BIO Analysis: Oil Companies Set to Lose Trillions

A recasting of oil industry data from a recent NERA Economic Consulting study prepared for the American Petroleum Institute (API) found the oil industry would be economically harmed by more than $12.3 trillion in potential profits in 2015 if the Environmental Protection Agency (EPA) sets the Renewable Fuel Standard (RFS) obligations below statutory levels. The analysis, “Economic Impacts Resulting from Failing to Implement the RFS2 Program,” was conducted by the Biotechnology Industry Organization (BIO), and finds the same result; however, views the information slightly differently.

“The Renewable Fuel Standard was designed to drive investment in renewable fuel production, and some oil companies have partnered with biofuel producers to do just that,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “Since many of the oil refiners are publicly owned companies, they have a fiduciary responsibility to their shareholders to maximize earnings and generate a return on that investment.”

dreamstime_xs_23776976Erickson continued, “The oil industry reported earnings of a paltry $77.2 billion for 2014, as prices at the pump fell during the year. But if EPA sets the RFS at the statutory volumes in 2015, the industry would be able to earn $12.3 trillion in profits this year by again raising the price of gasoline and diesel. The oil companies owe it to their shareholders to urge EPA to set RFS volumes at the statutory levels.”

According to BIO, the oil industry study from NERA Economic Consulting assumes that if EPA sets the RFS at levels established by the U.S. Congress, oil refiners will elect to export their products rather than sell them to American drivers. The resulting artificial shortage of fuels within the U.S, NERA’s proprietary economic modeling predicts, will raise gasoline and diesel prices to “outrageously high” levels – $93.64 per gallon for regular gasoline and $103.00 per gallon for diesel. NERA’s data indicates that ethanol is the lowest cost fuel component and that higher renewable fuel blends such as E85 would be the lowest priced fuel choice for consumers. Continue reading

Ethanol Groups Attack API Report

Ethanol organizations responded Wednesday to what they say is a “flawed study” released by the American Petroleum Institute (API) that concludes “statutory biofuel mandates under the Renewable Fuel Standard (RFS) are infeasible to achieve in 2015 and beyond and could cause severe harm to consumers and the U.S. economy.”

rfalogo1Renewable Fuels Association (RFA) President and CEO Bob Dinneen says the talking points in the study commissioned by NERA Economic Consulting (NERA) are nothing new from the oil industry.

“It’s déjà vu all over again,” said Dinneen. “This study is virtually identical to a study that NERA published for API in 2012. The conclusions of both analyses are completely divorced from reality… API was wrong in 2012, and it’s wrong in 2015.”

“This newest API study contains many of the same fatal flaws that plagued the 2012 study. This study claims that gas prices will rise by $90 a gallon and diesel will rise by $100 per gallon. It foolishly assumes EPA will not ever utilize its cellulosic waiver authority to partially reduce the advanced and total RFS volume requirements. And it also assumes obligated parties would purchase a RIN credit at any price rather than making modest infrastructure investments to expand renewable fuel distribution.”

growth-energy-logo1Growth Energy CEO Tom Buis says that API is “repackaging stale, false talking points” about the RFS. “(D)espite what API claims, over 84 percent of cars on the road today are approved to use E15,” said Buis. “Regardless of what API claims, the bottom line is that ethanol blends help clean the environment, are higher performing, less expensive and directly benefit the consumer by providing a choice and savings.”

Fuels America stressed that API doesn’t speak for fuel retailers who tell a story about the benefits of higher blend fuels. “When consumers have a choice, there is no blend wall,” said Dave Sovereign, owner and operator of the Cresco Fast Stop.

“We need to be supporting homegrown renewables. We need to be blending more ethanol into our fuel supply, not less,” said Cheryl Near, owner of Jump Start gas station in Wichita, Kansas. “We need blender pumps, we need to buy direct from the ethanol plants, and then we can pass our savings on to the consumers.”

EIA: Outage Increased Midwest Gas Prices

eia-outageNew data from the Energy Information Administration (EIA) confirms that the unplanned outage earlier this month of a 240,000-barrels-per-day unit at a refinery in Whiting, Indiana, caused gas prices to spike throughout the Midwest.

The outage occurred on August 8 and EIA notes that regular gasoline prices in the Midwest increased by 32 cents a gallon within the following week, from $2.47 the week of the outage to $2.79 a gallon on August 17. EIA says it was “the largest weekly increase for Midwest gasoline prices since the aftermath of Hurricane Katrina in 2005.”

“The EIA data show that the refinery outage made a serious dent in the wallets of consumers,” said Bob Dinneen, President and CEO of the Renewable Fuels Association, which released a statement in response to the unplanned shutdown. “The Environmental Protection Agency and the Obama Administration have all the tools they need at their disposal to assist in blunting the consumer impacts of the refinery outage. We, once again, call on EPA to immediately waive RVP requirements for E15 and also allow E12 blending in the Midwest region.”

According to EIA, it can take markets days or weeks to adjust to the sudden loss of production during unplanned outages, often resulting in sudden price increases. The severity and duration of the higher prices depend on how quickly the refinery problem can be resolved, how soon alternative sources of supply can arrive, and the marginal cost to bring alternative supply to the region.

RFA to EPA: Provide Consumers Relief at Pump

In light of a refinery shutdown of the BP plant in Whiting, Indiana that produces 240,000-barrels-per-day, the Renewable Fuels Association President and CEO Bob Dinneen is asking the Environmental Protection Agency (EPA) to provide consumers relief at the pump. Late last week, gas prices jumped an average of 80 cents per gallon overnight in several states including Illinois, Michigan Indiana, Ohio, Missouri and Wisconsin as well as other states including Iowa.

BP refinery in Whiting, Indiana. Photo Credit:

BP refinery in Whiting, Indiana. Photo Credit:

“The Whiting refinery outage demonstrates, once again, the folly of relying too heavily on one source of motor fuel. It’s worth noting that the refinery represents just 6 percent of the Midwest region’s refining capacity (and just 1 percent of national refining capacity); yet retail gas prices in some Midwest markets have spiked by 50 cents per gallon or more,” said Dinneen. “This is exactly why we need to further diversify our nation’s fuel supply and allow more renewable fuels by removing arcane barriers erected by the oil companies and the Environmental Protection Agency (EPA). Using more low-cost ethanol would absolutely help insulate consumers from these kinds of price shocks.”

Dinneen said that the total lost gasoline output, nearly 120,000 barrels per day, could be offset by increasing ethanol blends from E10 to E15. He sourced ethanol prices in the Chicago wholesale market as around $1 per gallon lower than gas. It should be noted that during the summer months, E15 is only allowed to be used by flex fuel vehicles although the rest of the year the ethanol blend can be used by all vehicles manufactured in 2001 or newer.

“That means, Dinneen said, “if refiners and blenders serving the Midwest market immediately switched to producing E15 to blunt the impacts of this refinery outage, gas prices would instantly fall by at least 5 cents per gallon and drivers in the Midwest would save about $6 million per day. In reality, the price impacts would likely be even more significant, as ramping up ethanol blending would immediately take the pressure off tightening gasoline stocks and ease wholesale gasoline prices.”

Dinned added, “EPA and the Obama Administration have all the tools they need to help alleviate this situation quickly. We call on EPA to immediately waive RVP requirements for E15 and also allow E12 blending—based on the fact that it is substantially similar to E10—in the Midwest region to facilitate expanded ethanol blending and blunt the consumer impacts of this refinery outage.”

Renewables “Rock” U.S. Energy Growth

The SUN Day Campaign’s Ken Bossong, has noted once again that renewable energy sources are dominating the new energy landscape according to the latest “Energy Infrastructure Update” report from the Federal Energy Regulatory Commission’s (FERC) Office of Energy Projects. The reports shows wind and solar accounted for all new generating capacity placed in-service in April. For the month, two “units” of wind (the 300 MW Hereford-2 Wind Farm Project in Deaf Smith County, TX and the 211 MW Mesquite Creek Wind Project in Dawson County, TX) came on line in addition to six new units – totaling 50 MW – of solar.

In addition, wind, solar, geothermal, and hydropower together have provided over 84 percent (84.1%) of the 1,900 MW of new U.S. electrical generating capacity placed into service during the first third of 2015. This includes 1,170 MW of wind (61.5%), 362 MW of solar (19.1%), 45 MW of geothermal steam (2.4%), and 21 MW of hydropower (1.1%). The balance (302 MW) was provided by five units of natural gas.

Hereford Wind ProjectFERC has reported no new capacity for the year-to-date from biomass sources nor any from coal, oil, or nuclear power.

The reports finds the total contribution of geothermal, hydropower, solar, and wind for the first four months of 2015 (1,598 MW) is similar to that for the same period in 2014 (1,611 MW – in addition to 116 MW of biomass). However, for the same period in 2014, natural gas added 1,518 MW of new capacity while coal and nuclear again provided none and oil just 1 MW. Renewable energy sources accounted for half of all new generating capacity added in 2014.

“Members of Congress and state legislators proposing to curb support for renewable energy, such as Renewable Portfolio/Electricity Standards and the federal Production Tax Credit and Investment Tax Credit, are swimming against the tide,” noted Bossong, executive director of the SUN DAY Campaign. “With renewable energy’s clear track record of success and the ever-worsening threat of climate change, now is not the time to pull back from these technologies but rather to greatly expand investments in them.”

Today renewable energy sources now account for 17.05 percent of total installed operating generating capacity in the country: water – 8.55 percent, wind – 5.74 percent, biomass – 1.38 percent, solar – 1.05 percent, and geothermal steam – 0.33 percent (for comparison, renewables were 13.71 percent of capacity in December 2010 – the first month for which FERC issued an “Energy Infrastructure Update”).

For renewable energy supporters, what may be the best news: renewable energy capacity is now greater than that of nuclear (9.14%) and oil (3.92%) combined. In fact, the installed capacity of wind power alone has now surpassed that of oil. In addition, total installed operating generating capacity from solar has now reached and surpassed the one-percent threshold – a ten-fold increase since December 2010.

TV Ad Marks 5th BP Spill Anniversary

americans-changeMarking the fifth anniversary of the BP oil spill, Americans United for Change is running a television ad in Des Moines and Chicago calling it “no rare incident.”

While BP airs their own ads congratulating themselves for their cleanup efforts despite the lingering economic and environmental fallout in the Gulf region, AUFC is kicking off Earth Day week with a message that the Deepwater Horizon disaster was only a drop in the bucket for an industry responsible for 14,000 oil spills every year. The message to lawmakers: Don’t help make a bigger mess by repealing the Renewable Fuel Standard or denying consumers the choice of cleaner alternatives like ethanol at the pump.

The spot called “Rare Incidents” features American Petroleum Institute President Jack Gerard’s outrageous 2011 comments downplaying the BP disaster as “clearly a rare incident”. The Iowa version is targeted to presidential candidates and concludes: “If Washington guts the Renewable Fuel Standard, expect plenty more ‘rare incidents.’ The version in Chicago is aimed at local leaders who are considering a “E15 Clean Air Ordinance.”

The six-figure effort kicks off an aggressive and ongoing campaign around a new website,

Book Review: Fractured Land

When is the last time you filled up your tank with a gallon of gas that was less than $2? For me, today. As oil prices have plummeted with gas prices falling suit, many people are attributing all the extra oil to fracking. But what is the cost, financially and environmentally speaking, of oil drilled in this manner?

Fractured Land by Lisa Westberg PetersA new book by Lisa Westberg Peters, Fractured Land: The Price of Inheriting Oil,” takes a look at these very issues. Interestingly, Peter is a self-proclaimed environmentalist who inherited land in North Dakota that is part of the state’s “fracking” oil boom. She acknowledges her discomfort with fracking technology, but attempted to keep an open mind during her educational journey to learn more.

When Peters father passes away and she is going through his things, she comes across all the documents related to his oil/fracking royalties that she will eventual inherit. The book follows her as she learns more about her family’s oil history, her research about fracking, which she is theoretically opposed to, and the family’s trip to North Dakota, where they have oil contracts, and spread her father’s ashes. The prose flows nicely as she weaves in and out between her family history and the information she learns about fracking.

From an energy perspective, despite being from the Midwest and current residing in Minnesota, she is opposed to the use of biofuels. She writes, “We don’t have petrochemicals in Minnesota, so we grow corn for ethanol. Homegrown alternative energy! I should be enthused about ethanol, but the production plants are water and energy hogs.”

Peters does address the chemicals and water used in fracking, albeit briefly and I feel she could have done a better job of addressing her environmental concerns over some of the issues brought on by fracking (potential for contaminated water, excessive water use that is much worse than other forms of alternative energy, mining of the frac sand, etc.).

Ultimately she chooses to keep her mineral rights when they come to her but she decides to donate a portion of them back to North Dakota to aid those who are struggling with high rents or the natural areas threatened by oil development. She concludes that while she will benefit financially from oil drilling, it brings her little joy.

Click here to purchase the book.

NY Gov Andrew Cuomo Bans Fracking

There is big news coming out of New York today with the announcement that New York Governor Andrew Cuomo has banned hydraulic fracking in the state. The news came on the heels of a study that was released concluding that fracking could pose, “significant public health risks.”

The Sierra Club applauds Governor Cuomo for recognizing what the science has made consistently clear: fracking is a hazard to human health that endangers communities wherever it is allowed,” said Sierra Club executive director Michael Brune. By banning fracking, Frack off GasholesGovernor Cuomo has set himself apart as a national political leader who stands up for people, and not for the interests of the dirty fuel lobby. Today’s decision will shake the foundations of our nation’s flawed energy policy, and we can only expect that it will give strength to activists nationwide who are fighting fracking in dozens of states and hundreds of cities and counties.

Yet while Governor Cuomo banned fracking, the state didn’t steam ahead with previous commitments to renewable energy. The Long Island Power Authority Board of Trustees voted to approve only a fraction of the renewable energy projects promised by the governor, bringing just 122 megawatts of new solar projects online and falling short of the 280 megawatts of renewable energy the governor committed to this year.

Brune added, “The Sierra Club also extends heartfelt congratulations to all of the passionate anti-fracking activists in New York who were relentless in telling the truth about the dangers of fracking, persevered years of opposition from the oil and gas lobby, and ultimately prevailed. All we need now is for New York to bring wind, solar, and energy efficiency to full potential so we can leave dirty fuels in the ground and move quickly to clean energy prosperity.”

Deck Stacked Against Ag and Biofuels in Report

bpcThe Bipartisan Policy Center (BPC) appears to be a bit partisan in a new report released this week on “Options for Reforming the Renewable Fuel Standard.”

The report was produced after several meetings during the year with an advisory group that consisted of 23 members, seven of which were oil companies representatives. Only five members of the group represented agriculture or advanced biofuels and biodiesel producers. The rest were a mix of academia (2), big business (4) with two of those representing Toyota, environmental groups (2), and policy organizations (3).

Both of the agriculture representatives were from the National Farmers Union (NFU), president Roger Johnson and vice president of programs Chandler Goule. “It was very important that agriculture that supports the renewable fuels industry be present at the table,” said Goule, who said the meetings were held in a very professional manner. “The problem with the meetings is that they were heavily skewed toward big oil.”

NFUlogoThe report concluded that improvements to the RFS are needed, but did not recommend actual repeal of the law. Goule says NFU has major objections to two of the policy recommendations made in the report. “The flattening of the total renewable fuel mandate at its current level going forward, but continuing to increase the three advanced categories, we have significant concerns about what that would to do ethanol and biodiesel,” he said. “Even more concerning was removing the total renewable fuel mandate and only mandating the three advanced categories. Basically what they are doing is giving in to Big Oil’s conclusion that a blend wall exists, which it does not.”

Chandler talks more about the BPC report in this interview: Interview with Chandler Goule, NFU

Ethanol Coalition: Auto Engineers Expose EPA’s Oil Bias

ACElogoA new paper from automotive engineers shows how the federal government has a bias toward Big Oil. Officials from the American Coalition for Ethanol (ACE) praised a new Society of Automotive Engineers (SAE) paper authored by experts from Ford Motor Company, General Motors Company, and AVL Powertrain Engineering Inc. that concludes that emissions from higher ethanol blends are cleaner than gasoline, and the approach used by the U.S. Environmental Protection Agency (EPA) to estimate exhaust emissions, the Motor Vehicle Emissions Simulator (MOVES) model, is biased in favor of oil.

“We applaud these Ford, General Motors, and AVL Powertrain engineers for exposing that EPA’s MOVES model is biased in favor of a result oil companies prefer and ignores the way gasoline is blended with ethanol in the real-world,” said [ACE Executive Vice President Brian] Jennings. “This is just the latest example of how Big Oil is twisting EPA’s arm to limit ethanol use. First, it appears EPA is about to completely rewrite the Renewable Fuel Standard to help oil companies avoid their legal responsibility to blend fuels, like E15 and E85, which reduce greenhouse gas emissions. Now, EPA is relying on a biased approach for estimating tailpipe emissions, remarkably making gasoline appear cleaner than ethanol.” Continue reading