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EPA Authority to Regulate Carbon Pollution PDF Print E-mail

Supreme Court Could Clarify EPA Authority to Regulate  Carbon Pollution

The Supreme Court will hear challenges from some states and industry groups opposed to the EPA's requirement that large industrial sources obtain Clean Air Act permits for their greenhouse gas emissions.

The permitting program is the only regulation at issue, and the Supreme Court's decision isn't expected to undermine the EPA's overall authority to regulate greenhouse gases or its upcoming carbon dioxide regulations for power plants.

Possible Guidance for Agencies

However, attorneys said the lawsuit could provide an opportunity for the court to issue new guidance to federal agencies on how they should interpret federal statutes.

Industry groups opposed to the permitting program have argued that the EPA ignored alternate interpretations of the Clean Air Act's permitting provisions that would have been less onerous.

Environmental advocates said the permitting programs are an important stopgap measure until the EPA can issue sector-specific regulations for greenhouse gas emissions. The permitting programs also are expected to drive the development of the control technologies necessary to reduce greenhouse gas emissions, they said.

“This case is important for greenhouse gas control because the application of the [best available control technology] analysis is likely to spur the development of technology that will help us across a wide variety of source types reduce emissions,” Sean Donahue, an attorney representing the Environmental Defense Fund in the lawsuit, told reporters Feb.18.

Statutory Interpretation

The Supreme Court will only hear arguments on whether the EPA's greenhouse gas standards for vehicles necessarily trigger similar permitting requirements for large stationary sources under the Clean Air Act. The court has rejected challenges to the agency's fundamental determination that greenhouse gas emissions endanger public health and the environment and should be regulated.

However, the Supreme Court's decision could offer new guidance on how much latitude federal agencies are due when interpreting statutes.

The EPA has argued that it is compelled by the Clean Air Act to require prevention of significant deterioration and Title V operating permits for greenhouse gas emissions. But the agency determined the emissions thresholds stipulated in the Clean Air Act would require millions of small sources to obtain permits, overwhelming state and local permitting authorities.

Environmental groups are painting the Supreme Court's decision to limit argument only to permitting issues as a win for the EPA because the agency's fundamental authority to regulate greenhouse gases under the Clean Air Act isn't at issue.

Industry groups have argued that the permitting requirements are burdensome without achieving significant emissions reductions.

Program Costs

“In terms of the cost of these programs, there are a lot of facilities being held over their CO2 emissions now,” Jeffrey Holmstead, a partner at Bracewell & Giuiliani LLP who represents industry clients, told Bloomberg BNA. Holmstead is not a participant in the lawsuits.

Clean Air Act Section 169(1) requires stationary sources with emissions greater than 250 tons per year to obtain prevention of significant deterioration permits. Sources with emissions greater than 100 tons per year are required to obtain Title V operating permits.

Instead, the EPA's tailoring rule limits prevention of significant deterioration and Title V greenhouse gas permitting to new sources that emit more than 100,000 tons per year of carbon dioxide-equivalent and modified sources that increase their emissions by more than 75,000 tons per year.

States and industry groups challenging the EPA argue that the agency could have adopted other reasonable interpretations of the Clean Air Act that would have exempted greenhouse gases from

the permitting program and avoided the need to deviate from the statutory emissions thresholds.

The EPA has defended its decision to require large stationary sources to obtain prevention of significant deterioration and Title V permits for their greenhouse gas emissions as consistent with its long-standing interpretation of the Clean Air Act. The agency argues that industrials sources are required to obtain permits for emissions of “any pollutant” regulated under the act and not just those subject to national ambient air quality standards (NAAQS), as some challengers have argued.

Plain Text of Air Act

The EPA's argument that it was compelled to permit greenhouse gas emissions by the plain text of the Clean Air Act is intended to persuade the Supreme Court justices who had originally opposed such regulation, attorneys said.

“The case has got some very odd—potentially—pulls and counter-pulls on some of the justices,” David Doniger, policy director of the Natural Resources Defense Council's Climate Center, told Bloomberg BNA. The Natural Resources Defense Council is supporting the EPA in the lawsuit.

While some justices such as Antonin Scalia dissented in the 2007 Massachusetts v. EPA decision that determined that greenhouse gases are air pollutants for purposes of the Clean Air Act, the EPA has relied on textualist arguments to defend its permitting program that Scalia and others may find persuasive, Doniger said.

Scalia recently reiterated his textualist approach to interpreting law in the Jan. 27 decision in Burrage v. United States, Doniger said.

“But in the last analysis, these always-fascinating policy discussions are beside the point. The role of this Court is to apply the statute as it is written—even if we think some other approach might” be preferable, Scalia wrote in that opinion.

Doniger said that same reasoning should apply to the EPA's interpretation of the Clean Air Act's permitting requirements.

“The statute is very clear,” he said. “Each pollutant subject to regulation is as inclusive as you can get.”

Permitting, Air Quality

Industry groups, including the Utility Air Regulatory Group, have argued that prevention of significant permitting should only apply to those pollutants shown to degrade air quality, which would exclude greenhouse gases

“Further, whatever ‘endangerment' carbon dioxide may present due to the effects of global climate change, carbon dioxide does not deteriorate ambient air quality—the quality of the air people breathe,” the Utility Air Regulatory Group argued in its brief. “The [Clean Air Act's] PSD provisions address exclusively the review, analysis, monitoring and control of ‘air pollutants' that deteriorate ambient air quality in specifically defined geographic areas. Carbon dioxide does not fit within these provisions.”

Holmstead said that the Utility Air Regulatory Group's argument “probably has the best chance of prevailing” among those offered by petitioners.

Not all utilities have opposed the EPA's greenhouse gas permitting regulations. Calpine, which filed an amicus brief in support of the EPA, said it has obtained six prevention of significant deterioration permits for its energy projects and didn't find the process to be particularly onerous.

Calpine's Experience

“First, in Calpine's experience, complying with the procedural requirements of the PSD program for GHGs has not resulted in the insurmountable burdens or excessive delays for applicants predicted by the rule's critics,” the company said. “Rather than the drastic revolution critics suggest, application of the PSD review process to GHGs represents a natural evolution of the program.”

The American Chemistry Council in its brief had argued that only industrial facilities that would already be required to obtain prevention of significant deterioration permits for emissions of pollutants subject to national ambient air quality standards (NAAQS) should have their greenhouse gas emissions regulated.

“Nowhere does the legislative record indicate that PSD permitting obligations would be triggered also by sources of non-NAAQS pollutants, such as smaller commercial and residential facilities,” the industry group argued. “Quite the contrary, Congress recognized that requiring these facilities to comply with these obligations would be ‘costly' and ‘unreasonable.' ”

Limiting greenhouse gas permitting to only those sources, sometimes called “anyway sources” because they would be subject to prevention of significant deterioration requirements anyway, could provide an attractive middle ground option for the justices to decide the case, attorneys said.

‘Soft Landing'

Jody Freeman, director of the Environmental Law Program at Harvard Law School and former White House counselor for energy and climate change, said that approach “doesn't lose EPA that much.”

“It would be what we might call a soft landing. From EPA's perspective that would be a very manageable place to be,” she told Bloomberg BNA.

Judge Brett Kavanaugh of the U.S. Court of Appeals for the District of Columbia Circuit made a similar argument in his dissent after that court voted not to rehear challenges to the EPA's greenhouse gas regulations in 2012.

In his dissent, Kavanaugh argued that only pollutants subject to a national ambient air quality standard could trigger the permitting requirements. But once industrial sources have reached that emissions threshold, they are required to obtain permits for all of their emissions, which would also include greenhouse gases.

Open to Argument

The EPA in its brief dismissed that interpretation as “self-evidently crafted to produce a particular result in a particular case, rather than to promote the sound long-term administration of the PSD program.”

However, attorneys said that the EPA's brief did seem to indicate the agency would prefer for the court to limit the permitting trigger to criteria air pollutants rather than exclude greenhouse gases from the permitting program entirely.

“EPA almost seems to be inviting the court to adopt that interpretation,” Holmstead said.

While limiting greenhouse gas permitting to only those sources already subject to prevention of significant deterioration might offer a pragmatic course for the Supreme Court to resolve the lawsuit, Freeman said that interpretation is “a bit of a strain of the natural reading of the term ‘any pollutant' ” under the Clean Air Act.

Limiting the permitting requirements to only pollutants subject to air quality standards also would exclude pollutants such as fluorides and hydrogen sulfide from regulation, the American Thoracic Society said in an amicus brief in support of the EPA.

“Adopting [the American Chemistry Council's] proposal would, therefore, do much more than simply carve GHGs out of the PSD program; it would hobble EPA in its effort to follow the Clean Air Act's mandate to ‘protect public health and welfare from any actual or potential adverse effect,' ” the American Thoracic Society said.

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Why Is China Buying So Much Methanol? PDF Print E-mail

By Celan Bryant | More Articles
February 3, 2014 | Comments (1)

Methanol is an alternative liquid-fuel source. It is also used in the production of acetic acid, formaldehyde, plastic, adhesives, foams, plywood sub-floors, solvents, and windshield-washer fluid. In March 2013, IHS Chemical found that the demand for methanol was growing faster in China than any other part of the world -- the country increased consumption 23% from 2010 to 2012 and is expected to consume half the world's production of methanol this year, which is about 32 million tons. By contrast, the United States currently consumes about 6.5 million tons. IHS Chemical expects the demand for methanol in China alone to triple by 2022.

So, what's fueling China's interest in methanol?

On Dec. 14, China became the first nation in 37 years to land on the moon. As China's economy grows and becomes increasingly more industrialized, the demand for fuel is outpacing supply -- everyone wants a car, and you can't start a car without fuel. In addition to needing alternative sources of fuel, China is also transitioning away from burning coal and oil. Unfortunately, natural gas is more expensive and harder to find.

The process of turning natural gas into methanol
Methanol, also known as wood alcohol, can be made from a variety of fossil fuels, including natural gas, which is cleaner than coal or oil. Many central-heating systems in China are dependent on coal, which means northern China is experiencing the worst bouts of toxic air this time of year.

From a logistics perspective, natural gas has no special requirements for safe transport. It is biodegradable, non-carcinogenic, evaporates when exposed to air, and dissolves when mixed with water -- it doesn't impose the same environmental and health risks associated with petroleum. In the case of spills, it evaporates or biodegrades.

Natural gas is usually produced in liquid form where it can be sent to plants via a pipeline and shipped to China with the use of freighters in a process like the one outlined below by Northwest Innovation Works. When combined with steam and heat, natural gas can be synthesized into carbon monoxide, carbon dioxide, and hydrogen. A "catalyst" is then used to spark a chemical reaction and viola! Pure methanol is created.

Source: Northwest Innovation Works

Northwest Innovation Works is a socialist/capitalist collaboration between China's government and BP (NYSE: BP  ) , formerly British Petroleum. The joint venture is looking into investing $3.6 billion in the building of two facilities in Washington state and Oregon. The facilities would produce 10,000 metric tons of methanol daily by burning 640 million cubic feet of natural gas.

Storage facilities to hold the methanol are already being built in Dalian, a city of 3 million people in northeast China. Northern Chinese cities are more familiar with air-quality issues, so the demand for natural gas and methanol is greater. The northeast Chinese city of Harbin had a severe event in October when air quality readings reached the maximum of 500 -- people couldn't see past traffic lights as schools were cancelled and traffic was paralyzed.

Investing in methanol
Most methanol plants based in the U.S. are in the Gulf Coast. Natural gas has traditionally been inexpensive in Texas and Louisiana. The Pacific Northwest is obviously a better geographic position to China than the Gulf Coast, but Northwest Innovations won't be able to add production to the market until 2018. Who will take advantage of the gap in demand until then?

Celanese (NYSE: CE  ) is a specialty-materials company that processes methanol, carbon monoxide, and ethylene. It is the world's largest producer of acetyl products. The company has entered into a joint venture with Mitsui of Tokyo to produce methanol in Clear Lake, Texas, however production won't be ready until 2015, and annual returns on the stock are low.

LyondellBasell (NYSE: LYB  ) , a company based in the Netherlands, produces methyl tertiary butyl ether (MTBE), which is a clean-burning gasoline component. The company recently announced plans to restart its methanol plant in Channelview, Texas. "The methanol plant restart is the first in a series of U.S. Gulf Coast projects by LyondellBasell to take advantage of the natural gas price advantage that we enjoy from shale gas," said the company.

With record fourth-quarter earnings, the leading producer of methanol in the world is Methanex (NASDAQ: MEOH  ) -- what an exciting time for this company. Headquartered in Vancouver, Canada, the stock had a one-year return of 75% and has a market cap of $5.8 billion. Methanex sold more than it could produce last year, as prices for methanol went from $425 to $438 per tonne. 

 
Waterfront Shipping to Commission New Ships Built With Flex-Fuel Engines PDF Print E-mail

PRESS RELEASE

Dec. 9, 2013, 2:01 a.m. EST

 

VANCOUVER, BRITISH COLUMBIA, Dec 09, 2013 (Marketwired via COMTEX) -- Waterfront Shipping Company Ltd. has reached an agreement with Mitsui O.S.K. Lines, Ltd. (MOL), Westfal-Larsen & Co A/S (WL) and Marinvest/Skagerack Invest to build six new ships, with an option for building an additional three, all to be delivered during 2016. These 50,000 dead weight tonne vessels will be built with MAN ME-LGI flex fuel engines running on methanol, fuel oil, marine diesel oil, or gas oil.

Waterfront Shipping, a wholly owned subsidiary of Methanex Corporation, is a global marine transportation company specializing in the safe, responsible and reliable transport of bulk chemicals and clean petroleum products. With the growing demand for cleaner marine fuel to meet environmental regulations coming into effect in Northern Europe and other regions, methanol continues to be a promising alternative fuel for ships.

"We are very excited to continue investing in methanol-based marine fuel. This announcement reinforces our commitment to continue investing in sustainable technology. Methanol is a sulfur-free fuel that provides many environmental and clean burning benefits. With fuel prices increasing and upcoming shipping regulations requiring the use of cleaner marine fuel, methanol-based fuel is a promising alternative which reduces emissions and fuel costs," stated Jone Hognestad, President, Waterfront Shipping.

Waterfront Shipping will charter these vessels to replace older vessels in its fleet and to support increased demand from Methanex Corporation's growth initiatives, including the relocation of two methanol plants from Chile to Geismar, Louisiana.

Of the ships being built, MOL, Marinvest/ Skagerrak Invest and WL will each own two, plus one optional vessel. The ships will be built by Hyundai Mipo Dockyard and Minaminippon Shipbuilding Co., Ltd.

About Waterfront Shipping

Waterfront Shipping operates the largest methanol ocean tanker fleet in the world with its fleet comprising vessels from 3,000 to 49,000 dwt. Its fleet of 18 modern, deep sea tankers delivers products to major international markets in North America, Asia, Europe and Latin America. For more information, please visit http://www.wfs-cl.com/ .

About Methanex Corporation

Methanex Corporation is a Vancouver-based, publicly traded company and is the world's largest supplier of methanol to major international markets. Methanex shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol "MX" and on the NASDAQ Global Market in the United States under the trading symbol "MEOH". For more information, please visit http://www.methanex.com/ .

About Mitsui O.S.K. Lines, Ltd.

Mitsui O.S.K. Lines, Ltd., founded in 1884, is one of the top shipping companies headquartered in Tokyo, Japan. The company operates more than 900 vessels, from containerships to tramp vessels and specialized carriers for cargoes including automobiles, iron ore, coal, wood chips, crude oil, liquefied natural gas (LNG) and chemicals. For more information, please visit http://www.mol.co.jp/en/ .

 
Why Don't Car Companies Make All Their Cars Flex Fuel? PDF Print E-mail
Posted: 28 Jan 2014 02:44 PM PST

 

Something strange, something counterintuitive is happening in the auto industry. Consider these facts:

1. Historically and reliably, when fuel prices drop, car sales rise.

2. If we had vigorous fuel competition in America, fuel prices would drop.

3. Any car that runs on gasoline can be turned into a GEM car (which can burn any combination of gasoline, ethanol, or methanol) for 41 cents, creating robust fuel competition in America.

4. Automakers deliberately disable the flex fuel capability of their cars.

Why? Why would the manufacturer of anything deliberately disable a capability that their customer might find useful? Even more curious, why would a manufacturer disable a feature that would greatly improve their bottom line? Dr. Robert Zubrin, the renowned engineer, in a recent article in The New Atlantis, writes:

One answer, and perhaps the most salient one, is that the automobile companies are not capable of pursuing their own independent interests. Rather, significant parts of these car companies are owned by entities that are much more heavily invested in oil. In some cases, it is safe to surmise that these investors are one of the obstacles preventing automakers from encouraging free energy competition.

For example, the automobile company with the highest revenues in the world is Volkswagen. Today, 17 percent of Volkswagen is owned by the Qatar Investment Authority, the sovereign wealth fund of OPEC member Qatar, which gets its money from Qatar’s state-owned oil industry. It is the third-largest shareholder in VW (after having sold 10 percent to Porsche in 2013). The vice chairman of the Qatar Investment Authority even has a seat on Volkswagen’s supervisory board.

We see similar situations with other European automakers. For example, the Kuwait sovereign wealth fund owns 6.9 percent of Daimler (which produces Mercedes-Benz cars). Aston Martin — famous for its James Bond cars — was purchased in 2007 by a group with majority funding from two Kuwaiti investment firms (although much of their share of the carmaker has since been sold off). In recent years, the government of Abu Dhabi (part of the United Arab Emirates, an OPEC member) has owned stakes in Daimler and Ferrari.

What about the two biggest American auto manufacturers, General Motors and Ford? The dominant shareholders in these companies — not counting the U.S. and Canadian governments, whose bailout of GM temporarily made the U.S. Treasury the company’s largest stockholder — are major Wall Street funds whose holdings in the energy sector, including major oil companies, typically far exceed their shares in the auto industry. Again, one suspects that their interest in protecting these oil investments might conflict with flex-fuel capabilities.

For instance, the largest institutional stockholder in GM, Capital Research Global Investors, owns $2.9 billion of GM stock, but has $19.1 billion invested in energy, including $3.0 billion in Schlumberger, the world’s largest provider of oilfields services. (All these figures are current as of September 2013.) GM’s second-largest stockholder is Harris Associates, which has $2.3 billion invested in GM and $3.7 billion invested in energy, including $1.6 billion in National Oilwell Varco, an equipment maker for oil and gas drilling, and $0.8 billion in Devon Energy, one of the biggest U.S. oil and natural gas producers. Third is JP Morgan Chase, with $1.7 billion in GM and $29.2 billion in energy, $4.9 billion of which is in Exxon Mobil, $3.0 billion in Chevron, $2.0 billion in Schlumberger, and $1.7 billion in ConocoPhillips. The fourth-largest GM stockholder, the Vanguard Group, owns only $1.6 billion in GM, but $93.5 billion in energy, including $22.2 billion in Exxon Mobil and $12.1 billion in Chevron. And the fifth largest, Berkshire Hathaway, owns $1.6 billion of GM stock, and $7.5 billion in energy, of which $4 billion is in Exxon Mobil. Another major investor in GM is Saudi Prince Al-Waleed bin Talal, who snapped up $500 million in shares when the revived company returned to the stock market in 2010.

Ford does have one major investor — its largest shareholder, Evercore Trust — whose Ford holdings ($3.7 billion) exceed its energy investments, which are minimal and not at all in oil. But otherwise Ford’s situation is similar to that of GM. After Evercore, the next four top owners of Ford include again the Vanguard Group ($3.0 billion in Ford, $93 billion in energy), State Street Corporation ($2.5 billion in Ford, $77.9 billion in energy, of which $18.2 billion is in Exxon Mobil and $12.5 billion in Chevron); Wellington Management ($1.7 billion in Ford, $36.2 billion in energy, of which $5.4 billion is in Exxon Mobil, $4.7 billion in Chevron, and $2.3 billion in BP); and Barclays Global Investors ($1.6 billion in Ford, $47.5 billion in energy, of which $6.1 billion is in Chevron, $3.1 billion in Schlumberger, and $2.3 billion in ConocoPhillips).

Now, it is true that some of these investors also have shares in alternative energy companies, and even in methanol companies. But these tiny holdings are dwarfed by their oil holdings. For example, Wellington Management invests in Methanex, the world’s leading methanol supplier. But Wellington’s $0.4 billion investment in Methanex is just one-fortieth the size of its investment in oil companies. JP Morgan Chase has $0.1 billion invested in Methanex, less than one-hundredth the size of investment in oil. Naturally, for these investors, protecting their financial interests means prioritizing oil over methanol.

In short, the owners of the biggest U.S. car companies have interests overwhelmingly aligned not with the automakers or their customers but with the oil cartel. At minimum, this represents a very serious conflict of interest. Barring a change in circumstances, it is unlikely the car companies will take actions that would imperil OPEC’s control of the market.

Automakers Disable Flex Fuel Capability

Posted: 28 Jan 2014 02:13 PM PST

Robert Zubrin, an accomplished engineer, did an experiment on his car, a 2007 Chevy Cobalt (a non-flex-fuel vehicle) and in the process discovered some interesting things. He wanted to run his car on methanol, which is legal to burn for fuel, but illegal to sell in America (at over a 5.4% concentration). To make his regular, non-flex-fuel car capable of burning methanol, he had to replace one part — a fuel pump seal. The seal that came with the car was made of Viton, which methanol would dissolve. The new seal he installed was made out of a material called “Buna-N.” The new part cost him 41 cents.

Other than that, the only thing he had to do to his car was adjust the Engine Control Unit software. The computer onboard his car was the same computer used in flex fuel cars, although his car was not flex fuel. But the software that would allow the car to be a flex fuel car was disabled. Zubrin wrote, “Currently, all new gasoline-powered cars sold in the U.S. are flex-fuel cars, but only about 5 percent are being sold as such. The rest are being marketed with their flex-fuel capability disabled by their manufacturers.”

- Excerpted from the book, Fill Your Tank With Freedom.

Higher Fuel Prices = Lower Car Sales

Posted: 28 Jan 2014 01:55 PM PST

"Other than the airline industry, no industry suffers from high oil prices more than the auto industry," Anne Korin and Gal Luft say in their book, Petropoly. "When oil prices rise the economy slows down and Americans have less disposable income with which to purchase new vehicles. The cars they do buy tend to be smaller and cheaper. Since Detroit makes most of its profits on light trucks and SUVs, its profits take a hit when oil prices soar.

"In the long run sustained high gasoline prices have a lasting effect on the automakers' bottom lines. When fuel prices are high, people drive fewer miles and that means less wear and tear, less replacement parts and fewer road accidents. All of these mean slower vehicle replacement and hence less profit for Detroit.

"Expensive fuel is therefore a drag on the autos' financial well-being. By any yardstick the industry would be better off when fuel prices are low."

 
Synthetic fuels could eliminate entire U.S. need for crude oil, create 'new economy' PDF Print E-mail

The United States could eliminate the need for crude oil by using a combination of coal, natural gas and non-food crops to make synthetic fuel, a team of Princeton researchers has found. 

Besides economic and national security benefits, the plan has potential environmental advantages. Because plants absorb carbon dioxide to grow, the United States could cut vehicle greenhouse emissions by as much as 50 percent in the next several decades using non-food crops to create liquid fuels, the researchers said. 

Synthetic fuels would be an easy fit for the transportation system because they could be used directly in automobile engines and are almost identical to fuels refined from crude oil. That sets them apart from currently available biofuels, such as ethanol, which have to be mixed with gas or require special engines.

Floudas

Professor Christodoulos Floudas (center), along with graduate student Josephine Elia and Richard Baliban, who received his Ph.D. from Princeton in 2012, developed a comprehensive system for optimizing the production of synthetic liquid fuels as an economical replacement for petroleum-based fuels. (Photo by Frank Wojciechowski)

In a series of scholarly articles over the past year, a team led by Christodoulos Floudas, a professor of chemical and biological engineering at Princeton, evaluated scenarios in which the United States could power its vehicles with synthetic fuels rather than relying on oil. Floudas' team also analyzed the impact that synthetic fuel plants were likely to have on local areas and identified locations that would not overtax regional electric grids or water supplies.

"The goal is to produce sufficient fuel and also to cut CO2 emissions, or the equivalent, by 50 percent," said Floudas, the Stephen C. Macaleer '63 Professor in Engineering and Applied Science. "The question was not only can it be done, but also can it be done in an economically attractive way. The answer is affirmative in both cases."

Accomplishing this would not be easy or quick, Floudas said. A realistic approach would call for a gradual implementation of synthetic fuel technology, and Floudas estimated it would take 30 to 40 years for the United States to fully adopt synthetic fuel. It also would not be cheap. He estimates the price tag at roughly $1.1 trillion for the entire system.

The research makes up an important part of a white paper recently produced by the American Institute of Chemical Engineers (AIChE), the nation's largest chemical engineering association. In the paper, the chemical engineers call for a greater integration of energy sources and urge policymakers to consider chemical conversion processes as a potential method to produce cleaner and cheaper fuels. 

"Right now we are going down so many energy paths," said June Wispelwey, the institute's director and a 1981 Princeton alumna. "There are ways for the system to be more integrated and much more efficient."

The paper was written by Vern Weekman, one of Floudas' co-researchers. Weekman, a lecturer at Princeton, is the former director of the Mobil Central Research Laboratories and a past president of AIChE.

Weekman said the main reason the industry has not embraced synthetic fuels has been cost. Although he said the economics are "still on the edge," Weekman noted that rising prices for crude oil and improvements in the efficiency of synthetic fuel production have made the process far more viable than before.

"The main reason we wrote the paper was to get the planning agencies — the national academies, the Department of Energy, the Environmental Protection Agency, the Defense Department — thinking about this," Weekman said. He added that it was important that the agencies consider "this key link of using chemical processes to produce conventional fuels."

In the Princeton research, Floudas' team found that synthetic fuel plants could produce gasoline, diesel and aviation fuels at competitive prices, depending on the price of crude oil and the type of feedstock used to create the synthetic fuel. About two-thirds of crude oil consumed by the United States is used for transportation fuel, according to the federal Energy Information Administration (EIA). The EIA said the United States imports about 45 percent of its annual crude oil consumption.

"Even including the capital costs, synthetic fuels can still be profitable," said Richard Baliban, a chemical and biological engineering graduate student who graduated in 2012 and was the lead author on several of the team's papers. "As long as crude oil is between $60 and $100 per barrel, these processes are competitive depending on the feedstock," he said.

The core of the plan is a technique that uses heat and chemistry to create gasoline and other liquid fuels from high-carbon feedstock ranging from coal to switchgrass, a native North American grass common to the Great Plains. The method, called the Fischer-Tropsch process, was developed in Germany in the 1920s as a way to convert coal to liquid fuels. 

The chemistry is complicated, but it basically takes the carbon and hydrogen from the feedstock and reassembles them into the complex chains that make up fuels like gasoline and diesel. Essentially, the feedstock material is heated to 1,000 to 1,300 degrees Celsius and converted to gas, and using the Fischer-Tropsch process, the gas is converted to chains of hydrocarbon molecules. These hydrocarbon chains are then processed over catalysts such as nickel or iron. The end products include fuels, waxes and lubricants normally made from crude oil.

The Princeton team's method adds a step to recycle CO2 through the process to reduce the amount of the gas vented by the plants. Baliban said there is a limit to how much CO2 can be economically recycled, although plants could also trap unused CO2 emissions for later storage.

Over the years, engineers have refined the original Fischer-Tropsch method to increase efficiency. But the high cost of building new synthetic fuel plants, coupled with the low price of crude oil, has made synthetic fuels too expensive for widespread acceptance.

As the price of oil has increased, however, synthetic fuels have become more practical. The U.S. government has undertaken a number of projects to look into the process; in particular, the Defense Department has studied synthetic fuels as a way to supply transportation fuel without depending on overseas suppliers.

In its work, the Princeton team looked at a broader picture. In a July article in the AIChE Journal, the team found that the United States could meet its entire demand for transportation fuel by building 130 synthetic fuel plants across the country. The article, with Josephine Elia, a graduate student in chemical and biological engineering as the lead author, made its assessment using three feedstocks: coal, natural gas and biomass. To avoid switching farmland from food production to crops used for fuel production — which would hurt the food supply — the researchers only included non-edible crops such as perennial grasses, agricultural residue and forest residue. 

The plants modeled in their scenario were placed in proximity to both feedstock supplies and markets for fuels. The analysis factored in external costs such as water supplies and electricity to power the plants' machinery.

Ultimately, the team recommended construction of nine small, 74 medium and 47 large plants producing 1 percent, 28 percent and 71 percent of the fuel, respectively. Most of the plants would be clustered in the central part of the country and in the Southeast. The state with the highest level of fuel production would be Kansas, which would have 11 large synthetic fuel plants. Texas would have the largest number of plants, but because of the scattered nature of feedstock in that state, most of those plants would be medium-sized.

The researchers found that the largest contributor to the price of synthetic fuel would be the cost of building the plants, followed by the purchase of biomass and then electricity. They estimated that the nationwide average cost of producing the synthetic equivalent of a barrel of crude oil would be $95.11, although the cost varies regionally. The cost in Kansas, where most production would occur, would average $83.58 for the equivalent of a barrel of crude oil.

The cost could be much lower if plants eliminated biomass and used only coal and natural gas to run the process, Floudas said, but that would eliminate most of the environmental benefit.

"If you want to have a 50 percent reduction in emissions, you need to have the biomass," he said.

In many ways, synthetic fuels are cleaner than petroleum fuels. The heavy metal and sulfur contaminants of petroleum fuels can be captured in the synthetic plants before the fuel is shipped out. Synthetic fuels also can be used in gasoline and diesel engines with no need for modifications, unlike many biofuels. The biofuel ethanol, for example, is commonly mixed with gasoline, but high levels of ethanol require modifications to car engines and pose special challenges for starting at low temperatures. 

Floudas said that synthetic fuels also would allow carbon reduction with the fleet of cars currently on the road. Even if the country immediately converted to zero-emitting electric or fuel cell vehicles, millions of internal combustion vehicles would still be driving. By switching to synthetic fuels, he said, the country would have the opportunity to reduce those emissions, even if it they would not be completely eliminated.

"This is an opportunity to create a new economy," Floudas said. "The amount of petroleum the U.S. imports is very high. What is the price of that? What other resources to do we have? And what can we do about it?"

 
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