by Debra Fiakas, CFA

The world needs more food.   At least more of the food produced in the world’s fields needs to end up in the mouths of humans and their animal friends.  According to the United Nations, the world’s farmers produce enough food to feed everyone, yet over 800 million people routinely go hungry.  This is due in part to the ancient and ongoing practice of selecting plants for high yield.  The consequence is a selection of highly homogenous food crops.  There are thousands of edible plants growing on Planet Earth, but only a dozen crops account for 75% of all human calories.  Lack of genetic variability in those twelve crops means particular vulnerability to pests, disease and climate change.

Human efforts to control crop pests and diseases are as long-lived as crop selection.  For centuries farmers manually picked insects from food crops, laid out smudge pots to ward off locusts or engulfed nearly ripened fruit trees in netting.  It was not until the late 1800s that chemicals were applied to crops such as sulfur, nicotine and arsenic.  By the mid-1900s the chemists appeared to have taken over agriculture, bringing all sorts of laboratory concoctions such as dichlorodipehnyltrichloreoethane to the field.  Otherwise known as DDT, its inventor was awarded the Nobel Prize for its discovery.  Enthusiasm has since waned as the potion began decimating bird populations and humans started having seizures and going infertile.

Fortunately, carcinogens are not the only way to boost crop success and food production.  Marrone Bio Innovations (MBII:  Nasdaq) offers bio-based solutions for pest and disease control.  The company has developed a fairly wide product line, including insecticides and fungicides as well as seed and soil treatments.  The company has developed proprietary technology to isolate important microorganisms that can be effective in pest management without collateral damage.   Other microorganisms have been found that help promote plant health and productivity.

In the most recently reported twelve months ending September 2019, Marrone has claimed $28.4 million in total sales of its various crop elixirs.  Despite a 54% gross margin, the company has still not delivered an operating profit.  The company is still spending heavily on research and development.  In the last twelve months 47 cents out of every sales dollar went toward new product development.  Marrone is also spending heavily on marketing and sales.  That investment is tucked away in the line of reported SG&A expenses, which represented a jaw-dropping 95% of revenue in the last year.  In the last twelve months, Marrone reported its deepest operating loss to day at $25.1 million.

Fortunately, on a cash basis the news was not so alarming.  In those same twelve months the company used $19.0 million in cash resources to support operations.  Unless something is done to conserve cash, Marrone may need to raise capital.  This is especially important if the company also uses cash for additional acquisitions, as it did in September 2019 with the $6.3 million cash purchase of Pro Farm and the Jet-Ag and Jet-Oxide product lines.

The company had $7.9 million in cash on its balance sheet at the end of September 2019, suggesting it could last about five months before it would need a capital infusion.  However, in the capital markets that is not much time at all, given that it takes about four to six months to drum up support for a struggling operation.

A trip to the capital market is made even more difficult if a company gets into a legal dust up with its investment banker.  In April 2019, Marrone was sued by investment banking firm Piper Jaffray for failure to pay a promised transaction fee related to a private placement.  The dispute was resolved with a promise to pay half the requested fee.  Nonetheless, in the future some bankers may think twice about signing on the help this company raise capital.

In the midst of the fee dispute with Piper Jaffray, Marrone adjusted its agreement with warrant holders.  The company was then able to call in 10 million warrants, raising $10 million in new capital during the quarter ending September 2019.  At that time there remained 26.6 million warrants outstanding under the warrant reorganization agreement.

In the past Marrone has used both debt and equity capital.  Management has also factored various accounts receivable.  Capitalization policy could be up in the air at this point, given that the company’s chief executive officer and founder resigned in December 2019.   Since the company bears her name and she will continue to serve on the board of directors, Dr. Pamela Marrone will likely continue to have some influence over the company’s future.

Drama in the board room may be a distraction for some investors.  Luckily there are fewer operational worries with a biologically-based product line.  The company uses nominal fossil fuel, does not rely on highly toxic chemicals and emits negligent greenhouse gases.  That means there are fewer unrecognized contingent liabilities in Marrone’s future, leaving investors with a straight forward play on an environmentally sound agriculture product line.

Editor’s Note: After the publication of this article, we received a communication from Marrone’s investor relations firm.  The firm claims that Marrone has “established a $36.6 million financing facility through a right to call the exercise of certain outstanding warrants. Through this financing facility, the company is positioned very well from a cash perspective and will not require to raise capital in the near future.”  The author is aware of this right to call, but in her analysis it may not be sufficiently strong.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 1/21/20.  

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by Debra Fiakas, CFA

In a series that began in March 2019, with the article titled “Vagants on the Earth,”  we looked companies offering products that address the building problem of top soil degradation and loss.  In the four articles that followed we explored forestation technology, environmentally-friendly timber harvesting, and modern soil fallowing programs.  Unfortunately, we found few companies where investors could get involved quickly as minority investors.  Another company has joined the movement to build topsoil.  This one has publicly traded stock!

Last week Gevo Corporation (GEVO: Nasdaq) announced commencement of a trial for a soil treatment at its Luverne, Minnesota facility.  The treatment developed by Locus Agriculture Solutions (Locus AG) is aimed at improving soil health for greater crop productivity.  Of course, Gevo is interested in improving corn crop yields for feedstock used in its isbutanol, renewable gasoline and jet fuel production.  However, the nature of Locus’ soil treatment technology as a non-petroleum based fertilizer will also give Gevo bragging rights to a smaller carbon footprint.

The Rhizolizer soil solutions that is being applied to Gevo’s corn fields is one of two products in Locus AG’s technology portfolio.  It is composed of fungal and bacterial microbes that learned in the earlier soil series are vital for top soil productivity.  Microbes can affect soil structure and fertility by digesting organic plant matter and animal residues.  They can also help transport mineral nutrients and water to plants.  The product gets its name from the ‘rhizosphere’ region where soil microbes interact with plant roots and stems. 

Rhizolizer is applied through the crop irrigation system and can be tailored to a particular crop and field.  So far it has been used on a variety of crops, including strawberries, citrus fruit and potatoes.

Customers with turf and shrubs can use Locus AG’s Terradigm treatment, which is a ‘brew’ of active microbial strains in a liquid. While the product must be kept refrigerated, it is highly concentrated and is applied in small amounts with a spray.

Gevo’s strategy to improve corn crop yields without using more petroleum-based fertilizer certainly should enhance the company’s ‘street cred’ for environmental sustainability and low carbon emissions.  Even if crop yields do not increase at all, Gevo could benefit. First, any carbon footprint calculation could be changed in Gevo’s favor.

Second, Gevo could be recognized for carbon sequestration.  That said, carbon sequestration benefits are a bit elusive. Soil is a known carbon sink.  It is estimated that about one-third of greenhouse gas emissions originate from the conversion of land from grass and trees to cultivation.  Working in reverse, the amount of carbon dioxide that gets caught up in soil due to an improvement in soil health is entirely uncertain.

The field trials should provide Gevo with the data to determine if the soil treatment is also economic.  Improvement in crop yields at an attractive investment in soil treatment could have an impact on Gevo’s profits.  Furthermore, if somehow the carbon sequestration is quantified and translated into credits that could be also have a positive impact on Gevo’s profit margins.

Gevo has still not turned a profit with its isobutanol or renewable fuel products. Investors taking a long position in its shares will have to wait at least two more years for any profits trickle to the company’s bottom line.  In the meantime, the company taps its bank account for about $1.25 million each month to support operations.  Thus no matter how enthusiastic an investor might be about Gevo’s latest efforts to improve the upstream end of its feedstock supply chain with improved corn crops, the shares are only for those with plenty of patience.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 7/16/19 as “Gevo’s Soil Amendment”.

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by Jim Lane

In our three-part series this month on utilizing waste resources, we’ll turn to rice straw, which is a major headache for Chinese and Indian emissions. Praj and Gevo are working hard on perfecting a technology to address this.

Specifically, in the past month, Gevo (GEVO) also executed an agreement with Praj to develop jet fuel and isooctane from rice straw and other feedstocks. Gruber noted that “we believe this second-generation technology combination has great potential to address India’s rice straw burning problem and related air pollution, while generating low-carbon hydrocarbons for jet fuel and gasoline. Praj is a leader in technology to convert straw and bagasse into fermentable sugars, their technology marries up nicely with ours—saves development cost and time, while creating new licensing opportunities.”

Gevo’s first quarter results

In Colorado, Gevo reported a $3.8M Q1 loss on $6.4M in revenue, and highlighted that its recent licensing agreement with Praj shows that “Gevo can complete a definitive agreement licensing our biobutanol biocatalyst technology on a commercial basis allowing us to move forward and license our technology for isobutanol from molasses and sugar. We look forward to further developing and completing licensing deals that we expect will generate revenue without us having to deploy capital.”

The other major quarterly highlight was an agreement with the City of Seattle to utilize a blend of Gevo’s renewable isobutanol with conventional gasoline in its pilot program to reduce the Carbon Intensity (CI) levels of fuels used in Seattle’s fleet vehicles. For this program, Gevo has partnered with Hughes Group LLC, a Washington-based, Certified Service-Disabled Veteran Owned Business (SDVOB), to coordinate the blending, logistics, and delivery of the final product to the City. Additionally, Gevo is collaborating with the City to supply a renewable drop-in gasoline on an on-going basis to further reduce the Carbon Intensity of the fleet.

Dr. Gruber added, “In terms of operations, we continue to make progress on our plans to ‘de-carbonize’ our advanced biofuels production facility in Luverne, Minnesota. In April 2019, we began the commissioning of the Shockwave dry fractionation equipment. So far, the commissioning is on track. This technology fractionates the corn into a starch fraction, a germ fraction, and a fiber fraction. The germ will be pressed to extract food-grade oil. The starch fraction will go to fermentation as a feedstock. The fiber and germ protein are expected to be sold for value-added feed products for beef, dairy cows, pigs, and chickens. With this technology, we expect the margins for our feed-related products to improve. Over the coming weeks and months, we expect to begin sales of these new feed and protein products while optimizing the new process.”

Given the small-scale of Gevo’s operations and the parlous state of ethanol prices, the company continues to record product losses and the company’s decision to limit production while product prices are low is going to limit opportunities to reach profitability without adding more value on the protein side and bringing in more high-value advanced biofuels sales or licensing revenues from the likes of Praj and other partners. Action on all three fronts is underway.

The company noted that revenues for the three months ended March 31, 2019 were $6.4 million compared with $8.2 million in the same period in 2018. Hydrocarbon revenues were $0.7 million compared with $0.0 million in the same period in 2018. Cost of goods sold was $9.0 million for the three months ended March 31, 2019, compared with $10.6 million in the same period in 2018, primarily as a result of decreased production of ethanol during the quarter.

Cash status is good. The company at March 31, 2019 had $35.5 million, and the total principal face value of outstanding debt was $13.8 million.

Elsewhere in Rice-based technology

In March, we highlighted as one of our Top 10 Innovations for the week that architect Philippe Madec expects biobased materials like rice husk to change architecture and help reduce greenhouse gas emissions from buildings. Rice husk peaked his interest after construction companies in Camargue, France began using local rice farming waste as insulation.

Once cleaned up, it becomes a high-quality insulating material, allowing houses to keep a homogeneous temperature in both summer and winter, with an energy consumption close to zero. All this while giving a welcome additional source of income for rice farmers. It can be used to build low-cost houses with structural longevity, thanks to its pest-resistance. An Italian group even built a US$1010, 3D-printed house there, using rice husk as well as earth, rice straw and lime, he adds.

In October last year, we reported that In India, Bharat Petroleum Corporation Ltd’s commissioning of its second generation ethanol bio refinery will start building the proposed plant this week in Baulsingha and is expected to be completed by 2020. The refinery will use rice straw as its feedstock. Official sources told Petrol Plaza that they expect that this plant will help to create the biomass availability, which currently is set at about 120 to 160 million metric tons per year to meet the country’s new 20% ethanol blending by 2030 mandate.

And last September, we reported that the state of Haryana has signed a Memorandum of Understanding with Indian Oil Corp. to build a 100,000 liter per day ethanol plant using rice straw as feedstock. The $124 million plant is hoped to provide a market for rice straw for local farmers to reduce the burning that plague’s the region’s air every year. The facility can also use sugarcane bagasse as feedstock during the months when paddy straw is not easily available.

Last June, we reported that Punjab’s Minister of Power and Renewable Energy says he is working to promote the use of rice straw for bio-CNG and ethanol production in the state in an attempt to significantly reduce or eliminate burning of the 20 million tons of straw produced every year. About a quarter of it is used, but the rest is burned. Seven biomass-power plants using rice straw as feedstock are currently under development but the minister estimates as much as 6 tons of bio-CNG could also be produced.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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By Dr. Rebecca White, Vice President of Operations, iWi (Qualitas Health, Inc.) for Biofuels Digest

This Wednesday marks a major milestone in the history of the American algae industry: the first meeting in which the Biomass R&D Board Technical Advisory Committee officials will discuss algae as an agricultural crop. Up until now, the vast majority of governmental funding and support has gone to one particular application of algae: biofuels. The success of biofuels is extremely important. But so is the success of algae in other applications, such as protein, omega-3s and fish and animal feed, which all have the potential to change the way we feed and nourish the world.

As an 11-year veteran of the algae industry, I’ve dedicated my entire career to proving the principle that algae is agriculture, first at Sapphire Energy, focused on translating traditional agronomic practices to algae, and recently as an industry professional growing algae at commercial scale. In my current role as VP of Operations for the food and nutrition company iWi, my team and I grow algae in open ponds on large scale farms throughout the Southwest United States, using the tools of crop protection and agronomic practices utilized by traditional farmers throughout the nation. Through all this work, I’ve learned a simple lesson: if you want to grow algae as a crop, you have to treat it like one. This mindset is what is critical to reaching scale and is the secret to iWi’s success.

Today’s meeting signals a new beginning for algae, which is finally on the cusp of being categorized as a mainstream crop, a designation that could drive algae’s fortunes in the decades to come. This significant but quiet transition – a momentous occasion for the industry – deserves some recognition, and a few comments on where it can take us.

The Department of Energy has brought algae this far – now the USDA can help take it further

It’s no exaggeration to say that the broader algae industry owes much of its progress – both technologically and commercially – to the DOE’s dedicated stewardship. For the 50 years preceding the 2018 Farm Bill, most of the investment into algae research was done by the Department of Energy, so it was no accident that the vast majority of grants and support were directed towards algal biofuels. This investment in biofuels also benefited the entire industry by leading to technology advancements that have opened up the possibilities for algae-based products of all sorts. In addition to the traditional nutraceuticals, supplements and cosmetic ingredients that have been the quiet, steady foundation of the commercial side of the industry, we are now seeing major, successful commercial endeavors in aquaculture feed, animal feed, human food and ingredients, materials, wastewater cleanup and other related areas.

The 2018 Farm Bill was a critical turning point for algae’s crop status

With this foundation in mind, we stand at a crossroads for the future of algae. The algae industry will likely be discussed in two distinct forms: before and after the Farm Bill of 2018. As part of the 2018’s Farm Bill reclassification of algae as a crop, the USDA – a department concerned with food, agriculture and nutrition – will contribute its unique federal role to help the algae industry achieve a new scale of work. By widening the government’s focus from biofuels to supporting an entire crop ecosystem (algae biomass), the Farm Bill paved the way for algae to be regulated and supported alongside other crops like wheat, corn and soy; the USDA will be building an algae production assistance and research program complementary to the currently ongoing research under DOE and other programs. Put simply, this means that the federal priority has expanded from supporting algal biofuels to algae biomass of all sorts – agnostic of products.

In order to get there, we’re going to need USDA and the DOE work closely together

The USDA can further expand the foundation that DOE created with its commitment to supporting algae technology and commercial development. DOE’s continued role in the space will help ensure that near term innovations in the algae industry are enabling of a long-term future, which includes biofuels.

As a start, here are three concrete recommendations that the Algae Industry Working Group can use to get its 2019 works started on the right foot:

1. Build on the DOE’s 5+ decades of work: The DOE has compiled many years of algae research and production data from their programs. This data could benefit the development of USDA programs such as the Biomass Crop Assistance Program, Crop Insurance, and the Algae Agriculture Research Program. Additionally, it could be used to develop a primer on algae production for the USDA Extension Service, to better serve algae producers, especially in states with large production facilities.
2. Establish a handful of “reference” algal species: Reference varieties are used for trials of other crops like wheat and soy; one of the issues with algal research is a lack of standard reference strains. Identifying a series of reference algal species and sequencing their genomes to support future R&D efforts would help the industry better standardize field trials (at a minimum).
3. Be inclusive of CO₂ capture and delivery technologies: Many of the current CO₂ capture and re-use scenarios for algae facilities are centered around co-localization with emitters, and are focused on future facilities. We need to ensure that Direct Air Capture technology for CO₂ delivery is supported in the regulations so algae facilities can more easily participate in the CO₂ economy; it removes the co-localization requirement and makes room for current algae facilities that are not co-located with emitters to participate.

We now sit at the beginning of a new chapter for the algae industry. We have the opportunity to elevate algae from a niche research project to a mainstream crop, and it’s ours for the taking. I’m looking forward to working with the rest of the industry and our partners in government agencies to make this happen.

This article was first published on Biofuels Digest. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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“When you cultivate the ground, it will no longer yield its strength to you; you will be a vagrant and a wanderer on the earth.” –Genesis 4:12*

In 1970, an agronomist named Norman Borlaug was awarded the Nobel Peace Prize.  He advocated hybridization of grains for higher crop yields, ushering in a new era of industrialized agriculture.  The Nobel Committee recognized Borlaug’s work as instrumental in saving a billion people from starvation.  Unfortunately, intensive farming that is part and parcel of the industry may be fostering an acceleration of another big problem. Unsolved it could leave humanity wandering like vagrants on the earth…with very empty bellies.

Topsoil is our problem.  The top 10 to 15 inches of the land is the most productive layer.  Besides minerals and water, topsoil has a high concentration of organic matter and hosts the micro-organisms that jump start biological activity.   Topsoil sustains the plants and animals that are the foundation of the human food chain and plays a role in absorbing carbon and filtering water.  Earth is losing that productive layer at a pace far faster than new topsoil is being created.  In the last 150 years, scientists estimate about half of topsoil has degraded to the point it does not produce food.

The implications of topsoil loss for food production are dire.  The United Nation’s Food and Agriculture Organization (FAO) estimates that about one third of the world’s topsoil has been degraded.  If current rates of loss continue, in about 60 years the world’s topsoil will not support growth of food.  That means a child born in this decade could end up as one of those wandering vagrants.

Topsoil losses are not even around the world.  In the United Kingdom, if no changes are made, the pace of topsoil loss means there are about 100 harvests left in the land.    In the United States, there are a few more years of productivity left in our soil.  However, development activity is squelching the life out of about a million acres per year in the North American continent.  In 1980, the U.S. had an average two acres of cropland per person.  By 2010, with a net increase of about 90 million people in our population, the U.S. only had about 1.2 acres in cultivation per person.

Industrial Agriculture

Some might suggest that more food could produced by simply putting additional land to the plow and applying more fertilizer.  Therein lies the rub.  True enough the FAO has determined that deforestation accounts for as much as 30% of soil loss as cleared lands are stripped of top soil by wind and water erosion.  However, the majority of topsoil degradation is the result of industrial farming activities that encourages overgrazing (35%) and relies on chemical fertilizers (27%).   Especially when coupled with irrigation, excessive use of fertilizers leads to leaching of vital nutrients from the soil and increased salinity.  In North America, industrial agricultural practices account for two-thirds of topsoil loss.

Soil Woes

Soil needs to be ‘friable’ for optimum productivity.  Chemical fertilizers that are popular with industrial agriculture are highly soluble and get absorbed into the ground faster than by the crop plant the fertilizer is intended to nurture.  Acids in chemical fertilizers destroy vital components of topsoil called ‘soil crumbs.’  Decomposed organic matter such as dead leaves and plants combined with clay in the topsoil to make these ‘crumbs.’  They play a vital role in soil drainage and air circulation in the soil  –  both critical in plant growth.  Chemical fertilizers destroy the soil crumbs and cause compacting and erosion.

Another problem is the loss of micro-organisms in topsoil. Synthetic chemicals in modern fertilizers impact the soil pH, making it in hospitable to beneficial micro-organisms. For example, there are antibiotic-producing bacterial in soil that help plants ward off disease and natural fungi that help plants defend against pests.  Most importantly, modern fertilizers impact the bacteria that fix the nitrogen balance in soil by converting oxygen to a form of nitrogen that plants can consume.

Debunking of Borlaug’s Hybrid Seeds

Borlaug suggested hybrid seeds could be a salvation for a planet that is experiencing rapid population increases  –  and hungry mouths to feed. Unfortunately, it would seem that the use of hybrid grains could be a bane to agriculture and a threat to human survival.  Some studies have found that modern wheat varieties have half the micro-nutrients of older strains. Likewise some fruits and vegetables have lost as much as half the nutritional value measured in 1950.  The problem is the degradation of topsoil from which crop plants derive micro-nutrients.

It is important to note that there are critics of the analytical approach of the Kushi Institute, which is often the source cited to support the argument that food crop nutritional values have declined.  Mineral Resources International Ltd., a manufacturer of nutritional supplements, has published similar results and is also often criticized for lack of peer review.

The lack of authoritative and respected analysis of food nutritional content is a bit of an obstacle for investors.  However, it also underscores the importance of critical thinking before committing capital to a destructive agricultural practices or poorly crafted solutions.

The nutritional approach may not be the only way to measure the implications of topsoil loss  –  at least as far as the food chain is concerned.  According to the USDA Natural Resources Conservation Services, in the heart of the nation’s breadbasket, Iowa is losing topsoil at a rate of 5.5 acres per year.  The Iowa Daily Erosion Project observes that there has been a reduction in corn yield that is linked to thinning topsoil.  The loss in yield could be as much as 29 bushels per acre in the most eroded fields with the average of 10 bushels per acre across the state.

Iowa farmers have applied fertilizer in ever increasing amounts and that has served to offset the loss in crop yield.  Nonetheless, the topsoil loss is unsustainable.   For every 5 tons of topsoil lost each year in Iowa only 0.5 acre of topsoil is replenished.  Under these conditions, eventually the 8 to 10 inches of topsoil will be reduced to nothing.

It is not just dirt…

It may just look like dirt, but the topsoil situation cannot be ignored by investors, especially shareholders of companies that are counting on selling products to Iowa farmers.  We begin a new series on the agriculture sector, exploring companies that are likely to benefit the most through fixing the topsoil situation and those that are likely to lose.

*Genesis 4 describes the rise and downfall of Abel and Cain, the sons of Adam and Eve.  Abel is favored by the Lord and out of jealousy Cain strikes him dead.  As a consequence of his treachery, the Lord renders Cain’s hand unproductive and he is forced to wander the earth as a fugitive.  Although apocryphal in nature, the story serves as well today as it did when first told around camp fires  –  destructive behavior can well lead to society’s demise.  

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 3/12/19 as “Vagrants on the Earth: Implications of Topsoil Loss.” 

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by Jim Lane

When the world’s leaders for sustainable aviation fuels have a general meeting the week before the COP24 global climate sessions (this year in Poland), you can bet that the focus will be breaking the “You Can Have Two out of Three Conundrum” of aviation fuels. Which is to say: affordable, available at scale, and sustainable, pick any two of the three.

Fossil fuels are (usually) affordable and always available at scale. Sustainable jet fuels that are available at scale have generally not been affordable to date, and affordable sustainable fuels have been mostly explored at bench scale, so far.

San Francisco’s buying more renewable fuel

Case in point, the exciting and welcome news that Shell, World Energy, SkyNRG, KLM, SAS and Finnair have joined forces to reduce carbon emissions at San Francisco Airport.

Turns out that Shell Aviation and SkyNRG have commenced the supply of sustainable aviation fuel (SAF) to international airlines KLM, SAS and Finnair at San Francisco Airport (SFO). The fuel is produced by World Energy, currently the only at0scale SAF refinery worldwide, at the Paramount refinery in Los Angeles, and is made from used cooking oil, resulting in a fuel that has significantly lower lifecycle carbon emissions than conventional jet fuel. In general, sustainable aviation fuel has a reduction potential of 60-80%, compared to conventional jet fuel.

And, isn’t this the same refinery that provided diesel and jet fuel blends for which the Navy paid $2.07 a gallon in late 2015? (And, though that was a 10 percent biofuels blend, the same refinery won a competitive bid in 2017 for a 30 percent biofuels blend).

So what’s not to like? In the context of aviation demand, running at billions of gallons worldwide and every drop of that airlines would like to switch-over to sustainable aviation fuels — there’s the problem of Peak FOG.

No that’s not something you see in San Francisco around November; it refers to a global shortage of waste Fats, Oils and Greases. Turns out the world runs out of affordable, sustainable liquid alternatives to fossil fuels faster than it runs out of fossils.

Year of the Tree

Which is why the talk of CAAFI was, in a nutshell, all about wood — not virgin timber, mind you, or even the choice parts of the timber supply chain that become 2x4s or round logs. No, there’s no Frame-House vs Fuel in here. It’s the needles, tops, branches that are the waste products of our usual applications for wood. Plus, thinnings as we take dead trees out of forests to limit fire risk.

A breakthrough in woody biomass from federal lands?

Among the more juicy items heard on the floor at CAAFI, one that regards the unfortunately-named 40 CFR 80.1401, Renewable Fuels Standard and Regulation of Fuels and Fuel Additives.

The 2,000 page FY2018 Omnibus Spending Bill signed by President Trump on March 23, 2018, in Title IV General Provisions, on page 866, states; “That the Federal policy relating to forest bioenergy- must be consistent across all Federal departments and agencies, shall recognize the full benefits of the use of forest biomass for responsible forest management and recognizes biomass as a renewable energy source. The only limitations is that, the use of forest biomass for energy production does not cause conversion of forests to non forest use”.

CJ Evans (Managing Director, American Diversified Energy Consulting Services) added, “Some background on this language. I first tried to advance legislation in 2007 (through Rep. Adam Putnam’s office) to make the definitions of biomass consistent across all federal laws. There were almost a dozen different definitions.  I hit a buzz saw of opposition from interest groups and abandoned the effort. Mark Riedy also got involved at one point and several groups wrote white papers in 2014 and 2015, without making any progress.

“I was working on other issues during the last 5 months of 2017 (restoration of funding for Title 17 and EERE at DOE and removal of a provision in ag appropriations that would have eliminated USDA staff working on renewable energy programs) but had contact with the offices that could fix the problem with not being able to use diseased trees from national forests and have the wood quality as renewable biomass. So I wrote a short bullet list with some suggested language and gave it to a couple of these offices … and it was included in the Omnibus Spending Bill. Certainly one of easiest legislative victories I’ve ever undertaken.”

The capacity build out

The numbers are getting impressive amongst those who can produce heavy fuels — diesel and jet fuels, specifically.

Consider these. Neste (NEF.F, NESTE.HE, NTOIF, NTOIY), 910 million gallons of existing capacity and a capacity-adding project underway. World Energy, 60 million gallons of existing capacity, with a project underway to expand to 300 million gallons. Diamond Green Diesel (a joint venture between Valero (VLO) and Darling Ingredients (DAR)) with 170 million gallons in place and expanding capacity towards a goal of 300 million gallons. REG (REGI), 70 million gallons in place in Louisiana, and a project underway in partnership with Phillips 66 to build new capacity in Washington state.

And that’s not taking into account companies such as Red Rock Biofuels (first commercial under construction), Fulcrum Bioenergy (first commercial under construction), SG Preston (first commercial under development), Ryze Renewables (first commercial under development), and EnerSysNet (pilot under development), among many more. Not to mention the companies pursuing alcohol-to-jet, including LanzaTech, Gevo and Vertimass.

The feedstocks

Think residues. That’s where the sustainability has, so far, met the economics. There have been three basic thrusts, to date. First, the afore-mentioned foray into waste FOG. There is municipal solid waste, which Fulcrum is using. There is waste wood, which Red Rock has been using. And, there has been waste land — targeting lands that have fallen out of traditional agricultural production because of crop disease or changing economics with traditional crops — Agrisoma and the SPARC consortium in Florida are targeting land that in years gone by would have been home to citrus or cattle in South Florida.

CORSIA fuels, baby

Perhaps the most welcome news of the floor is at last a single word that we can use to replace all the monikers and acronyms for sustainable aviation furls. SPK, SAF, CARB fuel, RJ just to name three of many.

Now we know we can simply call them CORSIA fuels. For the CORSIA Global Carbon Offsetting Scheme that the airlines have established. Which is not a carbon tax or emissions trading, and it applies only to international flights (which represent about 67 percent of commercial airlines fuel use).

Now even the CORSIA group has come up with a three-letter acronym of their own, CEF, CORSIA-eligible fuel. We’ll ignore that. CORSIA is fine.

The leading expert we know is Nancy Young of Airlines 4 America and here are your 10 takeaways:

• single global market-based standard
• time frame 2021-35
• CORSIA is in lieu of other measures imposed
• 2021-26 voluntary phase in for countries, 2027 mandatory other then exempt countries or routes eg LDCs
• 76 countries representing 76% of international in the opt-in phases, in 2027 goes up about 90 percent
• demonstration of compliance every 3 years begins Jan 1 2019
• monitoring is country by country reporting to ICAO
• alt fuel not included in 2019-20, rather in 2021 when offsetting begins
• emissions savings from purchase of CORSIA eligible fuels reduces individual operators obligations
• when we fly country to country, this is the single mechanism

On concerns that airlines will simply buy offsets and ignore fuels. Young predicts: “Watch what happens to the market over 15-20 years as countries move to meet Paris and CORSIA obligations, it will be a tight offset market.”

Mabus: stop buying a way out of a problem and starting buying into a solution

Former Navy Secretary Ray Mabus took the stage and said:

“When I was the nominee for Secretary of the Navy and waiting for my confirmation, what kept jumping out at me in the briefings I received was fuel, how it could be used as a weapon against us. We set a policy goal that no later than 2020 half of fuel would come from non-fossil. When i did that frankly the technology and the economics weren’t there, but we believed that we could save the navy and taxpayers money by doing i, and i saw energy as a national security argument and alternative fuels as a key part of that energy security.

“I got a little push back on that particularly from Congress where one legislator said “you’re the secretary of the navy not energy. I said that the navy has always led in energy transformation, sail to coal, coal to oil, oil to nuclear, and every time we did that there were all these naysayers. They would say, things like ‘why are you giving up all these coaling stations for this unproven oil technology,’ and every time single they were wrong and they are completely wrong about alternative energy.

“We moved aggressively. We tested and certified every type of ship and aircraft. We flew on 100% biofuels. And Fulcrum and Red Rock are here today and doing well, and we made an investment in them. But we got the benefit. 77 mgs in 2015 90/10 blend and in 2017 a 60 million gallons purchase on a 70/30 blend. In each case, 25 cents cheaper to the navy.

“Now, in 2017 I wasn’t there any more pushing for this. Now, it’s the new normal. Now, the navy and so many others — including airlines like United, KLM, Lufthansa and Alaska are moving aggressively, and ports and airports like San Francisco, Singapore, Oslo, Brisbane and Seattle. Alternative energy in all its forms did one major thing for the Navy, it made the navy better at what they do, better warfighters. This is not a group of ardent environmentalist, they run in big ships and have a lot of vehicles. They have become leaders because of the proof that it makes them better at doing the job that the United States needs them to do. Ultimately it was national security, not the 60-90% reduction in greenhouse gas emissions that was important.

“But, the US government put out a national climate assessment the day after Thanksgiving. Every time the assessment comes out , the warnings become more severe, the consequences more dire. The lower states have warmed 1.5 degrees this century, 1.2 degrees in last few decades and will get 3-12 degrees warmer by end of the century. The effects of this are catastrophic. Already we see the effects on places and people, we have the the first internally displaced people from climate change in some of our coastal islands.

“Big companies are now seeing the benefits of direct action. But we have got to get beyond buying carbon offsets. We have to stop buying our way out of a problem and starting buying into a solution. Two immediate ideas. Corporate jet fuels costs usually 3-4X larger than big commercial airlines, Switching to alternatives would send a strong signal that corporations are paying attention. And, favor airlines as business travel partners by screening for alternative fuels. Using that power with business travel to make sure we are moving in the right direction.

“We all have to change how we operate, just as we did at the Navy. In the military if you keep doing the same things you become predictable, and predictable is defeatable. If you don’t change and make the moves you have to make, and think differently about how you procure fuel, your corporation will go away.”

“The RFS debate has been not productive and about locking in first-generation biofuels and failing the industry.”

In his opening remarks, Steve Csonka, executive director of CAAFI said “Aviation is at a crossroads – a vision for expansion but a carbon intensity that the public is turning sharply against. if done right, biofuels can be part of the solution, but not done right it is the opposite.  LanzaTech is clearing industrial emissions, Agrisoma is planting cover crops.. Fulcrum is reducing landfill waste. The RFS debate has been not productive and about locking in first-generation biofuels and failing the industry.”

“The problem is the low cost of offsets”

SG Preston CEO Randy LeTang veered away from feedstocks as the primary challenge. “The problem is not feedstock, but support from the end consumer, when you have high cost fuel vs low cost credits. How can we drive down the cost to provide fuels without he support of airlines offtakers? We see lack of interest and waning interest from offtakers given the optionality of low cost offsets vs high cost fuels.”

#1 opportunity: “clean up this biointermediates rule”

For US policy, CAAFI brought in Advanced Biofuels Association president Mike McAdams, who noted that the 2019 RVO was as expected, and of more interest was the Brady tax bill which offers a 7 years tax credit starting at $1.19 and sunsets after 7 years. He noted that the i#1 opportunity was to “clean up this biointermediates rule”,  that it is essential in scaling advanced biofuels that bio-intermediates be allowable and with a mass balance rather than carbon-14 analysis system. He noted that “consumers are increasingly aware of aviation carbon impact and want to participate in real change; now is the time to drive policies to enable alternative jet fuel commercialization. But he warned that efforts could be undercut by carryover RINs. He commented that 2.8B carryover RINS issued in 2018; up from 2017’s 2.25 billion, and in the D6 RIN pool that had taken the RIN value from 80 cents to 6 cents.

“LCFS is the right tool to address the toughest GHG sector, heavy transport”

For California policy, CAAFI brought in Graham Noyes, who noted that the overall California Low Carbon Fuel Standard drives down the carbon intensity of California fuels by 1.25 percent per year through 2030, with obligated parties having the option to buy credits or blend low carbon fuels. Jet fuels are coming into the standard, though on an opt-in basis at first.

The value of California credits. Noyes noted that a technology with a carbon intensity of 40 could earn $1.19 per gallon and those with a carbon intensity of 10 could earn $1.83 in the trading values today.  He said that the LCFS is the right tool to address the toughest GHG sector, heavy transportation, because it materially overvalues alternatives compared to cap and trade of emissions and offsets.

He noted that Low Carbon Standards were very much in an expansion mode. Washington state in 2019 could be next, there was a coalition of interests in the Midwest looking at a regional LCFS, and a RGGI group for the Northwestern states. Noyes said that the essentials for

2019 were continued vocal leadership from A4A and CAAFI, and sustained support from the agencies.

“We all see a significant shift, that customers are demanding low carbon solutions and by and large the majors don’t make them.”

World Energy COO Bryan Sherbacow commented, “I was pleasantly surprised after 2008 with the Obama Administration coming in to find that the military were the new hippies in embracing sustainability. It seemed clear and obvious this was going to be the successful path forward and that Secretary Mabus was setting out the demand signal. Our timing worked well and we were awarded the first commercial fuel and now on our 3rd Navy contract and its one of our more important pieces of business for us. But the US government eliminated the USDA component and hopefully we can restore that, because we probably won’t be competitive in the fourth solicitation.

Meanwhile, people being displaced and fires are breaking out and it is important what we do. We all see a significant shift, that customers are demanding low carbon solutions and by and large the majors don’t make them.

“At World Energy we are partnering with incumbents in the oil & gas space and we become part of their distribution where they are compelled by policy, We don’t have to replicate the infrastructure – just work through them. Our California asset was back in 2013 a small asphalt refinery and we formed a JV to convert to renewables with initial deliveries in 2016 and first deliveries to UAL and delivering into LAX since then. We started at 3,000 barrels per day and are expanding to 20000 barrels a day. With our process we produce 50 percent jet, but about 10 percent very competitively on a cost basis. So, we’re making 3-4 million gallons, and in the future we would ideally make around 30-40 million gallons.

The problems are that the incentives significantly favor diesel over jet, and that we have to get past fats oils and greases and get to novel feedstocks. The incentives can be fixed, right now if a customer shows up in the California market we can win those contracts every time, unless we have just done a poor job of educating the customer. Now, in January, jet fuel will be included in that LCFS program and that will make a big change.

On technology, the tricky part of that most processes that involve gasification of woody biomass, which is available and affordable, give you a lot of naphtha and not enough diesel, so the economics don’t work nearly as well as they could, because naphtha generally fits into the lower-value gasoline pool.

Get beyond private wood

Red Rock Biofuels CEO Terry Kulesa noted, “the gasoline pool is growing and there’s a need for 30 percent more diesel going forward. We use the same process, different suppliers compared to Fulcrum BioEnergy, we gasify biomass, use FT to get to a biocrude, then hydroprocessing to produce a finished fuel. We’re making 15.1 million gallons per year of heavy transport fuels. The tricky part? In terms of technology, it’s really the gasification. The tricky part of the economics is that we have to buy private wood, we can’t qualify for federal renewable fuel credits when we use wood sourced from federal lands.” Even though we all could use getting some of that waste wood off of federal land.

“Completion? We’ll be completed in December and we expect 6-12 months of ramp up. Plants never run exactly as designed, that’s why we have great operators.”

“We need alternatives to landfilling fossil plastics that cannot be recycled or reused”

Neste’s US head, Neville Fernandes spoke about the growth at the world leader by production volume. “At Neste, we’re at 260000 barrels per day [in petroleum capacity] or 910 million gallons per year in Poorvoo, Rotterdam and Singapore, we have $1.4 billion in operating profit. In a few weeks we’ll make the decision on adding 340 mgy in Singapore which will take out total footprint up to 1.3 billion gallons.

Our pathway involved moving to renewable diesel in 2007, renewable jet in 2015, Ultra low Sulphur marine in 2018 and renewable propane and chemicals are the new initiatives. In the future, we see ourselves building a GreenHub to convert waste plastics to fuels. Last year, 80 percent of our feedstock came from waste and residues. In the short term it is about waste FOG; in the longer term we see microbial oil, algae and plastic liquefaction as important feedstocks. And we need alternatives to landfilling fossil plastics that cannot be recycled or reused.

“100% biofuels now ready for ASTM balloting”

Chuck Red at ARA took the stage to focus on 100% biofuels flights and supplies. “We’re now ready for the ASTM ballot. And we expect to have out first commercial unit at 3600 barrel per day in the Western US, with ARA participating as an equity partner and using a USDA 9003 loan guarantee.

“It’s jet, and ground operations, too”

FedEx’s (FDX) Joel Murdoch noted that the demand is not only for jet fuel but for diesel for ground operations, for many.

“FedEx’s goal is 30 percent alternative fuel use for aviation by 2030.  In petroleum we contract for 1-2 years but we contract for 5-10 years with alternatives, with exit mechanisms, and we have a 5% maximum per location until the security of supply established.”

The challenges? More than just fuel price and composition, Murdoch advises. “There are logistics as well as cost. Truck, rail, pipelines — how will it be transported? There’s the airport fuel consortiums to consider, will the blends be on or off the airport. There’s the use of existing tankage, the addition of new tanks. And more.”

Replacing aromatics

Representing the US Department of Energy was BETO director Jonathan Male, who noted that the 26 billion gallon jet fuel is expected to double in size and would require nearly a billion tons of biomass. He noted that most blends are restricted to date to 50 percent because of the performance of aromatics. “But, are there renewable molecules and help us with particulate matter and give us what aromatics do?” He suggested that R&D should and would examine replacing the aromatics with iso-alkanes and cycloalkanes.

Pursuing economics through process optimization and co-products

Overall, Male’s message was “Bring Down Cost’ and he noted that when it comes to feedstocks, and processing, yield was the goal and “every gram counts”.  To reach the economics needed, he said, you have to have unit operations s that work together in an optimal way — you don’t have a process until you join units together,” and by inference, you don’t have a sustainable, affordable, defensible process until the units work together in an optimal way.

NIFA’s National Program Leader in the Division of Sustainable Bioenergy Bill Goldner chimed in decisively on this point, The co-products are really important to the economics.”

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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Biomass stocks are publicly traded companies whose business involves growing, collecting, or using biological matter (biomass) which can be used to make some other form of energy. Biomass includes human waste, municipal solid waste, sewage sludge, as well as industrial wastes such leftover wood from logging operations.

If you know of any biomass stock that is not listed here, but which should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Biomass Stocks appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA

The last article “Advanced Disposal Services:  Hauling a Heavy Load” on July 18th inspired a closer look at the solid waste management sector in which it competes.   The solid waste industry is growing at a good pace between 1.6% and 2.0% per year, largely on population growth and the human penchant for consumption and waste.  In the U.S. solid waste collection is still populated by many localized, family-owned businesses, despite the emergence of several large consolidators that now command as much as 55% of the revenue in waste handling and disposal.  Fragmentation creates ample opportunity for the incumbents to ratchet up growth rates.

Advanced Disposal Services is the most recent in the sector to enter the public capital markets with an initial public offering of stock.  There are several seasoned securities in the sector and that begs the question, what is the best stock to own in the group. 

For investors who are looking for value, the solid waste sector is not fertile ground.  The average price multiple in the selected group presented in the table here is 35.31times expected earnings.  This is well above the average ‘forward price earnings’ multiple of the S&P 500 Index at 17.6 times expected earnings in 2017.  Only Stericycle (SRCL:  Nasdaq), a provider of specialty waste collection and disposal services for the health care industry, compares to the broader market with a forward PE of 16.08.  Among the plain vanilla garbage haulers, Waste Management (WM:  NYSE) appears to be the best value with a forward PE of 21.71.

Since its growth that is the primary attraction to the solid waste industry, a view on value relative to growth might be a better method for sussing out a winner.  The Price-Earnings to Growth Ratio puts value and growth in perspective.  Here again it is another specialty services player, Heritage Crystal Clean (HCCI:  Nasddaq) that offers the most attractive value against growth with a ‘PEG ratio’ of 1.07.  Even that measure suggests just fair valuation for the Heritage parts cleaning and waste solvent handling service for auto maintenance and other industrial companies.  The outsized PEG ratios of the rest of the regular waste haulers reveals just how much investors seem to like this sector.

Some investors might be quite happy ‘paying up’ to own shares in a solid waste management company. The business model is conducive to strong cash flow generation on the back of reliable recurring revenue streams.  Several pay ample dividends, delivering enticing yields even at current price levels.  The top of the list is Covanta Holding (CVA:  NYSE) with a forward dividend yield of 7.49%.   

The skeptical investor might need some comfort in the quality of an investment target.  Return on assets provides a measure of efficiency to see which company makes the most out of the trucks, handling equipment and landfills that are necessary for waste management. The winner in this contest is the ‘big guy’ Waste Management, which last year wrung income from its assets at rate of 7.42%.

This simple exercise reveals one truth in waste handling:  scale matters.  The most asset efficient company, Waste Management, is also among those that deliver strongest earnings and dividends, making it a solid play in the solid waste sector.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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by Debra Fiakas CFA

Last week Rentech, Inc. (RTK:  NYSE) revealed plans to idle its wood pellet production facility in Wawa, Ontario Canada.  To operate efficiently the plant requires additional repairs and upgrades beyond the replacement of conveyors that was completed in Fall 2016.  Beside the fact that the additional repairs were not included in the regular capital budget, Rentech management has apparently determined the expenditure is not economic given profits from Wawa.  When Rentech reports financial results for the fourth quarter ending December 2016, shareholders will be treated to an asset impairment charge for the Wawa facility.

Doors Close, Windows Open (then shut again)

The demise of Wawa is symptomatic of broader issues at Rentech, which has had to reinvent itself several times as the renewable energy industry has evolved.  Rentech got its start well over a decade ago pursuing synthetic gas technologies.  The company’s Rentech Process for producing synthetic fuel was thought capable of producing synthetic fuel by gasifying coal.  In 2004, Rentech bought a natural-gas fed nitrogen fertilizer plant in East Dubuque, Illinois and laid out plans to convert it for coal feedstock.  However, by October 2011, fuel projects in Rialto, California and Natchez had to be scrapped.  The company had planned to produce drop-in synthetic fuel from landfill waste at Rialto using Rentech’s proprietary application of Fischer-Tropsch technology.  Just a few months later in March 2012, Rentech abandoned its coal-to-liquid plant and later sold its land holdings in Natchez, Mississippi.

In March 2013, Rentech shuttered its product demonstration unit located in Commerce City, Colorado and terminated research and development on advanced biofuels.  With the syngas effort behind it, Rentech quickly moved on other opportunities.  In May 2013, the company acquired Fulghum Fibres, a processor wood fiber with 32 wood chipping mills strung out across the U.S. and South America.  Rentech had its eye on the market for wood pellets to be used as a low-carbon alternative to coal feedstock in power generation plants.  Unfortunately by 2015, the company was forced to begin writing down the value of its wood pellet inventory as the realizable fell under question under evolving demand and pricing conditions.  Now those economic conditions have forced the shutdown of the Wawa wood pellet operation.

Retribution

Some of Rentech’s early strategic moves have eventually proved fortuitous.  By 2011, all the company’s revenue was from sales of fertilizer products made from natural gas at the East Dubuque, Illinois facility.   In November 2011, 39% of the fertilizer operation, the Rentech Nitrogen Partners, was sold through a public offering of its common units.  The company received $276 million net of costs that was promptly used to retire term loan.  Then in early April 2016, another fertilizer producer, CVR Partners (UAN:  NYSE) acquired all the common units for $2.67 per share, retiring the units Rentech Nitrogen Partners from public trading.  Rentech received $59.8 million in cash and 24.2 million CVR common units valued at approximately $142 million in the bargain.  Again Rentech promptly distributed cash and some of the securities to repurchase $100 million in preferred stock and retire $41.7 million in debt obligations.  Altogether Rentech received $477 million for its interests in Rentech Nitrogen Partners.  Considering that the company paid $63 million for the business in 2004, the returns have been impressive.

After all the deal making, acquisitions and divestitures, at the end of September 2016, the last balance sheet disclosed by the company, Rentech had total equity of $278.1 million.  The company has taken in $533.2 million in equity altogether, but losses over the years have accumulated to $255.1 million.  The company has used leverage over the years, but long-term debt has been reduced to $125.9 million.  The debt-to-equity ratio is now a relatively placid 0.45.

While Rentech has improved its balance sheet, its assets appear to go underutilized.  Return on assets and return on equity are both negative based on recent financial performance.  The net loss was $127.7 million or $10.42 per share on $287 million in total wood pellet sales in the twelve months ending September 2016.  Even excluding discontinued operations, net results were negative.  Indeed, positive returns from its renewable fuel operations have eluded Rentech. Only when the company was producing fertilizer did Rentech generate profits.

Disappointing operating performance appears registered in the RTK price.  Rentech equity is valued at just $20 million and its enterprise value is near $106.2 million.  Some investors might argue that at a stock price less than $1.00 per share, RKT is a bargain against its total assets of $470.1 million.  Then there is that looming Wawa asset write-down and the possibility of additional charges to reflect the demise of yet another misstep in Rentech’s travels through the renewable energy market.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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Jim Lane

In Washington, Donald Trump captured the US Presidency in an upset victory that confounded pollsters and political pundits even as it delighted supporters of his maverick candidacy based on themes of immigration and trade reform coupled with a message that government policies of the past generation had failed for too many Americans.

An unexpected series of wins across US Midwestern states – capturing Iowa, Pennsylvania, Wisconsin and Ohio which had gone for Obama in 2012 – provided a comfortable margin of victory in the Electoral College and the popular vote.

5 Themes

Some immediate themes emerge for the global bioeconomy as the US turns now from its lengthy election process to the transition period between Administrations.

1. Trade rebalancing is front and center on the agenda. That’s not entirely bad for the bieconomy and for US-based manufacturing. Over at the Renewable Fuels Association, CEO Bob Dinneen noted:

“A core principle of the Trump campaign has been putting America first and more aggressively pursuing fair trade agreements that recognize the value of American products.”

2. Climate action is likely to be scaled back sharply. The President-elect is opposed to the Paris Climate Agreement we’ll have to see how that translates into meeting obligations imposed by that deal. At the very least, leadership on climate activities is likely to pass to others, and a shift back towards policies that favor US domestic production of coal, oil and natural gas is likely.

3. First-gen biofuels less impacted. Owing to fitting in to Trump’s themes of economic nationalism, manufacturing revival and domestic energy security, a Bush-era emphasis on the energy security aspects of shifting from imported fuels to biofuels is likely to remain in favor. Trump himself strongly backed the Renewable Fuel Standard, almost alone among front-runners for the Republican nomination, and Iowa Governor Terry Branstad, and Bruce Rastetter, the president of Summit Ag Group, had been appointed to Donald Trump’s agricultural advisory panel in August. Eric Branstad, the governor’s son. led anti-Cruz forces in the state a year ago and was chairman of the successful Trump campaign in Iowa.

RFA CEO Bob Dinneen added:

“The president-elect repeatedly expressed strong support for ethanol, generally, and the Renewable Fuel Standard (RFS), specifically, on the campaign trail. He understands the importance of clean, domestic energy resources and the economic power of value-added agriculture. We are confident Mr. Trump will continue to support the expanded production and use of fuel ethanol. Moreover, the president-elect is committed to removing regulatory barriers that impede growth. We look forward to working with a Trump administration to remove unnecessary volatility restrictions that have discouraged market acceptance of higher level ethanol blends like E15 and created unreasonable administrative burdens on gasoline marketers willing to offer these fuels to consumers. FWe are eager to work with the new Administration on myriad trade challenges currently facing the U.S. ethanol industry.”

Adam Monroe, President Americas for Novozymes (NVZMY) said:

“During the campaign, the President-elect expressed support for biotechnology generally and bioenergy and agriculture specifically, all core to America’s economy and keeping our country on the leading edge of innovation and discovery. At Novozymes, we’re looking forward to supporting those ambitions.

“President-elect Trump understands the need for good policy to help foster American innovation. It’s incumbent on the private sector to imagine and build cutting-edge solutions to solve society’s challenges – but we count on the President-elect to encourage that kind of groundbreaking innovation with smart, consistently-administered policy, fueling our economy and creating products used across the world.”

4. Reduced emphasis on government spending and a reduction in the government’s role in the economy can be expected to impact applied government R&D programs. However, the incoming Administration has not run on an anti-R&D program, but rather an anti-regulatory program and we can expect more action at this stage in rolling back EPA’s influenace rather than in wholesale slashing of government research.

5. A Farm Bill is due in 2018 and spending and priorities until then will largely continue along the lines established in the 2014 Farm Bill. Pro-domestic energy forces in the Midwest largely supported the Trump candidacy, and there’s no evidence yet that there will be wholesale changes in US domestic agricultural policies. A focus on renegotiating or exiting NAFTA will have impact on agricultural prices.

Looking at the result for meaning

1. A mirror of 2008. At the Digest, we see this election in many ways as a mirror of 2008 a candidate campaigning on “change you can believe in” and pointing to “inconvenient truths” in trade and immigration – but aimed at reversing Obama’s policies rather than Bush’s. We may well see, as a result, an unwinding of portions, or the whole of, the US health care reform authorized under the Affordable Care Act and changes in foreign policy. Supporters of the President-elect may well find that change is harder to deliver than it is to vote for we’ll see whether this President grapples more effectively to deliver on his ambitions and permanently embed change into the US way of life.

2. Too many left behind? Most experts believe that the shift towards global free trade is, on the average, better for all. Also, that the shift towards an advanced economy based around the innovation center of Silicon Valley, the policy center of Washington and the financial center of New York is, on average, better for all.

But experts also agree that trade deals and seismic shifts in the economy create winners and losers. The average economic result, for example, of NAFTA may well be positive. But it creates a have/have-not equation in sophisticated economies, and we have seen a concentration of wealth and power in recent years and a decline in the prosperity of the middle class. It is not controversial to say that people are left behind as economies and countries evolve, and in the US it appears that voters feel too many have been left behind. There simply are not as many affluent Americans who are for “more of the same” as there used to be, as wealth concentrates into the hands of fewer and fewer.

The discussion of how to spread the wealth of any nation is one that parties grapple with should it be through unleashing more opportunity for those left behind, or through redistributive tax and spending policies. Last night, the US public spoke on that one.

Jim Lane is editor and publisher  of Biofuels Digest where  this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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