Posts

By health check or economic necessity: A tale of two oil industries and their response to illness

By John Hofmeister and Marshall Kaplan

shutterstock_118647259A bad cold starts with a tickle in the throat and a languid day. It grows to painful swallows, stuffed sinuses and likely a fever. Does the patient treat the symptoms? Does he or she transform to avoid illness in the future?

Few oil company players will admit to it yet, but the future threatens a very bad cold for the current industry, or worse. Very few feel it coming because current business plans are robust and the workload is on overload. When they are recognized, the threats to the current business model are going to take more than treating the symptoms; there are transformative requirements to avoid getting permanently sick, including, for many, a difficult transition to alternative fuels. The industry’s investors are not likely to remain committed to oil. Neither are the politicians, the Wall Street analysts and the public who, for different reasons, some economic and some with concerns for the environment, are already shaky with respect to the future of oil. Unenthused investors actions, however, will speak much louder than concerned words.

Everyone agrees that conventional oil has peaked. Unconventional oil may be abundant, but it’s expensive. It’s so expensive that industry valuation is already being impacted by worried investors who don’t like companies borrowing cash to pay dividends. Shale formation decline rates demand evermore drilling. Drilling costs increase as more wells per amount of production are completed, raising per barrel costs. Sweet spots are finite as the majors have learned the hard way. They bought into many plays too late. The Middle East is, well, the Middle East. Don’t look for reduced tension in the near future. Do look for OPEC nations to increasingly shift oil for export into oil for local consumption — a residual of the Arab Spring. Business as usual is history. Brazilian, East African, Russian and Arctic production opportunities abound, except that the degrees of difficulty are unclear and uncertain, but are sure to be costly. The high costs and regulatory uncertainties of oil limit global growth and nourish alternative fuel prospects. Oil investors don’t like sore throats emerging from hard to swallow realities. They will want to create a new reality to protect their financial wellbeing.

The costs of carbon have yet to be added onto oil and we know they’re coming. There’s debate over the form of payment, not the reality. Take a look not only at the number of governments backing carbon constraints coming out of this year’s climate meeting at the UN, but, more importantly, count the companies! Count the crowd recently claiming the high ground from Central Park to Midtown in New York and other cities around the world. The oil industry’s low favorability gives it limited public influence. While special-interest money may run out the clock on near-term legislation in the next Congress, for the industry, it not a long term solution. Civil society and political trends are inevitably contrary to the industry’s status quo interests. The rhetoric alone will tax the bronchial capacity of oil and gas leaders; investors will cease shaking hands with infected stocks.

Cash is to oil what gasoline is to the internal combustion engine. Higher upstream costs and more expensive fuels reduce consumer demand and, inevitably, cash flow. Downstream cash can’t make up the difference for higher upstream capital (cash) outlays when consumers drive less or take advantage of increasing availability of lower-cost alternative fuels, despite the BTU and/or mileage disadvantages of alcohol fuels versus oil products.

Finally, when divestment trends start to impact the industry, perhaps initially not directly through actual shifting of resources, but because of the growing perceptions of the risk of stranded assets, opportunity costing equations will begin to hit hard. The value associated with increasing capital costs for oil development will be muted. With ever higher costs, more difficult unconventional production, more challenging resource basins and tighter regulatory scrutiny, along with environmental constraints, existing assets may never get produced. The probable reserve that never makes it to proven becomes ever less valuable with time, perhaps even worthless. Investors don’t like that. Oil price to support such production is unsustainable; the price rises until it crashes; production cannot recover from the collapse because sustainable alternative fuels will have taken increasing market share. To remain competitive, oil may not be able to climb above the $55 – 75 range. This prospect will cause full blown pneumonia for oil companies. Most still do not see it coming. For OPEC countries who are under inconsistent pressures — first to increase exports for needed revenues at home to fund services for an often restive population; second, to reduce exports to provide energy and gasoline products to larger population numbers, it could present real challenges affecting political stability.

Some companies that sense it coming will not wait for the cold symptoms to lodge in their respiratory systems. They will get out in front with natural gas, using an entirely different cost/price structure to displace high cost oil by producing natural gas for fuels, including ethanol, methanol, CNG and LNG. They’ll also embrace biofuels as a sustainable and carbon-reducing alternative to oil products only. In both cases, their cash flows and capital outlays will fund reasonable and rational alternative investments in downstream and midstream infrastructure to produce, distribute and sell alternative fuels, extending their business models and capabilities rather than risking everything on their past model. They’ll choose investor and their own health and economic necessity as the basis of a new business model transforming the mobility industry with fuels competition.

A handful of smart companies will astutely come to grips with their industry’s endemic inability to change their historic focus on oil as their base business. They’ll see diversity as an opportunity to run the race with competitive fuels, and they’ll recognize that oil and gasoline will only be able to sustain their monopoly status at the pump for a relatively short period of time. They will trade one form of steel in the ground for another, bringing the competencies of size, scale and execution to an ever-growing, oil-displacing, alternative fuels industry. In the process, they will simultaneously reduce the size of the oil upstream capital, cash, environmental and stranded asset problems that alienated investors, and, at times, the public, particularly related to emissions and other pollutants.

With a proper health check, after scanning the industry’s economic and environmental horizons, they acknowledge the inevitability of the changing critical role of investors. Their own financial health and economic necessity will redefine the role of oil and change the competitive landscape.

 

John Hofmeister, Former President Shell Oil Company (retired), Founder and CEO Citizens for Affordable Energy, Author of Why We Hate the Oil Companies: Straight Talk from an Energy Insider (Palgrave Macmillan 2010)

Marshall Kaplan, Advisor Fuel Freedom and Merage Foundations, Senior Official in Kennedy and Carter Administrations, Author

shutterstock_160159355-300x300

Bio-processing of Gas-to-Liquids: A Report Card

If finding microbes that can convert cellulose plant material into ethanol is of the holy grails of biofuels, an equally elusive goal is using microbes to make liquid fuels out of natural gas.

Almost everyone agrees that the best way to apply our now-abundant natural gas resources to transportation would be to convert it into a “drop-in” liquid fuel that would fit easily into our current gas-station infrastructure. T. Boone Pickens’ CleanFuels Corp. and others are trying to supply compressed natural gas to diesel trucks, but the effort has obvious impediments and will require a whole new infrastructure.

Much easier would be the direct conversion of natural gas to methanol, the simplest alcohol, which is now produced at a rate of 33 billion gallons per year for industrial purposes. But methanol still suffers from its Prohibition-Era reputation as poisonous “wood alcohol” (although gasoline is equally poisonous) and has run into stiff EPA regulations on converting contemporary engines to burn alternative fuels. (See “Making the Case for Mars and Methanol”) And so the vision has arisen that a golden gas-to-liquids pathway can be carved by the nation’s laboratories working with nature’s existing microbial stock.

A year ago, ARPA-E, the fast-track research funding agency modeled on the Defense Department’s Advanced Research Project Agency, announced a new initiative: REMOTE – the Reduced Emissions Using Methanotrophic Organisms for Transportation Energy.  Methanotrophic organisms are microbes that feast on methane, the simplest carbohydrate, and can convert it into more complex molecules such as butane or formaldehyde, which can in turn be synthesized by other microbes into butanol, methanol or other liquids that can be cleanly burned as fuels.  As the agency wrote in its Funding Opportunity Announcement (FOA):

The benefits of converting natural gas to liquid fuels for use in transportation have long been recognized. First, the existing transportation infrastructure is based on liquids, and such fuels can be conveniently “dropped in” without substantial changes in vehicles. Second, liquid fuels from methane have lower emissions than petroleum-based fuels. Liquid fuel produced from methane decreases emissions by up to 50%, compared to unconventional petroleum, and decreases particulate matter by up to 40%, compared to combustion of conventional diesel. Further, methane is responsible for 10% of the nation’s greenhouse gas emissions (on a CO2 equivalent basis), in part because its global-warming potential is 20 times greater than that of CO2 over a 100-year period. Technologies capable of capture and conversion of methane will help mitigate the global-warming potential of these emissions.

There are several interesting things going on here. First, ARPA-E has chosen the goal of reducing emissions rather than reducing dependence on foreign oil as the motivating force of the project. Alcohols do burn cleaner than gasoline. In fact, the whole California effort that put 15,000 methanol cars on the road in the 1990s was aimed at reducing air pollution, not replacing oil imports. This may satisfy environmentalists, who tend to see natural gas as just another fossil fuel and would prefer to pursue cellulosic ethanol in order to remain “carbon neutral.”

Second, although the chemical synthesis of methanol, butanol and other potential fuels is already economical, employing biotechnology gives the whole plan a “green” tinge. Chemical processes are regarded as “old economy” and unlikely to attract investment from Silicon Valley and other centers of venture capital, whereas biotechnology has a New Age sheen to it. Already ARPA-E has handed out $20 million to small startups and others have been forthcoming.

Finally, by latching onto natural gas flaring, ARPA-E is addressing a problem that is gaining more and more attention, particularly the publication of a paper in Science last week claiming that will be no climate benefits in switching from diesel and other crude-oil-based fuels to natural gas derivatives. Indeed, flaring is now said to consume the equivalent of one-third of America’s consumption of crude oil. Obviously, anything that addresses this will get attention.

So how are thing going?  Last week Robert J. Conrado and Ramon Gonzalez, two researchers in the Department of Energy, issued a progress report in Science. Basically, the news is that while there’s still lots of optimism about the idea, nothing much has been accomplished yet.

Conrado and Gonzalez note that the process of biological conversion involves three steps:   1) the “activation” of the stable methane molecule so it becomes chemically receptive; 2) the conversion of methane to formaldehyde and other intermediates; and 3) the synthesis of these intermediates into alcohols and other fuels through bioreactors. All three steps need improvement. “To access small-scale and time-varying resources [i.e., flared gas at remote wells], process intensification leading to an order-of-magnitude increase in volumetric productivities is needed and will require technological breakthroughs in [all] three areas.”

One institution that is working on the problem is the Sandia National Laboratory in New Mexico. Blake Simmons, manager of the lab’s biofuels and biomaterial science group, says the challenges are daunting but he remains optimistic. “There have been plenty of investigations into this in the past since there are plenty of organisms in nature that thrive and multiply off natural gas,” he said in an interview with Phys.org. “The problem, though, is that they exist in unique, tailored environments and are typically very slow at what they do. People have been trying to express this class of enzymes for a couple of decades, so this won’t be a slam dunk. But we have the collective experience and capabilities at Sandia to figure it out.”

And so the search for a clean, green conversion of methane to a liquid fuel goes on. In the meantime, however, it might be worth opening the door to methanol and other chemically synthesized products just as a placeholder.

shutterstock_110899697-300x300

Making the Case for Mars and Methanol

Robert Zubrin is one of those oddball geniuses who prowl around the peripheries of important national issues making suggestions that may seem completely off the wall but on closer inspection are revealed to have penetrating insight.

I first came across him a couple of years ago while writing about space exploration. Zubrin is perhaps the world’s leading advocate of manned trips to Mars. He’s written five books about making the trip to Mars, including How to Live on Mars (2008), which detailed how to establish a permanent colony on the red plant. None of this is going to happen soon, of course, and even though Zubrin is a highly trained aerospace engineer, it’s easy enough to dismiss him as a fatuous dreamer.

Except for one thing: he has also become the most knowledgeable and well versed advocate of substituting methanol from natural gas for imported oil as a way of breaking the back of OPEC.

Zubrin actually wrote his first highly informed book on the subject – Energy Victory – in 2008, before the fracking revolution began producing prodigious amounts of natural gas. At the time he was suggesting we use our abundant coal resources as the feedstock. Now that George Mitchell’s revolution has pumped up gas production to 24 times the level of 2007, the case is even stronger.

Zubrin has just published a 5,700-word article in the current issue of New Atlantis. I won’t do more than summarize it here, but I would recommend tying it up in a bow and giving it to everyone you know as a Valentine’s Day present. Zubrin wraps up all the major arguments for methanol and even manages to illuminate some obscure details about the Environmental Protection Agency’s policy toward methanol that eluded some of us for some time. Here are his major talking points:

  • OPEC still essentially controls the world price of oil. Even though non-OPEC production has increased 60 percent since 1973, 60 percent of the oil traded around the world is exported from OPEC countries and 80 percent commercially viable reserves are still owned by OPEC members. The price of oil is still set in the Persian Gulf.
  • This oligopolistic control has a huge impact on the American economy. Ten of the last 11 postwar recessions were preceded by sharp increases in oil prices. The recent upsurge in shale oil production won’t help much. The Energy Information Administration expects it to level off after 2016. By 2040 we will still be importing 32 percent of our oil.
  • Methanol made from natural gas is the only commodity that can realistically replace oil. “Methanol is not some futuristic dream touted by researchers seeking funding,” writes Zubrin. “Rather, it is an established chemical commodity, with a global annual production capacity of almost 33 billion gallons. It has recently been selling for around $1.50 a gallon.” Methanol’s energy content is only about 60 percent of gasoline, but the bottom line is that “pure methanol can get a car 30 percent farther down the road than a dollar of gasoline.”
  • Methanol has numerous environmental advantages. In fact, when California put 15,000 methanol cars on the road in the 1990s, it was for air pollution purposes, rather than cutting imports or reducing prices to motorists. Methanol burns cleaner, produces virtually no particulate matter or smog components, has none of gasoline’s carcinogenic aromatic compounds and reduces carbon emissions.  On pollution grounds alone, it would be worth making the transformation.

So why don’t we do it?  As Peter Drucker always said, in order to replace a well established technology, an upstart replacement must be 10 times as efficient to clear the institutional barriers. That’s a tall order. But as Zubrin details, there are some specifics that stand out:

  • In terms of sheer market capitalization, the oil industry far surpasses the auto industry. Thus, even though the auto industry might benefit from opening up to new fuels, the oil companies’ interest in maintaining the status quo overwhelms them. Zubrin documents how institutional investors that own large shares of the auto companies are even more heavily invested in oil. Several OPEC sovereign wealth funds also own huge slices of the auto companies. The Qatar Investment Authority owns 17 percent of Volkswagen, which has the highest auto company revenues in the world.  Its vice chairman sits on Volkswagen’s board.
  • The Environmental Protection Agency, through overregulatory zeal, has somehow ended up as one of the major impediments to methanol conversion, even though there would be vast environmental benefits. Although older cars can easily be converted to run on methanol at a cost of less than $200, the EPA no longer permits it. “Since 2002, the only way for a vehicle modification to be deemed lawful is if it receives certification ahead of time from the EPA or the California air-quality board. . . In 2009, the EPA specified massive fines that it may level against any individual or business that modifies a vehicles without advance certification, even if there is clear and compelling proof that no emissions increase had resulted, or even been risked, by such changes. In fact, even the use of unapproved engine parts identical to the certified brands would be considered an emissions violation . . . These fines are set at thousands of dollars for individuals and hundreds of thousands, or even millions, for manufacturers. For example, if a mechanic running his own small business converting cars to flex-fuel in his garage modified just a dozen cars, he would face a crippling fine of more than $105,000.”

In 2011 on National Review Online, Zubrin offered to bet anyone $10,000 he could modify his 2007 Chevy Cobalt (apparently in violation of EPA regulations) to run on 100 percent methanol and get 24 miles per gallon. He did it by replacing the fuel pump seal with a 41-cents replacement made from a synthetic rubber that resists methanol erosion. He also had to adjust the ignition timing for methanol’s higher octane. He would have won the bet but no one took him up.

As a way of moving the ball forward, Zubrin advocates the Open Fuel Standard Act, which has been sitting around in Congress since 2008. The present version would clear up some of the EPA’s restrictions and require at least 30 percent of each carmaker’s new vehicles be flex-fuel by 2016, moving up to 50 percent by 2107. The modification would only add about $200 to the price of the car.

Zubrin is one of those American treasures, an independent thinker operating outside the world of “policymaking” who dares think differently and big. His ideas for colonizing Mars may never get off the drawing boards.  But his proposal for substituting methanol as a domestic alternative to imported oil certainly deserves the greatest attention.

shutterstock_1337400861-300x200

Can Butanol Be the New Ethanol?

Even as the ethanol industry is wobbling over the Environmental Protection Agency’s decision to cut back on the ethanol mandate in 2014, a new candidate has emerged as an additive to gasoline – butanol.

Virgin Airways founder and CEO Richard Branson has announced that his Virgin Green Fund will be cosponsoring a groundbreaking butanol manufacturing plant in Luverne, Minnesota.  “Butanol is the future of renewable fuel,” said Branson, who is already using renewable jet fuel for his airline.  “It’s hugely versatile and can be used to produce gasoline fuel blends, rubbers, solvents, and plastics, which gives us scope to enter a range of markets,” he said in an interview with Bloomberg.

Corn ethanol now dominates the $26 billion gasoline additive market, drawing the glucose content out of 45 percent of the nation’s corn crop (the protein is fed to animals).  Branson’s butanol would use a similar feedstock – corn, sugar cane or cellulosic biomass – but would produce a fuel that has 84 percent of gasoline’s fuel density compared to ethanol’s 66 percent, although ethanol has a higher octane rating.  The implication is that butanol could be mixed at higher blends, giving it almost the same range as gasoline.

Both butanol and ethanol are made through a process that employs yeasts to ferments the glucose from organic material into alcohols.  Methanol, the simplest alcohol, has one carbon joined to a hydroxyl ion while ethanol has two carbons and butanol has four.  Octane, the principal ingredient in gasoline, has eight carbons without the hydroxyl ion.

As far a butanol is concerned, it’s not as if people haven’t tried this before.  Both BP and Royals Dutch Shell have experimented with producing butanol from organic material but have found the process harder than they anticipated.  “There is certainly a potential, but there have been quite considerable problems with the technology,” Clare Wenner, of the London-based Renewable Energy Association, told Bloomberg.  “It’s taking a lot longer than anybody thought years ago.”

Gevo’s plant in Minnesota, for instance, has been running at only two-thirds of its 18 million gallon-a-year capacity because of a contamination in its yeast fermenting facility in September 2012.  Similar instabilities in the microbial-based process have dogged the efforts to break down cellulose into simple molecules.  There operations can often be performed in the laboratory but become much more difficult when moved up to a commercial scale.

Branson is confident these obstacles can be overcome.  He’s already got Silicon Valley investor Vinod Khosla on board in Gevo and Total, the French oil company, has also taken a stake.  Together they have enlisted big ethanol producers such as Big River Resources and Siouxland Ethanol to commit to switching their manufacturing process to butanol.  Butamax Advanced Biofuel, another Minnesota refiner funded by Dupont and BP, is also in the process of retrofitting its ethanol plant to butanol.  Taken together, these facilities would be able replace 1 billion of the 14 billion gallons of ethanol now being produced every year.

Whether this would be enough to make a bigger dent in America’s oil import budget remains to be seen.  The 14 billion gallons of ethanol currently substitutes for 10 percent of our gasoline and about 6 percent of our total oil consumption.  The Environmental Protection Agency has limited ethanol additives to 15 percent of the blend, mainly to protect older cars.  (In Iowa, newer cars are running on an 85 percent blend.)  Now the reduction in the 2014 mandate is making the ethanol industry nervous about overcapacity.  Butanol is less corrosive of engines and the 16 percent blend could give it an edge.

On another front, T. Boone Pickens’ Clean Energy Fuels announced this week that it may turn a profit for the first time since its founding in 1997.  Clean Fuels is concentrating on supplying compressed natural gas for trucks, signing major contracts with Frito-Lay, Proctor & Gamble, United Parcel Service and Ryder.  It is also attempting to set up a series of filling stations on the Interstate Highway System.  The use of CNG requires an entirely new infrastructure, however, rather than the easy substitution of liquid and butanol.

The dark horse here is methanol, which is liquid and fits easily into our present infrastructure but would be synthesized from natural gas.  Somehow, methanol has not attracted the attention of Branson’s biofuels and Pickens’ CNG.     All of these efforts hold promise, however, and would make a huge dent in our annual $350 billion bill for oil imports, which constitutes the bulk of our $450 billion trade deficit.  So good luck to all and may the best fuel win – or all of them, for that matter.

shutterstock_154960103-300x200

Can the Methanol Revolution Start on Indiegogo?

Indiegogo, the crowd-funding site normally populated by documentary filmmakers may seem like an unlikely place to try to launch the methanol revolution. But Scott Morris is ready to give it a try. shutterstock_154960103

The Alabama native has experience in driving and servicing racing cars, so he knows the role that methanol has played in places such as Indianapolis, where the Indy 500 cars raced on methanol since the 1960s until finally pressured recently to give it up by ethanol producers.

“If racing cars going 200 miles per hour can run on methanol, why can’t ordinary consumer vehicles?” asks the (tk-year-old native of Alabama.  “The government has been shoving various alternative fuels down the public’s throat for some time but it obviously isn’t working,” he says. “We’ve got something here that’s going to be driven by consumer desires and nothing else.”

That “something” is a plan to open methanol stations around his native Montgomery with the promise of a free tuneup that will allow drivers to use methanol without any problems, a warrantee on the converted engine, and a chance to fill up at a methanol pump for a cost of about half the price of a gallon of gasoline.

“Ultimately, our business plan is shaped around the idea – give the consumer what they want,” says Morris. And what they want is a cheaper fuel that’s good for America and not sending dollars overseas to countries that could be funding terrorism.”

What Morris has discovered as a car mechanic and fledging entrepreneur is what a lot of experts also recognize – that there’s a huge market opportunity in turning our abundant natural gas supplies into a liquid fuel that could replace gasoline. All it would take is a little engine adjustment and a little initiative.

“What we’re doing is converting the customer’s car to methanol for free,” says Morris. “Then we give them a warrantee against any damage. [This is opposed to the reluctance of the auto companies, which are saying they will not honor warrantees on cars built before 2001 if they use methanol.]  “Then they can fill up at one of the methanol stations in Birmingham we’re going to open up. But if they can’t find a methanol station, they can still use gasoline.

“To me that’s the free market,” he adds. “Give the customer a choice and see which fuel wins.”

Morris is confident that at a per-mile cost that is 40 percent lower than gasoline, methanol is ready to win the day. But he needs some help in getting started.

“We already have the support of one of the nation’s largest methanol producers,” he says. “They’ve pledged $200,000 but we have to match it with $300,000 of our own money.” That’s where Indiegogo comes in.  Morris has posted under the title, “Kiss Gasoline Goodbye.”

“There is a fuel that costs as much as 40 percent LESS per mile driven and can easily replace gasoline, without requiring you to buy a new car or pay to have yours converted, and can be sold at the gas stations we already have in America,” he tells prospective contributors. “Methanol is that solution. Methanol can be made form almost anything . .. Currently natural gas is the most viable feedstock and will be for many years to come.  But coal is a close second, and we have a LOT of coal. Between natural gas as coal, we have enough to fuel every vehicle in the USA for the next 400 years!”

Unfortunately, Crimson Fuel has a long, long way to go. With 33 days left on its Indiegogo campaign it has still only raised $100. Beyond that it will have to deal with the lack of approval from the Environmental Protection Agency in using methanol in gasoline engines.

In truth, Morris’s campaign is pretty quixotic at this point. But he’s recognized all the advantages of methanol and has a sound business plan. If nothing else, it’s a way of getting out the news. With all its advantages, the methanol revolution is bound to start somewhere. Birmingham, Alabama just might be the place.

oldblog-Dec-iceland

What Do Iceland and Israel Have in Common?

In New York City politics they used to talk about the “three I’s” – the Irish, the Italians and the Israelis, which formed the major voting blocs. Today we can talk about the “two I’s” –two countries that are making significant progress in methanol as an alternative fuel – Iceland and Israel.

Iceland is by far the leader.  The Icelanders are blessed with a string of volcanoes that bristle with geothermal energy. Tapping these vents, they are able to get 25 percent of their electricity from this natural, renewable source – the highest proportion of geothermal in the world. Drawing the other 75 percent from the island’s ample hydroelectric resources, you have a grid running entirely without fossil fuels.

But that’s just the beginning. Blessed with this amplitude of natural resources, the Icelanders have decided to turn it into an auto fuel as well. In 2011 a Reykjavik-based company called Carbon Recycling International set up a unique operation that will capture the small amounts of carbon dioxide and carbon monoxide emitted from geothermal vents and transforming that into an auto fuel as well.

The target ingredient is methanol, the simplest alcohol, made up of a single carbon, three hydrogens and a hydroxyl ion. Methanol is a liquid at room temperature and can be easily funneled into our existing gas-station infrastructure. Methanol burns with about 50 percent of the energy content of gasoline but has a higher octane rating so the real effect is about 66 percent. Methanol functions similarly to the corn ethanol that currently constitutes 10 percent of our gasoline.

Through a simple procedure, CRI takes the carbon dioxide exhaust from the 75 MW Orka geothermal plant and combines it with hydrogen to produce methanol. The hydrogen is obtained through the electrolysis of water, using electricity from the power plant. The outcome is 5 million gallons of methanol per year. In the United States, the Environmental Protection Agency has not yet approved methanol as a gasoline additive but Iceland allows it to be mixed at a rate of 3 percent (although they also have some Fords running on 50 percent). Cars would actually run on 85 or 100 percent methanol – the Indianapolis 500 cars have done it since the 1960s – but government regulators in both countries are reluctant to give it a try (It would require replacing a few elements in the fuel line to avoid corrosion).

Iceland’s experiment has been so successful that the country has now decided to export the product to Europe. This year CRI has begun to send its “green methanol” to the continent to add to Europe’s gas tanks. The Icelanders advertise that the product adds no additional carbon dioxide to the atmosphere. This is because the carbon dioxide that is captured was already headed for the atmosphere. Instead it is burned in gasoline engines, also ending up in the atmosphere, but along the way it has replaced an equal amount of gasoline that would have produced its own carbon emissions.

Icelanders proclaim they are putting into effect what Nobel Prize Winning chemist George Olah called the “methanol economy.”  In his 2009 book, Beyond Oil and Gas: The Methanol Economy  

Olah and his co-authors outline how methanol from a variety of sources – natural gas, coal and any biological material – could serve as the basis of an economy much less dependent on fossil fuels. At the Orka carbon recycling and geothermal plant, they appear to be doing just that.

At the same time, Olah is finding recognition in Israel as well. This month Olah and his University of Southern California colleague G.K. Surya Prakash became the first recipients of the Eric and Sheila Samson Prime Minister’s Prize for Innovation in Alternative Fuels for Transportation, with Prime Minister Benjamin Netanyahu bestowing the first-ever award. The Israelis are also looking for alternatives to gasoline in order to reach their proclaimed goal of reducing dependence on oil by 60 percent by 2025. With the discovery of new gas supplies in the eastern Mediterranean they are in a good position to apply Olah’s proposed technology in transforming natural gas into methanol for transportation.

Nor is Olah standing still. In an October op-ed contribution to the Wall Street Journalhe announced that he has developed a new technology that will allow large quantities of carbon dioxide from power plants to be transmuted into methanol so that carbon exhausts can be “recycled” just as the they are at Orka. The plan could make use of carbon exhausts in the U.S., perhaps rescuing the fading coal industry.

Iceland and Israel are already taking steps toward the vision of a methanol economy. Will Iowa and Illinois be next?

oldblog-Dec-Tgiving

A Thanksgiving Feast of Alternatives

Over the river and through the wood

To grandmother’s house we go.

The horse knows the way to carry the sleigh\

Through white and drifted snow.”

Thanksgiving has come and gone, Christmas is coming, and that makes me think of alternative fuels and finding something to replace gasoline in our engines.

What, after all, was the horse and sleight except an old-fashioned means of transportation?  It had served humanity since the Bronze Age.  It has often been said that Julius Caesar and George Washington used essentially the  same transportation technology in pursuing their wars

All this held through the early days of the 20th century. There is a famous scene Jules Verne’s The Mysterious Island, written in 1875, where the adventurers go to investigate a mysterious submarine – in a horse and carriage!  When people started assembling on the New York docks in 1913 to hear reports of the missing Titanic, half of them arrived in horses and carriages.

We eventually made the energy transformation to the “horseless carriage” of automobiles but it wasn’t easy. People were afraid of the new invention.  They didn’t know how to work it. They fretted over the extraordinary speeds that could be reached – 30 miles an hour!  They did not like the nasty exhausts that some new technologies produced.

Nor was it ever certain which means of propulsion for the new “automobiles” would prevail. There were three contenders – the electric car, the steam car and the internal combustion engine running on any number of fuels.  Gasoline was not the foremost possibility. When Henry Ford built his first model in 1895, called the “quadricycle,” he designed it to run on corn ethanol, which seemed like a reasonable alternative.

The steam car set speed records of 200 miles per hour and the electric showed great promise as a gadabout town car. But the internal combustion eventually prevailed. Why?  The steam car, running on coal, took too long to warm up – about 20 minutes.  The electric car had a very short range, as it still does today. The internal combustion engine was awkward because it required the driver to hand-crank the engine from the front.  There was also a question of whether there would be enough fuel available to run large numbers of cars.  At the time, oil was still a relatively rare commodity, marketed mainly for the “lamps of China.”  But when Spindletop gushed forth in 1901, questions about the oil supply faded.  And when Charles Kettering invented the electric starter in 1912, the battle was over.

Still, Henry Ford didn’t particularly like gasoline and never gave up on the idea that ethanol was a better alternative.  Gasoline had a lower octane rating, was much more toxic (particularly when blended with tetra-ethyl lead to raise its octane rating) and emitted more pollutants. It was also more explosive and required complex refining, whereas ethanol was relatively easy to produce. Ford had roots in farm country and as late as 1925, with the farm belt in a chronic recession, he argued that farmers should be growing their own fuel. “The fuel of the future is going to come from fruit like that sumac out by the road, or from apples, weeds, sawdust — almost anything,” he told The New York Times. “There is fuel in every bit of vegetable matter that can be fermented. There’s enough alcohol in one year’s yield of an acre of potatoes to drive the machinery necessary to cultivate the fields for a hundred years.”

These ideas still resonate today.  Making auto fuel from crops has become a reality since we add 10 percent corn ethanol to our gasoline supplies, cutting our dependence on foreign oil.  There is still talk about using the much larger portions of “crop wastes” to produce cellulosic ethanol, although the technology to do this economically has not emerged yet.  Electric cars are getting another run as battery life and range are extended.  And there is a range of other alternatives – compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen fuel cells and methanol derived from natural gas, coal or any number of organic sources, including garbage, crops and crop wastes.  We have a regular Thanksgiving feast of options before us.  It’s just a question of finding out what works best.

So remember, no technology is forever.  The holiday revelers sleighing toward grandmother’s house for Thanksgiving never dreamed they might one day be making the same trip across 300 miles of countryside at speeds of 60 miles an hour. And today when you’re speeding down the Interstate in a car powered by gasoline from Saudi Arabia, you may not dream that in ten years you could be driving a car running on switchgrass grown on the scrubland of South Dakota or natural gas pumped from the Marcellus in Pennsylvania.  Yet stranger things have happened.  You never know where that path over the river and through the woods is going to lead.

shutterstock_87785530-200x300

If Mother Jones and the Wall Street Journal can agree on this

When Nobel Laureate George Olah wrote his Wall Street Journal op ed recently announcing a new process that can turn coal exhausts into methanol, it reverberated all the way across the political spectrum and into Mother Jones.

 “Can Methanol Save Us All?” says the headline of a story on MJ, written by political blogger Kevin Drum. Although loath to admit he had    been reading the pages of capitalism’s largest broadsheet (he blamed the government shutdown), Drum admitted that he was intrigued. “George Olah and Chris Cox suggest that instead of venting carbon dioxide into the atmosphere, where it causes global warming, we should use it to create methanol,” he wrote.

Olah has been writing about a “methanol economy” for a long time, and he skips over a few issues in this op-ed.  One in particular is cost: it takes electricity to catalyze CO2 and hydrogen into methanol, and it’s not clear how cheap it is to manufacture methanol in places that don’t have abundant, cheap geothermal energy – in other words, most places that aren’t Iceland. There are also some practical issues related to energy density and corrosiveness in existing engines and pipelines. Still, it’s long been an intriguing idea, since in theory it would allow you to use renewable energy like wind or solar to power a facility that creates a liquid fuel that can be used for transportation. You still produce CO2 when you eventually burn that methanol in your car, of course, but the lifecycle production of CO2 would probably b less than it is with conventional fuels.

There are a few things we can cite here to set Drum’s mind at ease. First, methanol made from natural gas is already cost competitive. We don’t have to speculate. There is a sizable industry manufacturing methanol for industrial use from natural gas where it has sold for years at under $1.50 a gallon. That’s a $2.40-per-gallon mileage equivalent for gasoline (before further gains from methanol’s higher octane), making it at least 30 percent cheaper from what you’re now buying at the pump.

Of course Drum is referring here to Olah’s proposal to manufacture methanol by synthesizing hydrogen and carbon exhausts. This would be a more expensive process. But if it ever happened, the utilities would undoubtedly pay the processors to take the carbon dioxide off their hands, since it would allow them to go on operating their coal plants and using all that cheap black stuff coming out of Wyoming and West Virginia. It’s hard right now to factor up the costs but suffice to say, you would not be limited to geothermal from Iceland to make it happen.

As far as the corrosion issues are concerned, Drum can rest assured as well. It is true that methanol corrodes certain elastomers in current engines. They will have to be replaced with o-rings that can be bought at Office Depot for 50 cents. Any mechanic can perform the procedure for less than $200. Modifying current gasoline engines at the factory to burn methanol is also a surpassingly simple procedure – as opposed to altering an engine to burn liquid natural gas, compressed natural gas or hydrogen, which all require an entirely different assembly costing up to an additional $10,000.

The real rub mentioned by Drum, however, is the implication that if methanol can’t be shown to reduce carbon dioxide emissions in the atmosphere, then there isn’t any sense in doing it. There’s a slight divergence of purpose here that isn’t always clear to people who can agree we ought to be looking for alternative fuels to replace gasoline.

For some people the issue is energy dependence and reducing the unconscionable $400 billion we spend every year on imports. As the United States Energy Security Council pointed out in a recent paper, even though we have reduced imports to only 36 percent of consumption, we are still paying the same amount for oil because OPEC functions as an oligopoly and can limit supplies. As the report concluded, “It’s not the black stuff that we import from the Persian Gulf, it’s the price.”

For other people, however, the amount of money we’re spending on foreign oil – and the international vulnerabilities it creates – is not the issue. The only thing that matters to them is how much carbon dioxide we’re putting into the atmosphere. Global warming is such an overriding concern that it supersedes everything else.

This was made clear in a recent article in Yale Environment 360 by John DeCicco, professor at the University of Michigan’s School of Natural Resources and Environment and former senior fellow for automotive strategies at the Environmental Defense Fund, entitled “Why Pushing Alternative Fuels Makes for Bad Public Policy.”

The article argued against all forms of alternatives – ethanol, compressed natural gas, hydrogen and electric vehicles – on the grounds that none of them will do anything to reduce carbon emissions. “In the case of electric vehicles, an upstream focus means cutting CO2 emissions from power plants,” wrote DeCicco.

Without low-carbon power generation, EVs will have little lasting value. Similarly, for biofuels such as ethanol, any potential climate benefit is entirely upstream on land where feedstocks are grown. Biofuels have no benefit downstream, where used as motor fuels, because their tailpipe CO2 emissions differ only trivially from those of gasoline.

Instead, DeCicco argued that environmentally conscious individuals should concentrate on cleaning up power plants while support for alternative fuels should be limited to research and development.

By the time the power sector is clean enough and battery costs fall enough for EVs to cut carbon at a significant scale, self-driving cars and wireless charging will probably render today’s electric vehicle technologies obsolete. Accelerating power sector cleanup is far more important than plugging in the car fleet.

All this short-changes the clear advantages that can come from reducing our huge trade deficit and replacing oil with homegrown natural gas. The less money we spend on imports, the more we will have for making environmental improvements and investing in complex technology such as carbon capture that can reduce carbon emissions.

In addition, DeCicco may be being too pessimistic about alternative fuels’ potential for reducing carbon emissions. As The New York Times reported in a recent story about natural gas cars, “According to the Energy Department’s website, natural gas vehicles have smaller carbon footprints than gasoline or diesel automobiles, even when taking into account the natural gas production process, which releases carbon-rich methane into the atmosphere. Mercedes-Benz says its E200, which can run on either gasoline or natural gas, emits 20 percent less carbon on compressed natural gas than it does on gasoline.” Besides, if the source of emissions can be switched from a million tailpipes to one power plant, it’s a lot easier to apply new technology.

Mother Jones and The Wall Street Journal have much more in common than they may realize. One way or another, it would benefit everyone if we could reduce our dependency on foreign oil.

 

naturalgas-300x200

The New York Times and Natural Gas- Is it the Moment?

The venerable Gray Lady, the NY Times, has in the recent past treated the possible use of natural gas and its derivatives (methanol and ethanol) as transportation fuels warily. Their primary focus has seemed to be on the environmental problems and economic opportunities related to fracking and the increased production of natural gas. Rarely did the Times cover or note in its editorials the increasing acceptance of natural gas, methanol and ethanol as a fuel to power vehicles. The importance of alternative fuels as part of national energy and environmental policies has not been granted significant visibility in the Times. The Times is still my favorite read over a cup of coffee.

But, surprise! Borrowing and taking liberty to amend the lyrics from the musical Jekyll and Hyde,   “this may almost be the moment…when The New York Times begins to send many of its doubts and demons concerning alternative transportation fuels on their way… this could be the beginning. The momentum and the moment may be coming together soon in rhyme.”

Paul Stenquist, a respected, frequent writer for the Times automobile section, wrote an Oct. 29 article titled, Natural Gas Waits for its Moment. The content of the piece was, in reality, not as ambiguous or speculative. Read it!  According to Stenquist, natural gas has arrived and this is its moment, or at least its soon-to-be moment. Sure there are problems to overcome, but to Stenquist, they seem relatively puny given where he thinks we are, and where he suggests we can be soon.

Stenquist opens his upbeat piece by indicating that “cars and trucks powered by natural gas make up a significant portion of the vehicle fleet in many parts of the world (Iran, Argentina, Italy, Brazil, and Germany).”  After noting the almost 2,000 natural gas stations in Argentina, he asks, “Is America next?”

Based on Department of Energy (DOE) information, Steinquist indicates that natural gas is about $1.50 cheaper than gasoline and diesel fuels for the same mileage, and that because natural gas burns clean, it requires less oil changes, and vehicle exhaust systems last longer.

Sure, the author notes that the initial cost of natural gas vehicles are significantly higher now than gasoline vehicles. But based on an apparent positive interview with a fleet manager from Ford, he indicates that increased sales or leasing volume could bring the vehicle price comparable to today’s conventional vehicles. The key issue Stenquist does not address, is when this will happen, and how long will it take?  But still he and his Ford colleague seem optimistic– perhaps a bit too optimistic, unless Detroit pulls a Steve Jobs; that is, just as Jobs did with the  iPhone, convince the public through marketing and technological innovation that cheaper cleaner natural gas vehicles are a “must” for consumers.

But wait, there’s more!  Stenquist, quoting from the Energy Department’s website, suggests that the environmental benefits of natural gas as a fuel appear to be immediate and important. Succinctly, natural gas vehicles have a much smaller carbon footprint than gasoline or diesel.

What remains, then, for the nation to benefit in a major way from use of natural gas as an alternative fuel?  Well for one, reducing carbon leakage during natural gas production and distribution. Progress is being made. Stopping or cutting back leakage has become a priority for both involved companies, and federal as well as state regulatory authorities.

Second, both car companies and the government acknowledge that using compressed natural gas in a conventional engine would result in degrading engine performance. However, retrofitting engines to use natural gas would increase the octane advantage of natural gas and lessen the density advantage of gasoline-reducing performance issues. Fully designed natural gas cars are still relatively rare and are, at this moment, significantly more costly than conventional cars. But with increased demand, as noted earlier, the costs would likely come down and make household purchase decisions easier. Interestingly, Governor Hickenlooper of Colorado(D) and Governor Fallin of Oklahoma(R) have put together a 22 state coalition. The group has committed to purchasing new natural gas cars to replace old cars in their respective fleets. Detroit has committed in turn to work on developing a less expensive natural gas car, given the market pool or demand created by the states. This effort deserves watching and will, if successful, hopefully, provide a path to cheaper natural gas vehicles for consumers.

Stenquist, correctly, points to the lack of natural gas fuel stations as a key obstacle to increased popularity of natural gas. But he is optimistic that technology now in place (or soon to be in place) will be able to link available natural gas pipelines to in home fuel machines. I, also, would hope that these fuel stations would be placed in parking garages and that they would be much cheaper than currently existing home refueling equipment.

I suspect that the natural gas movement will require more than a few moments; that is, it may take a bit longer to gain traction than implicit in Stenquist’s piece. But it’s nice to see a journalist link natural gas to transportation fuel in such an aggressive way as Stenquist. Now if the Times could only follow in the content of its editorial and op-ed pages.

It is hard to be critical of Stenquist’s piece since it’s almost a first for the NY Times. However, I am puzzled by the absence of any discussion of natural gas based ethanol and methanol as alternative fuels in his article. Both, likely, would be cheaper per gallon and per miles traveled than gasoline. Both would record more environmental benefits than gasoline, and both, if they are accepted in the market, would reduce dependency on imported oil. Perhaps most significantly, both, assuming appropriate government approvals, could be used almost immediately to fuel existing vehicles with relatively simple and cheap engine conversion kits. Think of it!  If we could add the trifecta: natural gas, ethanol and methanol –to fuel stations throughout America, it would provide needed competition to gasoline. Consumers would benefit by having access to lower cost fuel. The nation would benefit from improved environmental and Greenhouse Gas (GHG) conditions. America’s security and economy would be enhanced significantly. It would be a major win for the public interest and for America and Americans.

oilwell-300x200

What do Grover Norquist and Edmund Burke have to do with Natural Gas?

I don’t like the idea of advance pledges by candidates concerning how they would vote, if they were elected by us. I believe it is contrary to representative democratic government and denies the fact that economic, security, social and environmental conditions change, often rapidly, and must be responded to with studied intelligence and common sense, not constant polling or focus groups.

I guess I am, at least, part Burkian.  Although it departs from present reality, as the great philosopher and British MP, Edmund Burke indicated, our elected leaders , should use their “…unbiased opinion…mature judgment…enlightened conscience…(our) representative(s) owe …not (their) industry only, but (their) judgment; and (they) betray, instead of serving (us), if they sacrifice ( judgment) to (our often fleeting ) opinion(s).” Voters can, at least in theory if not always in practice, dismiss their representatives at the next election. I am not sure Burke won again after he made his plea for more thinking and less pandering.

I am suffering emotionally (not too significantly) by being tempted by  a Kaplan analogue to Grover Norquist’s “no new taxes” pledge, required of  candidates for office.  While the tax pledge, I believe, is responsible for at least some of the dysfunction in Washington, there is a certain romantic, almost utopian appeal to it with respect to frustrated advocates for more and better fuel choices at the pump than just gasoline. As Emerson wisely indicated, perhaps, “a foolish consistency is the hobgoblin of little minds.”

The new Kaplan analogue to the Norquist pledge would acknowledge that the natural gas train has left the station. Indeed, it has! One has only to look at the number of wells/rigs now in place compared to just a few short years ago and the relatively rapid escalation in gas production.

The natural gas sector has become, and likely will remain, an economic and political powerhouse. In this context, advocates of a “renewable transportation fuel only” approach, risk, implicitly, supporting a short and intermediate term future dependent on oil and gasoline. As a result, their success would likely result in increased environmental degradation, more greenhouse gas (GHG), higher costs for consumers, increased security problems and restricted economic growth. Clearly, the enemy of a short term good would become a distant perfect.

The Kaplan pledge would commit candidates to help secure reasonable and effective federal and state regulations to protect and enhance the environment and significantly reduce GHG production during production, distribution and sales of natural gas-from wellhead to automobile.

The pledge would commit candidates, once elected, to help foster a collaborative public, nonprofit and private sector effort to wean the country off dirty oil and gasoline. It would require them to develop and support initiatives that open up the now almost closed transportation fuel market to safe, environmentally sound, cheaper alternative transition fuels. Finally, it would commit candidates, should they take office, to support the development of renewable fuels and vehicles that would reflect competitive costs and mileage capacity that match the budget and occupation as well as life-style needs of low, moderate and middle income Americans.

I feel sinful in departing from the philosophy of Edmund Burke. I need to contemplate my fall from philosophical grace. I apologize!  I hope I am treated with grace and redemption. My excuse in proposing a Congressional pledge was only a temporary errant fantasy. It “ain’t” going to happen. It is a flight from reality.

But, was it all bad? Perhaps, the Kaplan pledge points the way to an alternative that is not antithetical to Edmund Burke. What if, instead of trying the impossible with elected officials, many  of whom try to fit their views to the, often of the moment, views of their constituents, advocates of a free fuel market and alternative transitional transportation fuels worked to form  a coalition of nonpartisan or bipartisan groups: business, labor, environment, government, academic and community . Each group would join because they are consistent in heart and mind with the Kaplan fuel freedom pledge. Each would accept the intent explicit in the pledge; that is the nation’s need for a comprehensive fuels strategy that would bridge the gap between renewable and natural gas advocates, between environmentalists and the natural gas industry, between liberals and conservatives.

Free market business and conservative adherents would put muscle behind their ideology in seeking a more open fuel market. Liberals would put meaning behind their desire to aid the needy who suffer from the high cost of gasoline and limited job opportunities because budget constraints limit driving. Environmentalists would match their concern for the environment with support for natural gas, ethanol and methanol as transitional fuels — fuels that would reduce GHG and other gasoline generated pollutants. The nation would be better able to secure the stimulus now required to improve economic growth because of the reduced dependency on foreign imports. Every one of us would benefit from success in assuring research and development of renewable fuels. The coalition would inform and increase Congressional understanding of the need for an integrated coherent national fuel strategy. The payoff to elected leaders:  The Coalition would promise to help voters comprehend the nation’s need for alternative fuels and a comprehensive fuel freedom strategy. It would meet with measured success. Sign me up! The best of all possible worlds! Oh Happy Day!  I can dream can’t I?