The New Carbon Cycle

Tax Credits Expire for Waste to Energy and Several Other Project Types Unless Construction Begins

Last year on December 18, 2015 Congressional approval of H.R. 2029, The Consolidated Appropriations Act, 2016, which President Obama promptly signed into law (P.L. No. 114-113, 114th Cong. 1st Session). This legislation extended tax incentives in the form of a production tax credit or the option to receive an investment tax credit (30 percent) for various renewable energy projects.  For those other than wind and solar, the incentives were only extended through December 31, 2016.  The only way to gain more time is to start construction as outlined in IRS memoranda and continue that construction, again as outlined in the IRS documents.  Waste to energy was one of the renewable energy types that was allowed under the new legislation.  Thus, WTE projects, and other non-wind and non-solar projects, must pay close attention to the deadline and how to extend it under IRS guidance.

Scientists Claim to Be Able to Produce Diesel from Sugar Using Genetically-Engineered Bacteria

CNN reports that scientists claim to be able to use genetically-engineered bacteria to produce diesel, and other fuels from sugar.  The company is LS9 Inc.  The representatives are quoted in the CNN article that they do no expect the process to replace existing petroleum sources of fuel, but that it may provide a portion of the fuel needed to power economies, if it can be done at significant scale.  The process apparently does not require food-based crops, but can use other forms of plant material.

Company Claims to Produce "Green Crude" from Algae

The Los Angeles Times reports that Sapphire Energy has demonstrated a process to use algae, sunlight, carbon dioxide and non-potable water to make "green crude."   The company claims that the “green crude” is chemically equivalent to the light, sweet crude oil that has been fetching more than $130 a barrel in New York futures trading.

Chief Executive Jason Pyle said that the company's green crude could be processed in existing oil refineries and that the resulting fuels could power existing cars and trucks as petroleum-based gasoline and diesel do now.

Jatropha Plant Being Used to Produce Biodiesel in India and Other Countries

Jatropha is a shrub that is easy to grow and has become a source of plant oil for producing biodiesel in India.  Many Indian farmers are planting jatropha as a supplement to their other farming income.  A Wallstreet Journal article reports on the use of the plant.

The plant needs little water or fertilizer and can grow in a range of environments. Its golf ball-sized fruits yield a yellowish liquid that can be made into biodiesel. Jatropha is not edible.  India is hoping to make use of its millions of acres of land where other plants will not grow as a result of depleted water tables.

Some companies are investing in jatropha as well.  In June, BP Plc said it would put $90 million into a biofuels startup that will develop jatropha in India.  In Australia, Mission Biofuels Ltd. has planted jatropha on 66,000 acres.

According to some estimates, the per-barrel cost of producing jatropha is about $43 -- half that of corn. Each acre of jatropha will produce about one ton of oil, and yield a profit of about $250 per acre.

Portuguese traders initially brought jatropha to India from South America, and it was long used as a hedge and to produce soap or lamp oil. In recent years, the Indian government has pushed the plant, growing it along railways and mandating that state-run oil companies buy biodiesel made from jatropha.

However, jatropha's yield can be unpredictable, and some farmers have already posted losses on the crop. The plant's ecological impacts have not been studied fully. 

For now many farmers and companies are studying the potential for jatropha to provide a profitable crop to use to produce biodiesel.

New CDM Methodology Approved for Landfill Gas

LONDON, UK – 27 June 2007 – CantorCO2e Limited announced today the approval of a new and unique Clean Development Mechanism (CDM) methodology involving the use of biogas sourced from Methane Capture Projects in Chile. Having just been approved by the CDM Executive Board, the new methodology, known as ‘CDM methodology AM0053’, is the “injection of biogenic methane into a natural gas distribution grid.”

Specifically this involves the use of captured biogas, perhaps methane from existing landfill sites or coal mines, and injecting that biogas into existing natural gas distribution grids whilst at the same time displacing more harmful fossil fuels that would normally be used within these grids. This new methodology was developed by CantorCO2e, which researched, advised upon and established the methodology for and on behalf of Metrogas S.A., the largest natural gas distributor in Chile.

The biogas used in the implementation of this methodology may be sourced from registered or non-registered methane capture CDM projects and so also enhances the scope of other CDM methodologies already in use. The methodology could help reduce the current natural gas crisis that Chile faces. Currently Chile produces very little of the natural gas that it currently consumes with all imports coming from Argentina. However, availability of imported natural gas from Argentina is limited.

According to the Chilean Natural Gas Association, the country has faced several shutdowns due to interruptions in the supply of natural gas from Argentina which impacts heavily on the Chilean people. Now that the methodology has been approved, it is expected that most landfill sites in the Metropolitan Region of Santiago, the capital of Chile, will supply its biogas to the natural gas distribution grid as an alternative to current electricity generation methods.

In addition to the reduction of greenhouse gas emissions, the implementation of this methodology in developing economies is of great sustainable benefit since it will result in a reduction in the dependence of other countries on the importation of fossil fuels and will instead enable them to become more self sufficient.

Department of Agriculture and Department of Energy Announce R&D Funding for Biomass and BioFuels

Yesterday, the U.S. Department of Agriculture (USDA) and the U.S. Department of Energy (DOE) announced a combined total of up to $18 million will be available for research and development (R&D) of biomass-based products, biofuels, bioenergy and related processes.

The $18 million solicitation will fund projects in the development of technologies to convert cellulosic biomass into intermediaries for bio-based fuels (45 percent); product diversification (30 percent); feedstock production (20 percent); and analysis for strategic guidance (5 percent).

USDA and DOE are issuing these grant solicitations for several types of projects aimed at increasing the availability of alternative and renewable fuels, which will help further President Bush's energy initiatives, including Twenty in Ten. The Twenty in Ten Initiative promotes greater energy security through increased efficiency and diversification of energy sources. USDA will provide up to $14 million and DOE will provide up to $4 million (FY'07).

New Bill Would Open Up Investment and Development of Biofuels Market in Mexico

Mexico is a large producer of sugar.  In a move to capitalize on the growing biofuels markets, and turn some of this sugar into ethanol, the Mexican House and Senate have passed a bill to promote biofuels in Mexico.  The bill has been sent to the President of Mexico for review. 

Thompson & Knight's Gabriel Ruiz in our Monterrey, Mexico office has written a summary of the bill.  An excerpt below explains in general terms the content of the bill.

The Bill states as its primary goal to guarantee the support of the agricultural sector by achieving an energy diversification and sustainable development through the development and promotion of “biofuels”; such term defined as ethanol and biodiesel fuels produced from energetic commodities or subproducts coming from agricultural activities. It also establishes the basic principles to promote the production, distribution and sale of ethanol-based fuel and biodiesel and to facilitate technical and economic incentives for their development. Once the Bill is enacted, specific regulations and norms shall gradually phase-in the use of ethanol in gasoline and biodiesel in diesel fuel. As approved, the Bill establishes the basic requirements private investors will have to meet in order to qualify for economic and technical incentives from the federal, state and municipal governments for infrastructure development. Finally, the Bill charges the President with the direct obligation to promote the use of biofuels through the use of any available economic and international law instruments, specifically mentioning the clean development mechanisms contained in the Kyoto Protocol to the United Nations Framework Convention on Climate Change.

If this bill is approved by the President, it would open up substantial investment opportunity in biofuels markets in Mexico.  It could also lead to the generation of carbon credits under the Kyoto Protocol to be sold to contries such as those in the EU where global warming and climate change legistation requires reduction of emissions of greenhouse gases and permits the purchase of reduction credits to meet these limitations.  This dual revenue stream and the proximity to the US ethanol market may lead to a substantial biofuels industry in Mexico.