Gauging Florida's Future in Ethanol
And it looks good.
The pipeline alteration is significant in two ways. First, the ability to transport ethanol via pipeline is noteworthy in and of itself. Ethanol, which is the same alcohol that’s in liquor, is both corrosive and water soluble. You can’t just squirt it through the same pipes that carry oil and gasoline products until you’ve addressed some significant technical issues.
Much more important, however, is what the pipeline modification reflects about the ethanol market in Florida — demand for ethanol has reached the point that large companies are making big investments in bringing more of it to market. Or, as spokesperson Emily Thompson says in corporate-speak, “Kinder Morgan is pursuing the transportation of ethanol via pipeline and adding ethanol storage to its Florida terminals in response to customer interest in ethanol blending.”
That, of course, is a good thing if you believe that increased use of biofuels — ethanol is the most prevalent currently — will help reduce carbon emissions and offset the need to import oil. Our country has adopted that belief as policy: A 2007 federal law requires the use of 36 billion gallons of renewable fuel annually by 2022. The legislation specifies that 21 billion gallons must come from advanced biofuels, including ethanol, made from sources like switchgrass, sorghum or citrus peels.
In the meantime, most ethanol will continue to be made in the U.S. from corn or imported from countries like Brazil, which makes it mostly from sugar cane. Most ethanol sold in the U.S. is a 10%-ethanol, 90%-gasoline blend that’s marketed as “E-10.”
Florida — the nation’s third-largest fuel market, consuming nearly 9 billion gallons of gas a year — has lagged many states in the availability of E-10. More than 100 gas stations across mid-Florida now sell it, but the fuel still isn’t widely available in either the northern third of the state or the southern third. No stations in northwest Florida sell it, according to a Department of Agriculture website (www.doacs.state.fl.us/standard/petro/AltSiteMap.html). Fewer than 10 stations sell E-10 in the state south of Palm Beach.
But as the price of ethanol steers a steadier course underneath the price of gasoline, the infrastructure to support the sale of more E-10 has begun falling into place. On the retail end, the RaceTrac chain recently joined Hess and Murphy, which sells gas at Wal-Mart stores, in pumping it. Marathon Oil’s in the market. In addition to modifying its pipeline, Kinder Morgan is spending $25 million on other ethanol-related facilities; as of April it will have added some 200,000 barrels of ethanol handling, storage and blending space to its Tampa and Orlando terminals.
Other developments: Jacksonville-based Gate Petroleum is spending $90 million to build a 55-million-gallon ethanol storage facility on a site off the St. Johns River so that it can supply its stations in northeast Florida with E-10. In south Florida, Broward County’s Port Everglades received its first shipment of ethanol in December and is creating ethanol storage facilities. A unit of CSX that’s the railroad’s fastest-growing division has said it will build three ethanol terminals in the South this year.
Florida is also trying to be a player in manufacturing ethanol. Florida Department of Agriculture Secretary Charles Bronson has doled out $25 million in grants to enterprises planning to produce ethanol or biodiesel from cellulosic (non-corn) sources, ranging from forest waste to citrus peels. News reports mention at least five ethanol plants on the drawing boards in Florida.
Many of those projects, however, involve unproven technologies and may produce ethanol later rather than sooner. In the meantime, ethanol manufacturers like ETH Bioenergy are scouting Florida and southeastern U.S. as a market. ETH, a Miami-based division of Brazilian construction giant Odebrecht, makes ethanol in Brazil from sugar cane. Another firm, Atlantic Alcohol of St. Petersburg, is brokering deals with Brazilian producers to import ethanol to Florida, according to a newspaper report.
Yet another player is former Gov. Jeb Bush, who with a former Brazilian agricultural official and an international banker founded the Interamerican Ethanol Commission in Miami in 2006 to promote ethanol trading between the U.S. and Brazil.
Interestingly, while Bronson’s department has been vocal in promoting the manufacture of ethanol, it’s been cautious in changing some technical standards involving ethanol blending that could help the ethanol market in Florida. Chemically, not all gasoline is created equal. Some formulations can’t be blended with ethanol and still meet certain existing fuel standards. Several southeastern states, including Tennessee, Georgia and North Carolina, have modified their standards so that a broader spectrum of gasoline can be blended with ethanol — meaning more ethanol use and a bigger overall fuel supply. Big oil companies in particular are eager to see uniform standards from state to state as they jump into the ethanol market.
Bronson’s department, however, is proposing modifications that are more restrictive than those adopted by the other states. It’s a little hard to understand why. A spokesperson for Bronson says the department is being careful not to compromise the operation of vehicles in Florida. But the standards involve highly technical chemical assessments; modifying them wouldn’t increase pollution, and neither the industry nor the other states believe there are drivability issues. Meanwhile, of course, less gasoline to blend means less use of ethanol.
Other ethanol-related issues will no doubt emerge: Should Florida, as the ethanol supply grows, require that all fuel sold in the state be E-10 — a move that several states, including Oregon, are making? Gov. Charlie Crist, who’s jumped headfirst into green politics, has ordered that state vehicles use E-10 and biodiesel “when locally available.” How quickly will counties and cities follow that lead?
Regardless how those issues evolve, it’s clear that the infrastructure vital to an ethanol market in Florida is coalescing. Whatever ethanol may do for Florida’s environment, it’s quickly becoming big business here.
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