LESSONS LEARNED AT THE 2021 FUEL ETHANOL WORKSHOP AND EXPO

BY BRYEN ALPERIN, DIRECTOR OF RENEWABLE ENERGY & SUSTAINABLE TECHNOLOGIES

I certainly don’t know all there is to know about ethanol. Prior to the 45Q tax credit, I knew exactly two things about ethanol: it is a sustainable fuel source, and it is typically made from corn.

I recently attended the 2021 Fuel Ethanol Workshop and Expo in Des Moines, Iowa, to speak on a panel about carbon capture, 45Q and the impact these will have on the ethanol industry. The panel, moderated by John Pierce of Perkins Coie LLP, was well attended and led to engaging conversations. While I was there, I learned quite a bit about the industry.

Here are five things I learned pertaining to carbon capture in the ethanol industry:

1. 1. Carbon Capture and Sequestration (CCS)Development for Ethanol Plants is Already Underway

   Christianson Biofuels Benchmarking statistics indicated that over 50% of ethanol plants in the US are in some stage of development for a CO₂ capture or sequestration project. Given that the larger projects are the ones most likely to be considering CCS, I expect this figure would be higher if weighted for ethanol production volume.

   The US produced approximately 13.8 billion gallons of ethanol in 2020, which would equate to approximately 41.4 million tons of CO₂ capture potential pear year. This means there are $25 billion of 45Q tax credits that could be generated in the ethanol industry alone (assuming a $50 tax credit and a 12-year credit period.) If a significant percentage of these projects end up getting developed, the volume of tax credits could be staggering.

    

   2. LCFS Fuel Credit Invalidation Needs to be Addressed for CCS

   The Low Carbon Fuel Standard (LCFS) overseen by the California Air Resources Board allows CCS projects to reduce emissions associated with the production of transport fuels sold in California and generate LCFS fuel credits. In order to qualify a CCS project of California LCFS fuel credits, sponsors must apply for and receive Permanence Certification. LCFS fuel credits can be invalidated if sequestered CO₂migrates outside an approved area or leaks into the atmosphere within 100 years post injection.

   For many CCS projects, an ethanol plant operator may sell CO₂ to a capture facility, and that capture facility many contract with a third party for storage services. Given that the ethanol plant would not be directly involved in the storage activities, we expect they may seek indemnities for the LCFS fuel credit invalidation risk from the storage operator.

   Industry professionals will need to come up with solutions to address this LCFS fuel credit invalidation risk. A range of financial instruments and insurance products could be used. Further work will need to be done in this area.

    

   3. The Ethanol Industry is Entrepreneurial

   The spread of COVID-19 early in 2020 disrupted the ethanol industry in ways that were previously unimaginable. At the peak of the crisis, more than half of ethanol capacity was idled. Ethanol producers around the country rose to occasion, and pivoted to procuring more high-purity alcohol for hand sanitizers and other disinfectants. This entrepreneurial spirit is now driving ethanol producers to seek out new revenue streams to diversify their businesses, including the sale of CO₂ for carbon capture. Beyond selling CO₂, I spoke to many ethanol producers exploring innovative new revenue streams, including production of bioplastics, high-protein livestock feed solutions, and corn-based asphalt. This ability to rapidly adapt and diversify will be critical for the industry’s ongoing success.

    

   4. Courts Recently Overturned Year-Round E15

   The D.C. Circuit Court of Appeals on July 2^nd reversed a 2019 rule by the Environmental Protection Agency that lifted restrictions on the year-round sale of E15 (a blend of 15% ethanol and 85% gasoline). Almost all fuel in the US is blended with 10% ethanol, or E10. Prior to 2019, retailers throughout most of the country were prohibited from offering E15 between June and September based on concerns it contributed to smog. In 2019, when the EPA allowed for year-round sales of E15, it was a boon to the ethanol industry. The recent reversal was based on the U.S. Court of Appeals finding that the EPA lacked the authority to provide such a waiver. This finding came on the heels of the U.S. Supreme Court overturning a 10^th U.S. Circuit Court of Appeals ruling that struck down three small refinery exemptions granted by the previous EPA administrators.

    

   5. Ethanol is Positioned to be the Low Carbon Future for Liquid Fuels

   While advancements in battery technology and electric vehicles can go a long way in decarbonizing world, there will continue to be a need for some type of liquid fuel (at least in the foreseeable future). Within the transportation sector, medium- and heavy-duty trucks and long airplanes will be difficult to electrify without serious advances in the energy density of batteries. In the industrial world, lots of high-heat industrial processes, like making steel, require liquid fuel combustion. In order to reduce carbon emissions in these industries, we will need a low carbon liquid fuel. A recent study led by Environmental Health and Engineering Inc., Harvard University, and Tufts University found that some corn ethanol on the market can achieve up to a 61% reduction in carbon intensity relative to gasoline. This carbon intensity could be reduced even further through use of carbon capture technology. By capturing the CO₂ released during ethanol production, we can effectively turn ethanol into “liquid sunlight” with an extremely low carbon intensity.

    

There is an exciting future ahead for carbon capture, and ethanol producers will play a key role in helping the world achieve a sustainable future. The carbon capture facilities built on ethanol plants will help catalyze the expansion of carbon capture throughout the United States.

Interested in developing a carbon capture facility or learning more? Contact me today at Br***@fo*******.com.