United hopes third try with biofuels is the charm

United Airlines took a giant step toward cutting its reliance on foreign fuels last week when it made $30 million investment in Fulcrum BioEnergy, one of the leading manufacturers of aviation biofuels made from municipal waste.

The move is being touted as a step toward reducing carbon emissions, although there are some doubts about its impact in that respect. But reducing consumption of jet fuel certainly will have a significant effect in reducing our dependence on foreign oil.

Last year, United’s fleet of aircraft consumed 3.9 billion gallons of jet fuel, at a cost of $11.6 billion. Fuel costs represent 40 percent of any airline’s total expenses, and any move that cuts into that expense would be huge. Jet fuel currently sells for $2.11 a gallon, whereas Fulcrum says it can provide biofuel for less than $1 per gallon. More than 12 percent of our oil goes to making jet fuel.

Fulcrum has developed and certified a technology that can turn municipal waste, like household trash, into a sustainable aviation fuel that can be blended with existing jet fuel. The company is currently building a refinery called the Sierra BioFuels Plant near Reno that is scheduled to begin operation during the third quarter of 2017. The company also has plans for five more refineries around the country.

Biofuels are having some difficulty penetrating the automobile market, for a variety of reasons. But they’re perfectly suited for airlines. For one, they are a “drop-in” fuel that can be substituted for jet fuel without any changes. It will not require a whole new national infrastructure.

Second, airlines do most of their fueling at centralized locations. This eliminates a lot of difficulty in transporting and distributing the fuel. United, for instance, can fuel a very high percentage of its flights from its hub in Los Angeles.

Third, with jet biofuel there’s no risk of hitting the “blend wall” that supposedly limits ethanol to 10 percent of the gasoline mix. United says it will begin using Fulcrum’s fuel in 30 percent of its fuel mix for the first two weeks of flights between Los Angeles and San Francisco this summer. After that, the biofuels will be mixed in with its entire fuel stock.

United’s deal with Fulcrum is just one of several recent efforts by airlines to get into the biofuels business. Alaska Airlines aims to use biofuels at one of its airports by 2020. Southwest Airlines announced last year it would purchase 3 million gallons of jet fuel made from wood residues and produced by Red Rock Biofuels. And last year British Airways joined with Solena Fuels to build a biofuel refinery near London’s Heathrow Airport for completion by 2017.

United is on its third venture into the field. In 2009 the company made an unsuccessful attempt to introduce jet fuel manufactured from algae. Then in 2013 it agreed to buy 15 million gallons over three years from California-based AltAir Fuels, which makes biofuels out of inedible natural oils and agricultural waste. United is expecting the first 5 million gallons of Fulcrum fuel to be delivered to its LAX hub this summer.

The decision comes at a good time for the airlines, because the Environmental Protection Agency is starting to make noise about regulating the emissions of jet planes. Jet planes account for only 3 percent of our carbon emissions, but the number is growing rapidly. The Obama administration is proposing to set limits for airliner emissions. The International Civil Aviation Organization, a United Nations agency, is also expected to complete its own deliberations on setting standards to limit airline emissions by next February.

Fulcrum claims its technology will reduce the airlines’ carbon emissions by 80 percent, but this is based on dubious math that says carbon emissions count for zero if they do not come from fossil fuels. This premise has been challenged by a growing number of scientists who say that the whole logic of biofuels is flawed. Professor Timothy Searchinger of Princeton University has become a gadfly to the industry, arguing that if a forest is cut for biofuels consumption, it will be 90 years before this carbon can be replaced by new growth. A group of 78 scientists recently sent a letter to EPA Administrator Gina McCarthy warning against the new EPA policy of encouraging the substitution of wood for coal. They said there would be no savings in carbon emissions.

The same logic applies, to some degree, to the use of municipal waste for biofuels. If the waste remained in landfills, it would be stored and not feeding its carbon content to the atmosphere. Therefore, it doesn’t make much difference if they are substituted for fossil fuels – the carbon output is the same. There is some benefit to using it, however, since some carbon from municipal waste ends up escaping from landfills as methane, and many facilities are required to capture it.

As far as gaining an advantage in cutting the level of foreign fuel imports, however, there is no question that biofuels can substitute for jet fuel on a 1-to-1 basis. Airlines are at a disadvantage in that they cannot be powered by electrification or natural gas, as is starting to occur in the automotive sector. Therefore, the amount of municipal waste-based fuel that can be substituted for oil-based jet fuel will be significant. And after all, the nation is certainly not going to run out of household trash.

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Here’s why air fares aren’t going down, despite cheap fuel

Drivers are loving life whenever they fill up at the gas station. According to AAA’s Daily Fuel Gauge Report, the national average Thursday was $2.477 for regular 87-octane gas. That’s down 23 percent from the same time last year, when the average was $3.216.

So why haven’t air travelers seen similar savings on airline tickets? After all, fuel accounts for between one-third and one-half of the entire cost of running an airline, and the jet-fuel prices have fallen at the same pace as automotive gasoline, down 32 percent over the last year.

And yet not only are airlines not discounting fares, they’re counting their winnings after years of economic struggles: Slate’s Josh Vorhees reports that airlines in North America expect their profits to grow from $11.9 billion in 2014 to $13.2 billion in 2015. The trade group Airlines for America said in a statement that its members are re-investing in 317 new planes, better amenities for passengers, dividends for shareholders and employee benefits. The group added that:

Air travel remains one of the best consumer bargains, given its superior speed and price compared with other modes of transportation. From 2000-2013, U.S. Consumer Price Index rose 35 percent, whereas average domestic airfare rose 15 percent. Thus, adjusted for inflation, the average round-trip domestic fare fell 15 percent.

When the airline industry is financially healthy, everyone wins. Airlines should be treated like every other business. When the price of coffee beans falls, no one asks Starbucks why his or her latte does not cost less. …

Here are three big reasons why airline customers aren’t seeing cheaper fares:

  • Many airlines buy fuel ahead of time, locking in a fixed price for six months or longer. It’s called “hedging,” and although not every airline does it (American doesn’t, and it’s reaping a windfall), it explains why some travelers are still being hit with fuel surcharges. Sen. Chuck Schumer wants the federal government to investigate the industry: “Ticket prices should not shoot up like a rocket and come down like a feather,” he said.
  • Supply and demand. Where’s the incentive for airlines to reduce fares when their North American planes are filled to 85.1 percent capacity? As The New York Times notes in an editorial, “a series of megamergers has significantly reduced competition in the industry. The four biggest airlines in the United States — Delta, Southwest, United and American — control about 80 percent of airline capacity, down from 11 companies as recently as 2005. For most travelers, that has meant higher prices and jam-packed planes.”

It’s impossible to predict where fuel prices will be in the new year, and airline executives might be reluctant to reduce fares now, only to have to hike them again in a few months. Alexandre de Juniac, head of Air France-KLM, told The New York Times that oil might be between $70 and $80 a barrel next year (it’s below $60 now). But he added: “Obviously, no one really knows.”