Field-to-Pump

"Field-to-Pump" is a unique strategy created by Renergie, Inc. (“Renergie”) to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies. On June 21, 2008, Governor Bobby Jindal signed into law the Advanced Biofuel Industry Development Initiative (“Act 382”), the most comprehensive and far-reaching state legislation in the United States enacted to develop a statewide advanced biofuel industry. Act 382 is based upon the “field-to-pump” strategy. Louisiana is the first state to enact alternative transportation fuel legislation that moves fuel ethanol beyond being just a blending component in gasoline by including a mandatory variable blending pump pilot program and hydrous ethanol pilot program.
History
Renergie, a corporation organized under the laws of the State of Florida, created the “field-to-pump” strategy. Renergie was formed on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten small advanced biofuel manufacturing facilities in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Renergie produces fuel ethanol solely from sweet sorghum juice. Each small advanced biofuel manufacturing facility has a production capacity of five million gallons per year (“5 MGY”).
Recent company developments
Renergie drafted the legislation (“HB 1270”) for the creation of an advanced biofuel industry development initiative in Louisiana. On June 9, 2008, the Louisiana Senate passed HB 1270 by a vote of 38-0. On June 21, 2008, Governor Bobby Jindal signed HB 1270 into law. On December 20, 2008, Renergie submitted a testing exemption application to the U.S. Environmental Protection Agency (“EPA”) for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. On-site blending pumps, in lieu of splash blending, are used for this test. On February 4, 2009, U.S. EPA granted Renergie a first-of-its-kind testing exemption for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. On October 18, 2007, Renergie submitted a grant application to the Florida Department of Environmental Protection (“DEP”), pursuant to the Renewable Energy Technologies Grant Program, for the purpose of partially funding “field-to-pump” in Florida. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida DEP’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. On January 20, 2009, the Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s “field-to-pump” funding from $1,500,483 to $2,500,000.
“Field-to-Pump” strategy
The unique “field-to-pump” strategy is best explained by studying the five risk areas in the production of fuel ethanol: cost of feedstock, feedstock selection, harvesting, processing, and marketing.
Cost of feedstock
It is the cost of producing the feedstock which ultimately determines the relative economic feasibility of an ethanol processing facility. “Field-to-Pump” does not allow an ethanol producer to fall victim to rising feedstock costs. There is a link between the compensation paid to “field-to-pump” farmers/landowners and ethanol market conditions. Farmers/landowners receive a lease payment for their acreage and a royalty payment based on a percentage of the gross revenue generated from the sale of fuel ethanol. “Field-to-Pump” marks the first time that farmers/landowners share risk-free in the profits realized from the sale of value-added products made from their crops.
Feedstock selection
In Louisiana, “field-to-pump” produces ethanol solely from sweet sorghum juice. The controversial “food vs. fuel” debate which is ongoing in agricultural, energy and academic circles in regard to Midwest corn-to-ethanol production does not apply to “field-to-pump.”
Advantages of Producing Ethanol Directly from Sweet Sorghum Juice:
(1) High Yield - Sweet sorghum juice yields between 500 to 800 gallons of ethanol per acre;
(2) Water Efficient Crop - Sweet sorghum, a seed-propagated crop with more than 4,600 known varieties, has very low irrigation needs compared to corn and sugarcane. It requires one-half of the water required to grow corn and one third of the water required to grow sugarcane;
(3) Ability to Grow in “Marginal Soil” - Sweet sorghum can grow in marginal soils, ranging from heavy clay to light sand. Sweet sorghum has been called a “camel among crops,” owing to its wide adaptability, its marked resistance to drought and saline-alkaline soils, and tolerance to high temperature and waterlogging;
(4) Not Harmful to the Environment - Sweet sorghum requires the use of only 40 to 60 pounds of nitrogen per acre whereas corn growers use more than 150 pounds per acre, according to the U.S. Environmental Protection Agency. Less fertilizer reduces the risk of water contamination;
(5) Rapid Growth - Sweet sorghum takes only 4 months to reach maturity, which is short enough to allow harvesting twice a year. Sugarcane requires 14 months to reach maturity. Sweet sorghum hybrids, which are not photoperiod sensitive, will flower when daylight is less than 13 hours a day;
(6) Energy Efficient - The energy requirement for converting sweet sorghum juice into ethanol is less than half of that required to convert corn into ethanol. This is due to the fact that the sugars in sweet sorghum juice are fermented directly. There is no need to excessively heat the juice to breakdown starch into sugars as required for corn ; and
(7) Benefits Marine Life in Gulf of Mexico - Corn requires a large amount of fertilizers.
Fertilizers from cornfields wash into streams and rivers that lead to the Mississippi River, funneling large amounts of nitrogen and phosphorus into the Gulf of Mexico. As temperatures rise in late spring, those nutrients combine with sunlight to fuel explosive algae blooms that cloud waters and suck up the oxygen available for marine life. For the commercial and recreational fishing industries, a huge swath of the Gulf of Mexico is off limits. This dead zone measured 7,915 square miles in 2007. Scientists at Louisiana State University and the Louisiana Universities Marine Consortium predict the "dead zone" of oxygen-depleted waters off the Louisiana and Texas coasts could grow this summer to 10,084 square miles. If this prediction is correct, the "dead zone" in 2008 would be 17-21 percent larger than at any time since the mapping began in 1985 — and about as large as the state of Massachusetts. A recent report by the National Research Council finds that producing biofuels in an environmentally friendly way is imperative if Louisiana is to continue reaping the benefits of a strong fishing industry. Sweet sorghum requires one-third of the nitrogen required to grow corn. Producing ethanol from sweet sorghum, rather than increasing corn-to-ethanol production, will reduce the risk of the formation of dead zones.
Harvesting
One challenge of producing ethanol from sweet sorghum is that, unless fermentation of the juice is started within a few hours after harvesting, a 50% sugar loss may occur in only 24 hours. “Field-to-Pump” is the only strategy with a proven mechanical harvesting system capable of:(a) harvesting and transporting whole stalks of sweet sorghum to small advanced biofuel manufacturing facilities; and (b) ensuring that juice extraction and fermentation are started within a few hours after harvesting.
Processing
Smaller is better. “Field-to-Pump” establishes the first commercially viable large-scale decentralized network of small advanced biofuel manufacturing facilities in the United States capable of operating 210 days out of the year. As with most industrial processes, large ethanol plants typically enjoy better process efficiencies and economies of scale when compared to smaller plants. However, large ethanol plants face greater supply risk than smaller plants.
“Field-to-Pump” employs a decentralized network of small advanced biofuel manufacturing facilities in Louisiana, each small advanced biofuel manufacturing facility utilizing feedstock from a reasonable transportation distance. The distributed nature of a smaller advanced biofuel manufacturing facility network reduces feedstock supply risk, does not burden local water supplies and provides broad-based economic development. The U.S. EPA is encouraging the development of renewable energy by identifying currently and formerly contaminated lands and mining sites that present opportunities for renewable energy development. “Field-to-Pump” agrees with the U.S. EPA’s position that, “By using these sites, we can help meet the growing national demand for renewable energy while lessening pressure on greenspace and providing economically viable and socially beneficial futures for sites that are currently under used or vacant.” The map of EPA sites in Louisiana with biorefinery facility siting potential indicates that a few sites may be suitable for one or more “field-to-pump” small advanced biofuel manufacturing facilities.
Marketing
“Field-to-Pump” focuses on growing ethanol demand beyond the 10% blend market. Each “field-to-pump” small advanced biofuel manufacturing facility produces fuel ethanol, transports the fuel ethanol by tanker trucks to its storage tanks at its local gas stations and, via blending pumps, blends the fuel ethanol with unblended gasoline to offer its customers a choice of E10, E20, E30 and E85. Each “field-to-pump” small advanced biofuel manufacturing facility captures the blender’s tax credit of 45-cents-per-gallon thereby guaranteeing its ability to make sufficient royalty payments to its farmers/landowners and be cost-competitive.
Blender’s tax credit
The American Jobs Creation Act of 2004 established the Volumetric Ethanol Excise Tax Credit (“VEETC”), also known as the “Blender’s Tax Credit.” Excise taxes on highway fuels have been a dedicated source of funding for the since its creation in 1956. The Federal Government levies a tax of 18.4 cents per gallon on domestic gasoline sales. The Blender’s Tax Credit provides a credit against federal gasoline taxes that is worth 45 cents for every gallon of ethanol blended into the gasoline pool. The excise tax credit is fully refundable. To receive a refund, a blender must first apply the excise tax credit against any excise tax liability for a particular taxable year. To the extent the blender has any excise tax credit remaining after applying the credit against its excise tax liability, the blender may request a refund of the excess credit or may apply the excess credit against its income tax liability.
Blending pumps
“Field-to-Pump” uses variable blending pumps to blend fuel ethanol with unblended gasoline at the gas station pump. In the U.S., the primary method for blending ethanol into gasoline is splash blending. The ethanol is “splashed” into the gasoline either in a tanker truck or sometimes into a storage tank of a retail station. “Field-to-Pump” eliminates the inaccuracy and manipulation of splash blending by precisely blending the fuel ethanol and unblended gasoline at the point of consumption, i.e., the point where the consumer puts E10, E20, E30 or E85 into his or her vehicle. A variable blending pump ensures the consumer that E10 means the fuel entering the fuel tank of the consumer’s vehicle is 10 percent ethanol (rather than the current arbitrary range of 4 percent ethanol to at least 24% ethanol that the splash blending method provides) and 90% gasoline. Moreover, a recent study, co-sponsored by the U.S. Department of Energy and the American Coalition for Ethanol, found E20 and E30 ethanol blends outperform unleaded gasoline in fuel economy tests for certain motor vehicles.
Hydrous ethanol
Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions. The U.S. Environmental Protection Agency has granted a testing exemption to Renergie. Under the test program, the first of its kind in the U.S., Renergie will use variable blending pumps, not splash blending, to precisely dispense hydrous ethanol blends of E10, E20, E30, and E85 to test vehicles for the purpose of testing for blend optimization with respect to fuel economy, engine emissions, and vehicle drivability. Sixty vehicles will be involved in the test program which will last for a period of 15 months.
Use of hydrous ethanol in the U.S.
Hydrous ethanol has been used in the United States as a transportation fuel for at least one-hundred years. The Model T Ford, which debuted in 1908, was originally designed to operate on alcohol. The Model T and Model A Fords were later designed to operate on either alcohol or gasoline or a blend of alcohol and gasoline. These were arguably the first “flex-fuel vehicles.” During the early 1900s, a distillery was a standard piece of farm equipment. These distilleries made 192-proof alcohol for human consumption, lantern fuel and transportation fuel. The distilleries were referred to as “stills” and the alcohol became known during the Prohibition period as “moonshine.” This moonshine was hydrous ethanol. Rural America, especially southern rural America, has always used small farm distilleries to process hydrous ethanol for transportation fuel during times of severe oil shortages or high gasoline prices.
Use of hydrous ethanol in Brazil
Brazil introduced its current generation of ethanol-powered cars in 2003, the same year in which anhydrous ethanol consumption peaked. Named flex-fuel vehicles (“FFVs”), these automobiles run on gasoline, ethanol, or any blend of the two. When the car is filled at the pump, an internal system analyses the mix of the two fuel types and adjusts accordingly. The first such vehicles were introduced by Volkswagen in 2003, and by 2004, they accounted for more than 17% of the Brazilian auto market. In 2005, their sales increased even further, accounting for approximately 54% of all new car sales. Before the introduction of the flex-fuel car in Brazil in 2003, cars running on ethanol fuel were primarily using pure ethanol or hydrous ethanol blends.
In Brazil, there are currently two fuel types available at the fuel station for passenger vehicles: E100 (“AEHC”) that is the derived from a simple distillation process and has about 4.9% water content in it and Gasoline C, or E25, which is a mixture of 75% Gasoline A and 25% in volume of anhydrous ethanol (“AEAC”) with a maximum of 0.4% of water. It is possible to use gasoline C made with hydrated ethanol (“AEHC”) with minimum risk of phase separation due to Brazilian climate conditions.
The State of Louisiana believes the “field-to-pump” transition from anhydrous to hydrous ethanol for gasoline blending will make a significant contribution to fuel ethanol’s cost-competitiveness, fuel cycle net energy balance, and greenhouse gas emissions profile.
“Field-to-Pump” challenges
“Field-to-Pump” small advanced biofuel manufacturing facilities have two basic challenges: (a) access to wholesale unblended gasoline; and (b) importation of duty-free foreign fuel ethanol by U.S. oil companies and their blending affiliates.
Access to wholesale unblended gasoline
Fair and healthy competition in the marketing of fuel ethanol is essential. It was never the legislative intent of the U.S. Congress, nor the intent of the U.S. Environmental Protection Agency, to allow oil companies to be the sole beneficiaries of the blender’s tax credit. Section 6426 of the Internal Revenue Code creates a credit against the excise tax on taxable fuels. The excise tax credit is generally available to any person that blends alcohol or biodiesel with taxable fuel in a mixture. To qualify for the credit, a qualifying mixture must either be sold by the producer to a buyer for use by the buyer as a fuel or be used as a fuel in the trade or business of the producer. In Louisiana, “field-to-pump” small advanced biofuel manufacturing facilities have easy access to wholesale unblended gasoline in order to blend. However, this is not the case in other states where oil companies have a monopoly on blending fuel ethanol with unblended gasoline and thereby capturing the blender’s tax credit of 45-cents-per-gallon.
Importation of duty-free foreign fuel ethanol
Permitting oil companies to import relatively inexpensive duty-free foreign ethanol under the
Caribbean Basin Initiative and subsequently permitting only such oil companies and their affiliates to blend and receive the 45 cents-per-gallon blender’s tax credit impairs fair and healthy competition in the marketing of fuel ethanol. “Field-to-Pump” small advanced biofuel manufacturing facilities have the right to blend fuel ethanol and unblended gasoline to receive the 45 cents-per-gallon blender’s tax credit and be cost-competitive.
Ethanol import tariff
Ethanol imported into the United States is subject to two customs duties: an ad valorem tariff rate of 2.5 percent and a secondary tariff of 54 cents per gallon. The Ethanol Import Tariff of 1980 imposed the 54 cent-per-gallon tariff on imported ethanol. In many cases, this tariff negates lower production costs in other countries. For example, by some estimates, Brazilian ethanol production costs are roughly 50% lower than in the United States. A key motivation for the establishment of the tariff on imported ethanol was to offset the Blender’s Tax Credit incentive for ethanol-blended gasoline. Unless imports enter the United States duty-free, the tariff effectively negates the incentive for those imports.
Caribbean basin initiative
U.S. oil companies, due to a loophole in the Caribbean Basin Initiative (“CBI”), are currently allowed to import thousands of barrels of fuel ethanol every month without having to pay the 54-cent-per-gallon tariff. The CBI was established in 1983 to promote a stable political and economic climate in the Caribbean region. As part of the initiative, duty-free status is granted to a large array of products from beneficiary countries, including fuel ethanol under certain conditions. If produced from at least 50% local feedstocks (e.g., ethanol produced from sugarcane grown in the CBI beneficiary countries), ethanol may be imported duty-free. If the local feedstock content is lower, limitations apply on the quantity of duty-free ethanol. Nevertheless, up to 7% of the U.S. market may be supplied duty-free by CBI ethanol containing no local feedstock. In this case, hydrous (“wet”) ethanol produced in other countries, historically Brazil or European countries, can be shipped to a dehydration plant in a CBI country for reprocessing. After the ethanol is dehydrated, it is imported duty-free into the United States. Currently, imports of dehydrated ethanol under the CBI are far below the 7% cap. CBI imports have the potential to increase significantly over the next few years, especially as the domestic market grows under the renewable fuels standard.
Act 382
Act No. 382, entitled “The Advanced Biofuel Industry Development Initiative,” was co-authored by 27 members of the Legislature. The original bill was drafted by Renergie, Inc. Representative Jonathan W. Perry (R - District 47) , with the support of Senator Nick Gautreaux (D - District 26) , was the primary author of the bill.
Economic benefits
§3761 of The Advanced Biofuel Industry Development Initiative states, “The legislature hereby finds and declares that the development of an advanced biofuel industry in Louisiana is a matter of grave public necessity and is vital to the economy of Louisiana. The use of advanced biofuel will expand United States and Louisiana fuel supplies without increasing dependency on foreign oil. The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing: (1) increased value added to the feed stock crops which will benefit the producers and provide more revenue to the local community; (2) increased investments in plants and equipment which would stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed; (3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and (4) increased local and state revenues collected from plant operations would stimulate local and state tax revenues and provide funds for improvements to the community and to the region……. Therefore, an advanced biofuel industry development initiative in Louisiana is vital to ensuring the broad-based rural economic development of Louisiana and is a matter of public policy.”
State vehicle fleets
Act 382 further states, “The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel that results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof that meet or exceed federal Clean Air Act standards.” Louisiana’s Advanced Biofuel Industry Development Initiative provides that a governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30 or E85 advanced biofuel at a price equal to fifteen percent (15%) less per gallon than the price of unleaded gasoline for use in any motor vehicle.
Team approach
Louisiana realizes that merely building ethanol plants without simultaneously developing the necessary fueling infrastructure, ensuring an open and competitive market for the ethanol producers, and having the Louisiana Department of Agriculture & Forestry , the Louisiana Department of Environmental Quality and the U.S. EPA work as a unified team to test and approve blending pumps, mid-level ethanol blends and hydrous ethanol, is not in the best interest of the state, the ethanol producer, the agricultural community or the consumer. The Louisiana Legislature finds and declares that the proper development of an advanced biofuel industry in Louisiana requires the comprehensive "field-to-pump" strategy.

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