Governors' Biofuels Coalition

The second of a two-part series. Part one can be found here.

“The history of aviation is marked by people achieving extraordinary things, despite the conventional wisdom of the time telling them it couldn’t be done.” — Air Transport Action Group

In May 2016, investigators from the Government Accountability Office assembled a panel of 19 experts in Washington to explore what had happened to a program to develop a commercial market for advanced biofuels.

It had been 12 years since Congress began to demand action on transportation fuels that would cut greenhouses gases by at least 50 percent, but the upshot was that after a great deal of hype and billions of dollars’ worth of investments, nothing much had happened.

In one sense, this was a kind of financial autopsy. The GAO found that U.S. government agencies had spent $1.1 billion in research and development between 2013 and 2015. Meanwhile, private investors had plunged a multiple of that amount in stocks of startup companies, some of which vanished in bankruptcies.

Brazil had had success with an effective biofuel, but in the U.S., the GAO found plenty of blame to go around. Congress had created a tax incentive for producers of renewable fuel at $1.01 a gallon and ordered U.S. EPA to create a renewable fuel standard that required an expanding annual production output running through 2022.

But the markets were still telling EPA that biofuels couldn’t compete. Between 2011 and 2017, the price of a barrel of oil plummeted from $114 to around $50 a barrel today. Although EPA sometimes cut its production schedules for advanced biofuels by as much as 40 percent, producers responded with only a trickle of product.

Congress helped drive future investors away by sometimes arguing over renewing the biofuel tax credits until after they expired. The uncertainty that created, the experts told the GAO, was a “major barrier for commercialization.”

In all, the experts said that processes for making advanced biofuels were “well understood,” but they predicted that it might take another dozen years or more to bring them to market.

This was dismal news for the Air Transport Action Group and other committees formed by the airlines and aircraft makers, such as Airbus and Boeing, to respond to the growing international pressure for reducing greenhouse gas emissions. While the auto industry can move to electric cars and electricity producers can also cut their emissions by resorting to solar and wind power, there are no electric airplanes in sight for airlines. They need the greater energy density of liquid fuels to carry an estimated 3.57 billion passengers a year.

Another group also felt the pain. “A dismal picture? Well, we’re the collateral damage association,” remarked Michael McAdams, president of the Advanced Biofuels Association, which represents the industry in Washington. Over the last three years, it lost about half its members. Currently, he represents 40 companies hoping the industry survives.

Greening the Navy with biofuels

Heavy trucks and ocean-going merchant ships share the same problem. Because of their weight, they also need the extra energy that a petroleum-like liquid fuel can provide. “We’re the most likely silver bullet for this part of the transportation sector,” McAdams explained.

In the current Congress, McAdams said he believes companies that make and sell biofuels will have to fight to keep their tax credits. The law will also have to be changed to give the industry and investors more certainty about the path ahead.

He sees enemies and friends on the pathway needed to reform the RFS. The pyrolysis process that can extract an oil-like feedstock from wood chips and other materials by subjecting them to heat without the presence of oxygen is one that could add more volume to advanced biofuels.

Environmental groups, he complained, have put a definition in the law that rules out widespread use of trees and forest wastes in the U.S. McAdams says he’s told them “you can’t have any materially significant volumes because you’ve eliminated the feedstock.”

The Navy, on the other hand, has become more interested in using advanced biofuels. A goal that took shape after the shock of the Arab oil embargo in 1973 blossomed during the Obama administration when the Navy did training exercises with a carrier strike force dubbed the “Great Green Fleet.” Its planes and some ships operated with fuel blends that included a 10 percent mix of advanced biofuels.

A Navy spokesman said the Navy is still running tests to find new pathways that produce low-carbon oil for ships and jet fighters, which will help reduce its dependence on fossil fuels, especially in areas where other alternatives are more available.

Commercial airliners have made more than 5,000 flights using blends of advanced biofuels since 2011 that have included mixes of used cooking oil, extracts made from jatropha and camelina (hardy plants with oily seeds), and oil made from algae. Some of these fuels are now used regularly in flights from Los Angeles; Oslo, Norway; and Stockholm, Sweden.

Waste-to-energy, an endless resource

Last September, the Navy took a further step, sending an EA-18G fighter jet called the “Green Growler” aloft using 100 percent advanced biofuel.

Test pilots and fuel specialists saw no noticeable difference in the fighter’s performance. And former Navy Secretary Ray Mabus noted: “In the middle of the 19th century, we went from sail to coal. In the early 20th century, we moved from coal to oil. In the middle of the 20th century, we pioneered nuclear as a propulsion method. Every single time, we moved to a new form of power, as we are doing now with alternative fuel. People had doubts, and every single time they were wrong.”

Just how the Navy’s stance will be in the Trump administration is not clear as factions around the president differ on whether the U.S. should follow the Paris Agreement to reduce greenhouse gas emissions worldwide. Still, McAdams, Boeing, ATAG and others are pressing the case for an advanced biofuel. One new element is a feedstock that may compete with the price of oil.

In June 2008, when momentum began building in Congress and elsewhere for advanced biofuels, the market looked appetizing. Oil was perched at $155 a barrel. But after 2011, when airlines began using approved biofuels, oil took a spectacular nosedive, hitting $29 a barrel in January 2016, a performance that knocked out a good portion of McAdams’ members. Even with the tax incentive, they couldn’t compete with cheap oil.

Since then, oil has oozed up into the mid-50s, and where it may go from there is anybody’s guess. There is one emerging company that says it’s not terribly worried because it has found a material that appears to be as cheap and available as a feedstock is ever going to get: trash.

“Let’s face it — there will never, ever be a shortage of garbage,” says a statement by Fulcrum BioEnergy Inc., a Pleasanton, Calif., company that has been working on advanced biofuels since 2007. Unlike many of its competitors, its early partners — including Waste Management Inc., owner of the nation’s biggest garbage collection networks; United Airlines Inc.; and BP PLC — have since become investors.

Fulcrum uses a process called Fischer-Tropsch that was first commercialized in Germany before and during World War II, when oil shortages forced Germany to turn to a liquid fuel made from coal. The Fulcrum version of the process will separate organic materials from municipal solid wastes, shred them and then use high temperatures to convert them into a synthetic gas. The gas is then purified and fed through a reactor where a catalyst turns it into light, medium and heavy oil-like products.

No ‘winner-take-all’

Although other companies have had trouble making a reliable jet fuel using Fischer-Tropsch, there are many variations of the process, and the version that Fulcrum is using — which promises an 80 percent reduction in carbon reductions compared with conventional jet fuel — has found an attentive audience.

It was awarded a $70 million grant from the Department of Defense to help build its first commercial-scale plant near Reno, Nev., and a loan guarantee of $105 million from the Department of Agriculture. It has entered into long-term contracts to buy municipal wastes from two big garbage collectors and recyclers in the U.S. In a recent statement, Fulcrum says it has also signed long-term contracts with six airlines, including United and Lufthansa, and two refiners, BP and Tesoro Corp., to sell its biofuel. The Nevada plant is scheduled to open in 2019.

ATAG calls household and municipal waste “a very promising source” of sustainable aviation biofuels. And United, a member of an industry that is estimated to spend 25 to 35 percent of its budget each year on fuel costs, says it has plans to “work with Fulcrum to develop up to five biofuel refineries located near our U.S. hubs.”

Asked for more information, Karen Bunton, a spokeswoman for Fulcrum, said her company was “in the process of closing a couple of financial transactions so we are not able to provide any media interviews.”

Fulcrum’s breakthrough — if that’s what it turns out to be — fits with the climate plans of the world’s airlines. The industry voluntarily agreed to stop the growth of emissions by 2020 and cut them in half by 2050. To ensure the industry meets its goals, the International Civil Aviation Organization then gave final approval in 2016 to impose emission standards for future aircraft and to establish a penalty for international airlines that continue to increase emissions.

Darrin Morgan, Boeing’s chief strategist for creating new aviation fuels, says Fulcrum’s progress is part of a new period of inventiveness in low-carbon and low-cost jet fuels that has taken a while to evolve. “There are lots of ways to chase wastes,” he said, including some still in the testing stage.

“This probably won’t be a winner-take-all,” Morgan added, noting that the focus has broadened from the merits of particular fuels to a variety of economic benefits that spring from the reuse of wastes. Some countries are attracted by the possibilities of turning farm wastes into jet fuel or growing non-edible feedstocks on otherwise unproductive land that create domestic jobs and develop low-carbon fuels that reduce the cost of importing petroleum.

“Those are big things, and this is sort of why it’s happening. It’s happening for climate, but also for other needs that these nations have. That’s why it is so important and why it’s kept us going,” he explained.

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