Monday, August 12, 2013

Corporate lobbying writ large

Over a year ago I sank my teeth into Tim Worstall's horrifically uninformed rant about Celanese's TCX technology and the Renewable Fuels Standard.  At the time, I didn't know where he got his position from - now I do.  That website is, simply put, a vehicle for corporate lobbying.  Lobbying for what, you might ask?  For this: a law that would allow Celanese to make synthetic ethanol and sell it on the US fuel market under the ethanol standards set by the erstwhile Renewable Fuels Standard.  Meanwhile, Celanese has already been hard at work implementing its technology in Nanjing, China and is in the process of doing so with PERTAMINA in Indonesia.

I don't want to re-hash arguments over the RFS - suffice to say, it is a deeply flawed law.  However, I think that it's worth highlighting exactly what this Domestic Alternative Fuels Act is in context of the RFS.  Far from being a way of opening up the US to a "free market" in alternative fuels, it is in fact a huge corporate giveaway to one corporation in particular (Celanese), and transparently so.

Besides the fact that the so-called Domestic Alternative Fuels Act as proposed will amend the RFS and make a mockery of the "renewable" part of that statement, it also falls well short of being a domestic alternative fuels bill.  If it were, it would include provisions for natural gas vehicles, or fischer-tropsch diesel, or LPG vehicles, methanol for fuel, and the like - there are a whole slew of technologies that would be capable of counting as a domestic fuel if we wanted to refashion the RFS into simply a bill focused on energy security.  But no, this bill (which I will uncharitably refer to as "the giveaway") only focuses on ethanol.

So why is focusing on ethanol so bad?  First, it's a protected market with a protected production quota.  Celanese and Pete Olson both know this, and are pushing forward their giveaway anyhow.  Never mind that encouraging true domestic fuels security might involve other products.  Never mind that ethanol was a bad fuel to blend from the beginning and encouraging other fueling methods, especially for fleet vehicles or trucking, might be much more beneficial to domestic energy security.  No, we have to use ethanol, because that's where Celanese's product can go.

But wait, Josh, can't we produce non-fermentation ethanol from a method that Celanese doesn't use?  Why yes, there is. It's called direct hydration of ethylene, and it hasn't been commercial since the mid-'90s, even though many college design textbooks (including my own) continue to use it as a process design example.  The US has run for close to 2 decades without a single ethylene direct hydration plant, not because of the abundance of corn ethanol, but mainly because ethylene is an incredibly valuable product.  Once corn ethanol became sufficiently advanced to drop the price of industrial alcohol below a certain point, any chemical company running a cracker could make more money by switching to polyethylene, or ethylene glycol, or a whole host of other products - and by and large that's what they did, years before the RFS.

At the moment, ethane (the main feedstock for ethylene production in this country) is at the cheapest it's been in a decade and up until a few weeks ago ethanol was at an all-time high because of last year's drought (recent projections of a bumper crop of corn this year and revisions to the RFS have since changed that).  Presumably, these conditions are ideal for a revival of this venerable, time-tested technology.  I set out to find out if that was true.

Some hacking at economic models later*, and I came to the conclusion that yes, direct ethylene hydration could make money if you sold ethanol into the fuel market - if whoever was running it wanted to throw away, at minimum, 20% of the value of their ethylene, not even counting the opportunity cost of adding value to it in, say, ethylene glycol.

So truthfully, Celanese is the only party that can possibly benefit from this bill because they are the only ones with an economical fossil ethanol technology.   And they even set up a misleading lobbying website to do it, filled with loaded language about how only corn ethanol is legal in the United States.

And if you needed more proof, the instigator of this giveaway, one Pete Olson (R-Sugar Land), represents the Texas 22nd Congressional District.  Guess where Celanese is located?  Good little lapdog.

One final note that I'd like to make on this issue is why Celanese specifically has focused on ethanol.  The truth is that Celanese has found itself in the unusual situation of being more competitive than ever, not in ethanol (though that would, in the absence of a carbon tax, which I continue to advocate, also be competitive) but for its main product: acetic acid.  Celanese is one of the world's largest producer of acetic acid and related acetals, and due to the shale gas boom felt confident enough to even brave contract cancellation fees and litigation by cutting off its supply agreement with Methanex, the Trinidad-based methanol producer, because natural gas is cheap enough that restarting methanol production in the US is favorable for them again.  I've since taken a good look at their patents (see, e.g., US8471075) and confirmed my suspicions: the only reason Celanese is targeting ethanol is because it's a bolt-on, single step transformation from their existing acetic acid process... and the company is obviously trying to unload as much of it, as a chemical or as a fuel, as possible to make as much money as possible. 

In short, they're trying to bootstrap, via lobbying, into a higher value, protected market.  Even if it means rank hypocrisy when they try to promote "free markets."  And to anyone with a second-year undergrad technical background in process engineering, it's as plain as the nose on your face.

* Although I would like to show the evidence, I used some of my company's proprietary models in order to get the result, and am not interested in revealing commercially useful information or anything else that could lose me my job.  I'm thus forced to speak about the uncompetitiveness of ethylene hydration as a process in vague generalities, which might also reveal something commercially useful but, on the other hand, is just a repeat of everything everyone in the industry has already known since around the time I was in grade school.

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