Alcoholics Unanimous Newsletter ~ July 2007

Legislative A­ctions

Proposition 87 in California

Prop 87 went down in flames in California. It would have been a big step forward for alcohol and alternative energy in California, but Chevron and the Oilygarchy spent almost $100 million to defeat it. Most people never heard a pro-87 ad during the entire election season, but you couldn't go anywhere without hearing anti-87 ads. The measure would have taxed oil companies on the oil they extracted from California lands. California is nearly the only state to not tax oil when pumped out of the ground. Chevron, California's most prominent oil company, has the most to lose, and poured money into the defeat of the measure. This would not have happened if alcohol had a large grassroots constituency. One of the main goals of the book project is to build that broad grassroots base that can be mobilized to pass positive legislation.

Biofuels Security Act of 2007

Although there are a lot of new bills being floated right now in Congress, there is one that needs all of our support right away. In the Senate it's SB23, and in the House it's HR 559. This bill strikes right at the heart of what is holding up ethanol in the U.S. It increases the amount of renewable fuel in the renewable fuel standard radically, to 60 billion gallons of fuel' - about 30% of the gasoline we'll be using by 2030. This essentially would mean that we would need no OPEC oil whatsoever.

The other thing that this bill does is force the oil companies that own big chains of stations (more than 4500) to have to start providing alcohol at the pump. It starts off slow, but by 2017 requires that 50% of all stations have alcohol at the pump.

And to top it all off, it requires automakers to make 100% of all gasoline or diesel vehicles dual-fueled by 2017, with 10% increases per year from here on out. There is a hidden bomb in the bill that classifies methanol as a permissible fuel, and I deal with that later on in this newsletter. Your task: Make sure your Congresspeople sign on to co-sponsor this bill and, most importantly, amend all references to alternative fuel to read RENEWABLE fuel. For a copy of the bill and to track it, you can go to

http://thomas.loc.gov/cgi-bin/bdquery/z?d110:HR02809:@@@X

State of the Union Trojan Horses

One of the most powerful things Jimmy Carter did while president was pass a windfall profit tax on oil of 50 cents per gallon. He then channeled that money into "alternative energy," which we all thought we knew the meaning of. You know: solar, alcohol, etc. Well, once Carter had been torpedoed by Big Oil and George Bush, Sr., and Reagan took over the White House, the meaning of "alternative energy" became very muddy. So you found coal companies spraying diesel fuel on the coal and ripping off our Treasury for billions of dollars in tax credits for this new "alternative fuel."

Now we have a "renewable fuel standard" that Democrats want to see raised from the current measly 12 billion gallons to 60 billion gallons by 2030. This is the so-called 30% by 2030 initiative, similar to the 25% by 2025 initiative circulating right now. What MegaOilron's poster boy did in his State of the Union address was to subtly change the mandate from renewable to alternative and include in it oil/coal company darlings like methanol and butanol, two rather toxic alcohols. This would keep Big Oil from losing market share to farmers and other riffraff since, with nearly unlimited capital, the big boys would start turning coal into fuel. But not only is the stuff not renewable, it is business as usual in terms of greenhouse gas emissions, acid rain, mercury, radioactive particles, plus it spews a whole new set of toxins in exhaust. I address the shortcomings of both these fuels in my book.

There's also dimethyl ether (DME), MegaOilron's choice for the liquid fuel of the future from coal. It, too, would likely be considered an alternative fuel, and we could find all the truly renewable fuels completely displaced by these disastrous "alternatives."

At press time, the Bush proposal to make the renewable fuel standard into an alternative fuel standard - which gives extra credit to things like oil shale, nuclear hydrogen, and DME - is official.

We need to clearly tell our Congresscritters that this bait-and-switch from clean solar-based renewable fuels won't be tolerated. I will keep you updated on this issue as the battle brews. But it can't hurt to tell your representatives now that you know the difference and you'll be watching them.

DOE Disappears E-85 Station Funds - Your Calls and Letters Needed Now!

For years now, the National Ethanol Vehicle Coalition (NEVC) has been cost-effectively establishing hundreds of E-85 stations across the nation. They have nearly single-handedly put E-85 on the map, by both converting existing pumps and financing installation of aboveground stations.

So when it came time to finance our first, driver-owned model station here in Santa Cruz, the NEVC were the first people I called to help us fund the new aboveground station we are going to build. I knew that they had been awarded $1.8 million from the Department of Energy to continue the build-out of E-85 infrastructure. When I called last month, I found that they were tapped out. That would have been okay if it was because they were so successful in spending the money on new stations. But what I discovered was that DOE, for no stated reason, simply would not release the last $800,000 of the budgeted amount.

Now, given that our president has admitted that America "is addicted to oil" and has publicly made a big deal out his support for E-85, it sure smells fishy that the DOE is reneging on one of its few programs supporting alcohol fuel. Historically, Republican administrations have paid lip service to ethanol, but when it comes to spending money, they can't seem to find a way to do it. At the end of the 70s under Jimmy Carter, $440 million in loan guarantees were approved to underwrite private-sector loans for farm alcohol plants. But as soon as George Bush, Sr., and Ronald Reagan took office, they simply refused to honor the congressionally allocated loan guarantees, bankrupting several plants.

So here we go again, with the administration trying to take credit for what has historically been a farmer's, Democratic, patriotic, program to reduce our dependence on foreign oil. But when it comes to actions, rather than words, the silent, and some might argue illegal, alteration of the congressional budget to protect Big Oil seems to be in full swing once again.

Make no mistake about it - control of the distribution of auto fuel is Big Oil's only remaining tool in stopping E-85 from sweeping the nation. We have seen what has happened in Brazil when drivers had a choice at the pump. Demand for flexible-fuel vehicles was so swift that within a few short years companies such as Volkswagen, Fiat, and soon even GM will have given up making gasoline-only vehicles. MegaOilron will do whatever it can to prevent Americans from having that same choice.

So when a bureaucracy acts outside of the will of Congress, they often get away with it ... unless members of Congress get wind of how they are being disobeyed. Since the NEVC spends all its money on setting up stations and not building up a big organizational membership, it is ill-equipped to spread the word about its plight.

The NEVC has tried to work though official channels to solve the problem and now finds itself having to write off this year's funding. But you know me; I don't give up, or just take no for answer. So, I figure it's up to us to help save the NEVC budget and keep them from having to lay off their trained and skilled staff, which would be a serious blow to the E-85 movement. It is very simple - all you have to do is call your Congressperson or Senator's staff and ask them to explain to you just why the DOE failed to release the funds earmarked to the NEVC to implement E-85 stations. Tell them you think that the DOE needs to do what Congress has instructed them to do and you want to be kept abreast of how this situation is handled. Believe me, if a few dozen legislators start calling the DOE on behalf of their constituents, there will be action. So pick up your phone and call your legislators right now.

To be connected directly to your Senator or Congressperson, call the Congressional Operator at 202-224-3121. A phone call is much better than an email. Send a copy of this note to everyone on your list, too. With enough phone calls to legislators, we can make our voice heard and stop this administrative attack on ethanol. Now, if you really want to cause a stir, call your local newspaper and ask them to investigate this story.

If you would like to support the NEVC, you can join the organization with a modest donation. Go to http://www.e85fuel.com/membership/membership.php

All tyranny needs to gain a foothold is for people of

good conscience to remain silent.

--Thomas Jefferson

Positive News about Alcohol

When I last wrote a newsletter at the start of summer, alcohol fuel was still an unknown issue in the U.S. But that's all changed in the past few months. Literally hundreds of generally positive articles have been printed recently, catapulting alcohol from a virtually unknown fuel to a prominent solution for global warming and declining oil supplies. This has been such a fresh breeze compared to the usual blizzard of uniformly negative press that alcohol has been buried under.

What's even more exciting is that venture capital has discovered alcohol in a big way. When I last wrote, there were about 70 plants built, with another couple of dozen in the pipeline. In the last few months, at least 100 new plants have been capitalized and are in various stages of implementation. It's a no-brainer for the venture capitalists. Plants cost about a dollar per annual gallon of capacity to build. So a 100-million-gallon plant costs about $100 million to build. It also only costs about a dollar per gallon to produce the alcohol. With auto fuel topping $3, a $100-million investment would bring in $300 million the first year of operation, paying off the plant and providing $100 million in profit. Although MegaOilron has crashed the price of alcohol to about $1.90 a gallon, no one expects it to stay that low, and even if it does, it still makes alcohol fuel one of the hottest investments going. After all, no one expects there to be an increase in the amount of oil or a reduction in demand for fuel.

This year, more than $3 billion of investment capital flowed into Iowa. That's a little more than flowed into the capitalist powerhouse of New York.

The net effect of all the news around this is a greatly expanded awareness of the American people that there are clean alternatives to oil that we can produce right here. Here's a list of links to some of the stories of the last few months.

The Future of Nebraska's Family Farms by James Cornwell

http://counterpunch.org/knotwell10102006.html

Vinod Khosla in WIRED

http://wired.com/wired/archive/14.10/ethanol_pr.html

Tom Daschle on ethanol

http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=11317

Barack Obama on ethanol

http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=11328

The importance of doing ethanol right

http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=11322

How to beat the high cost of gasoline forever- Fortune Magazine

http://money.cnn.com/2006/01/24/news/economy/biofuel_fortune_020606/index.htm

Rosa DeLauro, Connecticut Congresswoman, speaks to Yale students on how renewable energy can spur economy.

http://www.house.gov/delauro/press/2006/February/yale_speech_2_22_06.html

US: Defense and oil company executives reap windfalls from Iraq war

http://www.wsws.org/articles/2006/sep2006/exec-s15.shtml

Branson pledges $3 billion transport profits to fight global warming

http://environment.guardian.co.uk/climatechange/story/0,,1878492,00.html

The Saab 9-5

http://lifeandhealth.guardian.co.uk/experts/martinlove/story/0,,1728379,00.html

Food Versus Fuel

Ethanol is being blamed for an increase in the price of corn. Food retailers are blaming ethanol for the increase in the price of milk, meat and eggs. Food riots in Mexico over the price increase in Mexican corn is being laid at ethanol's feet. It turns out none of this is true and that this is an extension of a long running propaganda campaign perpetrated by Big Oil. Listen to a great radio interview featuring David Blume and the VP of the American Corn Growers Association on Food Chain Radio taking the Food versus Fuel myth head on.

Click here to listen to the interview.

Indianapolis 500 Converts to 100% Ethanol!

The 2007 Indy 500 will run on moonshine. It's a great PR coup for ethanol to have some of the highest-performance vehicles in the world run on high-octane ethanol. Previous races were run on a 90/10 mix of methanol and ethanol. Methanol is made from natural gas, is toxic, and has toxic emissions like methyl nitrite, formic acid (bee-sting venom), and formaldehyde. Running on ethanol, the racecars will be close to emission-free. "The IndyCar Series always has been recognized for its technical leadership in automobile racing, and now it is the industry's leader in renewable and environmentally responsible energy," said Brian Barnhart, President and COO of the Indy Racing League. He went on to say, "We are proud to partner with the ethanol industry to showcase a great American fuel source. We feel a commitment to the environment and our country's energy security is consistent with our sport's legacy of race-bred innovation and leadership."

Gasoline and Alcohol Prices over the Last Summer through Winter

As I predicted, gasoline prices went back to over $3 per gallon this last summer. Amazingly, alcohol prices went right up with the gasoline prices. There were several reasons for these run-ups that were not reported in the media. First of all, worldwide refining capacity is a limiting factor. Although all the data is not yet in, it appears we probably had about two million barrels a day of demand for transportation fuel above the amount refineries could process. This started gasoline prices ratcheting up above $3 in Africa and parts of India months ahead of the price rise in the U.S. Right now, we are in the lull between summer transportation fuel demand and winter fuel oil demand, so we are currently just within the refining capacity. High prices have not come down in developing countries.

The other reason why prices jumped so high last summer when they haven't gone quite this high in previous summers is because of the current administration's deregulation of refinery profits. Under President Carter, refineries had a cap on how much they could profit from processing oil. This was called for, since there is no free market in refining and monopolies cannot be trusted. But the current administration removed this cap, so instead of the formerly approved $2-per-barrel profit cap, refineries were making as much as $22.76-per-barrel profit. Who are the refiners? ExxonMobil, Texaco, Shell, Conoco, Amoco, Occidental, BP, and Chevron -- the same people who import and/or produce the oil.

What initially appeared as a feature of the "market" was the increase in the price of alcohol to over $3 per gallon as well. MegaOilron claimed it was due to ethanol shortage in replacing MTBE. To avoid liability from continuing underground leaks of MTBE into water supplies, oil companies quietly ended their use of this octane booster/oxygenate this last summer. The only replacement available was alcohol. The claim of insufficient alcohol wasn't at all true; there was plenty of alcohol. But oil companies don't operate in a free-market manner, being a monopoly. Since they are the buyers of 99% of the ethanol produced in the U.S. today, they decide what they are going to pay for alcohol. When they ran the price of gasoline up, it would have been very embarrassing for E-85 to remain below $2 a gallon at the pump while gasoline was averaging over $3. For publicity reasons, it was inexpensive and ultimately beneficial for them to bid up the price of ethanol for a few months.

During this time, they were quite busy in the propaganda department. Countless articles were printed that said that alcohol fuel was a bad idea for America since it was more expensive to produce than gasoline. More expensive to produce? Big alcohol plants were still producing the fuel at about $1 per gallon, while production costs for gasoline were close to $2.50. But the articles pointed to the price at the pump as "proof" that alcohol cost too much to produce. The crown jewel of MegaOilron's propaganda effort was the article in Consumer Reports that damned alcohol for its expense in comparison to gasoline. Within a week of the article being published, oil company purchases of alcohol dropped in wholesale price from over $3 to about $1.70. Virtually overnight, the Oilygarchy crashed the alcohol futures market. But where is Consumers Reports today? Hope they feel foolish for being taken in by the American Petroleum Institute.

So Why Did Gasoline Prices Go Down Last Fall?

A late September poll showed that 42% of Americans believe that last fall's low price of gasoline had to do with Republican electioneering. In other words, the bulk of the population believed the price of fuel would go back up after the November elections. Was the public right? Statistically, this has happened before. In fact, the spring following elections statistically always has an unexplained spike in oil prices ever since Bush and Reagan have controlled the White House. One would be tempted to assume that the price run-ups after the elections, which don't incur punitive action by the government, constitute the "payoff" for election-year campaign funding. Check out the chart I put together that shows how West Coast gasoline plummeted until the election, and then began its inexorable climb back up the very next week after the election. Data is from the Energy Information Agency.

Prices would have already climbed more steeply, but unseasonably warm weather in the Northeast, with temperatures 20-30% higher than normal, kept the price of heating oil, and therefore gasoline, lower. But the American Petroleum Institute was quoted in the 12/27/06 Christian Science Monitor as saying if temperatures dip in January, it "could prevent refiners from switching to gasoline production because they would have to produce more heating oil." This would give them all the excuse they need to spike gasoline prices. The same article has traders predicting $85-per-barrel oil by summer. Just as predicted, temperatures dipped and prices are ratcheting up. I saw one Chevron station in SF brazenly charging $4 per gallon for premium on March 20th. I predict we'll be over $4 a gallon all over California by sometime in May 2007, in anticipation of China beginning to buy 100 million barrels of oil for its new Strategic Petroleum Reserve.

Toyota Likely to Come Out with Flex-Fuel Models

So far the flex-fuel market in the U.S. has been dominated by Chrysler, GM, and Ford, with latecomer Nissan making full-sized pickups and SUVs with flex-fuel engines. Toyota, who didn't even make vehicles for Brazil, is about to make its play for a share of the flex-fuel market. Its first rollout is going to be in Brazil this coming year, with models offered in the U.S. shortly thereafter.

In the book Alcohol Can Be a Gas, we discuss how Toyota computers are already almost flex-fuel-ready now. For Toyota to offer most of their engines as flex-fuel should just take a little in the way of alterations to software

Santa Cruz Ethanol Station

With the book production nearly off my plate, I am now focusing on setting up a station organized along the lines discussed in my book. The focus of this station is that the drivers themselves will be part-owners. Although the station will be a normal corporation, it will operate in a manner very similar to a nonprofit. Initially, alcohol will be purchased from farmer cooperatives at a long-term contract price. We expect to be able to sell fuel for about $2.50 per gallon even when gasoline goes back up over $3 and maybe even $4 this year (more on this below.)

There are several very important aspects to this station. Since we are setting this up so that regular members become owners, we are able to pass through the tax credits of 51 to 61 cents per gallon to the drivers. As I outline in my book, these tax credits normally go to oil companies that buy alcohol to blend with gasoline. By setting up our paperwork correctly, we can grant the tax credit to our drivers instead of to MegaOilron. That means that when you take the 61 cents off the $2.75 projected fuel price, the drivers will only be paying a net amount of $2.14 per gallon. You won't have to be a member to buy fuel at the station, but you won't get the tax credit unless you are a member. (See more about how tax credits work below in "Tax Credit for Station Investors.")

Our first organizing meeting on November 14^th drew 50 people, and we have built on that to now have over 100 people on our CruzFuel list. To make sure we win whatever battles we may encounter in the permitting process, we are counting on having a large activist constituency to overwhelm obstacles. Once we demonstrate that a driver-owned station is possible, we expect them to start popping up all over.

To be kept abreast of what's happening on the station, check in at the CruzFuel page on our website. Sign up to be on the mailing list for the station news at info@permaculture.com

Tax Credit for Station Investors

To facilitate the speedy capitalization of the Santa Cruz station, we hope to attract a handful of investors to put up the money to establish the station. This avoids our having to sign a couple of hundred people up in advance before we can move forward. Due to provisions in the 2005 Energy Bill, there is a $30,000 tax investment credit that can be earned by financing the establishment of an alcohol fuel station like the one we are planning. Credits are different than deductions. A credit comes right off the tax you owe, while deductions only reduce the income on which you calculate your taxes. So credits are about three times as valuable as deductions. The early investors in the station will be able to take that credit immediately or hold it until a year in which they have tax liability. So if an investor puts in $10,000, he will get to take approximately $2,500 directly off his taxes. Investors do not have to live in Santa Cruz nor be active users of the station. For more information on becoming one of the handful of investors who will harvest this tax credit, contact me at farmerdave@permaculture.com.

Need Premium? Save Significantly by Buying Alcohol!

Buying fuel at our station will be most valuable to those folks who need premium to run their vehicles. A lot of the higher-horsepower SUVs and higher-performance cars today have to use expensive premium high-octane fuel. Alcohol is 105 octane when used straight, but is rated at 112.5 octane when it's blended with gasoline. Since we proved last year in our own study that virtually any unmodified car can run 50% alcohol, people who have to buy premium can save a load of money. If they first fill up halfway on less-expensive regular gasoline (87 octane) and then top off with 50% alcohol (also less-expensive), they will have a 99+-octane super-premium blend in their tanks. Their engines will like that a lot, and so will their pocketbooks - and all without making any modification to their vehicles. Of course, they would save even more money running straight 105-octane alcohol, which their engines will like even better, after inexpensive flexible-fuel conversion. This kind of conversion permits use of either gasoline or alcohol, so you aren't limited.

Walmart to Be Largest E-85 Retailer?

Well, maybe not yet, but Walmart shook the ethanol world this last summer by opening investigations into offering E-85 at its stores nationwide. It's investigating whether there is sufficient production at a stable enough price to warrant selling alternative fuel at its stores.

Sales of fuel at convenience stores has long been recognized as a "leading loser" strategy to increase patronage at the main store. Fuel at convenience stores is often sold at just above cost to guarantee the weekly trip to fill up at the cheap pump and draw the consumer into the high-markup products inside. Walmart and, to a lesser degree, grocery chains have been selling gasoline in this same way for some time. By being early in the E-85 distribution build-out, Walmart would have an even more loyal following each week than those simply drawn to less expensive petro fuel. Stay tuned to see how this plays out.

Global Warming Reality Checks

In Malasiga, Papua New Guinea, the palm trees appear to be marching into the sea. That's because global warming's rising ocean levels are steadily and mercilessly moving the waterline inland. "There used to be two rows of houses," said Mickey Tarabi, a wood carver in his 50s, nodding toward the crystal blue sea. "The first one has been moved, and the second one will be gone soon." By the middle of this century, the Intergovernmental Panel on Climate Change very conservatively estimates that carbon dioxide levels will go up 50% and that sea levels will not go up by inches, but by one and a half to three feet between now and the end of the century.

Doesn't sound like much? The World Bank conservatively estimates that rising sea levels could "could displace tens of millions of people living in low-lying areas" around the world." As you can see above, rises of a couple of inches are already flooding people out of their homes. Many of you saw the effect of small changes in ocean level in the graphically dramatic An Inconvenient Truth.

In the low-lying Netherlands, there is already one developer selling amphibious houses.

British Petroleum Turns UC Berkeley into Corporate Whore

There has been big news about the $500 million that BP is granting to the University of California for biofuels research. BP got lots of greenwashing in the press, heralding this massive funding as proof that BP cares about global warming. But when we look at the history of alcohol fuels, whenever oil companies give a big sum of money to agriculture, we find that there are strings attached. The agricultural extension system began when Rockefeller made a huge grant to the USDA. But the strings that were attached prohibited this new educational arm of the Department of Agriculture from saying one word about alcohol to farmers.

So, my suspicions about what this deal was with BP have recently been borne out by insider leaks. Normally, universities get to keep the intellectual property that comes out of their research, although the sponsor often has the right of first refusal to buy rights. The researchers also expect to publish their studies. In this BP deal, BP decides what, if anything, gets published, and BP gets the intellectual property rights on anything that gets developed. The deal covers 25 wide-ranging departments.

This should be seen as a serious threat to the alcohol fuel movement, since with half-a-billion dollars, the research done at UC Berkeley and patented by BP could put a serious damper on many of the new initiatives in cellulosic alcohol, the vaporized alcohol engines that UC has been working on, and many other things. A blizzard of patents would be ammunition to sue anyone doing anything similar. Far from being a vote in favor of biofuels this grant is insurance to make sure that biofuels never challenge MegaOilron's domination of the fuel market.

Alumni of Berkeley should write the school and tell them no more donations will be forthcoming as long as Berkeley continues to be BP's whore. State legislators should weigh in on this, too, since they pay for most of UC with our tax dollars. We should demand that the BP grant follow normal arrangements for publishing and intellectual property, to avoid this being a manipulation of the fuel market by Big Oil.

The Recent Stanford Ozone Study

Recent reports of a study out of Stanford University made big national headlines damning alcohol fuel. The study claimed that if high blends of alcohol, for instance E-85, were adopted by 100% of U.S. cars by 2020, deaths related to ozone and formaldehyde emissions from cars would increase by 200 people per year. The way the press reported the article, you would think that this was a major condemnation of alcohol.