Repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007.

Open e-mail to Rep. Neugebauer:

Randy,

On October 27, 2011, I e-mailed you asking that you energize the Congress to repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007. They were ill conceived originally. They involve unnecessary government subsidies, which we cannot afford, and contain restrictions on private business development.

I now present additional information, which supports this position. Another way to look at it is that, in establishing the two Acts, Congress did not take into consideration the power of subsequent technology development from existing private industry. I refer specifically to the ethanol provisions of the two Acts, which mandates ethanol use in motor fuels, even though gasoline is less expensive on the market.

The ideal fuel for motor vehicles is liquid form, which can be carried and enable the vehicle to have an operating range of several hundred miles. Gasoline admirably satisfies this requirement. Electricity and natural gas have enough deficiencies that they are not competitive. However, other liquid fuels might also be acceptable, including ethanol. But again, we need to consider price and availability.

In the October 24 issue of Chemical and Engineering News, there is an article by Alexander Tullo entitled, "Celanese Takes an Ethanol Plunge".

We have in the US tremendous coal reserves. It has been a long-standing objective of the chemical industry to convert coal to a liquid fuel for automotive use. Several processes have been developed, but none of these have met the cost requirements to compete with gasoline. However, Celanese now claims to be able to do this.

In order to analyze whether Celanese really has something, we need to be first concerned with measurement. Since petroleum is a prevalent energy source, it has been convenient to relate any other sources to petroleum. In their announcement, Celanese has used figures involving Barrel of Oil Equivalents (BOEs), but most liquids are sold on a per gallon basis. First, we need to understand a BOE and second, we need to be able to convert $ / BOE to $ / gallon.

A standard petroleum barrel contains 42 US gallons. Inherent in the barrel of oil is a quantity of available energy, which is 5,800,000 British Thermal Units (BTUs). Other fuels may then be calculated for their energy contents relating to the energy content of a barrel of oil. The term is a "Barrel of Oil Equivalent", or a BOE. Therefore, if I want a comparative prices of alternative fuels, I can compare their BOE prices with the price of an actual barrel of oil. However, a fixed barrel volume is only applicable to 42 gallons of petroleum. BOEs for other fuels are not true barrels. For example, gasoline has an energy content of 125,000 BTUs per gallon. To have the same quantity of energy as a barrel of crude oil, 46.4 gallons (5,800,000 / 125,000) are required. The BOE for gasoline is then, 46.4 gallons, not 42 gallons

In its announcement of the a low-cost route to ethanol from coal, Celanese has forecast that, with its new TCX Process, it could produce ethanol at a selling price (not cost) of $60 per BOE. For comparison, Celanese said that petroleum and corn fermented ethanol were both selling at $100 per BOE. A check of the market prices confirmed the price of $100 per barrel of crude oil, which is the same as the BOE. There is no reported price for a BOE of ethanol, but spot price at Chicago is $1.68/ gallon

The above figures are not really comparable, because they do not take into account differences in taxes and subsidies. In addition, crude oil cannot be used directly in automotive vehicles, while ethanol can be used directly, even if only at low rates of mixing with gasoline. Therefore, we need adjustments to obtain comparable figures. These adjustments have been made in the attachment.

The net result is that gasoline price at the refinery is $2.39 per gallon. Corn fermented ethanol, when corrected for subsidy and less energy content as compared to gasoline is $3.60 per gallon. It makes no sense to use corn fermented ethanol as a motor fuel, especially when we have ample reserves of crude oil, which can be tapped and refined to gasoline. Note also that even with the giveaway of a $.51 gal subsidy, corn fermented ethanol costs $3.09 per gallon, compared to gasoline at $2.39 per gallon.

Finally, Celanese's TCX ethanol looks to be cheaper than gasoline on a comparable energy basis ($1.30 per gallon versus $2.39). We can be hopeful that it will come to realization, but it is presently pie-in-the-sky. There are also two other disadvantages. Automotive vehicles are now constructed to only be able to use a blend of ethanol with gasoline. This could be solved to allow complete ethanol use, but likely at considerable cost to vehicle modification. In addition, the lower energy content of ethanol versus gasoline will reduce the driving range, unless there is an increase in carrying capacity.

Randy, we go back to the start. Congress must repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007.

Ref: http://www.eia.gov/oog/info/gdu/gasdiesel.asp