(Dan Dicker is currently on vacation and will be back with us next week. To fill in we have prepared a special report on the biofuel – Camelina which we believe is an area energy investors should be keeping a close eye on.)
I also wanted to let you know that we have a detailed bonus report for subscribers coming out next week that looks at: 10 Oil & Gas Trends that Will Change the Way You Invest.
It’s taken quite a while to put together and is definitely something that investors and energy professionals will not want to miss. I’m hoping we’ll be able to get it to you by Thursday.
In the race for renewable biofuels, the three leading U.S. contenders are algae, jatropha and camelina.
All have their passionate advocates, but amidst the partisan campaigning, camelina is emerging at the initial winner, with enormous potential implications for U.S. agronomy and companies involved in its cultivation.
On 26 February camelina received approval from the U.S. government’s Environmental Protection Agency as a new low-carbon feedstock under the federal government’s Renewable Fuel Standard program.
The RFS originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007 and requires transportation fuel sold in the U.S. to contain a minimum volume of renewable fuels to be blended into transportation fuel in increasing amounts each year, escalating to 36 billion gallons by 2022, with each renewable fuel category in the RFS program required to emit lower levels of greenhouse gases relative to the petroleum fuel it replaces. The RFS requires a 50-percent greenhouse gas emissions reduction for qualifying biomass-based diesel or advanced biofuel. The EPA requires a comprehensive evaluation of the greenhouse gas emissions of a proposed renewable fuel as compared to the lifecycle emissions of the gasoline or diesel fuel that it replaces to determine if a fuel meets that requirement, and camelina passed the threshold.
National Biodiesel Board Vice President of Federal Affairs Anne Steckel noted that the EPA ruling provides another option for producing sustainable, domestic biodiesel that displaces imported oil. Steckel said, “This decision adds to the growing list of biodiesel feedstocks that meet the EPA’s standards for Advanced Biofuel and gives us yet another option for producing sustainable, domestic biodiesel that displaces imported oil. This is important for our energy security, for our economy and for addressing climate change, and we thank the EPA for conducting a thorough and fair review.”
How big is the potential market? In March 2010 Biomass Advisors released their 116-page study, Camelina Aviation Biofuels Market Opportunity and Renewable Energy Strategy Report, projecting that by 2025 one billion gallons of camelina biofuel would be produced for the aviation and biodiesel sectors, creating 25,000 new jobs and producing over $5.5 billion in new revenues and $3.5 billion in new agricultural income for U.S. and Canadian farmers.
Camelina grows 1-3 feet high and has branched stems that become woody at maturity. Seed-pods are the size and shape of a small pea, which can be harvested with combines when it is mature. The seeds are very small, amounting to about 400,000 seeds per pound, and they are 40 percent oil, compared to 20 percent with soybeans. Camelina seeds have a high natural oil content and seed yield has been shown to be equal to that of canola under some growing conditions.
Camelina has several positive agronomic attributes: low agricultural inputs, cold-weather tolerance, short growing season (85–100 days), compatibility with existing farm equipment, and it grows well in semiarid regions.
Furthermore, no part of the plant is left unused, as the remaining silage after processing can be fed to livestock and poultry to increase their omega-3 production, a practice now approved by the FDA.
Camelina absorbs carbon dioxide during growth and a recent lifecycle analysis (LCA) of jet fuel created from camelina seeds conducted at Michigan Tech University in conjunction with Honeywell and Sustainable Oils found that the renewable fuel reduces carbon emissions by 80 percent compared to petroleum jet fuel, an issue of increasing concern to civilian airlines.
As a “drop in” fuel, camelina oil blended 50-50 with Jet A-1 aviation fuel kerosene derived from fossil fuels has reduced carbon emissions by up to 85 percent. Jet A-1’s military equivalent, JP-8, is the most widely used fuel in the U.S. military, accounting for about 65 percent of U.S. Department of Defense fuel needs, which uses about 4.6 billion gallons of fuel each year. All the Pentagon’s major services have tested camelina JP-8 successfully, and the U.S. Air Force has now certified it for use in its fleet of C-17 Globemaster III transports.
Last but hardly least, camelina has begun to attract some of Wall Street’s major investment players, including the Carlyle Group, Goldman Sachs and Riverstone Holdings. Among the emerging players, on 7 February 2011 BioJet International Ltd. announced that it had received a three-year contract providing $1.2 billion in funding from the Cayman Islands-based Equity Partners Fund SP. BioJet is a leading international supply chain integrator in renewable bio jet fuel and related products for the aviation and transportation sectors.
Since global demand for aviation fuel for passenger flights is now more than 40 billion gallons annually, it stands to reason that camelina has a bright future.