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Investing in Ethanol: A Case Study of Terrible Investment Advice

Comically Terrible Timing

In June 2006 I read an article at Financial Sense that promoted ethanol as a great place to put your money:

Investing in Ethanol: A “New” Stock Play on Soaring Energy Prices and Why Now is the Time to Invest in this “Fuel of the Future”

Among the gems in the article were these:

Strap on your seatbelt… an alternative energy source is set to take the world by storm. In this research report, we’ll take a close look at the booming ethanol industry… and how investing in ethanol could prove to be an extremely profitable move for investors.

With a mandate from the U.S. government and the obvious need for change, we see this as a fantastic opportunity for investors to earn serious profits.

Take a look at recent investments made by some of the richest and most successful people in the world:

* Bill Gates, the richest man in America, allocated $84 million into Pacific Ethanol, Inc. (Nasdaq: PEIX), a company poised to control a considerable share of the ethanol industry.

Not So Fast

Mary Puplava at Financial Sense had asked me if I would contribute an article there, and I had procrastinated up to that point. But the article above prompted me to write a rebuttal. I told Mary that investors “are going to get trounced” if they take the advice from that article, and I wrote to her in an e-mail that “fundamentally something like Pacific Ethanol is a very poor investment (despite what Bill Gates thinks).” My rebuttal:

Ethanol Investing Counterpoint

In the three months following that rebuttal article, ethanol stocks fell across the board by about 40%, including Pacific Ethanol which I highlighted in the article. (An analyst at one brokerage firm told me that they advised clients to sell ethanol stocks after reading my article). I followed up a few months later with:

The Ethanol Bubble has Burst

I am getting around to the point here, which isn’t actually to argue that I am a financial genius. (As a matter of fact, my portfolio since last summer looks like almost everyone else’s: Down sharply). No, what I want to focus on here is just how that article – and investors like Bill Gates – could have missed so horribly with ethanol stocks. The reason this is pertinent is that I get an e-mail every week or so from someone wanting to know which cellulosic ethanol play I would recommend. For similar reasons to why I disputed that 2006 article on investing in ethanol, the answer is “none of them.”

Why the Advice Was Wrong

The initial article was correct on one key point: On the back of mandates and heavy subsidies, the ethanol industry was poised to grow dramatically. But there were two really big problems for prospective investors wishing to capitalize, and a third if you happened to be an investor in Pacific Ethanol. First, the fact that ethanol has to be mandated to gain market share should have been a strong tip-off that the economics didn’t look all that good. The companies simply were not poised to compete in the marketplace, hence the mandates.

Then there was problem number two: Producing ethanol isn’t rocket science. The barriers for entry into the marketplace are low, meaning competitors were going to sprout up everywhere. I documented a number of cases where complete amateurs decided they were going to get into the ethanol business. I can assure you that complete amateurs don’t go around building oil refineries, because the capital costs and technical challenges pose a very high barrier that Bob the Dentist and his buddies aren’t going to overcome by pooling their money and channeling their passions.

So as a result, ethanol capacity was overbuilt, there was too much competition, and margins vanished. This has led to a wave of ethanol bankruptcies and plant closings. In hindsight, it is clear that ethanol was not the place to sock away your money.

Pacific Ethanol faced an additional challenge: They built their plants far from the raw materials needed to run the plants. I could foresee that an ethanol plant in Iowa could put ethanol in Pacific Ethanol’s backyard for cheaper than they could do it themselves after the logistics of corn imports and DDGS exports were taken into account. The fall for Pacific Ethanol has been steep. Once boasting a market capitalization of over $1 billion (in 2006), that has now fallen to $23 million. Bill Gates eventually decided that Pacific Ethanol wasn’t what he thought it was, and sold out his shares.

The Game is Now Cellulosic Ethanol

So now here we sit in 2009, and many now want to know how to make money with cellulosic ethanol – the next big thing. As I told someone last week, “this is a low margin business.” Why do you think the government not only has to mandate ethanol, but then put extra mandates and goodies in for ethanol made from cellulose? Because the economics look horrible. No producer is going to be able to gain a decided advantage over others. There will be producers of cellulosic ethanol. That technology exists. It just doesn’t exist economically, and nobody is going to do it and make consistently high margins.

Take Verenium, for instance. There was a recent story in the news that they have teamed up with BP on a cellulosic ethanol venture:

BP and Verenium form cellulosic ethanol venture

Within that story was a little detail that I found interesting:

The joint venture expects to break ground on the Florida site in 2010, the press release said, and the estimated construction cost for this 36 million gallon-per-year facility is between $250 million and $300 million.

Ah, capacity and capital costs. That’s the sort of information we can put to good use. What do we find? Capital costs for this 2300 barrel a day facility amount to almost $130,000 per daily barrel. (To put that scale into perspective, a 60,000 barrel a day oil refinery is considered to be small). The following is starting to become a little dated, but I still like it for its relative comparisons:

Capital Costs of Fuel Facilities
Source: EIA Annual Energy Outlook 2006

When someone argues that coal-to-liquids companies might make for good investments, for instance, I point out that capital costs are about double those for gas-to-liquids (GTL), and those GTL projects are being canceled because their costs are too high. So think now about the capital costs of this Verenium venture, and consider the fact that corn ethanol plants with a fraction of the capital costs are going bankrupt. This is not to say that Verenium won’t successfully produce cellulosic ethanol. I just predict that the economics will not allow them to compete with other energy options, and they will live or die by the mandates. Likewise, I believe the same is true for most companies that have aspirations of making ethanol from cellulose.

Are There Any Investment Opportunities Here?

OK, I did say ‘most companies.’ I am hedging a bit, because some company might come up with something slightly advantageous. Will this make cellulosic ethanol a high-margin business for them? No, and if you want to play this game, you are trying to pick a winner out of a pack of losers. Safer in my opinion to stick with a sector that looks like an overall winner.

Look for a company that enables cellulosic ethanol. Buy the company that makes the novel enzyme for cellulose hydrolysis or the membrane system for the separation, not the company that uses them to make ethanol. Profit margins on the former might be good. Profit margins on cellulosic ethanol will at best mimic those of other commodity energy sources.

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February 22, 2009 - Posted by | ethanol, Financial Sense, investing, Pacific Ethanol, PEIX, personal finance

34 Comments

  1. Cellulosic ethanol will be great when it becomes economically viable. Till then, methanol might be considered as an alternativesteve selverston

    Comment by Anonymous | February 22, 2009

  2. I never understood why these ethanol outfits didn’t establish themselves next to refineries along the Louisiana and Texas coasts. 20% of the nations corn already comes down the Mississippi for export markets,so shipping costs aren’t that expensive. And the ethanol could be piped directly to the refinery,instead of being trucked around the country. By-products would be near a port,and cheaper to export. If all the ethanol plants go under tomorrow,there will still be a mandate. Maybe the refineries will all end up with in-house operations. Valero seems to be going in that direction.

    Comment by Maury | February 23, 2009

  3. Not certain you are on target with the main reason for bankruptcies. Since the Feds mandated use of 9 billion gallons in 2008, and 10.5 billion gallons this year, I’m not sure it’s overcapacity that is causing most of the financial problems, and I’m not sure the industry will produce that much ethanol this year with corn prices where they are. For some ethanol plants, main problem was poor hedging for their feedstock (which is also a result of inexperience in energy markets). Some of them locked in lots of corn at $6-7/bushel, and that was a losing bet as both corn and crude prices dropped rapidly. But even if plants hedged correctly, they are still having problems with profitability when corn prices are still at $3.70/bushel. Producers make about 2.7 gallons of ethanol per bushel, so their feedstock cost alone is $1.35/gallon (or equivalent to about $2 gas on energy equivalence). They can also sell the byproduct distillers grains, but overall, at today’s corn prices, they need $50 or $60 crude to be competitive. Note that corn prices have only declined about 50% from their highs, while crude dropped ~75%.

    Comment by Anonymous | February 23, 2009

  4. Greater Ohio ethanol (GO) got liquidated last week for $6 million (plus a ‘promise’ to pay $15 mil more)!! That’s a brand new (opened last April), $150 mil, 110 gal/yr capacity plant, now apparently worth maybe $20 million. Wow. Valero maybe has overbid for the VeraSun assets (they’ve bid $280 mil for about 650 mil gallons of annual capacity)!

    Comment by Anonymous | February 23, 2009

  5. Regarding costs for cellulosic. Yeah, the BP-Verenium deal looks expensive, and I'll be it costs even more than that by the time it is up and running. They are looking for Federal loan guarantees to pick up a lot of the capital costs, since no one else would be that silly. As an example, check out the Range Fuels Fiasco. They (your old friend V. Khosla is a major investor) got $76 million grant from DoE to get started in 2007, have raised >$150 million from private investors in 2008, and just were selected by USDA for $80 million loan guarantee by USDA. All that for a plant with annual production of <10 mil gal of 'mixed alcohols' (methanol and ethanol). Oh, and they are 18 months behind their original schedule to completion. . . . and they are the leaders in cellulosic! Feds are going to throw a lot of $$ at cellulosic, looks like Carter's synfuels snafu all over again. Biomass fuels have a role to play, but forcing technology with federal mandates is so wrong.

    Comment by Oxymaven | February 23, 2009

  6. again, thanks for the consistent reminders and didactics on this subject. both new and long time readers need advice, given all the hype around the energy subject these days.fran

    Comment by Anonymous | February 23, 2009

  7. Investors always remember: If something is hot, Wall Street hucksters will be selling it. Dot coms, REITs, alternative and clean energy. Wall Street will hype “a story.” In the 1990s, it was dot.coms, and that everybody (as one example among dozens) would buy toys on the Web. Remember eToys? All you have left is e-money now. Big stories get written on Wall Street, including the Peak Oil story. Oil will be going to $200, so invest in ethanol, or coal, or whatever. You gotta remember that Wall Street frames arguments the way lawyers do: They marshall all the evidence they can to make a case. Is the case real? They do not approach it as detached scientists. Weigh the evidence, consider different alternatives.You can’t see an IPO by saying “this company will flop when oil goes to $40.”

    Comment by benny "MOAG" cole | February 23, 2009

  8. But even if plants hedged correctly, they are still having problems with profitability when corn prices are still at $3.70/bushel. Producers make about 2.7 gallons of ethanol per bushel, so their feedstock cost alone is $1.35/gallon (or equivalent to about $2 gas on energy equivalence).But why do you think this is the case? True, a number of producers hedged incorrectly. But of those who didn’t, why can’t they make any money? Too much capacity, brought on by the fact that it is too easy to get into the business (for one). They are certainly not helped by the fact that gasoline is historically cyclical, and we are now in the down cycle. But they are using one commmodity to make another commmodity competing against a 3rd commodity that is oversupplied at the moment. The profit margins on such a scheme are never going to be consistently good.RR

    Comment by Robert Rapier | February 23, 2009

  9. Very informative. Isn’t your advice,”Look for a company that enables cellulosic” quite risky? Isn’t such novel information usually bloated, unreliable and typically almost impossible to verify?

    Comment by bug | February 23, 2009

  10. Response to RR re bankruptcies: I think we’re mostly in agreement (but of course). My main observation is that there is a bit of a twist to how this energy market works because it’s not just commodity vs commodity. One of them (ethanol) has both a subsidy (50 cents/gallon) and a mandate to use (blenders had to purchase 9 bil gallons of it last year). I’ll let the brainiac economistas explanin to me how that influences any pricing / production distortions. And I think that even at these corn prices and oil prices that some ethanol plants are making money, not losing it (mostly the ones that paid off their CAPEX debts during the boom 3 years back).

    Comment by Anonymous | February 23, 2009

  11. I’m going OT, but I think this is very telling: Obama’s Auto Team drives imports RR made a big deal during the election about experience. How can people who either don’t own a car, or drive old imports be put in charge of fixing the US auto industry? Or how about this: Obama Cabinet is a CEO Black Hole . Obama wants to fix American business but has no advisors with – business experience. The longer Obama is in office the more I’m convinced he doesn’t have a clue.

    Comment by KingofKaty | February 23, 2009

  12. Good points on cellulosic. The best argument I heard against the mirage of cellulosic ethanol was from Donald Stedman, a chemist at Univ of Denver who’s been studying ethanol’s effects on air quality for years.He said something to the effect of: “Man has been making booze for about 6,000 years. We make it out of all kinds of things: cherries, potatoes, corn, apples, grapes….Don’t you think that if we could make it out of grass and sawdust we would have done it by now?”– Robert Bryce

    Comment by Anonymous | February 23, 2009

  13. He said something to the effect of: “Man has been making booze for about 6,000 years. We make it out of all kinds of things: cherries, potatoes, corn, apples, grapes….Don’t you think that if we could make it out of grass and sawdust we would have done it by now?”Hello Robert! I often make a similar point. A lot of people who argue that we are on the cusp of all of these cellulosic ethanol breakthroughs don’t realize that we have been working on this for 40 years – probably as long as we have been trying to cure cancer. So unless you believe that we are also about to have a bunch of cancer cures come onto the market, there is no reason to believe that commercial cellulosic ethanol is now about to make an appearance (not matter how much money is thrown at it).Some people don’t understand that you can’t just mandate technology and then sit back and wait for it to be invented.Cheers, Robert

    Comment by Robert Rapier | February 23, 2009

  14. Isn’t your advice,”Look for a company that enables cellulosic” quite risky?As a long-term investment, yes. That’s because I don’t think cellulosic will be a long-term experiment. But in the early stages there will be a lot of people living off of government mandates, and utilizing various producers of key equipment in order to try to make it happen. Those equipment producers are going to make some money, just as the makers of specialized equipment used for corn ethanol production have made money.Cheers, RR

    Comment by Robert Rapier | February 23, 2009

  15. Kingo-If you think Obama cannot fix the Epic Bush Mess, then you should short oil. $10 oil here we come, unless this global economy revives soon.

    Comment by benny "MOAG" cole | February 23, 2009

  16. As an example, check out the Range Fuels Fiasco. They (your old friend V. Khosla is a major investor) got $76 million grant from DoE to get started in 2007, have raised >$150 million from private investors in 2008, and just were selected by USDA for $80 million loan guarantee by USDA. All that for a plant with annual production of <10 mil gal of 'mixed alcohols' (methanol and ethanol). Oh, and they are 18 months behind their original schedule to completion. . . . and they are the leaders in cellulosic!Thanks, Oxy, but I’m not sure you’re right about Plant capacity: Apperently you got your numbers off the Range Fuels website: Construction on the first phase of the plant is scheduled to be completed by the end of 2009, with the production of ethanol and methanol at a run rate of less than 10 million gallons per year to follow in 2010. But what do you make of the next sentence? At full-scale, the Soperton Plant is permitted to produce over 100 million gallons of ethanol and methanol each year. That’s a big difference. If the ~$310 million that you indicated is a total capital investment for the full capacity, they would be pretty close to the range for coal-to-liquids (at ~$47/daily bbl). Not there, yet. But making progress.Product: Not sure if they are limited to producing mostly ethanol and methanol by the technology, or that they are just trying to get on the bandwagon and sell themselves as Cellulosic technology that can work. If it’s the first they’ll have limited application. If it is the second, it is a tragic case of political interference distorting the goals of process engineering.Regardless, I think once Washington catches up with the limitations of ethanol as a fuel, the Soperton, GA plant can be modified to produce mostly butanol (King?).Of all the ways to produce liquid fuels from biomass, I think Range Fuels is up there at the lead. If they fall by the wayside, it won’t look to good for biofuels in the short term…

    Comment by Optimist | February 23, 2009

  17. BTW, Benny, I just had to share this dose of cold, hard reality: PHEV Letdown BeginsRead the numbers and weep.

    Comment by Optimist | February 23, 2009

  18. Novozymes, the Danish enzyme manufacturer, recently published an analysis that showed how cellulosic ethanol could be profitable in the U.S. by 2015 without mandates. Also, Sandia National Lab just published a very optimistic analysis of cellulosic ethanol, concluding that EROEI will be about 3.8, and that cellulosic ethanol will be competitive with gasoline at $2.65/gal pump price. Is all of this wishful thinking, or biased analyses?

    Comment by Anonymous | February 23, 2009

  19. Range Fuels runs a wood chip gasifier. That technology was invented – like in the 1850s. They call it “cellulosic ethanol” because they make you think it is all high-techy or something. There seems to be a bunch of California “stupid money’ invested in ethanol and other clen fuels as if Moore’s law applied. About 18 months ago a wise man said: “Cellulosic ethanol is not a recent invention. It has in fact been around since well before the 70’s. People like Vinod Khosla who draw these Moore’s Law type growth curves for cellulosic ethanol should ask themselves where computer technology was in the 70’s, and where it is today. The point is that while cellulosic ethanol has made some progress since the 70’s, the learning curve has been flat when compared to Moore’s Law. It has never before been on a Moore’s Law trajectory, but we are being confidently told that’s what the future holds.What I would argue is that we certainly should continue to fund cellulosic ethanol, but we also need to have realistic expectations. We can’t simply legislate technological breakthroughs as many of our political leaders seem to believe.”

    Comment by KingofKaty | February 23, 2009

  20. Optimist must be confusing me with someone else. I’m not a big butanol fan. I like DME a lot better. Benny – I don’t think you can lay the US auto industry problem at Bush’s feet. GM and Chrysler’s problems were decades in coming, back to the 1970s when they negotiated the “30 and out” contracts. GM bought Saab in 1990 and Hummer in 1998, years before Bush took office in 2001. GM at least was a train wreck that has taken 20 years or more to happen. I reviewed the Sandia study over the weekend – total pile of crap. Sandia makes the same mistake as others in just assuming away the logistical and market problems with increasing the ethanol production.

    Comment by KingofKaty | February 23, 2009

  21. Optimist-Firt-gen, jerry-rigged PHEVs getting in excess of 50 mpg? Why would I cry about that? Better batteries will get developed, the product will get better. These are nascent efforts. And still double US fleet mpg averages! Goodness, if the nation converts to even existing PHEVs (let alone future, better ones), our national fuel bill would get cut by 30-40 percent. Are you sure you are an optimist?Kingo-GM and Chrysler, in some regards, have only themselves to blame, I am sure. Still, this is the worst economy since the Great Depression. Bush was a terrible and lousy steward of our economy, our biggest asset. Obama will try to clean up the mess, but the stables Hercules tidied up are nothing compared to this…..On ethanol: Maybe ethanol was a lousy investment, but oil is crap too. BP and COP at half of highs. BP offeting a 8.69 percent yield now. Oil stocks dumping hard today. Don;t really know why today in particular, but maybe investors are figuring out cheap oi is here to stay for a long, long time. If you oil think has a better future, BP is an interesting stock. Buy, collect the 8.69 divvie, and wait for oil recovery. If you have a long, long wait, that’s okay. You still collect divvie (we hope). Still, these stocks were cheaper in the 1990s. That may be the benchmark. Hard to tell. I sense capitulation is setting in. There is way too much oil on the markets, and oil is a fungible commodity. Gluts means prices head lower than a Sandy Koufax ERA. That’s Nolan Ryan to you, Kingo.

    Comment by benny "MOAG" cole | February 23, 2009

  22. On ethanol: Maybe ethanol was a lousy investment, but oil is crap too. BP and COP at half of highs.Depends on when you got in. I have been investing in COP since 2002. Look at the performance over that time frame, and tell me what’s done better – even including the recent drop. If you got in in the past year, then yeah, my condolences. Cheers, Robert

    Comment by Robert Rapier | February 23, 2009

  23. Well, US Treasuries have done better. And $10 oil may be coming. By the way, I take no joy at all in the stock market plunge, or the global economic contraction. I wish all investors and workers the best of luck. I happen to think oil stocks will see another bad year or two, although perhaps the current price has “discounted that in.” On COP: RR, at least you have been collecting a dividend along the way, even if you are back where you started. If oil skids even more (I think it will) oil stocks look tempting, if they can maintain dividends. But the worst glut of all time in a fungible commodity (oil) is not going to do good for oil stocks.

    Comment by benny "MOAG" cole | February 23, 2009

  24. Benny – I saw Koufax pitch in 1966 at the brand new Busch Stadium. He was a shadow of his former self, but it was still a thrill. Yes, it is all Bush’s fault. He made this bus driver buy an $800,000 home and this bartender refinance the $87,000 home she bought in 2001 for $270,000 in 2005 and then declares bankruptcy. (what happened to the $183,000?) Or maybe The Foreclosure Five might help to explain the problem.

    Comment by KingofKaty | February 23, 2009

  25. The King of Katy Hybrid (25 mpg) gets better mileage than google’s so called “green vehicle”. But I don’t have a cool name for it like Cahokia . I’m thinking of renaming my Ranger “Chernobyl” or “Toxic Avenger”. I’ve done the math on PV solar, hybrids, plug hybrids, etc. Saving the planet for people with more money than sense!

    Comment by KingofKaty | February 23, 2009

  26. Kingo-I grew up on Sandy Koufax. Not only was he a terrific pitcher, he was actually a nice guy. They don’t make ’em like that anymore. On Bu$h: No, he didn’t make anybody take out any loans. He didn’t stop ’em either. The rating agencies (Moodys et al) told the world that mortgage-backed debt was triple A, or at least senior tranches. Banks worldwide bought the debt. Nobody made them buy either. Then, a financial meltdown. On Bu$h’s watch. The free market went haywire straight into the toilet. Sank faster than a Johnny Podres’ sinker. It is a tricky question: If the free market commits seppeku, should the government step in? Oh well, here we are now. I hope Obama knows what to do.

    Comment by benny "MOAG" cole | February 23, 2009

  27. Interesting analysis. But for a good capital cost per barrel comparison with oil, shouldn’t you include the cost of the *wells*, not just the refinery, for oil?

    Comment by David | February 24, 2009

  28. “I hope Obama knows what to do.”Well, Benny, it looks like your man is going to do everything he can to drive the price of oil back up to never-before-seen highs.Looks like he is planning to get an American army trapped & destroyed in land-locked Afghanistan, encouraging your Thug States; to let Iran get nuclear weapons, and trigger a Middle-East war; to ignore growing chaos in Mexico & Venezuela; to kow-tow to Russia, which wants higher oil prices. He may even piss off the Canadians by sticking "green" import taxes on oil from the tar sands.It is hard to say which leg of this oh-so shakey stool will break first. Still, it is a very good guess that something will break, with very predictable results for oil prices. The price of oil is going to be driven by political decisions, not simple supply & demand.Good time for contrarians to start buying into depressed oil stocks. The only thing the rest of us can do is to keep on hoping for change.

    Comment by Kinuachdrach | February 24, 2009

  29. But for a good capital cost per barrel comparison with oil, shouldn’t you include the cost of the *wells*, not just the refinery, for oil?That is an upstream function, like corn farming is an upstream function. Neither are included in that analysis. This is about how much money it costs to turn the raw materials into finished product; refineries in both cases.Cheers, RR

    Comment by Robert Rapier | February 24, 2009

  30. Well, US Treasuries have done better.In 2000 COP was at $20 and in 2002 COP was at $25. So even with the latest fall, it doubled since 2000 – and as you say has paid dividends along the way. That’s not better than US Treasuries.As I always say, I am a long-term investor. Over the long-term, oil companies have fared quite well. And oil isn’t going to stay where it is.If I can get it finished today, the next post is on peak demand.Cheers, Robert

    Comment by Robert Rapier | February 24, 2009

  31. At full-scale, the Soperton Plant is permitted to produce over 100 million gallons of ethanol and methanol each year. That’s a big difference. If the ~$310 million that you indicated is a total capital investment for the full capacity, they would be pretty close to the range for coal-to-liquids (at ~$47/daily bbl). Not there, yet. But making progress.They are permitted for that much. That is to say they put in their permits that eventually they might go that high. Rest assured that $310 million is not for a full capacity of $100 million gallons. Gasification isn’t that cheap.Cheers, Robert

    Comment by Robert Rapier | February 24, 2009

  32. Optimist: For a final word on where Range Fuels is actually at, see the January 2009 DoE Environment Assessment – http://www.eere.energy.gov/golden/PDFs/ReadingRoom/NEPA/DOE_Range_Fuels_%20final_SEA.pdf See section 2.4 and 2.5 on modifications to proposed operation and construction.I hope that DoE is not providing $80 million in funding for Phase 2 of this project (initial expansion) until they can at least get some indication that Phase 1 is working halfway decently and is viable. And I hope that Range wouldn’t be thinking about expanding until they get a year or so operation of Phase 1 under their belts. Clearly Phase 3 is a ways off.RR – any updates on Choren’s progress in Germany?

    Comment by Oxymaven | February 24, 2009

  33. KoK – you say you reviewed the DoE Sandia / GM cellulosic report? Was it actually the report or just their ExecSum?? I’ve tried to get the report but they say they are going to publish papers instead. That’s fine but I really find it distasteful that they hold a big press conference and tout the findings, but never provide the report! I would like to think a Steve Chu DoE would want to be open and transparent in their research, not spin the results like Sandia has and not let anyone see how they got them. That sounds like the Bush DoE.

    Comment by Anonymous | February 24, 2009

  34. I wonder when the full truth and realization of what Range is doing and struggling with – will finally be exposed? They now have a career oilman from Shell as a new CEO to replace a former Apple computer salesman. Good choice! Review their management, BoD and Advisors. These are not agri-businessmen at all. Ligno-cellulosic ethanol? Come on now!!!Range's management has consistently used the buzzwords of "ligno-cellulosic ethanol" in order to obtain $76M in DOE grant money and another $80M in taxpayer supported USDA Loan Guarantees – this is public knowledge. Yet the GTL mechanism they are obviously late in commercializing/showcasing isn't ligno-cell in anyway shape or form. Citizens who read about emerging second-generation biofuels and bureaucrats who give out grants and loan guarantees are not at all familiar with the science, chemistry and process efficiencies behind many of these highly-varied new biofuel conversion processes.The true definition of ligno-cell is to convert lignin contained in (corn stalks, cobs, wood chips, switchgrass, etc.) plant biomass with extra expensive, extra acidic enzymes into five and six carbon sugars, then continue a traditional biological batch fermentation using yeasts. And within this process of ligno-cellulosic conversion, far less volumes of more costly C2 ethanol per 7-day batch are produced when compared to traditional 4-day fermentation of corn kernels for their intrinsic carbon content. This ligno-cellulosic fermentation process is something which Canadian Iogen began pioneering about seven years ago when Shell Oil stepped in with millions in R&D investment backing. Been kinda quiet lately, huh? Therein, close insider observers learned that a 7-day cook time for ligno-cell biologic fermentation was too long, mother nature's biobugs contaminated about every third batch which produced only 35% or so of the ethanol volumes achievable from fermenting corn.What Range is attempting to accomplish is to produce a mixed alcohol blend of 4, 5 or maybe 7 or 8 longer-chained higher alcohols. C2 ethanol is only one of these simple (n – or normal, non-branched) alcohols herein.Yet C2 ethanol is the largest by volume of this synthetically produced GTL blend of fuel-grade alcohols. C4 n-butanol may be present at about 7% to 9% of these blended alcohols where the ethanol portion may be 50% or greater volume. This blend features higher octane, significantly more BTU's, several other synergistic combustion and petroleum-blending features and finally, a much lower cost per unit volume to produce via GTL than ethanol batch fermented from either corn kernels or ligno-cellulosic substrates. The building blocks herein are simply carbon, hydrogen and oxygen. And agricultural harvests have nothing to do with the makeup of providing such basic building blocks. (This is globally where most folks still are terribly confused.) Hence the gasification front-end which Range employs near Sooperton, GA which can cleanly convert ground tires or coal or garbage just as easily as wood chips into the same three basic building blocks of carbon, hydrogen and oxygen.Nothing needs to be planted, fertilized, watered nor annually harvested to provide unlimited carbonaceous feedstocks for conversion to a new, stronger and cheaper biofuel in this type of GTL process.It will be interesting to see what finally eeks out into the 'truth be known' or more common public understanding within the biofuels marketplace. In the meantime, public money will still be changing hands while erroneous labeling of 'ligno-cellulosic' continues to flourish via DOE and other documents. Didn't we read a couple of years ago that Vinod admitted he was changing his personal schedules by flying into Wash D.C. on a much more regular basis than before? Let's get past the mis-labeling of ligno-cellulosic as a buzzword term which people still do not understand at all. Thanks.(from the net via an earlier comment and URL herein:)SupplementalEnvironmental Assessment and Notice of Wetlands Involvement Construction and Operation of aProposed Cellulosic Ethanol Plant,Range Fuels Soperton Plant,LLC(formerly Range Fuels Inc.)Treutlen County, GeorgiaDOE/EA 1647Prepared for U.S. Department of Energy January 2009

    Comment by Anonymous | February 24, 2009


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