Will ethanol E85 catch on in the US? Will we Live Green and Go Yellow?

snakeweasel · June 2006

All VW diesels have been canceled for 2007

You can thank the airheads in DC for that.

gagrice · June 2006

All VW diesels have been canceled for 2007 -- the 2006's should be firesaled out...they are now orphans that probably will carry a really low price

I know you are trying to be funny. I can tell you for sure I will buy a half dozen Jetta TDIs if they go on fire sale. As a matter of fact many dealers are gouging them. I guess they learned from Toyota dealers. Last I read from VW is they are making an extra amount of 2006 model TDIs to last until the 2008 model with the new diesel arrives.

Guess what, they will not run on E85. That is the good news.

gagrice · June 2006

forbidden to buy new diesel engines due to state mandated bans on them

Those bans are based on diesel cars using fuel that is 500 PPM sulfur. There have been no tests of the same modern engines using ULSD, diesel with less than 15 PPM.

I wonder if the EPA & CARB have bothered to test older engines using E10 tainted fuel. How will that affect emissions?

I see the American Lung Association is distancing themselves from ethanol.

(The American Lung Association of the Upper Midwest is not responsible for misinformation reported on the E85 Price Forum.)

snakeweasel · June 2006

Those bans are based on diesel cars using fuel that is 500 PPM sulfur. There have been no tests of the same modern engines using ULSD, diesel with less than 15 PPM.

Regardless of that those bans are in effect, which means nearly 25% of the population cannot buy them.

Its also my understanding the the new requirements for diesel fuel means that new diesels (2007 MY and on) need to be redone and would cost more. Thats one of the reasons VW is not selling diesels for the 2007 MY.

jim314 · June 2006

What I read is that VW is changing the fuel systems on its diesels from, to coin a term, "divided paths" to what is called "common rail". Common rail is what is used by Mercedes (and maybe Volvo) and it allows very precise and instaneously controlled fuel injection.

VW is currently using other fuel delivery systems, one of which is "pumpe deuse" (spelling?), abv. PD, Eng. trans. pump nozzle. The VW fuel systems presumably had certain relative advantages over common rail, but it has turned out that common rail allows much better management of tail pipe emissions especially NOx and particulate matter. VW could not meet the emissions requirements without changing to common rail.

But overwhelmingly VW diesel buyers don't care if their vehicle pollutes more than a Mercedes diesel; they want a diesel. The regs evidently allow VW to continue to sell 2006 models in what would ordinarily be the 2007 model year if the 2006's were imported before a certain date. So VW is increasing its inventory of 2006 diesels so it can continue to seel them throughout the 2007 model year.

heel2toe · June 2006

It is exactly the opposite -- there is so much demand for the TDI that they are selling above MSRP in a lot of the country.

And VW is extending the build cycle through the end of the year. They anticipate supply of the '06 models through next spring.

john1701a · June 2006

> I see the American Lung Association is distancing themselves from ethanol.

Really? Then how do you explain this from their own website?

Ethanol is a liquid alcohol fuel produced from biomass (which consists of trees, grasses and wastes), grain or agricultural waste. For cars and other light-duty vehicles, ethanol is typically sold as E85, a blend of 85% ethanol and 15% gasoline. Ethanol produces lower emissions of ozone-forming compounds and toxic air pollutants.

JOHN

socala4 · June 2006

There is incentive to change, that being that diesel engines give better mileage and more power from the same size engine.

This has been true for decades, yet diesel remains a very small part of the US market. Perhaps this mileage benefit would be more appealing if fuel prices were higher, but demand is obviously very low now.

Diesel proponents have been pounding this drum for years, but clearly, consumers don't agree or care.

The problem with diesel is government intervention.

Actually, it's the opposite -- it's the lack of government intervention that has allowed gas to remain most popular in the US.

Europeans buy diesels in large part because the fuel is much cheaper than gas. This price advantage exists because of their higher fuel taxes on gas, and lower fuel taxes on diesel. Their governments have intervened to encourage the use of diesel, rather than gas.

Yet even with this advantage, diesels are still the less popular of the two fuels. One dollar per gallon just isn't enough of a benefit even for many Europeans.

seniorjose · June 2006

All VW diesels have been canceled for 2007

You can thank the airheads in DC for that.

Amen to that...CA led the charge to ban all new diesel autos...does the ban also knock out the large pickup truck models?

gagrice · June 2006

Its also my understanding the the new requirements for diesel fuel means that new diesels (2007 MY and on) need to be redone and would cost more.

Actually the current VW diesel engines run great on ULSD. It has been available at ARCO stations for a couple years in CA. the engines were developed for low sulfur diesel. Most of the problems people had with the VW and the Liberty diesel was related to crappy diesel. The reason for the change is the new regulations that are going into affect for 2007 are much stricter for both gas and diesel engines. Cars that now pass the SULEV II standard will be OK, all others will have to match that from what I am reading. Not sure how engines running on E85 will fare.

gagrice · June 2006

does the ban also knock out the large pickup truck models?

They are still protected property. It does not make sense to allow a big PU with diesel and not a smaller diesel PU that would be adequate to do the job. We could cut emissions and fuel usage. That is our EPA/CARB mentality at its finest. Same regulations that allowed the $100k deduction on the BIG vehicles a couple years ago.

gagrice · June 2006

Haw about this week. Would you be so kind as to give us an update. With wholesale ethanol price Friday at $3.53 the price at the pump will have to come up. Unless your local station is into selling at a loss.

snakeweasel · June 2006

This has been true for decades, yet diesel remains a very small part of the US market. Perhaps this mileage benefit would be more appealing if fuel prices were higher, but demand is obviously very low now.

Again the lack of diesel engines on the road has far more do with government interference than the market place. If state governments didn't lock out 25% of the market to diesel engines and the Federal government didn't play their emission games then you would see a lot more diesels out the today.

socala4 · June 2006

If state governments didn't lock out 25% of the market to diesel engines and the Federal government didn't play their emission games then you would see a lot more diesels out the today.

I don't see any reason to believe that. Diesels have just not been popular here, even before the CARB mandate.

As diesels improve (and they certainly have become more similar to gasoline cars as of late), I see them potentially having more of a future, but it will not be easy to undo decades of a predisposition against them, particularly if it doesn't offer an obvious advantage such as a lower price.

I think that we need to accept that Americans are not favorably predisposed to buy diesel, regulations or not. They doh't like the rattle, the glow plugs, the soot or the smell of it, and it will take awhile for consumers to see the improvements and decide to include them on their shopping lists.

And again, you can't ignore the impact of fuel taxes on European demand for diesel. Changing tax policies for whatever fuel you prefer could create a favorable result for that product, be it gas, diesel, E85, etc., but the US largely lacks the will to drastically increase fuel taxes on any type of fuel.

john1701a · June 2006

You (gagrice) have posted 3 new messages since that one (link above), yet still no reply. Why? Could it be that you are still frustrated by the reality that biodiesel actually makes smog worse (a 10% increase in NOx emissions)?

Whatever the case, that information from the American Lung Association is well worth pointing out again... Ethanol produces lower emissions of ozone-forming compounds and toxic air pollutants.

JOHN

gagrice · June 2006

still no reply. Why?

Are you wanting me to tell you why the American Lung Association put a disclaimer onto one of the pro E85 Websites? I would imagine they did not want to be linked with a bunch of wild claims about the benefits of Ethanol. Ask them not me.

You have already shown a couple years ago that as far as you are concerned the negatives of growing huge amounts of corn using huge amounts of fossil fertilizers and pesticides is OK as long as it benefits Minnesota. You have argued against any attempts to look at the big picture of growing corn, and the affects downstream caused by chemicals leached into the streams and rivers. I see no argument from your side of the fence about the newest ethanol plants using coal for production as it is 1/6th the cost of natural gas. Whats wrong with a little coal smoke in the air. Of course we won't worry about the added CO2, grow more corn to absorb the added GHG. Maybe that is why the Sierra Club & Audobon Society are not real thrilled with ethanol.

As far as I can tell the emissions may be the only bright side to ethanol. For those that worship at the PZEV sanctuary ethanol may be a good thing.

gagrice · June 2006

Ethanol is a liquid alcohol fuel produced from biomass (which consists of trees, grasses and wastes), grain or agricultural waste.

Sounds like they need to learn a bit more about ethanol before they post misinformation on their website. That is future speculation until it goes into commercial production. Right now Corn grown specifically for ethanol is used with it's own pollutants that I am sure the ALA would not care to breath. Not all ethanol plants are capable of producing feedstocks as a byproduct of ethanol. Nor are they real clean operating. ADM is the 10th worst polluter in the USA.

john1701a · June 2006

> the newest ethanol plants

It runs entirely on waste SAWDUST material.

That's a good thing, especially when the resulting ethanol is used in a hybrid. The nonsense you are spreading is not. Too bad diesel doesn't even meet the minimum criteria. But smog problems won't be solved by only minor improvement (equal to a dirty gas vehicle) anyway.

JOHN

captain2 · June 2006

GM is, of course, promoting the bejeebers on their 'flex' fuel vehicles. Why? Not because of economy of operation - E85 would have to be 30% cheaper than gas to make up for the poorer fuel economy - not because of things like vehicle range which would decrease the same percentage.
BECAUSE our erstwhile government has decided not to count the alcohol portion of E85 consumption in CAFE calculations! Needless to say, this skews the CAFE numbers dramatically.
For poor old Chevrolet who can't sell much of anything that isn't a truck - they now have 33 mpg+ Tahoes (CAFE rating) that actually are lucky to see anything over 12 mpg running E85. Keeps GM out of hot water with their fleet average FE numbers and probably the only reason they are championing the stuff.
It strikes me that the jury is still out on hybrid and certainly E85 use - diesels the way to go - all we would have to do - clean up our diesel fuel to European standards and we might even be able to keep the Californians happy.

socala4 · June 2006

It's odd -- you seem to think that growing crops that produce vegetable oil for biodiesel is A-OK, while growing switchgrass to produce ethanol is going to ruin the planet.

I'm not claiming that it doesn't take resources to grow crops, or that some crops aren't better or worse than others, but at this point, it sounds like a shrill mantra that lacks balance. Again:

-Every resource requires some consumption of resources to be produced. You need to compare them to get a better understanding, not point out the resource needs of those you dislike while ignoring the downsides of those that you favor.

-It need not be an either-or choice. For example, with the right R&D and tax policies, we could work to create hybrid cars that run on E85 and hybrid diesels that run on biodiesel, as well as electrifying our trains and shipping interstate freight via the rails. There is no magic bullet here.

-Any "solution" that consumers don't use, or that can't be allocated effectively, is a non-solution. For example, if you are going to support biodiesel, you had better figure out a way to get consumers to want or have to use it, to get them cars that can run on it, and to distribute the fuel through the existing or a new distribution network. Otherwise, it's just shuck and jive.

The discussion seems more like an argument about whose God we should worship, rather than a cogent assessment of alternatives and how some or all of them can be implemented. As I have no particular solution that I favor, I find this astounding -- I'm surprised that it all seems starry-eyed, with very little pragmatism, from the most fervent advocates.

tpe · June 2006

Toyota, grudgingly, has decided to start offering E85 vehicles in 2008. They don't plan on aggressively marketing this capability. A Toyota spokesman said that they would leave it to GM to tout the benefits of E85. You get the sense that they don't really buy into E85 but feel it is prudent to cover their bases.

socala4 · June 2006

You get the sense that they don't really buy into E85 but feel it is prudent to cover their bases.

Toyota is investing a lot of effort to build itself as a leader and unique provider of hybrid technology, particularly in North America. You can expect it to continue to focus on hybrids, because it gives it a competitive advantage to do so. It is a significant exercise in branding.

For Toyota to support E85 would be to hand an advantage to a competitor, because it may make GM to appear to be a more credible player. Whether ethanol is fantastic or horrible, it is wise for TMC to maintain that strategy, unless E85 becomes popular enough that offering FFV capability become mandatory.

Toyota has no issue with FFV in Brazil. Obviously, the marketing strategy there is different, and it has nothing to lose and everything to gain by participating. Again, that's a business issue, not a technology issue.

captain2 · June 2006

from what I understand the issues are: E85 production capacity that is likely to remain a very small percentage od total consumption for at least the next ten years, E85 cost relative to the fuel economy it allows, and, the fact, that nobody is really working on improving the technology. GM, as much money as they have been losing, not the one to develop anything - Toyota, on the other hand, could afford to attack at least this last problem.

gagrice · June 2006

It's odd -- you seem to think that growing crops that produce vegetable oil for biodiesel is A-OK, while growing switchgrass to produce ethanol is going to ruin the planet.

You must have a very serious memory problem. I thought we had this conversation at least twice in the last couple days. Maybe I should ask you where is this ethanol plant that is using Switchgrass to produce ethanol? I would be happy to give it a bit of publicity. I think ethanol from any waste biomass is Great. Corn growing is not Great for the planet.

gagrice · June 2006

It runs entirely on waste SAWDUST material

And where might they be located?

Late last year in Goldfield, Iowa, a refinery began pumping out a stream of ethanol, which supporters call the clean, renewable fuel of the future.
There's just one twist: The plant is burning 300 tons of coal a day to turn corn into ethanol - the first US plant of its kind to use coal instead of cleaner natural gas.

An hour south of Goldfield, another coal-fired ethanol plant is under construction in Nevada, Iowa. At least three other such refineries are being built in Montana, North Dakota, and Minnesota.

Coal Cloud over the Midwest

Maybe one is coming to your city!!!

socala4 · June 2006

Maybe I should ask you where is this ethanol plant that is using Switchgrass to produce ethanol?

And where is all this biodiesel that we are supposed to use? And how would we use it when the vast majority of cars sold in the US operate on gasoline?

Let's try this one more time -- none of these products are here yet, or in wide distribution. All of them are just talk unless the cost, resource and distribution issues are sorted out.

It's amazing that you don't acknowledge these obvious issues. When I ask you how this is all supposed to happen, your answer is, "Biodiesel is the answer," but it is just chatter unless you deal with the issues.

Very basic: I can't buy biodiesel, my car doesn't use it, anyway, and virtually everyone else in the United States is in the same situation. So how would you change this?

gagrice · June 2006

none of these products are here yet, or in wide distribution

What would you call the mandate to force us all to use ethanol in our gas? For not being here yet I find 4.5 billion gallons of ethanol more than a pittance. I have never said that biodiesel is widely used. I don't care if anyone uses biodiesel. I don't like being forced to use ethanol made from an invasive crop like corn. If you and seniorjose want to run ethanol straight into your tank, hey go for it. Just don't try to force me to use that inferior fuel. That seems to be your position. Or is it just to argue over nothing? How about, we argue over whether GM gets more miles from a gallon of E85 than Ford.

socala4 · June 2006

You've been pitching biodiesel throughout this thread, yet you now claim that you "don't care if anyone uses biodiesel"?

Incidentally, you critiqued another poster for taking the exact same position, but in respect to E85 (wants it out there, but doesn't care if anyone actually uses it.) Given that both of you are clearly devotees of one answer and highly critical of another, that's a rather incongruent response.

gagrice · June 2006

that's a rather incongruent response.

Maybe you should post where I have advocated mandating the use of biodiesel. I have said it is a good alternative that gets equal mileage to diesel. It requires a diesel vehicle to use it. That is limiting in itself. Though there are a lot of trucks that wander on the highways of America. I will leave the sale of biodiesel to Bio-Willie. Oh, I have also said and can prove that there are more stations selling biodiesel on the West coast than sell E85. I think you will find my position is the same today as it was two years ago. Corn grown the way ADM and the mega farmers grow it is NOT good for the land. That would also apply to corn oil for cooking and corn flakes for breakfast. Which I do not use knowingly. I read each label in the store before I buy. I love sweet white corn on the cob which I am watching from my office window as I type. I only use natural manure to fertilize the soil. That goes for our citrus trees as well. Any other hollow arguments?

socala4 · June 2006

I have said it is a good alternative that gets equal mileage to diesel.

Walking is a good alternative, too, but if I suggested that exchanging cars for shoe leather was the solution to our energy problems, you'd realize that I've offered you an alternative that makes no sense.

So you've opted to be a passionate advocate for a fuel that is produced at extremely low volumes, has almost no distribution and cannot be used in virtually car in America, yet you believe that to be a "good alternative"?

That's not an alternative at all if nobody can get it or use it. It may be a possible alternative for the future, and it may have potential, but as of right now, it is a non-issue.

seniorjose · June 2006

(and now for the rest of the coal fired Ethanol plant article)

"It just made great economic sense to use coal," says Brad Davis, general manager of the Gold-Eagle Cooperative that manages the Corn LP plant, which is farmer and investor owned. "Clean coal" technology, he adds, helps the Goldfield refinery easily meet pollution limits - and coal power saves millions in fuel costs.

With 97 ethanol refineries pumping out some 4 billion gallons of ethanol, the industry expects to double over the next six years by adding another 4.4 billion gallons of capacity per year. Tax breaks as well as concerns about energy security, the environment, and higher gasoline prices are all driving ethanol forward.

The Goldfield refinery, and the other four coal-fired ethanol plants under construction are called "dry mill" operations, because of the process they use. The industry has in the past used coal in a few much larger "wet mill" operations that produce ethanol and a raft of other products. But dry mills are the wave of the future, industry experts say.

More plants slated for Midwest, West

Scores of these new ethanol refineries are expected to be built across the Midwest and West by the end of the decade, and many could soon be burning coal in some form to turn corn into ethanol, industry analysts say."It's very likely that coal will be the fuel of choice for most of these new ethanol plants," says Robert McIlvaine, president of a Northfield, Ill., information services company that has compiled a database of nearly 200 ethanol plants now under construction or in planning and development.

seniorjose · June 2006

By Reuters

Published: June 15, 2006, 8:08 AM PDT

"Ethanol"

Alternative-energy buzz drove ethanol maker VeraSun Energy to a dazzling market debut on Wednesday, but investment strategists are skeptical about the chances to turn a fast buck in an energy form that remains largely a mystery to many Americans.

Speaking at the Reuters Investment Outlook Summit in New York, strategists said that if crude oil prices were to slump, the wild bets that investors have put on ethanol's future could breed the kind of pain that stung Wall Street when the Internet bubble burst in 2000.

"There's a substantial amount of risk there," said Ed Keon, chief investment strategist at Prudential Equity Group.

"There was a time when all kinds of alternative-energy sources looked like the great next thing, and then oil prices came down. It's very hard to say what the investment potential in some of those things will be," he told the summit.

Made primarily from corn and sugar cane, ethanol is blended with gasoline, helping to reduce emissions and petroleum usage.

Since President George Bush's call for the United States to end its "addiction" to foreign oil in his State of the Union address earlier this year, ethanol, or ethyl alcohol, has become the talk of the market as investors look for new areas to put their cash.

Soaring crude oil prices have also helped fuel the buzz, which has sent even smaller ethanol stocks into a frenzy.

Year-to-date, shares of California's Pacific Ethanol, which counts Bill Gates, the world's richest man and chairman of Microsoft, among its investors, have more than doubled.

Meanwhile shares of Archer Daniels Midland, the largest U.S. ethanol producer ahead of VeraSun, are up 57 percent, compared with a 2.9 percent gain in the shares of Exxon Mobil, the world's largest publicly traded oil company.

VeraSun's market debut on Wednesday marked one the year's best-performing initial public offerings, according to analysts. But just as the stocks tied to ethanol have soared sky-high, so would expectations for the companies to deliver real returns.

Strategists said ethanol was largely an untried energy form which could spell some disappointment if crude oil prices were to fall back sharply from their current level of about $70 a barrel. And with global commodity prices swinging wildly amid fears about a potential slowdown in economic growth, the risks could prove even greater.

"According to some studies, ethanol is very inefficient to produce. It costs you more to produce than you actually get," said Tobias Levkovich, Citigroup's chief U.S. equity strategist.

"(Ethanol) gets sexy again when you have higher energy prices. These are hot stories at any point in time. They (become a) fetish, and if I see lots and lots of stories written about it, it scares the heck out of me."

Story Copyright © 2006 Reuters Limited. All rights reserved.

seniorjose · June 2006

Aylmer gets ethanol plant

Thu, June 15, 2006

Facility will be set up with help from the province

By LONDON FREE PRESS STAFF

AYLMER  Aylmer will become the site of a new ethanol plant, with the help of $14 million from the province.

The provincial government announced here this morning it would invest $32 million to help companies build three new ethanol plants to be located in Aylmer, Hensall and Cornwall.

The province has also said it will kick in $60 million a year to help operate the three plants, as well as plants in Chatham and Collingwood.

The fuel-from-corn facility in Aylmer is the idea of the Integrated Grain Processors Co-operative, a farmers' collective aiming to swing the area economy towards renewable fuels.

The provincial funding is part of the $520-million Ontario Ethanol Growth Fund.

By 2007, all gasoline sold in Ontario is to have at least five-per-cent ethanol blend, resulting in cleaner emissions.
The provincial requirement is particularly welcome in Southwestern Ontario, which is one of Ontario's top corn-producing regions and which also boasts a huge Commercial Alcohols ethanol plant in Chatham.

seniorjose · June 2006

Is Ethanol Worth the Hype?
By Ryan Fuhrmann, CFA
June 15, 2006

If you recall the movie Back to the Future, nutty professor Dr. Emmett Brown, a.k.a. "Doc," created a time machine capable of driving back and forth in time. During one of his trips back to the future, Doc invented an automotive fuel source capable of blending and transforming fruits and veggies from a Cuisinart into a petrol equivalent. According to Doc, "The way I see it, if you're gonna build a time machine into a car, why not do it with some style?" He was probably talking more about the DeLorean sports car body, but the Cuisinart was definitely a classy feature.

The future for today

Maybe some day there'll be a plethora of time machine companies, all of which will gladly offer shares to investors to allow them to participate in jaw-dropping sales growth while also subsidizing company development costs and years of operating losses. Until that time, we'll have to settle for the developing investment craze of ethanol companies, which are capable of turning crops such as corn into an alternative fuel source -- kinda like that Cuisinart from Back to the Future.

The current crazePart of the growing ethanol hype is yesterday's share offering of VeraSun (NYSE: VSE) to the public at $23. VeraSun is the second-largest producer of ethanol in the U.S. The company plans to use the stock proceeds to build more ethanol plants and expand market share. Imagine that. The stock opened at $28 and shot to $30 by the close of the market for a 30% gain on the day. Great Scott! No wonder investors want in on the action.

And shares of Archer Daniels Midland (NYSE: ADM) have nearly doubled this year as investors discovered it's the largest producer of ethanol in the United States. Soon-to-be-public companies include Aventis Renewable and Hawkeye Energy. There will be no shortage of ethanol IPOs as long as investors willingly snap up the shares.

The issues with ethanolClearly, there are merits to producing ethanol and using it as an alternative to oil-based gasoline. It would most definitely benefit domestic farmers with a huge new market to sell corn into. It would also reduce American dependence on oil from the geopolitically charged Middle East.

On the flipside, it's unclear whether ethanol is, or will be, more affordable than gasoline. The issue is further complicated by factors such as subsidies provided to ethanol producers and fluctuating oil prices. If oil were to return to $20 a barrel, for instance, SUVs might even revisit their heyday. There's also a rather critical debate as to whether more energy is actually expended to create ethanol than is spent using it as a fuel source. And what about concerns that ethanol might damage engines and clog up filters? In other words, there are quite a few issues yet to be worked out.

Berkshire Hathaway weighs inThere's no better illustration of these issues than a summary of Charlie Munger's and Warren Buffett's thoughts on the subject at the May annual Berkshire Hathaway (NYSE: BRKa) meeting in Omaha, courtesy of fellow Fool Rick Casterline's copious note-taking.

Question: What is your opinion on the economics of ethanol as a fuel additive and as a potential investment? Should I be looking at that industry?

WB: Charlie and I don't know enough to answer that latter part. We've been approached many times, but we're trying to figure out the economics of an ethanol plant. It will depend on many factors, such as government policy and a lot of other variables we're not good at predicting. It's also a very hot area for investors right now, and our general experience is that we don't participate in things that are hot and easy to raise money for. I have a son who is head of the Ethanol Board in Nebraska. When he starts making more money than me, I'll reconsider. There's no question that usage will grow, but generally speaking, agricultural processing firms have not earned high ROICs. Look at Cargill, ADM. It has not been a great business. Ethanol could prove to be an exception, but I'm not sure how you gain a significant competitive advantage with any particular ethanol plant.

CM: My attitude is even more hostile than Warren's. I have just enough knowledge of thermodynamics left in me to suspect that it takes more fossil fuel energy than you can get out of ethanol, and that's a very stupid way to solve an energy problem. [Laughter]

The Foolish bottom lineIn summary, there will be a substantial amount of money made and lost by companies and investors alike as they wrangle over ethanol and its market potential. Cynicism aside, ethanol has promise. If the economics become compelling, the industry has the potential to greatly benefit oil-dependent domestic and international economies, as well as the environment. But from an investment perspective, until that promise develops, the Foolish investor would be wise to passively watch this one unfold from the sidelines.

fireball1 · June 2006

The last I heard, there was no such thing aS "clean coal" technology. The stuff is flat-out dirty.

fireball1 · June 2006

It had better be cheaper! A lot cheaper to win over drivers!

Mid-Nebraska, today: Regular unleaded, $2.79 a gallon; E-10, $2.85. Add in the mileage efficiency differences, and I can't see how anyone would fill 'er up with E-10 in this neck of the woods.

seniorjose · June 2006

Will Ethanol plants continue to make money if costs go up?
The Blade, Toledo, Ohio - May 22, 2006

The country's fascination with ways to curb oil imports has ethanol-producing plants springing up throughout the country. The corn-fed refineries making fuel for cars and pickup trucks are expected to be quite profitable this year and next, but after that, they may not be money machines, experts said. Some plants bring in a 30 percent return on investment, and others are in the lower double digits, experts said. But some have much more modest profits.

The ventures can be risky. With hefty investments of $80 million for a 50 million-gallon-a-year plant to $140 million for twice that size, recouping investment takes more than a couple of years. Success depends on location, corn prices, ethanol prices, fuel prices, and other factors, they say.

Jeff Ehlert, president of Great Lakes Ethanol LLC, which is building a 50 million-gallon plant near Blissfield, Mich., said his plant's profit projections are rising now as higher gasoline prices prompt demand for more ethanol and gasoline suppliers use ethanol to replace a harmful fuel additive called MTBE. But Mr. Ehlert fears that profits will "be bouncing all around" over the long term. "It should be real good for the next few years, but after that we don't think it will be as good," he said.

Thomas Byrne, head of Byrne & Co. Ltd., of Preston, Minn., which has helped develop more than 30 ethanol plants, said "the thing to remember is it's a commodity-based industry. Sometimes it's going to be good, sometimes it will be bad." Of nearly 100 plants operating in the United States, most were built to turn profits when the price of ethanol delivered to a terminal market, such as Chicago, hits $1.30 to $1.35 a gallon, Mr. Byrne said.

A year ago, ethanol terminal prices were down to a $1 to a $1.20 a gallon, and some plants lost money, he said. But with ethanol prices at the terminal hovering between $2.70 and $2.90, some plants now are swimming in profits. And Mr. Byrne said he's bullish on ethanol and bets that prices will never go down to $1.20 again. "The plants right now are very profitable if managed right and in the right location," he said.

Mr. Byrne said those high profits are based on plentiful low-priced corn, which has been the case the last several years. But the price of corn has been working its way up. And natural gas, an ethanol plant's second-largest expense, also is getting more expensive. Over the long term, those two factors could cut profitability, he said.

Feed corn is a critical fuel source, so a plant typically can have an annual purchase expense of $70 million or more. If a corn shortage sends prices up quickly and ethanol prices drop, perhaps because of lower gasoline prices, what looked to be a sure profit can drop, Mr. Byrne said. "The problem is, your bottom line can change by $100 million pretty quickly either way, and that's pretty significant."

But for now, profits are high. "If you have a 50 million-gallon plant and ethanol hits $2.30, you've made $50 million. Your returns now are very, very good," Mr. Byrne said.

A typical 50 million-gallon plant stands to make additional millions. Distillers' dried grain - the byproduct from distilling the starch from corn during the ethanol process - can fetch $12 million to $13 million. Cattle farmers buy the product. Carbon dioxide, another byproduct, is worth about $2 million to bottlers and dry-ice makers, Mr. Byrne said. A plant's payroll and maintenance total less than $2 million annually.

Alex Samardzich, chief executive of Ace Ethanol LLC, which runs a 40 million-gallon plant at Stanley, Wis., said local agricultural issues greatly affect a plant's profits. "Sometimes there's too much corn, sometimes not enough. What you'll find is with profitability, it ranges across the board," he said.

seniorjose · June 2006

Mid-Nebraska, today: Regular unleaded, $2.79 a gallon; E-10, $2.85. Add in the mileage efficiency differences, and I can't see how anyone would fill 'er up with E-10 in this neck of the woods.

I filled up today here in Cedar Rapids, Iowa at $2.69 a gallon for E10 89 Octane. 87 octane gasoline was $2.79. Just think of it as kicking the oil cartel dictators in the rump! Drivers don't neeed to be "won over."

gagrice · June 2006

"It just made great economic sense to use coal,"

I really was not preaching to you, it was to the church of Zero Emissions. Coal is not horrible compared to years back. To some it is bad news. To anyone that thinks a car should be PZEV or banned it is a disaster to use coal for anything other than a Christmas stocking.

You probably don't care if they use bunker oil to fire the furnaces of the ethanol stills. I would be surprised if this does not put all the out of business bootleggers back to work.

seniorjose · June 2006

The last I heard, there was no such thing aS "clean coal" technology. The stuff is flat-out dirty.

Clean coal technology has been around since the 1960s -- if you build the scrubbers in like almost all regulations state. I watched the local (New Jersey) Owens Corning plant shift from no scrubbers in 1964. From being a terrible "smokestack" industry, it was turned into a very good neighbor with no particles in the air. the difference is dramatic and since it is an old technolgy by now, it can work. The coal smokestacks that belch like the steel plants of turn-of-the-century Pittsburg steel mills is long gone into history.

lmyers92123 · June 2006

I thought E10 was the new standard fuel? They replaced 10%MTBE with 10%ethanol. Maybe it's just another CA only piece of legislation but I though it was national. E85 would be a completely different mix.

There is a lot of opinion and passion in this thread..that is good. I guess as long as we move from foreign oil dependence and being held over the barrel by oil companies that is good. I hope we put out many alternative fuels and break the cycle. Competition, in general, is great for the consumer.

seniorjose · June 2006

American Coalition for Ethanol Releases Results of Fuel Economy Study

Sioux Falls, SD (August 24, 2005)  The American Coalition for Ethanol (ACE) today released the results of its recent Fuel Economy Study, a pilot study that researched the fuel economy, cost per mile, and driveability of various blends of fuel, including unleaded gasoline, E10, E20, and E30.

As ethanol production and use continues to expand from coast to coast, increased public discussion and media attention have often turned to a debate over ethanol's fuel efficiency, said Ron Lamberty, ACE Vice President / Market Development. Because there was very little scientific information out there, ACE commissioned a pilot study to determine whether there are variances in gas mileage between ethanol blends and gasoline.

The research tested unleaded gasoline, a 10% ethanol blend (E10), a 20% ethanol blend (E20), and a 30% ethanol blend (E30) in three late-model vehicles. The Chevrolet Impala, Ford Taurus, and Toyota Camry were not flexible fuel vehicles, and no modifications were made to them for this research. Care was taken to eliminate any human inputs that might render the tests unscientific, including the use of a computerized data logger and strict controls on the vehicles, fuel, and terrain.

The test was conducted by Allen Kasperson, a Fuel Research Specialist and instructor with more than 30 years of experience training automobile and truck technicians at Lake Area Vocational Technical Institute in Watertown, South Dakota. The study also examined an E10 blend that had been denatured with iso-pentane and soy biodiesel, a denaturant combination that Kasperson had studied and found to have lowered the fuel's reid vapor pressure (RVP). While the RVP tests in this study were inconclusive, the blend did perform better than unleaded in most tests.

Read full results of the study
Miles per gallon
The three vehicles averaged only 1.5% lower mileage with E10, 2.2% lower mileage with E20, 5.1% lower mileage with E30, and increased mileage of 1.7% when using the specially denatured E10 blend.

Cost per mile
Although the MPG of ethanol blends was slightly lower than the unleaded, the cost per mile of operation was generally lower. Also, the higher the concentrations of ethanol, the lower the cost per mile. Using the study's average MPG, E10 is less expensive per mile than unleaded until ethanol's cost is nearly 30 cents above unleaded. On a $20 bill, drivers can travel up to 15 miles farther on ethanol-blended fuel than on straight unleaded.

Driveability
Contrary to statements commonly made by vehicle manufacturers and technicians, no warning lights were displayed at any time while operating on any of the fuel blends. The data logger used for the research monitored all systems and detected no malfunction indicator lights (MIL), diagnostic trouble code lights (DTC), or emissions DTCs.

Also, it has been assumed that in older model vehicles the oxygen sensor could not recognize fuel with ethanol content higher than 10% and therefore caused a malfunction indicator light to be displayed. In all vehicles used, the car's computer seemed to have the ability to adjust the air/fuel ratio normally with ethanol blends even beyond the standard 10%.

The study cautioned that motorists should not use fuel with concentrations of ethanol higher than those recommended by the vehicles' manufacturers, but called for more research to determine if those fuels should be approved for use in standard, non flexible fuel vehicles.

If drivers want to save money at the pump as gas prices reach new record highs, this pilot study confirms that ethanol is the fuel of choice, said Brian Jennings, ACE Executive Vice President. Using ethanol is like money in your pocket, and you feel good about filling up on this homegrown fuel because it comes from America's farm fields, not the oil fields of the Middle East.

The bottom line is that, in addition to offering higher performance and lower emissions, ethanol-blended fuel is easier on the pocketbooks of American motorists, Lamberty said.

lmyers92123 · June 2006

This is the link from seniorjose's post.

http://www.ethanol.org/

Why did they do E10-E30 in non FFV vehicles and not compare costs per mile of E85 in FFV's? I'm always wary of information provided by "unbiased" sources on a lobbing website.

gagrice · June 2006

I'm always wary of information provided by "unbiased" sources on a lobbying website.

Maybe that is where the good news about ethanol resides. We have actually strayed from the original topic. That is as you have mentioned E85 is the subject on the thread. And whether it is good for the country made from Corn (yellow). I'm sure if they had tested a FFV with E85 it would not have looked real good for the guys selling this boondoggle. So they go with mixtures that would void your auto warranty using anything stronger than E10. I actually am not anti ethanol. I am anti mandate and mega farmer.

As this report indicates less corn will be available next year. That drives the price of ethanol above the current $3.50 per gallon. If we are only worried about the guy with the FFV no big deal he can buy regular gas and tell ADM to buzz off. With the E7-E10 mandate for all regular unleaded. It will drive all gas prices even higher.

With the 3.8 million acre decline in plantings that was indicated in the March intentions, a trend U.S. corn yield would produce a crop about 900 million bushels below potential 2006-07 utilization

Iowa corn projection

tpe · June 2006

I thought E10 was the new standard fuel?

That's impossible since the amount of ethanol produced only accounts for 3-4% of our fuel consumption. E10 has significance in that all gasoline burning cars can use E10 without voiding their warranties. I suspect that every gasoline burning car could also run on E85. Its just at some point the corrosive nature of ethanol would eventually cause problems for those vehicles not designed for this fuel.

I hope we put out many alternative fuels and break the cycle. Competition, in general, is great for the consumer.

I agree. We all want energy independence. Allow the market some say in what is the best approach. Minimize politics. Ethanol cannot be separated from politics.

tpe · June 2006

I recently read an article expressing that OPEC is concerned with the current emphasis on exploring alternative fuels. They feel like a price of 50-55 dollars per barrel would be consistent with their interests of maximizing profit and perpetuating oil economies. I'm not sure what this has to do with the ethanol discussion, but I find it interesting. Specifically its the fact that although OPEC would like for oil prices to be cheaper they are no longer in the position to make it happen. To me that is an indication of a system that is strained very close to capacity. I personally hope that gas prices stay high because I welcome the increased R&D into alternatives that it has spurred.

lmyers92123 · June 2006

I stand corrected by tpe. I mixed cars built currently to run on 10% ethanol without damaging effects with E10.

fireball1 · June 2006

Environmental Defense, July 2004:
"Anyone who has spent a day outdoors in a bustling city, near a construction site or a factory is unlikely to forget the black sooty grime washed off at the end of the day. Technically known as particulate matter (or PM), soot is spewed out in the black smoke billowing from tailpipes and smokestacks -- from factories and power plants, diesel-powered trucks, buses, ships, boats, locomotives and tractors. But sooty particles are more than just a nuisance -- they are one of the nation's most pressing public health problems.

Particulate pollution is a mixture of soot, smoke, and tiny particles formed in the atmosphere from sulfur dioxide (SO2) and oxides of nitrogen (NOx) pollution. Sooty particles are most dangerous when very small as they can penetrate deep into the lungs (and the lungs are not effectively able to expel them), where they cause serious health impacts. Children are especially vulnerable because their lungs are still developing. Breathing in air heavy with tiny particles can be dangerous even over a short time; because these particles are so minuscule, they can enter the circulatory system and damage blood vessels.

Coal-fired power plants are a big contributor to the problem. "Power plant smokestacks are public health enemy number one for their contribution to deadly particulate pollution across the eastern United States," said Dr. John Balbus, a physician and head of Environmental Defense's health program. "Particulate pollution contributes to tens of thousands of premature deaths annually, heart attacks, strokes and asthma attacks."

fireball1 · June 2006

May 25, 2006

GOVERNOR ANNOUNCES MAJOR INITIATIVE TO REDUCE MERCURY EMISSIONS

Proposal Would Protect Public Health and the Environment by Cutting Mercury Emissions from Coal-Fired Power Plants by 90 Percent

Governor George E. Pataki today announced a new State proposal to reduce harmful mercury emissions from coal-fired utility power plants by approximately 50 percent from current levels by 2010 and 90 percent by 2015.

Mercury emissions from coal-fired power plants can have severe environmental and public health impacts, and we must take aggressive steps to control these harmful emissions and reduce the presence of this pollutant in our air and water, Governor Pataki said. By adopting these new standards, all coal-fired power plants in the State would be required to use pollution control technologies to significantly reduce their mercury emissions. This initiative is another example of New Yorks leadership in improving air quality and protecting our natural resources, and will help to ensure a healthy Empire State for all to enjoy.

fireball1 · June 2006

Citizens for Pennsylvania's Future:

Toxic mercury pollution from (coal-fired) power plants threatens the health of women and their babies. More than 600,000 women of childbearing age nationwide have amounts of mercury in their blood over the level set as safe by the Environmental Protection Agency and the National Academy of Sciences. Unsafe levels of mercury in mothers' blood and breast milk can interfere with the proper development of babies' brains and neurological systems and can lead to learning disabilities, attention deficit disorder, problems with coordination, lowered IQs and even mental retardation.

Pennsylvania power plants are the second biggest emitters of toxic mercury pollution in the country. The Fish and Boat Commission has issued advisories that cover every lake, river and stream in the state that warns people to limit eating fish caught here.

Will ethanol E85 catch on in the US? Will we Live Green and Go Yellow?

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