Hurricane Season

Hurricane Katrina

Last year when Hurricane Katrina hit, the refineries that refine crude to gasoline were hit and hit hard. Ethanol became the darling of the day; oil companies clamored to get ethanol to shore up the loss of gasoline by adding about ten percent of ethanol into the gasoline. The price of ethanol and gasoline went up.

Were back in Hurricane season and some of the refineries are in harm’s way again. On Tuesday, June 6, 2006, the Energy Information Administration (EIA) will come out with their analysis of Crude, Oil and Natural Gas and their Short term Outlook.

According to AccuWeather, “The 2006 hurricane season forecast this year is highlighting the region from the Carolinas northeastward as the prime area for above-normal risk of impact from hurricane activity.”

What happened with Hurricane Katrina and Rita were very rare cases.

According to PhysOrg, “Because the city’s defenses have been so compromised by Hurricane Katrina, even a glancing blow from a hurricane elsewhere could spell trouble for the city,” AccuWeather’s Ken Reeves told The Washington Times. According to the Energy Information Administration (EIA), the refineries were not hurt by hurricane winds, but by flooding. If the refineries can sustain the hurricane winds and there is no flooding and the city’s facilities aren’t hurt the Gulf could be okay.

According to the Oil and Gas Journal, Energy Assurance and the Energy Information Administration (EIA) there are seventeen refinery plants in Louisiana alone, refining over 2.7 million barrels of oil a day (bbl/day) before Hurricane Katrina. District III, the Gulf Coast district, has 53 operating refineries and produce 60 percent of the refined crude.

Weatherman are not limiting the problems from hurricanes to District III. Accuweather has been quoted as saying that with warmer ocean temperatures, that hurricanes are more likely to hit Connecticut, Delaware, New Jersey, New York, southern New England, and the North Carolina coast. District I, the Northeast coast, looks like it could take a hit this year and that would put 13 operating refineries, 6 of those refineries in New Jersey, in harm’s way.

What are our alternatives?

According to Robert White, Project Director, National Ethanol Vehicle Coalition, in June 2005 production of ethanol was at 249,000 barrels per day, while the demand was at 277,000 bbd. There was only a 24-day reserve of ethanol. That was back in June when the oil companies were fighting against putting ethanol in their gas. The Thursday before Hurricane Katrina hit the wholesale price of ethanol was $2.32 a gallon (gas was $2.07). The Thursday after Hurricane Katrina wholesale ethanol was $2.62 per gallon (gas was $2.62).

Today there are 101 ethanol biorefineries operating and 32 under construction. Today the production of ethanol, according to Matt Hartwig, spokesperson for Renewables Fuel Association, production is at 301,000 bbd. The demand for ethanol is 280,000 bbd.

All ethanol is not created equally

Cellulosic ethanol is what President Bush wants us to use, but there is no cellulosic ethanol being produced in the United States at this point in time. Cellulose ethanol has the same properties as ethanol made from corn, but the exhibit’s a net energy content three times higher than corn ethanol and emits a lower level of greenhouse gases. There is a company to watch for; Iogen Corporation and Panda Energy. Iogen has a pilot program in Canada and is awaiting government approval. Shell Oil Co. and Goldman-Sachs have invested in Iogen.

Panda Energy is an interesting ethanol company based in Dallas Texas. Most ethanol plants are built next to cornfields. Panda is planning to build next to cattle fields. According to Sam Burkett, Director of Biofuels for Panda Energy, the manure will be collected and processed for electricity for the boiler for steam for fermentation. The wet feed leftover that didn’t create ethanol will be fed to the cattle. According to the Pandas website “Over the next three years, Panda Ethanol plants will be producing approximately 1.2 billion gallons of Ethanol annually, replacing some 30 million barrels of imported oil.”

Is ethanol the only choice?

We all now about ethanol and biodiesel. The United States is the Saudi Arabia of coal. How about coal gasification to synfuel? Governor Brian A. Schweitzer, D – Montana, is hot on this idea, “Montana has 120 Billion tons of coal. You can produce 240 billion gallons of gas with that. Montana, alone, could fuel America’s needs for 35 years with just our coal. ”

According to Schweitzer, last August Sasol, the South African oil company that had a petroleum plant in Lake Charles, LA, visited Montana. Schweitzer explained to Sasol that Montana was very secure, meaning that the place Montana had its powder river basin coal was not in a tornado belt, that Montana had no hurricanes. Schweitzer explained that the synfuel would be produced in Montana, therefore there would be little shipping and the value of fuel goes up as you move from the coast to the center of the United States.

Schweitzer believes the best way to get this started is to have the government put a floor price of $1 a gallon on gas for ten years. This would give companies time to build the plants and get them up to maximum capacity. Schweitzer says that it would take 5 years from now if they had a company willing to build today. He also said that the Department of Defense has said they would buy all the synfuel the country could provide and that the Navy, just the other day, tendered an offer for 13,000 barrels of synfuel per day.

Schweitzer just got back from Iraq where he said he told the soldiers, “we will be in Iraq as long as we keep consuming oil”. Schweitzer ended by saying, “We are the only country that subsidizes our exports, ships it over to them and sells it at a loss. The oil countries don’t do that for us.”

This is not just about getting off the dependence of foreign oil. This is about energy in times of disaster, about having backup options and long term plans.