Midwestern Governor’s Association
Bioeconomy and Transportation Meeting
Chicago, July 21, 2008
Attendees: Bill Johnson (Alliant Energy)
Mike Doherty (Illinois Farm Bureau)
John Biondi (C5-6 Technologies)
Mary Blanchard (Virent Energy Systems)
Joe Shacter (Environmental Law and Policy Center)
Mary Culler Mary Culler (Ford Motor Company)
Observers: Diane Schmidt (Flint Hills Resources), Ivan Tomovski (ADM)
Presenter: Steve Taff (University of Minnesota)
MGA: Jesse Heier
GPI: Brad Crabtree, Brendan Jordan
CCS: Gloria Flora, Ken Colburn
Further information about attendees
Shacter – Environmental Law Policy Center - ReAMP – focusing on transportation issues and fuels.
Blanchard - Virent Energy Systems advanced biofuels from plant sugars.
Biondi - C5-6 – front end of biofuels conversion process, converting feedstocks. Chair of regional econ development.
Craig- director of ag development State of MI, agri-business and renewable energy, ethanol, biodiesel
Huggins – Nature Conservancy, biofuels and land use. Past chair of renewable energy,
Ivan Tomovski – ADM, life-cycle analysis, engineering and policy aspects of biofuels, CHP in biofuels process
Doherty - IL senior economist and policy analyst in IL Farm Bureau
Johnson – WI, biofuels technology, methane capture from landfills, baseload capacity using coal and biomass (
Schmidt – Flint Hills, refineries, outside St. Paul. Gasoline supply in Midwest and purchaser of biofuels.
Welcome – Jesse Heier –Meeting tomorrow with Governors’ staff. Will seek approval of work to date, and adding more people to BTAG.
MGA Greenhouse Gas Accord Progress - Brad Crabtree
· Update on Tier II Advisory Groups
o Bioeconomy and Transportation
o Energy Efficiency
o Renewable Energy/Advanced Coal/CCSR
§ Implementation of Regional Resolutions
§
o GHG (cap and trade with complementary policies)
· Regional Scenario Model Development (see S. Taft’s presentation)
· MGA Energy Security and Climate Stewardship Roadmap
Transmission Adequacy Resolution: Preliminary Strategy
CO2 Mgmt Resolutions – enhanced oil recovery, geologic assessment in MN, WI and IA; inventory of jurisdictions; uniform statutory framework; CO2 pipeline siting and jurisdiction
GHG Advisory Group-
· Scope Group - cap covers electricity and large industrials which account for only 48%: transportation outside of cap; allowance distribution (who gets what) is problematic
· Target-Setting - range of 15-25% reductions from 2005 by 2020 and 60-80% by 2050 (largely along IPCC lines)
· Offsets – when a sector is capped, each emitter surrenders allowances or purchase allowances to cover future.
Modeling Discussion, led by Steve Taff, University of MN
· A route to explicitness, answering the question… who is instigating people to take action to do what when?
· Model tells you what happens if you do what. There are many models around that claim to giver you the “best” answer but they are a tool for displaying information not spitting out answers.
· Many different methods of measuring and baselines used.
· Low Carbon Fuel Policy/Standard:
o North Central Bioeconomy Consortium, chaired by Iowa Secretary of Ag in IA is working on a guidelines for Low Carbon Fuel Policy.
o EPA is not going to be able to set a clear number because of the inherent complexity in the system for tracking carbon. Total carbon score may be politically very difficult to institute if ethanol score is very high. Particularly challenging for the Midwest. CAFÉ standards may be easier to adopt.
· Response in VMT? At what point? You can bring in LCFS but if you don’t address consumption then the total use could continue to go up and thus carbon increases too.
· Effect on public transportation? Demand will increase.
· Biofuels should be considered as transition/bridge to advanced biofuels.
· Need to model non-ethanol biofuels
· Many things missing from the model: exports, tar sands, etc.
· Steve needs a limited number of policy options to reasonably process.
· Looking at interactions on a reasonable number of elements.
· Will be semi-final at next meeting
· Where does energy independence and building the economy fit into model (total expenditures in model feeds into state economic impact analysis for example).
· Does money flow in or out of the region? It can be tracked
· As part of recent renewable fuels legislation, ethanol is grandfathered as having no carbon outputs.
· Critical aspect is to determine accurate baseline for gasoline. Canadian tar sands is a significant part of supply. 30% liquid fuels come from CA, but what % is tar sands?
· Dirty energy should get a worse score. Quality of crude oil is declining requiring greater refining.
· It is very likely that biofuels facilities, as “large industrial energy users”, may be covered under a cap. Therefore, carbon intensity of biofuels will go down. How do we avoid double counting?
· Two refineries in MI capture all CO2 emissions. So not all plants are equal.
· Cellulosic ethanol is better and needs to be considered separately from other ethanol
· Increasing prominence of ILUC (indirect land use change) and source of feedstocks. Recognizing associated damage from certain feedstocks. Need green certification process.
· The big question about Low Carbon Fuels is not necessarily policy design, but accurate accounting of GHG emissions from a complex system (land use, geographic differences state to state, etc)
· Two other things are important – energy security and economic development. Does the model adequately track them?
Policy Options Discussion
(by cluster)
Low Carbon Fuels Policy and Infrastructure
· NCBC – LCFP (North Central Bioeconomy Consortium – Low Carbon Fuel Policy) – Has a process in place, studying life-cycle assessments for corn ethanol, Webinars – status of LCF Policies and status of life-cycle analysis and legislation in US and Europe. Best practices; direct and indirect land use change. Included MGA participants.
· Webinar #3 - July 25, 2PM CT, 1.5 hours focus on land use. Webinar #4 on July 31, see email from Brendan Jordan.
· Just doing 10% reduction in carbon with no other policy option would lead to further reliance on corn ethanol. Over time, increase proportion of the fuel that reduces carbon by 50% (cellulosic). Wean off corn.
· Europe has carbon reduction goals. States should pay attention for future exporting. (US models are more advanced then European models but needs improving – best to use dynamic modeling based on regions. Need to evaluate each facility and feedstock producers based on agreed upon framework)
· Farmers can be motivated to use less fertilizer.
· Consider adopting a consistent accounting structure that meets standards set by CA and Europe for imports.
· Carbon intensity reductions. Baseline 2005. Measuring reductions in carbon intensity. Policy call – carbon intensity of traditional fuels (inc. oil sands)
· Goal: Reduce the life cycle GHG emissions of xx units of fuel by __% by ___ (date). Start with CA’s 10% by. Xxx?
· Need physical cap also?
· Why can’t oil and gas industry be asked to play a stronger role in reducing total GHG reductions? Major questions that are part of modeling. Source? Refining techniques? Reducing reliance on Middle Eastern oil is current direction; Canadian oil is replacing. Reduces shipping costs in life cycle so even “dirty” oil has improved rating from shorter shipping.
· Until new fuels are generated to replace, the only feedstock for gasoline is crude oil. There is a cost differential in each source of feedstock. Energy efficiency is self-driven by the refining industry.
· Note that there are existing goals from the Platform for ethanol.
· Should tag individual batches of feedstock and tagging batches of biofuels.
· Current goals – if ethanol meets renewable fuel standard definitions (EPA RFS) then it’s likely you will meet the MGA goals. Encourage EPA’s process and progress.
Other Transportation options – Joe Shacter
REAMP came up with suite of policy options for IL that addresses three-legged stool: fuels, vehicle efficiency and demand. Set of additional policies to just fuel. Will share the paper with team.
- Reform infrastructure and planning
- intermodal transportation, including slow modes
- Policy on freight (moving more to rail from trucking)
- Direct VMT demand reduction, Pay-as-you-drive, parking, and other incentives to reduce VMT. Establish targets.
- Transportation be considered within cap. (Who would be regulated? Likely refineries would be and then rise prices accordingly)
Don’t forget using other fuels such as compressed gas
Discussion: BTAG group is willing to take on developing policies in other areas of the transportation system. Staff should recommend additional participants to accomplish this goal, as there is not now sufficient expertise to take this on.
Research and Technology
Discussion:
· Look at carbon as a valuable product rather than a liability. Be creative instead of fearful. Add market value.
· Use methane from decomposition of organic materials for fuels, heating, transportation, etc.
· Need to justify costs in the public realm.
· Public institutions need to be wiling to invest in private commercial ventures.
· Bio-ag still being driven by bio-tech companies on the coasts. Another examples is Electric Power research Institute based in Palo Alto, industry funded multi-billion dollar research.
· Track federal research dollars. Money keeps drifting to coasts.
· Does ownership of technologies have a calculable dividend to the Midwest?
· Gas Technology Institute does basic research for gas industry. Are there parallel institutes that can be encouraged to locate in the Midwest?
· Government form collaboration with industry. Why should government go first? Go to the organizations that can pool money from industry for seed money. Gov’t can contribute.
· First generation feedstocks are grown in the Midwest so the industry needs to be close to the feedstocks. Advantage through not needing to transport.
· Sugar support system is a huge barrier to producing biofuels from sugar. Price supports 18.5 cents for cane, beets 23.5 cents. In other countries it is less than half that. Sugar beets are a major crop in ND, SD, MI.
· Identify barriers and opportunities to biofuels production from trade policies and price supports. Compatibilities or incompatibilities with trade policies.
· Converting food to fuel is a political and social issue. At present, there is no coordination between fuels and commodities trade policies.
· Alternative crops that have high sugar content but aren’t covered. Farmers trying to figure out what government wants. Is this another food?
· Funding initiatives, grants and tax incentives are possible implementation mechanisms. Also, writing down the cost of building a new plant could encourage investment.
BT- 2
State of New York - funding a switchgrass plant
MI working on a wood processing plant.
MT opening a cellulosic ethanol plant.
· Economic development – support from Governors’ Toolboxes would help states that may not be robust enough to tackle right now.
· Battery research and technology, such as for hybrid cars could be market niche that is currently unexploited. 3M, Johnson Controls have the potential
· Governors will all chip in a certain percentage of money to focus on specific venture capital and project development for advanced technologies. (two different pools) Share (%) more important than amount.
· Commercial demonstrations. Harvest, storage and transportation and logistics of moving biofuels. IN field desensification.
· Health Care and Energy are both about 17% of economy. There are very different amounts being put into research in those sectors than in energy and technology.
· Capital investment from retirement funs and health insurance companies.
· Land grant universities. Need good old agricultural yield optimization research. Leverage what we have. And should have direction for land grant universities to focus on non-traditional crops.
· University of WI and MI State have 135 MM, BP funded project, Iowa $20 mm from Conoco-Phillips, etc., greater level of collaboration and efforts necessary to build on that funding.
· Regional venture capital fair and inviting investors to visit with project proponents. Chicago has one, WI and St. Louis has one. NREL has one every year.
· How to you get the venture money and not just the venue?
Biobased Products
· Review of MGA Bioproduct Taskforce (see Brendan’s powerpoint) Group met in Ames IA to discuss state procurement issues. Send this document around.
· Focus on bio and not energy. Only certification is on whether the product is bio-based. Need protocol to determine life-cycle and embedded energy costs.
· Can we make definitive statements about the environmental impact of biobased products?
· One participant has experience with particleboard from straw. Changing the bonding chemicals completely changed the environmental footprint. All elements have to be considered.
· Benefit isn’t always greenhouse gas emission reduction. Jobs are a real benefit. There are a host of environmental and economic benefits to biobased products other the GHG impact (e.g. displacing imported oil, less toxic off-gasing, etc).
· Therefore, bio-based products in general are more beneficial in terms of climate change and environment and health.
· University of Illinois, Chicago - Institute of Science and Policy has done a lot of analysis of bio-products. Get contact from a participant. Should give lit review level understanding of this issue.
· Ford using a lot of soybean based products in their automobiles; foam, seats, panels, etc.
· Reduce sales tax on bio-based products.
· Labeling of bio-based products, informing consumers. Public education for buying local products made of bio-based products. But be sure that the benefits and embodied energy estimates are accurate. Need a foundation for sound science in evaluating biobased products, so there is credibility behind these products. We need to avoid the problems we are having w/ corn ethanol by being aware of these issues in advance. Do the research to show that it is an energy savings and smaller carbon footprint.
· Focus on utilizing by-products of bio-energy and biofuels not just new products.
· MGA has bio-based product marketing program. Gov’t procurement officials have met and developed plan. Copies available. MGA should do a regional biobased product marketing effort beyond gov’t acquisitions.
· Should timber/wood-based products be included?
· Federal rule excludes certain uses. Right now, federal definition of bio-based product and definition of woody biomass under attack. Pulp and paper industry may resist.