnership with Goodyear, the development of renewable technology for the production of tires, using a novel fermentation process based on  an engineered molecule.

Project of the Year went to Neste Oil for the completion and start-up of its massive 240 million gallon renewable diesel plant in Singapore.

Technology of the Year Awards went to LanzaTech, the partnership of Rentech and ClearFuels Technology, the partnership of Taurus Energy and SEKAB, and Renewable Energy Group. These awards recognized pre-pilot, pilot, demonstration-scale and commercial-scale installations.

LanzaTech is commercializing the fermentation of waste steel gases into ethanol and other bio-based chemicals, with a pilot in New Zealand and a forthcoming demonstration of its technology in China. Rentech and ClearFuels have combined on a gasification and Fisher-Tropsch processing of biomass into synthetic jet or diesel fuels, in a project that will be built at Rentech’s Product demonstration Unit in Colorado, and has been supported by a $23 million grant from the US Department of Energy.  Taurus Energy and SEKAB have combined on a cellulosic ethanol process, using Taurus Energy’s yeast strains and SEKAB’s demonstration-scale cellulosic ethanol plant in Sweden. Renewable Energy Group was honored for its novel continuous-flow, multi-feedstock processing technology that has allowed the company to pioneer the acquisition of a wide variety of hard-to-process, low-cost feedstocks such as tallows and yellow grease.

The town of Emmetsburg, Iowa was recognized as Community of the Year for the transformation of the small local community’s economy through corn and cellulosic ethanol. The town is the site of POET’s Project LIBERTY, a 20 million gallon cellulosic ethanol demonstration, bolted onto an existing corn ethanol plant, which also is home to advanced work by POET BIOMASS in corb cob and agricultural residue harvest and logistics.

For Project Structure, Biofuels Digest recognized ZeaChem, for creativity in financial structure, as well as BlueFire Renewables, for off-take and feedstock contracting. Sapphire Energy received the “Plan for Scale” award for its design of its  algal biofuels system with planned demonstration scale facility in 2014 and first commercial facility in 2018.

The Digest recognizes Iowa State University as Institutional Research Facility of the Year, the Joint BioEnergy Institute as Government-Institutional Research Facility of the Year, and the Energy Biosciences Institute as Public-private Research facility of the Year. JBEI’s researchers have been notably active in the development of novel technologies utilized by, among others, Amyris and LS9, while EBI has lately funded research that resulted in a newly engineered yeast strain, that can simultaneously consume glucose, a six-carbon sugar that is relatively easy to ferment; and xylose, a five-carbon sugar that has been much more difficult to utilize in ethanol production. Iowa State’s BioCentury Research Farm provides researchers with the opportunity to integrate harvesting, transportation, storage, and processing, as well as test plant breeding, genomics, cropping systems, soil conservation and nutrient management.

Partnerships were recognized in several awards this year. The Corporate partnership of Boeing, Air China and PetroChina is recognized for pioneering the testing and availability of jatropha-based aviation biofuels for the key China aviation market. Algenol and Lee County (Florida) were recognized for Public private partnership (county) of the Year, a partnership which has resulted in a state-of-the-art algal biofuels research center in southwest Florida as well as a future pilot-scale algal farm. Enerkem and the US state of Mississippi were recognized for Public private partnership (state or province) of the Year for their work in developing the Pontotoc, MS cellulosic ethanol project using municipal solid waste. Ineos BIO and the US Department of Energy are recognized as Public private partnership (National) of the Year for their cooperation in bringing the Vero Beach, Florida cellulosic ethanol demonstration plant to fruition on schedule. The US Department of Agriculture and the US Navy are recognized for Public-public partnership of the Year for their cooperative work in developing advanced biofuels for naval onshore and fleet operations. Finally, Cosan and Shell are recognized as Joint Venture of the Year for their $14 billion combination of ethanol, advanced biofuels, sugarcane and fuel distribution assets in Brazil.

In Feedstock development, Ceres is recognized as Feedstock research project of the year (new feedstock or traits) for its development of seawater-tolerant energy grasses. SG Biofuels is recognized as Feedstock domestication project of the Year (new feedstock or traits) for its development of the JMax platform for jatropha in Cehtral America. Genera Energy is recognized as Feedstock grower development project of the year for its work in developing a switchgrass-grower network in Tennessee.

The Bio-XCell project in Iskandar, Malaysia is recognized as Multi-project (co-location, or symbiosis) development of the Year, for its custom-built biotechnology park and ecosystem being developed by Malaysian Biotechnology Corporation and UEM Land Holdings, which will become home to the GlycosBio demonstration-scale project among other tenants in 2012.

Statoil was recognized as Downstream partner of the Year for its work with Inbicon, Bioarchitecture Lab and other partners in creating investment and distribution for advanced biofuels.

Bunge was recognized as Strategic Investor of the Year for its investments in Solazyme, Renewable Energy Group, and its strategic alliances with Verenium, and SG Biofuels.

Company of the Year SOLAZYME

Technology of the Year (pre pilot) RENTECH, CLEARFUELS

Technology of the Year (pilot) LANZATECH

Technology of the Year (demonstration state) TAURUS ENERGY, SEKAB

Technology of the Year (commercial stage) RENEWABLE ENERGY GROUP

Product of the Year (fuel) AMYRIS – FARNESENE

Product of the Year (renewable chemicals) GENENCOR – BIOISOPRENE

Product of the Year (bio-based products) OPX BIOTECHNOLOGY – BIOACRYLIC

Project of the Year NESTE OIL, SINGAPORE

Project Structure of the Year (off-take and feedstock contracting) BLUEFIRE RENEWABLES

Project Structure of the Year (creativity in financing) ZEACHEM

Community of the Year EMMETSBURG, IOWA

Institutional Research Facility of the Year IOWA STATE UNIVERSITY

Government Research Facility of the Year JOINT BIOENERGY INSTITUTE

Public-private Research Facility of the Year ENERGY BIOSCIENCES INSTITUTE

Corporate partnership of the Year BOEING, AIR CHINA, PETROCHINA

Public private partnership (county) of the Year ALGENOL – Lee County, FL

Public private partnership (state) of the Year ENERKEM

Public private partnership (federal) of the Year Ineos BIO, US Department of Energy

Public-public partnership of the Year US Department of Agriculture, US NAVY

Joint venture of the Year COSAN, SHELL

Plan for Scale SAPPHIRE ENERGY

Feedstock research project of the year (new feedstock or traits) CERES

Feedstock domestication project of the Year (new feedstock or traits) SG BIOFUELS

Feedstock grower development project of the year GENERA ENERGY

Multi-project (co-location, or symbiosis) development of the Year BIO-XCELL – ISKANDAR, MALAYSIA

Downstream partnership of the Year STATOIL

Top Strategic Investor BUNGE

SOURCE: BIOFUELS DIGEST

The soybean checkoff has been a driving force behind the biodiesel industry from its inception, culminating in 2008, when the industry produced nearly 700 million gallons. In that time, the biodiesel industry became a powerful economic engine. According to a report by consulting firm LECG, LLC, the biodiesel industry supported nearly 52,000 jobs in 2008.

In 2009, however, production declined to 545 million gallons and all but stopped toward the end of the year as the industry awaited announcements of the federal Renewable Fuels Standard (RFS2) and extension of the federal blenders’ tax credit. This drastic drop in production led to the loss of nearly 29,000 of those jobs, according to the LECG report. Still, the industry added $4.1 billion to the U.S. gross domestic product and generated $828 million in local, state and federal tax revenue in 2009, according to the report.

“The soy biodiesel industry remains vitally important to any community and state where a soy biodiesel plant exists,” says USB Domestic Marketing Chair Jim Schriver, a soybean farmer from Montpelier, IN. “There are large groups of people whose livelihoods either directly or indirectly depend on a profitable soy biodiesel industry. Biodiesel plants represent good, high-paying jobs for thousands of people as well as millions of dollars in tax revenue to our local, state and national economies.”

The federal blenders’ tax credit allows a biodiesel producer or fuel supplier to acquire 1¢ for every percentage of biodiesel blended with petroleum diesel, making soy biodiesel even more cost-competitive. Schriver says the reinstatement of the federal biodiesel tax credit should enable more U.S. biodiesel manufacturers to resume production of large quantities of this homegrown, renewable fuel and to recharge efforts to make biodiesel more available to diesel users on a greater basis.

“Smaller plants can get started back up right away, but larger plants will need more time to get everything back in place,” Schriver says. “I think, in time, more of the biodiesel industry will return to profitability and be able to provide the economic benefits of job creation and tax revenue to our communities.”

Biodiesel became the first domestically produced fuel to qualify as an advanced biofuel under the RFS2 because it reduces greenhouse gas emissions by at least 50% over petroleum diesel. The RFS2 called for 1.15 billion gallons of biodiesel to be used in the U.S. by the end of 2010 and ensures the domestic use of at least 1 billion gallons of biodiesel annually beginning in 2012. By 2022, when the RFS2 will be fully implemented, the Environmental Protection Agency expects biofuels production to increase U.S. net farm income by $13 billion, or more than 36%.

Soybean oil remains the dominant feedstock for U.S. biodiesel production, and the soybean checkoff funds a large portion of the biodiesel research and promotion conducted by the National Biodiesel Board.

SOURCE: CORNAND SOYBEAN DIGEST/united soybean board.

The agreement includes the construction of a plant within 14 months in the province Azua (south) to use oil from native varieties of brush such as jatrofa and higuereta, which haven’t any use so far since the oil they produce is toxic.

The agreement includes the Surfuturo Foundation, which will promote the establishment of plantations in the country’s poorest region, with the guarantee for farmers who raise the crops to be bought by the future plant.

Globasol executive Jose Vicente Galindo said the plant’s maximum production of 100,000 tons per year would require plantations totaling 60,000 hectares.

Attending the signing ceremony were Spain ambassador Diego Bermejo and Asturias region president Vicente Alvarez Areces, who concludes his first official visit to the country today.

 SOURCE: DOMINICAN TODAY

SAO PAULO (Reuters) – Royal Dutch Shell plans to form an ethanol and fuel distribution joint venture worth up to $12 billion with Brazilian sugar and biofuel giant Cosan, becoming the latest global energy company to buy into one of Brazil’s fastest-growing industries.

The deal, announced on Monday, marks Shell’s first foray into ethanol production and follows moves by British oil company BP, which in 2008 took a stake in a big Brazilian biofuel project and unveiled $1 billion in investments.

Cosan shares jumped 12 percent in Sao Paulo, compared with a 1.1 percent gain by the benchmark Bovespa index. Shell shares rose 1.1 percent in London, outperforming a 0.3 percent rise in the Dow Jones European oil and gas index.

“It’s a vote of confidence from an oil major for the Brazilian ethanol industry,” said Jonathan Kingsman, managing director of the Lausanne-based Kingsman SA ethanol and sugar consultancy. “I expect more interest from the oil companies in Brazilian ethanol, both in production and distribution.”

The 50-50 joint venture will be the third-largest fuel distributor in Latin America’s largest country, with almost 4,500 filling stations nationwide. By joining forces, Cosan and Shell will be better positioned to compete with the two top players in the market, state oil giant Petrobras and Ipiranga, a unit of Brazil’s Grupo Ultra.

Cosan first branched out into the fuel distribution business in 2008 when it acquired U.S.-based Exxon Mobil Corp’s Esso chain of service stations for nearly $1 billion. Cosan also agreed in December to buy a local chain of filling stations called Petrosul for an undisclosed sum.

While the deal will not immediately add to Cosan’s existing cane crushing capacity of about 60 million tonnes a year, it will give it a deep-pocketed partner at a time when some of its smaller rivals are vulnerable to takeovers.

The companies hope to more than double ethanol output to up to 5 billion liters a year from about 2 billion now, Shell’s downstream director, Mark Williams, said in London, without giving a time frame. The increase would come from takeovers and organic growth, he added.

The deal is another feather in the cap of Cosan Chairman Rubens Ometto, whose family has been in the sugar business since 1936. On Ometto’s watch, Cosan went on an acquisition spree and expanded into fuel distribution and port terminals.

Ometto hopes to capitalize on Shell’s global clout to make ethanol a widely traded commodity.

“Brazil’s aim is to become an ethanol exporter. Shell has distribution facilities throughout the world that we could use in a much more integrated way,” Ometto said in Sao Paulo.

“This step will be very important to consolidate ethanol as a clean and renewable fuel … and help it become a global commodity.”

Oil companies and major global investors have been searching for partnerships in Brazil’s promising ethanol sector, which is still largely dominated by family companies with complex ownership structures.

Shell has been looking for opportunities in Brazil’s ethanol industry for years. About 90 percent of all new cars in Brazil are flex-fuel, running on any mix of ethanol and gasoline, making the country a huge market for biofuels.

Other foreign companies have also been delving into Brazil. U.S. agribusiness giant Bunge Ltd struck a deal in December to buy sugar and ethanol producer Moema for $452 million, while French commodities company Louis Dreyfus said in October it would take over the Santelisa Vale mill for an undisclosed sum.

COSAN EYES OVERSEAS MARKETS, TECHNOLOGY

The combined entity will have about 40 billion reais ($21.4 billion) in annual sales, Cosan Chief Financial Officer Marcelo Martins said on a conference call with analysts and investors.

For Cosan, the world’s largest sugar and ethanol producer, teaming up with Shell could give it access to a vast overseas distribution network and new technologies in ethanol production, an area where Shell has been investing. Shell’s network may help Cosan export more ethanol as output grows.

“We’ll have a partner with an absolutely huge international presence in fuels sales,” Martins said.

The so-called second-generation in ethanol production has yet to reach commercial scale, but some companies are betting on the use of cellulosic material such as bagasse or cane stalks and grasses to make biofuels, in part to move away from making fuel from foodstuffs.

Cosan, which recently obtained a court injunction to remove its name from a government black list of companies with workers in slave-like conditions, said it had 180 days to discuss the nonbinding memorandum of understanding exclusively with Shell International Petroleum Co Ltd.

As part of the transaction, Cosan will transfer its sugar, ethanol, fuel distribution and energy generation business to the merged entity, with assets valued at $4.93 billion and debt of $2.52 billion.

Shell will contribute its retail fuel and aviation distribution business, valued at up to $3 billion, and inject $1.63 billion into the merged company in up to two years.

Brazilian investment bank BTG Pactual advised Cosan on the transaction, while JPMorgan Chase advised Shell.

Cosan and Shell will have the option of buying each other’s stake in the venture after 10 years, with the price to be determined at the time of purchase.

Earlier on Monday, Cosan released its quarterly earnings for the three months ended December 31. It posted net income of 167.1 million reais, up sharply from 5.2 million reais a year earlier. ($1=1.87 reais)

Reporting by Elzio Barreto and Inae Riveras; additional reporting by Reese Ewing in Sao Paulo and David Brough, Nigel Hunt and Tom Bergin in London; editing by Todd Benson, Dave Zimmerman and John Wallace.

Source:  Reuters

Soybean, one of the most important global sources of protein and oil, is now the first legume species with a published complete draft genome sequence. The sequence and its analysis appear in the January 14 edition of the journal Nature.

The research team comprised 18 institutions, including the U.S. Department of Energy Joint Genome Institute (DOE JGI), the U.S. Department of Agriculture-Agricultural Research Service (USDA-ARS), Purdue University and the University of North Carolina at Charlotte. The DOE, National Science Foundation, USDA and United Soybean Board supported the research.

“The soybean genome’s billion-plus nucleotides afford us a better understanding of the plant’s capacity to turn sunlight, carbon dioxide, nitrogen and water, into concentrated energy, protein, and nutrients for human and animal use,” said Anna Palmisano, DOE Associate Director of Science for Biological and Environmental Research. “This opens the door to crop improvements that are sorely needed for energy production, sustainable human and animal food production, and a healthy environmental balance in agriculture worldwide.”

With the soybean genetic code now determined, the research community has access to a key reference for more than 20,000 legume species and can explore the extraordinary evolutionary innovation of nitrogen-fixing symbiosis that is so critically important to successful agricultural crop rotation strategies.

Jeremy Schmutz, the study’s first author and a DOE JGI scientist at the HudsonAlpha Institute for Biotechnology in Alabama, said that the soybean sequencing was the largest plant project done to date at the DOE Joint Genome Institute. “It also happens to be the largest plant that’s ever been sequenced by the whole genome shotgun strategy—where we break it apart and reassemble it like a huge puzzle,” he said. Of the more than 20 other plant genomes taken on by the DOE JGI, those already sequenced include the black cottonwood (poplar) tree and the grain sorghum, both targeted because of their promise as biomass feedstocks for biofuels production.

“This is a milestone for soybean research and promises to usher in a new era in soybean agronomic improvement,” said co-author Gary Stacey, Director, Center for Sustainable Energy and Associate Director and National Center for Soybean Biotechnology, University of Missouri. “The genome provides a parts list of what it takes to make a soybean plant and, more importantly, helps to identify those genes that are essential for such important agronomic traits as protein and oil content.”

Soybean, one of the most important global sources of protein and oil, is now the first legume species with a published complete draft genome sequence.

From the sequence analysis, Stacey said that he and his colleagues have identified more than 46,000 genes of which 1,110 are involved in lipid metabolism. “These genes and their associated pathways are the building blocks for soybean oil content and represent targets that can be modified to bolster output and lead to the increase of the use of soybean oil for biodiesel production.”

While biodiesel from soybean oil represents a cleaner, renewable alternative to fossil fuels with desirable properties as a liquid transportation fuel, there simply is not enough oil produced by the plant to be a competitive gasoline on a gallons-of-fuel yield per acre. The availability of the soybean genome may provide some key solutions. “We can now zero in on the control points governing carbon flow towards protein and oil,” said Tom Clemente, Professor, Center for Biotechnology, Center for Plant Science Innovation at the University of Nebraska, Lincoln. “With the combination of informatics, biochemistry and genetics we can target the development of a soybean with greater than 40 percent oil content.”

The availability of the soybean genome sequence has accelerated other soybean trait discovery efforts as well. For example, researchers have used the sequence to zero in on a mutation that can be used to select for a line that has lower levels of the sugar stachyose, which will improve the ability of animals and humans to digest soybeans.

In another effort, by comparing the genomes of soybean and corn, a single-base pair mutation was found that causes a reduction in phytate production in soybean. Phytate is the form in which phosphorous is stored in plant tissue. Because phytate is not absorbed by the animals that eat the feed, the unabsorbed phytate passes through the gastrointestinal tract, elevating the amount of phosphorus in the manure. Limiting phytate production in the soybean could reduce a major environmental runoff contaminant from swine and poultry waste.

Of additional importance for soybean farmers is that the genome sequence has provided access to the first resistance gene for the devastating disease Asian Soybean Rust (ASR). In countries where ASR is well established, soybean yield losses due to the disease can be as high as 80 percent.

Provided by DOE/Joint Genome Institute

Source: Physorg

OLD TOWN, Maine (Reuters) – From the outside, the rustic red-brick mill on a bend in Maine’s Penobscot River resembles any other struggling American pulp and paper mill.

But along with its usual business of pulp-making, the century-old mill is doing something unprecedented: Developing technology to produce bio-butanol, a jet fuel, from parts of trees that would otherwise go to waste, one of the world’s first to do so.

Production is still two years away, but the reinvention of Maine’s Old Town Fuel & Fiber mill is already drawing interest as a potential model for a new wave of biofuel companies that could slash dependence on oil, create jobs and reduce the emissions that lead to global warming.

Loggers, a fading way of life in rugged northern United States and Canada, see the mill as a lifeline for their crippled industry. Environmentalists see it as a test of the Obama administration’s push for a big expansion in biofuels.

And chemical and oil companies are waiting to see if the mill can do what none has done before by extracting sugars from wood chips into a biofuel that many regard as more efficient than corn-based ethanol as a possible substitute for gasoline.

“There has been a lot of interested parties in what we are doing here,” said Old Town’s president, Dick Arnold. “There have been several oil companies that have been interested in our extract and production of biofuels. There has been a number of chemical companies that have expressed the same desire.”

Like its once-mighty peers, Old Maine’s mill has suffered in recent years from declining pulp prices and loss of market share to Chinese and Latin American rivals. Georgia-Pacific Llc, the maker of Quilted Northern bathroom tissue, shut it in May 2006, laying off all 400 workers. A group of investors known as Red Shield bought it a few months later.

Red Shield won a $30 million grant from the U.S. Department of Energy to work with the nearby University of Maine on a pilot ethanol production plant, but they ran out of cash and filed for bankruptcy last year, shutting the plant again.

Enter Lynn Tilton, a New York venture capitalist who owns one of the nation’s largest helicopter makers. Tilton’s Patriarch Partners bought the mill in November, invested about $40 million and shifted its focus to cellulosic bio-butanol.

ALTERNATIVE TO ETHANOL

Tilton can use bio-butanol in her own helicopter and aircraft businesses but is eyeing a potentially huge market after Congress decreed that the United States must use 21 billion gallons of “advanced” biofuels such as cellulosic ethanols, bio-butanol and “green gasoline” a year by 2022.

Whether the technology takes off comes down to cost — and to corn. For much of the last decade, federal officials have touted the potential of corn ethanol as the best substitute for gasoline, but critics question that assumption, noting it corrodes pipelines and raises food prices.

Bio-butanol, a relative of ethanol, is less corrosive and easier to mix with gasoline. Unlike ethanol, it can be transported by pipeline. And its energy content is about 30 percent higher than ethanol’s. If regulations allow, it could be pumped into a fuel tank with no changes to a car engine.

Butanol is also sometimes used as a petrochemical in brake fluids, paint thinners and plastics. Its supporters include chemicals maker DuPont Co and oil giant BP Plc, which have formed a joint venture to make bio-butanol.

“It’s really comparable to gasoline,” said Mark Bunger, a biofuels analyst at Lux Research, a Boston consulting firm specializing in emerging technologies. “The issue has been that ethanol is easier to make, it’s just not easier to use. Butanol doesn’t have those same restrictions.

“For a lot of chemical reasons, it’s a good alternative. If you’re a venture capital company and you said you are going to be making ethanol, I would say, ‘Do you have another idea?’. But if they are really focusing on butanol, that is a smart move.”

He cautioned, however, that it remains unclear if bio-butanol can compete on cost with oil or substitutes like ethanol without government subsidies. “A lot more research and technical development is needed to make it cost competitive.”

OBAMA FACTOR

Other companies are trying, such as startups Tetravitae Bioscience in Chicago and Cobalt Biofuels in Mountain View, California. But Old Town is the first to do so with a fully functioning timber mill that already generates cash flow by selling traditional pulp to paper companies.

Bio-butanol will be derived from wood that would have gone to waste in pulp production, or have been left on the forest floor as unusable by loggers.

“I wouldn’t go deep into a hole without the ability to generate cash flow on what we do now,” Tilton said. “That is the beauty of this. We are not building a start up facility to create ethanol where you are out $300 million before you start creating any kind of cash flow.”

Already the plant has put in place a system for extracting sugars from the wood and expect by year end to start construction of a biorefinery to turn it into butanol. She expects the mill will need another $75 million to meet its target of producing butanol in two years.

“Some of that will come from the Department of Energy and some we will invest. And how that return on investment will be garnered will be deeply dependent on government demands, pricing for the product as well as our ability to take this technology and roll it out across other platforms.”

A big factor, she said, is the Obama administration’s push for renewable energy through tax breaks, loan guarantees and millions of dollars in grants, with more support expected in upcoming energy bills.

“If one believed that ultimately this would peter out and green energy would become less of a focus going forward, this would be a very risky investment because truthfully pricing will be dependent on supply and demand. If it is not forced as a mandate, then I think the pricing won’t be there,” she said.

To that end, the mill is on track, said Arnold. Two towering vessels, each 100-feet (30-metres) high, extract sugar from wood chips that will eventually make butanol, while also maintaining the traditional process of extracting fiber from wood to create sheets of dried pulp to sell.

“That $30 million award from the government will help us finance the building of the balance of the biorefinery,” he said. “We believe that in the next two years we will have an operating biorefinery at the mill.”

Initial volumes will be small, about 1.5 million gallons of bio-butanol a year produced from 80 dry tons of wood. “But we believe this technology can be replicated. And there are a lot of assets out there in terms of pulp and paper mills that are suffering that could be used for expansion,” Arnold said.

Jason Szep

(Editing by Cynthia Osterman)

Source: Reuters