Why Is Everything Bigger in Texas?

Author:   Andrew Bleemel, Account Manager, Kinect Energy

You frequently hear the saying, “everything is bigger in Texas.”  Why?  The saying supposedly originated as a reference to the state’s size versus the other lower 48 states; plus Texas is second in size only to Alaska based on square miles.  Texas is so big that you can take 10 of the smallest American states combined and cover only half of its square mile total.  Texas also ranks second in population with California being number one.

Since you didn’t log onto an energy website for a geography lesson, the reason this saying rings true when dealing with energy is due the most recent U.S. Geological Survey study on the Wolfcamp shale.  This formation has been crowned the largest unconventional crude accumulation ever assessed in the United States that is deemed technically recoverable.  It’s nearly three times larger than the Bakken play located in North Dakota.

wolfcamp-shale

The Wolfcamp shale formation is located in West Texas (see map) and covers a little piece of ground in the southeast corner of New Mexico.  It is located in the Midland Basin within the Permian Basin – historically a very lucrative area of oil and natural gas.  The recent estimates indicate the formation could hold as many as 20 billion barrels of crude oil valued at around $1 trillion based on recent crude market prices.  In addition to the crude, the formation will reportedly yield a projected 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids.  The natural gas in this play alone would supply the entire United States demand for over six months as a sole source of supply.  All of these resources are said to be trapped under four layers of shale and a mile in thickness in some locations.

The Permian Basin has been gushing crude since the 1920’s.  The Wolfcamp area has been a location for vertical drilling since the 1980’s.  It has been only recently that the full potential has been realized due to technological advances and techniques in extraction.  Horizontal drilling is occurring in the area now, and more than 3,000 wells have been drilled and completed.  Exploration companies have rushed to the area, grabbing up land for future wells.

While there still are some factors that may sway the strength and importance of the Wolfcamp play’s future production, the finding of the resource is big not only for the state of Texas but for the entire domestic energy sector.  So when you hear the saying, “everything is bigger in Texas,” don’t think only about the land mass or the population.   You can reflect upon the state’s contribution to the domestic energy sector and the “big” potential of the Wolfcamp basin.

Biofuels from Seaweed

NSF - kelp 1
Photo courtesy of the National Science Foundation

In the last blog post on EPA’s changes to cellulosic biofuel goal under the Renewable Fuel Standard (RFS) I touched on one of the challenges of growing feedstock for ethanol production – the land use conflict of food vs. fuel.   Cellulosic ethanol helps to address this question by using byproducts such as corn stover and wood waste as inputs to the ethanol production process; but, progress on advancing this technology to commercial scale has been slow.  For this Future Friday post we’ll look at research on seaweed-based biofuels that holds promise for addressing these problems while increasing the efficiency of biofuel production.

There are many advantages to using seaweed as the feedstock for biofuel production.  With 71% of the earth’s surface covered in saltwater biofuel production from seaweed does not run into the same constraints and conflicts as terrestrial-based biofuels.  Seaweed is up to five times more efficient at storing the suns energy in biomass, and it grows much faster than land-based plants.  Another advantage is that seaweed farming is already a multibillion dollar global industry; though production to date is focused on producing alginate (a food thickener), vitamin supplements, inputs to the cosmetics and plastics industries and animal feed.

Though seaweed appears to be an ideal feedstock there are obstacles that must be overcome for it to be used for large-scale biofuel production.  As with cellulosic ethanol the primary challenge is finding or engineering bacteria that can break down the carbohydrates in seaweed into fermentable sugars.  One avenue being pursued is the collection of bacteria from the droppings of Scottish sheep that subsist on a diet largely of seaweed (Seaweed biofuels: a green alternative that might just save the planet).  In 2012 the Bio Architecture Lab (BAL) in Berkeley, CA patented a genetically modified bacterium that can break down the carbohydrates in brown seaweed.  Research shows that the bacterium is highly efficient, making 80% of the maximum sugar yield from seaweed available.  With this technology seaweed has the potential to produce 1,500 gallons of ethanol per acre, which is 50% more than sugar cane and three times as much as corn-based ethanol (Unlocking Seaweed’s Next-Gen Crude: Sugar).

Seaweed’s fast growing, carbohydrate dense characteristics confer many advantages, but economic viability of seaweed-based biofuels will likely depend on it being part of a larger interconnected value chain.  For example, seaweed is being integrated into aquaculture operations (e.g., fish, shrimp, oysters) because of seaweeds ability to clean the water and maximize nutrient use.  The ability to extract a high value product to serve an existing market, and then produce biofuel could make the economics more favorable and increase the likelihood of a future with seaweed-based biofuels.

EPA Lowers 2013 Cellulosic Biofuel Goal by 99%

RFS
Photos courtesy of the U.S. Department of Energy

On Tuesday the Environmental Protection Agency (EPA) finalized the Renewable Fuel Standard (RFS) volumetric requirements for 2013, cutting the goal for blending biofuels produced from cellulose by 99.4%.  The original 2013 goal for cellulosic biofuel blending was 1 billion gallons, but the EPA was forced to lower this goal because cellulosic biofuel production has not increased fast enough to meet the blending goals envisioned when Congress passed RFS2 in 2007.  The table below shows the final 2013 volume blending requirements and the blend percentage (the ratio of renewable fuel to petroleum-based gasoline and diesel consumed in the United States).  The final row, Total Renewable Fuel, is inclusive of the three other fuel categories, so just under 10% of liquid transportation fuels in 2013 will come from renewable sources.  It should be noted that the overall renewable fuel blending requirement for 2013 remains unchanged at 16.55 billion gallons.

Final 2013 RFS Standards

Fuel Type Volumes Blend Percentage
Cellulosic biofuel 6.00 mill gal 0.004%
Biomass-based diesel 1.28  bill gal 1.13  %
Advanced biofuel 2.75  bill gal 1.62  %
Total Renewable fuel 16.55 bill gal 9.74  %

Cellulosic biofuels are seen as the future of renewable fuels because they have lower lifecycle greenhouse gas (GHG) emissions and do not raise the same food vs. fuel questions that producing corn ethanol does.  Cellulose is a polymer, or long chain of linked sugar molecules that is present in the cell walls of all green plants.  This means that cellulosic biofuels can be made from waste products such as corn stalks, wood chips, or fast growing plants such as switch grass that require little or no inputs and can grow on marginal lands not suited for traditional agriculture.  The sugars in cellulose are not as easy to free from the rest of the plant and the challenge has been scaling up processes to produce commercial volumes cost effectively.  Only 20,000 gallons of cellulosic biofuels were produced in 2012, highlighting the difficulty of commercializing the technology.

Despite the low production volumes progress is being made scaling up cellulosic biofuel production.  At the end of July Ineos Bio announced that their Indian River BioEnergy Center began producing cellulosic ethanol at commercial scale.  The BioEnergy Center uses a gasification and fermentation process to convert cellulosic biomass to ethanol and renewable power.  Inputs have included citrus, oak, pine, pallet wood waste, and the facility is permitted to use municipal solid waste (MSW).  The plant is expected to produce eight million gallons per year of ethanol and six MW of renewable power.  Ineos hopes to use the plant to demonstrate the viability of the technology at the Center with the goal of leasing it to others.  The Energy Information Administration summarizes the outlook for cellulosic biofuel production through 2015 here.

In addition to the challenges of ramping up new technologies for cellulosic biofuel production there are political challenges as well.  Demand for cellulosic biofuels is primarily created by the RFS2 mandates.  The American Petroleum Institute has called on Congress to scrap the Renewable Fuel Standard (API Press Release) because volume blending requirements have not been adjusted to reflect reduced U.S. consumption of gasoline and diesel, and over concern that more than a 10% ethanol blend will harm vehicles.  A discussion of the political issues around cellulosic and corn ethanol can be found in a recent Fortune article here.

Rising RIN Prices Explained

rinprices Source: U.S. Energy Information Administration

The U.S. Energy Information Administration (EIA) published an interesting report yesterday that sheds some light on why we have seen the rise in Renewable Identification Number (RIN) prices for corn ethanol.  RINs are tradable instruments used to demonstrate compliance with the Renewable Fuel Standard (RFS), which since 2005 has required the blending of increasing amounts of biofuels into the U.S. transportation fuel supply.  Corn ethanol RIN prices rose from their historic average of $.01 – $.05 to just under $1 in March of this year.  In short, the report finds that rising RFS blending volume mandates, coupled with a decline in U.S. transportation fuel use, will make it increasingly more costly to meet blending obligations.  More details can be found in the report: What caused the run-up in ethanol RIN price during early 2013?  For more information on the RFS and how RINs are used to implement it see the EIA report: RINs and RVOs are used to implement the Renewable Fuel Standard.