Bioenergy Update
November 2000, Vol. 2 No. 11
South Carolina Governor Jim Hodges Initiates Southern States Biobased Alliance
South Carolina’s Governor Jim Hodges, newly-elected Chairman of the Southern States Energy Board, announced at the Board’s recent annual meeting in Little Rock, Arkansas, that he was directing the Board to organize a Southern States Biobased Alliance. Governor Hodges told the Governors and state legislators attending, "…in my first action as chair of the Southern States Energy Board, I am initiating a ‘Southern States Biobased Alliance’ that will use the Board’s unique infrastructure for developing strategies that will strengthen the biobased products industry in this region." The Governor further noted, "For the past several years, all of our states have struggled with continued problems of declining rural economies and increasing environmental issues—including the disposal of waste and residues."
The new Southern States Biobased Alliance will complement the federal government’s Biobased Products and Bioenergy Initiative. The national initiative was created by executive order in August 1999 and has a goal of tripling the nation’s use of biobased products and bioenergy by 2010. The FY2001 Energy and Water Development Appropriations bill includes an appropriation of up to $18 million in funding for the Initiative.
Governor Hodges recommended to the group that the Alliance members be "…gubernatorial appointees, legislators, private industry, federal and local governments, and non-profit and non-governmental organizations, including special interest groups."
The South is already the national leader in the use of trees, grasses, crop residues, and other biomass materials for energy and biobased products. However, the Governor professed that the South still has tremendous untapped potential for the development of these resources. The new Alliance will provide the Board with policy and program recommendations that promote environmental, economic, and energy benefits to the region.
Southern States Energy Board, headquartered in Norcross, Georgia, is an interstate compact that includes 16 states, Puerto Rico, and the Virgin Islands. Governors and state legislators serve as Board members. As the Board’s Chairman, Governor Hodges is considered the lead Governor on energy and environment in the southern states. The Board also manages the U.S. Department of Energy Southeastern Regional Biomass Energy Program, which will assist in technical support to the Alliance.
For more information about the Southern States Biobased Alliance, visit the Southern States Energy Board web site at www.sseb.org
New SERBEP Bioenergy Projects Funded
The Southeastern Regional Biomass Energy Program (SERBEP), managed by the Southern States Energy Board for the U.S. Department of Energy, recently announced the funding of seven new projects. Funding for the projects comes from the U.S. Department of Energy’s Office of Fuels Development and Office of Power Technologies through the Department’s Atlanta Regional Office.
SERBEP received proposals in response to a solicitation sent to the state bioenergy coordinators in the region earlier this year. The SERBEP region includes the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia. Also, Puerto Rico, the U.S. Virgin Islands, and the District of Columbia are in the SERBEP region. According to Kathy Baskin, SERBEP Manager, "These projects will further our efforts to develop bioenergy as a viable alternative in the Southeast. Although our region is the national leader in bioenergy use, we have tremendous potential for further development."
Several projects funded are related to the production of liquid fuels for transportation applications. A project with the Foundation for Organic Resources in Fayetteville, Arkansas, and administered through the Arkansas Energy Office, will assess the potential to make fuel ethanol from poultry litter. Alcorn State University and the University of Southern Mississippi are collaborating with the Mississippi Energy Division to assess wood and cotton waste resources in Mississippi for potential use in ethanol production.
A third project, funded through the Virginia Energy Division and to be conducted by Virginia Tech, will develop procedures to convert cotton gin waste into a fuel ethanol. If successful, the project will solve a waste disposal problem while simultaneously generating a value-added product for the cotton processing industry. The West Virginia Development Office is supporting West Virginia University to further develop a process to convert agricultural wastes into a diesel fuel substitute. This project is investigating the potential for energy use on-farm and possible use of poultry litter, crop residues, and other agricultural wastes.
In South Carolina, the Energy Office is working with Linpac Paper to perform a preliminary feasibility study for a biomass fueled cogeneration facility for their plant in Cowpens, South Carolina. Funding for another project supports a collaborative effort with the Alabama Division of Science, Technology, and Energy and the University of Alabama—Huntsville, to finish the design and implementation of a Biomass Waste Exchange (Bioexchange) Directory. The latter project will allow wood waste buyers and sellers to buy and purchase wood waste directly online. Searches can be conducted based on county, quantity, species, and zip code.
Finally, SERBEP and the Northeast Regional Biomass Energy Program jointly funded a project with the Maryland Environmental Service. The project will conduct a conceptual design and siting study for a 40-megawatt power plant that will fire wood waste and poultry litter. The plant will be located on the Delmarva Peninsula in Maryland and use wood waste and poultry litter from Virginia. Other partners and collaborators are Fibrowatt, the University of Maryland Eastern Shore, Eastern Precision Services, Delmarva Poultry Industry, local agricultural boards, Forest Conservancy District Boards, Association of Forest Industries, Chamber of Commerce, Chesapeake College, Wye Research and Education Center, the USDA National Resource Conservation Service, and others.
Total SERBEP funding for the seven projects was over $222,000, with the contractors, energy offices, and others providing over $680,000 in cost sharing. Kenneth Nemeth, Executive Director of the Southern States Energy Board said, "This level of cost sharing clearly shows the level of interest and commitment in developing bioenergy by our project partners."
The Southern States Energy Board has managed the Southeastern Regional Biomass Energy Program for the U.S. Department of Energy since 1999. The Board, established in 1960, is an interstate compact headquartered in Norcross, Georgia, and is made up of the states and territories in the SERBEP region plus Maryland, Texas, and Oklahoma. Governors and state legislators serve as Board members.
For additional information on the Southern States Energy Board, Southeastern Regional Biomass Energy Program, or Southern States Biobased Alliance, visit the Board’s web site at www.sseb.org
Slow Release Fertilizers from Bio-oil
Bio-oils made from the fast pyrolysis of biomass have shown great potential for bioenergy applications in recent years. One of the big advantages of bio-oils is that they can be made into a number of coproducts using the biorefinery concept.
The ability to produce multiple products allows chemical compounds with higher uses to be produced and marketed separately, with the remaining bio-oil used for lower value applications such as energy. One potential use for this remaining bio-oil is to produce slow release fertilizers, which transforms it into a higher value use.
Recently the International Energy Agency (IEA) completed a technical and economic assessment for producing slow release fertilizer from bio-oil. The production of slow release fertilizers from biomass is based on patented technology developed by Resource Transforms International (RTI) LTD, of Waterloo, Ontario, Canada.
The principal benefits of nitrogen slow release fertilizers are the more efficient use of nitrogen and the avoidance of nitrate and ammonium pollution of groundwater. However, other benefits can also be cited. Lignin is widely accepted to be a major source of soil humus, which promotes plant growth. Besides functioning as simple organic soil conditioners, soil humus helps control soil acidity, reduces the effects of excess aluminum and iron, and increases the availability of phosphorous. Lignins also assist to make micronutrients and other nutrients available to the plant. According to RTI, these features allow the fertilizer to be refined and tailored to precise agricultural requirements.
RTI officials say that by reacting bio-oil with ammonia, urea, or other sources of ammonia groups like animal manures, the nitrogen in the bio-oil is converted to stable, biodegradable organic forms, which can function as organic nitrogen slow release fertilizers. Based on bio-oil properties, the study verified that up to 10 percent nitrogen could be incorporated into bio-oil by such direct reactions. However, if the market requires, up to 30 percent nitrogen could be obtained by using urea.
The process also allows other nutrients, such as potassium and phosphorous, to be added to the reactor. For example, phosphorous can be added as pulverized phosphate rock, which can be at least partially dissolved by the bio-oil. Thus the phosphorous is also expected to be available in slow-release form.
The nitrogen conversion in the oil can be carried out on condensed bio-oil or online during the pyrolysis process by injecting the nitrogen source before condensation. The final product may, as required, be produced in liquid form or as a solid by drying.
The IEA assessment was based on scaling up the technology to a plant producing approximately 20,000 tons per year of solid fertilizer from whole bio-oil, containing 10 percent nitrogen. This size plant would process all of the bio-oil from a 200-ton per day (wet, 50 percent moisture basis) bio-oil plant using wood feedstocks.
The basic process operations required to produce slow release fertilizer from bio-oil are conventional, and scaling up this technology to commercial-scale operation should not present major problems. Pilot testing of the drying step will be required to verify operating parameters and for sizing the spray dryer.
A key area of uncertainty is the actual performance of the slow release fertilizer produced from bio-oil compared to existing specialty fertilizers. Limited testing has been done with the fertilizer product on the growth of plant matter, and the rate of release of the nitrogen is presently not known.
The slow release fertilizer from bio-oil is seen as a by-product, with the fertilizer production operation being part of a bio-oil facility that produces bio-oil for energy applications and other chemical products. For this reason, the fertilizer production plant would operate within a larger bio-oil production facility as opposed to a stand-alone plant. This permits some cost savings and efficiencies in terms of utilities integration and facilities sharing, such as steam production, buildings, land and administration. These cost savings are taken into account in this cost estimate.
The main factor influencing the cost of producing slow release fertilizer from bio-oil is the cost of the bio-oil, which is highly dependent on the cost of the biomass feed used. Therefore, the cost of the slow release fertilizer was determined for several cases using different wood and related bio-oil costs. The results of these different cases are shown in the table below, based on a 100-dry-wood-ton-per-day capacity fast pyrolysis plant.
The cost of producing slow release fertilizer from bio-oil appears to be competitive with conventional nitrogen controlled release fertilizers, which vary in price from US$250 per ton for sulfur-coated urea to US$1,250 per ton for polymer coated fertilizers.
It is envisioned that the bio-oil derived fertilizer product could be competitive in market niches which already use slow release fertilizers. These include golf courses, horticulture, greenhouse operations, and other applications. However, a more interesting opportunity is its use in large-scale conventional farming operations, especially in conjunction with the disposal of agricultural wastes and carbon sequestration opportunities. The product would produce added value for agricultural waste and at the same time enhance agricultural productivity. Additional possibilities in the future include fertilizers for agroforestry applications such as energy crops.
The overall value of the slow release fertilizer product will be determined by several factors. These include the sum of the replacement value of conventional nitrogen fertilizer, yield enhancement value related to humus benefits, carbon dioxide sequestration credits and waste disposal credits for the biomass feedstock (if applicable).
This article was based on the report from the IEA Bioenergy Task 22: Techno-economic assessment for bioenergy applications 1998-1999, Final Report, Part 2, entitled Slow Release Fertilizer Production Plant From Bio-Oil Technical-Economic Assessment.
Sandia Ash Deposit Report
Ash deposit formation has always been and continues to be one of the most important issues impacting design and operation of coal utilization equipment (boilers, gasifiers, etc.) and selection of coals used in such equipment. This final report summarizes the principal results of the extensive experimental investigations and the associated theoretical analyses conducted at Sandia’s Combustion Research Facility over the past eight years.
This work has led to new characterization techniques for coals and other solid fuels such as biomass that provide, for the first time, systematic and species-specific information regarding the inorganic material. The transformation of inorganic material during combustion can be described in terms of the net effects of the transformation of these individual species.
The work characterized ash deposit formation during coal combustion and properties of these deposits.
The behavior of inorganic material during coal combustion is cast in quantitative terms and in a sufficiently fundamental framework, so that it can be applied to a wide range of conditions and coal conversion technologies in order to predict deposit formation as a function of coal properties, boiler design and boiler operation. The principal overall conclusions from this work and critical needs for further research are summarized separately under each topic.
The complete report, Ash Deposit Formation and Deposit Properties: A Comprehensive Summary of Research Conducted at Sandia’s Combustion Research Facility—Final Report, by Larry Baxter, Sandia National Laboratories, Livermore, California, is available from the National Technical Information Service, US Department of Commerce, 5285 Port Royal Rd, Springfield, VA 22161. Web site: www.ntis.gov/ordering.htm. Refer to publication number SAND2000-8253.
Can the US Ethanol Industry Expand to Replace MTBE?
Methyl Tertiary Butyl Ether (MTBE) has been used as an oxygenate in US gasoline for several years. Oxygenates facilitate the cleaner burning of gasoline and thus reduce air pollution. Reformulated gasoline (RFG) makes up about one-third of the gasoline sold in the United States and MTBE has been the dominant oxygenate for reformulated gasoline.
However, recent research indicates that MTBE is contaminating groundwater and causing other environmental problems. This contamination has led to a ban on MTBE in some parts of the country. A recent study for the Governors’ Ethanol Coalition by AUS Consultants entitled Ability of the U.S. Ethanol Industry to Replace MTBE examined whether the United States ethanol industry had the ability to replace MTBE, and came up with some interesting conclusions.
The replacement of MTBE with ethanol will increase the demand for ethanol from 1.3 billion gallons per year to nearly 3.2 billion gallons by 2004. As shown in the following table, the study found that the US ethanol industry could double capacity within two years and even exceed the capacity to meet ethanol demand.
The authors of the study found no material constraints that should prevent increasing ethanol capacity in the short term. As a result, the authors project that US ethanol production will expand adequately and should not lead to an increase in gasoline prices.
Currently there are 45 companies in the US, including farmer-owned cooperatives, which operate 58 ethanol plants in 19 states. These plants currently produce 1.53 billion gallons per year and have a combined capacity of 1.85 billion gallons per year, for an industry capacity utilization rate of 82 percent.
Potential additional production from these facilities will come from (1) increased capacity utilization and (2) plant expansion. Surveys by the authors determined that if the demand for ethanol did go up, improvements in operating efficiencies could be made quickly and at little cost, to bring the existing industry capacity utilization rate up to 90 percent. Such an improvement could quickly provide an additional 180 million gallons of ethanol per year.
Another way to rapidly expand industry production would be to expand existing production facilities, which can be accomplished in less than half the time required to bring new facilities on line. Costs and time are saved for permitting and infrastructure development with existing plant expansion strategies. However, not all plants are capable of expansion due to limited land or other limitations.
In addition to increasing efficiencies of existing plants and expanding them, there are a number of new ethanol plants already under construction. These plants are projected to come online in the next 12 to 18 months, and could provide an estimated 134 million gallons of new capacity.
And finally, industry sources estimate that up to one billion gallons of new capacity are in various stages of development. This latter category includes projects ranging from those in the final stages of financing to those in the preliminary feasibility stage. Proposed feedstocks include forest residues and wood waste, non-traditional agricultural products such as sweet potatoes and rice straw, and municipal solid waste. A phase-out of MTBE should help these projects obtain financing and move forward.
The cost to add the new ethanol capacity to replace MTBE is estimated at nearly $1.9 billion. The level of construction activity associated with this expansion, combined with the increased demand for corn and other grain to produce the additional ethanol, will add $11.7 billion to real GDP by 2004, increase household income by $2.5 billion, and generate more than 47,800 new jobs throughout the entire economy.
For a copy of the report entitled Ability of the U.S. Ethanol Industry to Replace MTBE, contact John M. Urbanchuk, AUS Consultants, 155 Gaither Drive, Morrestown, New Jersey 08057, +1 856 234 9200, fax +1 856 234 0733, or jurbanchuk@ausinc.com
Compacting Biomass and Municipal Solid Wastes to Form and Upgrade Fuel
Biomass is a substantial renewable energy resource that can be used as a fuel for power generation. Biomass is also referred to as a "green energy" resource because it is carbon-neutral and produces virtually no sulfur emissions. Co-firing biomass with coal in existing coal-fired power plants has emerged to be an attractive and low-cost option for generating "green power" and reducing greenhouse gas and acid gas emissions.
However, the uneven, fluffy and/or bulky nature of biomass materials often makes it difficult and costly to handle, store, and transport. It is also difficult for the raw biomass materials to be fed and burned effectively in boilers. Densification of biomass materials can not only improve their handling and combustion properties, but also significantly reduce transportation and storage costs.
In this study, a new compaction technology, developed at Capsule Pipeline Research Center (CPRC), University of Missouri-Columbia, was tested for producing densified high-quality biomass fuel from biomass waste materials. The objectives of this Phase I project were: (1) to find the optimum compaction and process conditions for producing high-quality densified fuel logs from various biomass waste materials by conducting extensive laboratory tests; (2) to assess the properties of the logs compacted in terms of the combustion characteristics, impact-and wear-resistance, and water absorption; and (3) to conduct economic analysis of this technology for anticipated future commercial use.
A small compaction machine, which produces 1.91-inch diameter laboratory-size biomass logs, and a large compaction machine which produces 5.4-inch diameter commercial-size biomass logs, were used in this study. The large machine, designed by CPRC personnel, has unique capabilities including high-pressure and high-speed compaction, backpressure control during ejection of logs from mold, special mold shapes, and other features.
A variety of biomass waste materials, including sawdust, mulch and chips of various types of wood, combustibles such as paper, plastics and textiles that are found in municipal solid waste streams, energy crops (willows and switch grass), and yard waste including tree trimmings, fallen leaves, and lawn grass, were tested by using this compaction technology.
The compaction conditions, including compaction pressure, pressure holding time, backpressure, moisture content, particle size and shape, piston and mold geometry and roughness, as well as binder for enhanced densification, were studied and optimized. The properties of the compacted products—biomass logs—were evaluated in terms of physical, mechanical, and combustion characteristics.
It was found that the compaction pressure and the moisture content of the biomass materials are critical for producing high-quality biomass logs. For most biomass materials, dense and strong logs can be produced under room temperature without binder and at a pressure of 10,000 psi, approximately. A few of the materials tested, such as sawdust and grass, need a minimum pressure of 15,000 psi in order to produce good logs.
The appropriate moisture range for compacting waste paper into good logs is 5-20%, and the optimum moisture is in the neighborhood of 13%. For the woody materials and yard waste, the appropriate moisture range is narrower—5-13%, and the optimum is 8-9%.
The effects of particle size and shape on log quality vary with different biomass materials. For shredded paper, the size and shape have little effect on the quality of the logs compacted. But for woody materials, particle size has some effect and particle shape has remarkable effect on the log quality. Woody materials in the form of mulch produced the strongest logs, sawdust the second, and chips the least.
For grass (lawn grass and switch grass), grinding into fine particles can help produce slightly denser logs, but it adversely affects the impact and abrasion resistance of the logs. Therefore, except for wood in the form of chips, all different particle sizes and shapes can produce good logs as long as the raw material can be fed into the mold efficiently. Wood chips are not waste materials and hence should not be considered as a material source for producing biomass logs.
The pressure holding time has a significant effect on the quality of the biomass logs compacted only at low compaction pressure. At the optimum compaction pressure 10,000-15,000 psi for most of the materials, a 10-second holding time is more than adequate. Since longer holding time means a decreased production rate of biomass logs for each compaction machine, it is more efficient to adjust pressure and moisture conditions to improve the log quality than to increase the holding time.
The effect of mold exit geometry and piston end shape on the quality of the biomass logs is significant in certain cases and insignificant in other cases. The roughness of the mold has some effect on compacted log quality—a smoother mold makes denser logs. Smoother molds also use less energy for compaction and hence are more economical.
The large compaction machine at CPRC has the capability to control backpressure. Backpressure can significantly improve the integrity and increase the density of the logs made of dry paper and leaves; its effect on wet and more ductile biomass logs is insignificant. For waste paper and leaves, a backpressure of 100 psi or even smaller is sufficient to improve the log quality.
The compacted logs have a dry density of 0.8 to 1.0 g/cm3, which corresponds to a wet density of 0.9-1.1 g/cm3 approximately. They are highly resistant to impact and abrasion, but not resistant to water and hence need to be protected from water or rain. The logs also have good long-term strength when protected from water, and can be stored for a long time without significant deterioration. Such high-density and high-strength logs not only facilitate handling, transportation, and storage, but also increase the energy content of biomass per unit volume.
After transporting to power plants and crushing, the biomass logs can be co-fired with coal to generate electricity. The biomass log fuel (BLF) made of waste paper has an average heating value of 7,100 Btu/lb. For logs made of a mixture of paper and plastics, the heating values will be higher because plastics usually have more than twice the heating value of paper. The logs made of woody materials and yard waste materials have an average heating value of 8,500 Btu/lb.
A cost model for biomass log fuel production was developed based on the technology developed. The model uses life-cycle cost analysis coupled with a net-cash-flow approach. The model was used to determine the unit cost of the BLF in dollars per ton including a return on investment. The production cost of the BLF, including a 15% above-inflation return of investment, was found to be between $5.5 and $8 per ton for plants giving capacities between 675,000 and 135,000 tons per year, respectively.
This process appears to be more economical than conventional densification processes including pelletizing, briquetting, and extrusion, which usually cost over $10 per ton, and it produces a dense and strong fuel. Analysis of the transportation cost of the densified biomass logs showed that barge is the most cost-effective, followed by rail and then truck.
Pneumatic capsule pipeline (PCP) and hydraulic capsule pipeline (HCP) were also considered. HCP technology uses unwheeled capsules to carry cargoes moving through a water-filled pipeline. PCP technology uses wheeled capsules to carry cargo moving through a pipeline. Air forced through the pipeline by blowers or fans propels the capsules.
The study found that PCP and HCP technologies are not cost-effective compared to truck for transporting BLF due to its relatively small volume (less than 1 million tons per year) needed at each power plant. The unit cost of biomass logs handling at power plants, including crushing and storage, is only about $0.53 per ton. It is concluded that even without consideration of the tipping fees avoided at landfills, the BLF is economical for distances up to about 50 miles in today’s market. Its economical range can be extended to distances much beyond 100 miles if the tipping fee is considered.
This work was funded by DOE grant DE-AC26-98FT40155. For a copy of the final report entitled Compacting Biomass and Municipal Solid Wastes to Form an Upgraded Fuel, contact Dr. Henry Liu, Capsule Pipeline Research Center, College of Engineering, University of Missouri-Columbia, Columbia, Missouri 65211-2200.
Legislative Update On Alternative Energy Incentives
During the last Congressional term, members of Congress introduced several measures affecting biomass and alternative energy, including expansion of Internal Revenue Code (IRC) §45 (tax credit for electricity produced from wind and "closed loop" biomass), expansion of IRC §40 (relating to the small ethanol producer credit), extension of IRC §29 (tax credit for nonconventional fuel) and creation of new tax incentives for fuel cells, solar energy, and other renewables. In addition, some potential threats to alternative energy have arisen. Congress and Treasury have begun to focus on proposals to address the perceived problem of corporate tax shelters, which could adversely affect energy tax breaks unless exemptions are created for Congressional incentives. On a similar note, certain industry groups have complained to Congress that the §29 credit is having a negative impact on the coal industry in Kentucky and West Virginia. These developments are outlined below.
Section 45 Electricity Credit. Section 45 was extended last year to cover facilities placed in service by December 31, 2001, and expanded to include poultry waste as a form of qualifying biomass. However, the requirement for "closed loop" biomass (dedicated energy crops used exclusively to generate power) remained intact. This restrictive requirement has effectively prohibited taxpayers from claiming the §45 credit for electricity produced from biomass. Proposed §45 legislation is found in H.R. 4923 (companion bill S. 2779), The Community Renewal and New Markets Act of 2000. The Joint Committee on Taxation published proposed modifications of this bill which would (1) expand the credit to include electricity produced from landfill gas, (2) allow credit for electricity produced from biomass co-fired with coal, and (3) redefine qualifying biomass to incorporate solid nonhazardous, cellulose waste from wood and crop by-products or residues, but not including old growth timber. In general, the credit would apply to qualified facilities for three years, with effective dates and placed in service requirements dependent on the specific type of facility. Both Presidential candidates have indicated support for extension and modification of §45.
Section 40 Small Ethanol Producer Credit. Measures have been introduced which relate to the small ethanol producer credit for alcohol used as a fuel as set forth in Internal Revenue Code §40. H.R. 5279 (companion bill S. 2884) would allow allocation of the small ethanol producer credit to patrons of cooperatives and would raise the production ceiling from 30 million gallons per year to 60 million gallons per year. Additionally, the small ethanol producer credit would not be treated as a passive activity and could be used against the alternative minimum tax. This bill further clarifies that the credit is not added back to income under §87, relating to income inclusion of the alcohol fuel credit. In H.R. 4923, referred to above, the Joint Committee on Taxation proposed adding these same provisions to that bill, other than the raise in the production ceiling.
Section 29 Nonconventional Fuel Credit Back in the Spotlight. Measures have been introduced which would extend the credit for producing fuel from a nonconventional source as set forth in Internal Revenue Code §29. H.R. 5401 (companion bill S. 3171), the Energy Security for American Consumers Act of 2000, in part would (1) extend the credit through 2012 (subject to a phase-out provision in years 2009 - 2012); (2) allow new facilities to be placed in service from the date of enactment through 2010; and (3) allow application of the credit against both regular and alternative minimum tax.
In other news, taxpayers claiming the §29 credit for biomass projects should be aware of the recent §29 controversy involving the coal industry. Earlier this year, a few members of Congress complained about the §29 synfueling process to the Treasury Department. As a result, a backlash of support by those in favor of §29 as it applies to the coal industry has occurred. Treasury is studying this issue and it is uncertain what effect this controversy will have on other §29 projects.
Fuel Cells, Solar, and Other Renewables. Other proposed legislation this term, relating to alternative energy in general, include S. 2904, which provides tax breaks for residential photovoltaic and solar water heating systems; H.R. 4958, which provides a credit for a portion of the cost of converting from the use of heating oil to natural gas or a renewable energy source; H.R. 5339, which establishes a tax credit to encourage the marketing and use of energy-efficient fuel cells; and H.R. 5226, which adds new §45D to allow a credit for the production of electricity from landfill gas from qualified facilities which are located in U.S. possessions.
Corporate Tax Shelter Proposals. Additional proposed legislation which may affect alternative energy projects includes a bipartisan bill dealing with corporate tax shelters. Last year, H.R. 2255, the Abusive Tax Shelter Shutdown Act of 1999, specifically exempted §29, §45 and other Congressionally sanctioned incentives from tax shelter scrutiny. A recent Treasury proposal supported this approach. However, a draft proposal from the Senate Finance Committee contained no such exemption. Further, the Treasury Department has issued Temporary Regulations which (1) require tax shelter promoters to maintain on-site lists of investors in tax shelters for Internal Revenue Service (IRS) inspection; (2) require the registration of confidential tax shelters; and (3) require taxpayers to report all tax avoidance transactions and potential shelter transactions. The Temporary Regulations do not contain any exemption for Congressionally sanctioned incentives either. The IRS has requested public comments on corporate tax shelters and the proposed rules no later than November 14, 2000.
(This article was prepared by Lesley White Berggren and Greg Sanderson of Sanderson & Rotroff, LLP, 770-953-1310.)
USDA to Blend Biodiesel With Heating Oil This Winter
As winter approaches, one government agency is taking action to help alleviate the projected shortage of home heating oil by using biodiesel to heat some of its buildings.
The Agricultural Research Service (ARS) in Beltsville, MD will use a blend of five percent biodiesel (B5) in its heating oil this winter. ARS is the research agency within the United States Department of Agriculture (USDA).
Biodiesel is a clean-burning fuel made from domestically produced renewable fats and oils—most commonly soybean oil. It has similar fuel economy and performance as conventional petroleum distillate fuels such as kerosene, diesel fuel and heating oil. The use of biodiesel drastically cuts harmful emissions such as carbon monoxide, unburned hydrocarbons and particulate matter compared to petroleum-based diesel, and reduces air toxics by up to 90 percent.
Although biodiesel is used to heat homes in Europe, ARS is taking the lead in using the fuel with heating oil in the U.S.
"If we use a B5 blend, even five percent less fuel, that means there’s five percent more fuel oil to go around," said John Van de Vaarst, ARS deputy area director. "Our goal is to demonstrate that it can work as home heating oil, and to raise awareness in the government that it is an option to stretch our heating oil supply this year and in the future."
ARS already uses a blend of 20 percent biodiesel and 80 percent petroleum diesel (B20) in diverse fleet of 150 diesel vehicles.
"We’re very pleased with the results of biodiesel in our diesel vehicles," Van de Vaarst said. "We’ve had no problems with it. Our mechanics like it, the operators like it and we had no reservations about using it in our boilers as a result."
A 1993 study conducted in the U.S. by R.W. Beckett Corp. showed biodiesel and home heating oil were close in performance, with biodiesel burning cleaner and having more thermal stability.
"Biodiesel use in home heating oil applications can play a significant role in developing a strategy for energy conservation and domestic energy security," said Joe Jobe, executive director of the National Biodiesel Board (NBB). NBB is a non-profit trade association for the biodiesel industry. "Biodiesel has excellent potential to play a role as a fuel extender for home heating oil, or as a replacement fuel in industrial heating applications."
Biodiesel is the only alternative fuel to have completed the Health Effects testing requirements of the Clean Air Act amendments of 1990. Those test results show it is non-toxic, biodegradable and free of sulfur. The National Renewable Energy Lab estimates the cancer-causing potential of biodiesel exhaust is 94 percent less than that of petroleum diesel. Additionally, US Department of Energy lifecycle analysis shows an 80 percent reduction in CO2, the primary greenhouse gas attributed to global warming.
The National Biodiesel Board is funded in part by the United Soybean Board and state soybean board check-off programs. You can visit their website at www.biodiesel.org