Signs of Recovery

While it will only be with years of hindsight that we can determine the total environmental impact of the Macondo blowout in the Gulf of Mexico, there are encouraging signs that the environmental devastation will be less severe than many had feared. Today a reader sent me this encouraging story:

Oil spill area coming back to life

More than a dozen scientists interviewed by The Associated Press say the marsh here and across the Louisiana coast is healing itself, giving them hope delicate wetlands might weather the worst offshore spill in US history better than they had feared.

Some marshland could be lost, but the amount appears to be small compared with what the coast loses every year through human development.

Irving A. Mendelssohn, a coastal plant ecologist at Louisiana State University, said the wetlands data so far is good news for fishermen who depend on the ecosystem to produce shrimp, menhaden and other seafood.

“My gut feeling, based on what I have seen, based on the recovery people have observed, I doubt that the impact to the wetlands is going to create a significant problem for our coastal fisheries,” Mendelssohn said.

Good news indeed, but let us not let our guard down. Just because the worst case may have been avoided doesn’t mean the risk of a worst case isn’t still there. The industry will need to remain diligent in identifying and addressing root causes, and in coming up with better response plans. (I previously noted the $1 billion investment in a containment system to mitigate against this possibility in the future: New Oil Spill Containment System to Protect Gulf of Mexico Planned by Major Oil Companies).

Signs of Higher Prices

On the other hand, I have maintained from the beginning that beyond the environmental impact, there would be a very real impact on future oil supplies as a result of this incident. The International Energy Agency has now estimated that the loss in 2011 may be 100,000 barrels per day:

IEA Raises Gulf of Mexico Output Loss to 100,000 Barrels a Day

Aug. 11 (Bloomberg) — The International Energy Agency raised its forecast for Gulf of Mexico oil production loss to as much as 100,000 barrels a day in 2011 because of BP Plc’s crude spill and subsequent deepwater drilling ban.

The Macondo spill will curb Gulf output by 60,000 barrels a day this year, Paris-based IEA said today in its monthly report. The agency has doubled its estimate from last month, when it also said the reduction may increase to 100,000 barrels to 300,000 barrels a day in 2015.

With oil supplies still tight, this will put additional pressure on prices. The likelihood that we will continue into the Long Recession scenario remains high in my view.

Last December, I received an intriguing request from the Public Relations Director at the world’s largest ethanol producer. Nathan Schock asked if I would be interested in posing a video question that would be answered by POET CEO Jeff Broin. He said that any topic was fair game, except for questions dealing with proprietary information.

I considered a number of questions, and wrote an essay detailing my thought process as I ran through a list of potential questions: The Questions I Didn’t Ask. But I had one question that had been weighing on my mind more than any other, and I posed that one in the video I sent in.

Since then, Nathan and I have exchanged a number of e-mails about the status of the question. As the months went by, I began to suspect that even though anything was supposed to be fair game, the particular question I did ask was a bit tricky for them to answer. But today, they answered that question and issued a press release calling for a change in direction on the nature of the ethanol tax credit:

Ask POET Episode 3: the Ethanol Tax Credit

I have long maintained that with the Renewable Fuel Standard (RFS) in place, the ethanol tax credit (the VEETC)  is redundant. I have made this argument many times on my blog (see Strategizing for the Ethanol Industry), and I made the argument at Forbes.

My argument has been that we don’t need the tax credit with the RFS in place, but if we do have a tax credit it should be directed at building out incentives and infrastructure for E85 – particularly in the Midwest close to the source of the ethanol. The current nature of the VEETC is to pay oil companies for complying with the law requiring them to blend specific quantities of ethanol.  This was the gist of a plan announced today by Growth Energy:

Growth Energy Proposes Fundamental Shift in America’s National Fuel Policy

The “Fueling Freedom” plan calls for the phasing out of current ethanol supports over time, by redirecting a portion of those funds to build out the infrastructure for the distribution and use of ethanol, and shifting the remaining portion away from the oil companies to opening the market. The primary elements of the plan include:

* Funds currently going to the oil industry as an incentive for blending ethanol into gasoline (the VEETC) would be redirected to provide backing for the build out of distribution infrastructure for ethanol – such as tax credits for retailers to install 200,000 blender pumps and federal backing of ethanol pipelines. This will provide Americans the access to choose ethanol in an open and free market, and would allow for the elimination of the tax supports over time in exchange for that level playing field.

* Requiring that all automobiles sold in the U.S. be flex-fuel vehicles – as many as 120 million. This requires no additional cost to taxpayers and a minimal cost (about $120 per vehicle) to vehicle manufacturers.

Growth Energy’s Fueling Freedom plan, once implemented, would build out the infrastructure in the United States to create a path that leads to a genuinely free market – an open market that is free of government supports. Redirecting monies currently paid to oil companies to blend ethanol into gasoline toward infrastructure improvements would enable consumers to choose between gasoline and renewable, homegrown ethanol.

POET also issued a release voicing support for the plan:

POET voices support for Fueling Freedom Plan proposed by Growth Energy

I was told that the development of this plan is why it took longer for my question to be answered; that they didn’t want to answer it when it anticipated the change in strategy that they were working on.

I will note a couple of things related to the announcement. First, I don’t think the fact that it will cost the auto industry an additional $120 to produce E85 vehicles means there will be “no additional cost to taxpayers.” Someone will pay for that, and I don’t think it will be the car manufacturers. I am not suggesting that it is a bad idea (I actually support this) but the cost will be borne by taxpayers in one form or another.

Second, there are phrases in there like “phasing out of current ethanol supports over time” and “eventual phasing out of government support for ethanol.” Those comments will require significant clarification. What exactly does that mean? A cynical person might suggest that the ethanol industry could see that the government was losing an appetite for the subsidies, and by embracing a strategy of “eventual phasing out” they might be able to keep the bulk of the subsidies for many more years. So right away the question becomes “What does your time-line look like for the phase-out?”

We know that the VEETC expires at the end of 2010. We have been hearing for quite some time now that ethanol is competitive with gasoline. We know that the oil industry is the recipient of the VEETC payments. Why then is an “eventual” phasing out required? I think it is time to move on to the question of “What would be the impact if the tax credit is not renewed at the end of 2010?”

In fact, in the answer to my question, Jeff Broin calls on the oil industry to walk away from their subsidies. Given the recurring argument that the VEETC is really an oil company subsidy since they receive the payments, wouldn’t allowing the credit to expire this year mean they are walking away from a subsidy?

In any case, I do thank POET for taking on the question. I believe their answer is a step in the right direction, and I appreciate the opportunity to be involved in the debate.

I really had to brainstorm on exactly which question I would ask. I made a short list, and finally honed it down to one that I think is fair, but tough. But I had a number that I decided not to ask, either because I already knew how it would be answered (even if I disgreed with the expected answer) or the questions/answer to the question was so complex that it couldn’t be answered in a short video clip.

Here I discuss what I didn’t ask, but it really gets to the heart of the issues I have with U.S. ethanol policy. First, a bit of framework. I believe that I am, and have always been objective, and a realist. I don’t believe that we are ever going to have a moment where government leaders say “Let’s abandon this ethanol pathway.” We had an example of that with MTBE, but there was clear evidence that MTBE was getting into groundwater and lingering.

The issues around ethanol are more complex. Corn ethanol has been U.S. policy for the past 30 years, and it will be policy for the next 30 years. It is too embedded in agriculture policy, and I think it would be devastating for Midwestern economies if we changed direction on corn ethanol. Thus, I think we continue down that path, for better or worse.

I am not pro-ethanol nor am I anti-ethanol. In one of my earliest essays in this blog, over 3.5 years ago, I talked about some of the things I would like to see happen in the grain ethanol industry, mostly aimed at improving the energy balance. I came out in favor of the approach of E3 Biofuels, who were trying to build a highly integrated ethanol complex that minimized fossil fuel inputs. I have endorsed such approaches on multiple occasions.

My concerns are, and have always been: What are the long-term consequences? I don’t limit this to ethanol; this is a question that I ask of all energy options. Dependence on oil has some significant long-term consequences. The most serious of which, for me, is the potential for building a world that is only sustainable as long as oil production continues to expand. I see significant risk there, so it has always been my position that we need to reduce our dependence on fossil fuels in general.

With respect to ethanol, consider this thought experiment that I posed following one of my previous essays: Would you consume 2 BTUs of natural gas to produce 1 BTU of ethanol? I think most people would conclude that this would be foolish; that your natural gas supplies would stretch much further if instead you simply use the natural gas in CNG vehicles (acknowledging of course that there are lots of things you have to evaluate in that scenario). For those who would answer “Yes” to that question, I would argue that your view of ethanol is entirely one-dimensional. You probably only care that it is homegrown, and you don’t worry much about the long-term consequences.

Of course the truth is more complicated than the example above. It doesn’t take 2 BTUs of natural gas to produce 1 BTU of ethanol. Estimates vary, but it is still safe to say that most ethanol operations in the U.S. continue to have substantial fossil fuel inputs. That is the way they were built, and that is the way they will continue to operate. Over the long-term, there is potential to change that equation by using biomass boilers, but those are more expensive to operate than a standard natural gas boiler.

So on average the ethanol industry does still have a heavy fossil fuel dependence, albeit largely domestic coal (for electricity) and domestic natural gas – with some petroleum inputs for trucks, tractors, etc. (One thing to note is that more than 50% of our fertilizer supplies – derived from natural gas – are in fact imported). So what if the question was “Would you spend 1 BTU of natural gas to make 2 BTUs of ethanol?” If you are doing a holistic analysis, the answer should be “It depends. What are the other impacts?”

There are those who wrap U.S. ethanol policy in patriotism and the American flag, and who would rather not get into those questions. These questions are hand-waved away with clichés like “I would rather support American farmers than Saudi sheiks.” I try to look at it from the perspective of an engineer, a scientist, and an environmentalist. I want to stack the columns up and figure out what is really happening as a result of our ethanol policy and subsequent rapid expansion of corn production. I want to look at it from the perspective of “What is going to be the impact on the world my children will inherit?”

Just a few of the key questions for me are the following:

In a nutshell, I want to know if we are compromising the future relative to other options, and/or relative to the status quo. These sorts of issues are generally ignored by most advocates. They believe our ethanol policy is the right thing to do, and then nothing else matters. I have debated people like this before, and they are simply not interested in the holistic picture. Often, it is because they are vested interests.

Chief ethanol lobbyist Bob Dineen isn’t going to be at the forefront, trying to determine the answers to these questions. His job is to promote ethanol, period. He will get involved when one of these questions becomes persistent enough and loud enough, and his position will typically be that of defense attorney: Deflect the question if you can, and try to raise doubts that the question even matters.

But I am not a vested interest dug into a bunker. If our ethanol policy is better than the status quo, then I am all for it. But you can’t know that unless you take a really comprehensive look. I would like to see an independent analysis of all of these issues, now that we are some 11 billion gallons per year into this experiment.

The problem is finding an independent agency to do such an analysis. The ethanol lobby hires their consultants, who conclude, “It’s all good.” Big surprise there. (By the way that is the same guy who wrote a paper stating that ethanol with the energy value of 64 million barrels of oil displaced 206 million barrels of oil).

Energy policy in general is a complicated issue, and it is wrapped up deeply in politics. I doubt we will ever get the independent review I would like to see – and even if we did the lobbyists would immediately go to work trying to discredit the study. But I hope you can see why I decided not to ask that question. It might take 10 minutes to ask it, and then an hour to answer it – and I don’t think the answer would really get into the fine details that I am interested in.

You will have to stay tuned to see the question I did ask.

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It started out innocently enough. Oil prices were climbing. Our energy production was shifting to an ever greater extent to countries that are hostile to the U.S.

So, Step 1 is to propose a solution:

1. Subsidize ethanol production to encourage biofuels and enhance energy security.

However, subsidies didn’t do the trick. It was still too expensive to produce ethanol. People still chose gasoline derived from hostile sources over more expensive ethanol. What we really needed was Step 2.

2. Let’s mandate ethanol usage.

At the point that the subsidy turns into a mandate, things change. Now, the fuel doesn’t have to be economically priced. It is going into the fuel supply regardless of the price. And this kicks off a massive expansion of ethanol capacity.

But soon we notice that too many people are building ethanol plants. This is causing a glut of ethanol, and putting downward pressure on the price of ethanol. On the other side, it is raising the price of corn. This lowers the margins for ethanol producers, and some producers start to go bankrupt. Projects are delayed or cancelled. The solution? Proceed to Step 3 (which was entirely predictable):

3. We need to raise the mandate for ethanol usage.

Unfortunately this leads to more of the problems that arose from the original mandate. Corn prices go even higher. Land prices continue to climb. Land is shifted to corn production, forcing commodity prices up in other areas. Very few segments of the population are experiencing true benefits.

The primary beneficiaries are commercial corn (and other commodity) farmers who purchased their land several years prior to the mandate. They are truly experiencing a windfall from these policies, and thus will fight the hardest to continue down this ill-advised road.

Secondary beneficiaries are lobbyists who defend the practice, as well as those who are willing to write papers (commissioned by the National Corn Growers Association) that downplay the consequences (or even better, point the finger in another direction).

The ethanol producer is hurt each time the overbuilding cycle occurs. They are starting to realize that the energy business is often low margin (and cyclical), and not as lucrative as they once thought. Maybe the solution is to increase the mandate again? ;-)

The cattle rancher (like my Dad) and pig and poultry farmers get hurt from higher feed prices that cut into already razor-thin (or negative) margins.

The person trying to buy farmland is hurt by land prices that have exploded as a result of the mandates (unless they inherit family land).

The environment suffers as the mandated corn production means more herbicide, pesticide, and fertilizer usage, some of which ends up in our waterways.

The person who eats is hurt because higher commodity prices ripple through their food budgets, already stretched because of increasing energy costs.

So what’s the solution to this mess that has been made? I think it is simple, really. We all need to become either corn lobbyists or corn farmers. That way we all get rich and can afford to pay the financial consequences of spiralling inflation resulting from these mandates. (I suppose we will need to be subsidized for our farm purchase, since farms have gotten pretty expensive).

As for the impact on the environment? We can simply commission a study to show that there is in fact no impact on the environment. Ah, the aquifers. I forgot about those. Looks like I will need to commission another study.

Problem solved.

The Guardian has just published a list of 50 people who may save us all from “stranded polar bears, melting glaciers, dried-out rivers and flooding on a horrific scale.” Some of the names certainly belong on the list, and some left me shaking my head:

50 people who could save the planet

It is pretty clear to me that the author couldn’t really distinguish between what is complete hype, and what may actually work. Some will get a kick out of seeing Amory Lovins on the list. Especially in light of this article in Energy Tribune. Leonardo DiCaprio is also on the list, but I think he is a guy who tries hard to walk the talk. I put him in the same category as Ed Begley, Jr. Here is what they wrote about DiCaprio:

Combining the diametrically opposed worlds of the A-list Hollywood star and the impassioned environmentalist is a fraught, sometimes contradictory process, but DiCaprio has pulled it off, becoming one of the world’s most high-profile campaigners.

His primary aim, he says, is to raise awareness, not to preach: “It’s not about imposing a certain belief system or a way of life on people in any economic background. It’s about just being aware of this issue – that’s the most important thing – and really trying to say, ‘Next time I vote, next time I buy something, I’m just going to be aware of what’s really going on.’ “

The first campaigning steps were taken a decade ago after he found himself the target of angry environmentalists. During the filming of The Beach, the bestselling novel about backpackers seeking a shangri-la off the Thai coast, the production team was accused of damaging a pristine beach in a national marine park – in an attempt to make it look even more “perfect” for the cameras, some palm trees were temporarily planted and sand dunes moved. Despite the authorities giving the film-makers permission, their actions made headlines around the world.

Evidently stung by the criticism, in 1998 DiCaprio established the Leonardo DiCaprio Foundation, which has since collaborated with the likes of the International Fund for Animal Welfare, Oceana, the Natural Resources Defence Council and the Dian Fossey Foundation to raise awareness, particularly among children, of environmental issues.

In 2000, he was the US chair of Earth Day, the annual celebration of the environment. “Enough is enough,” he told the crowd in Washington DC. “We must set an example now and move environmentalism from being the philosophy of a passionate minority… to a way of life that automatically integrates ecology into governmental policy and normal living standards. We are entering an environmental age whether we like it or not.” But it was his Earth Day interview with President Clinton on ABC News that caused the biggest ripples: ABC journalists were said to be furious that a young, heart-throb actor had been allowed to do such an important interview. The final edit of the interview itself was fairly soft in tone, but it did include questions that now seem ahead of their time – namely, about the science of climate change, the lobbying power of Big Oil, ways to decrease the use of SUVs and how vulnerable New Orleans was to sea-level rises. There was even a lengthy exchange about hybrid cars, long before they became the car du jour of Hollywood stars.

As DiCaprio’s acting career matured, he continued his parallel life as an environmental activist, speaking at colleges and campaigning on behalf of John Kerry in the 2004 presidential campaign. And for his new documentary, he has mustered the likes of Stephen Hawking, Bill McKibben, David Suzuki, Mikhail Gorbachev and Wangari Maathai (below) to take part. He limits his own appearance in the film – essentially a series of talking heads set against library footage – to that of host and narrator. Since its release in the US last year, it has been dubbed the unofficial sequel to Al Gore’s The Inconvenient Truth.

“It was a learning process,” says DiCaprio, “and I wanted to play the role of investigator – from watching documentaries at a young age, from seeing films on rainforests in Brazil and really appreciating the beauty of our planet, and then learning more and more about human impact and wanting to do something about it.”

His next eco-project is already in production – he’s a producer for a Discovery Channel show called Eco-Town, which records how a Kansas town devastated by a tornado in 2006 attempts to rebuild itself as a “model of green living”.

Some other notable names on the list were Al Gore, Angela Merkel, Craig Venter, and Cormac McCarthy. You may not recognize McCarthy’s name, and I wouldn’t have two weeks ago. He is the author of The Road, which was recommended to me over Christmas. It was very disturbing.

Vinod Khosla did not show up on the list, which was surprising to me given some of the people who were on the list. In a couple of years, I intend to be on it. :-)

One of my interests, dating back 25 years to when I was a member of my local FFA land judging team, is soil conservation. I have long been interested in things like terra preta and composting because of their ability to build topsoil. But I never thought much about how difficult it can be to build up topsoil until I read Kim Stanley Robinson’s Mars Trilogy – Red Mars, Green Mars and Blue Mars(great books, by the way). The books trace a future hypothetical terraforming of Mars, and one of the major difficulties the characters face is producing topsoil on the planet. It was then that my interest in the mechanisms for topsoil erosion and topsoil production greatly increased.

While I would eventually like to get some experience with producing terra preta, earlier this year I got a flyer from Waste Aware Scotland for discounted composters. So, I bought one, and started to experiment. I wish I had done so years ago, because it has really been a fascinating exercise.

I got the larger 330 L (87 gallon) model shown above and started dumping all things cellulosic into it. There is quite a little tropical ecosystem inside the composter. Even when it is cold outside, the waste is always steaming. And not only has it attracted numerous earthworms, but there are beetles, slugs, and lots of insects I haven’t been able to identify. Besides being an interesting science experiment, there are major environmental benefits from composting. According to the most recent newsletter from Waste Aware Scotland:

• It reduces waste sent to landfill

Scotland produces 900,000 tonnes of organic waste a year. That’s enough to fill Hampden Stadium more than 18 times. We could divert a large amount of organic waste from landfill by using it for home composting.

• Reduce global warming

Organic waste sent to landfill cannot decompose properly because it doesn’t have access to air. As a result, it produces methane, which is a powerful greenhouse gas that contributes to global warming.

• Your garden benefits

Compost improves soil, so plants in your garden become healthier and more pest and disease resistant. They will produce better fruit and vegetables and more beautiful blooms.

As I explained to my daughter, who recently told me she wants to become more environmentally responsible, there are two ways in which composting combats global warming. The first is the reduction of anaerobic digestion, which results in methane production as explained above. Because methane is such a potent greenhouse gas, this is not something you want occurring in an open landfill. But the second benefit is that home composting reduces the mass of material that would be transported (via fossil fuels) to the landfill. So home composting is much more environmentally responsible than throwing your waste in the trash.

So, what can you compost? Again, referring back to the newsletter:

Kitchen waste:

✔ Fruit scraps and vegetable peelings
✔ Tea leaves/bags and coffee grounds
✔ Egg shells
✔ Paper items which can include scrunched up cardboard, egg boxes, toilet roll tubes, vacuum cleaner bags, cereal boxes and paper towels

Garden waste:

✔ Cut flowers
✔ Garden and house plants
✔ Grass cuttings
✔ Young annual weeds
✔ Shredded twigs
✔ Hedge trimmings
✔ Straw and hay
✔ Wood chippings and sawdust
✔ Hamster or other pet bedding

If you start to segregate your garbage, you will find that these items make up a substantial portion of what would normally go to the landfill.

In the picture above, the composter contains about 30 gallons of composting material. But I have filled it to the top at least 10 times and haven’t taken anything out of it. In other words, that 30 gallons of material was originally around 1,000 gallons. It is amazing how much the volume is reduced as it decomposes. But that also goes to show how much material it takes to produce an inch of topsoil.

So get yourself a composter(or make one) and do a bit more for the environment. You may even find that you enjoy it.