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Originally published Saturday, March 17, 2012 at 7:07 PM

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Officials keen to make region a center for aviation biofuels

Efforts are under way to create an aviation biofuels industry in the Northwest, harnessing the presence of Boeing, Alaska Airlines and research labs across the state.

Seattle Times Washington bureau

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WASHINGTON — For three weeks last November, Alaska Airlines flew passengers aboard Boeing 737s powered in part with used cooking oil, becoming only the second American carrier to operate scheduled flights using renewable biofuel.

The destination for one of the maiden flights from Seattle?

Washington, D.C. — home to lawmakers Alaska and other U.S. airlines believe are crucial to eventually securing plentiful aviation biofuels that cost no more than petroleum jet fuel.

That's a distant reality. As it was, the biofuel Alaska bought was made from restaurant grease by a Louisiana company and sold through a broker based in Amsterdam — at $17 a gallon.

In all, Alaska flew 75 flights with a 20 percent biofuels blend "to highlight the issue. But it was very expensive for us to do it," said Keith Loveless, Alaska's executive counsel, who led the trial effort.

Now efforts are under way from Olympia to Congress to help jump-start the nascent industry and to bring prices of jet biofuel down to earth.

The goal is to establish the Pacific Northwest as an epicenter for aviation biofuels by harnessing the presence of Boeing, Alaska Airlines and research labs across the state. In addition, the region's forests and farms are promising sources of crops, algae and woody material that could be converted to fuel.

Making the fuels viable, however, almost certainly would require a big hand from government via subsidies and regulatory support. And the federal budget deficit, and the billions of public dollars already spent on renewable energy, have stirred opposition.

Gov. Chris Gregoire on Thursday signed a bill that would let private aviation biofuel plants in the state tap financing through lower-interest revenue bonds. And U.S. Sen. Maria Cantwell, who chairs the Senate subcommittee on aviation, is pushing the Federal Aviation Administration to create an aviation biofuel research hub, ideally in the Tri-Cities near Washington State University's branch campus and the Pacific Northwest National Laboratory.

U.S. Sen. Patty Murray and Rep. Jay Inslee, D-Bainbridge Island, have been lobbying on biofuel issues as well.

High-altitude test

The race for aviation biofuels has barely begun. Four years ago, Virgin Atlantic flew a jetliner with fuel partly made with coconut and palm oil, showing that biofuels can operate safely in high-altitude temperatures and require no engine modifications.

Last July, ASTM International, a global technical-standards group, officially sanctioned the use of petroleum-based jet fuels mixed with 50 percent biofuels derived from plant oils and animal fats, such as those from jatropha and camelina plants and from beef tallow.

Airlines are eager to embrace biofuels, for environmental reasons, as well as to hedge against spikes in conventional jet-fuel prices. Compared to many industries, airlines arguably have fewer options but bigger stakes when it comes to alternative fuel sources.

Batteries, solar and wind aren't yet feasible for powering airplanes. But fuel is a top expense for carriers, making any savings crucial. For Alaska, every penny drop in a gallon of jet fuel bumps its bottom line up by $3.25 million a year.

"Biofuels is a necessary component for the industry" over the long haul, said Mike Hurd, Boeing's director of environmental strategy.

Biofuel makers are lobbying for government support, yet the fate of two pivotal policies — tax credits for biofuels and minimum requirements on the use of renewable fuel — remains in limbo.

In December, Congress let expire a $1-per-gallon tax credit for blenders of biodiesel and aviation biofuels. That was among a slew of "tax extenders" that got caught in the partisan skirmish over renewing the payroll-tax holiday and longer unemployment benefits.

More importantly, the biofuels industry is waiting for the Environmental Protection Agency to boost next year's Renewable Fuel Standard, which since 2006 has set the minimum annual volume of biofuels that must be blended into gasoline and diesel. The mandate, which includes aviation biofuels, essentially ensures demand for producers. But the EPA has yet to set a separate minimum-volume requirement for aviation biofuels.

For 2012, for instance, 1 billion gallons of biodiesel must be mixed into the nation's transportation fuel supply. Biodiesel producers want that raised to 1.28 billion gallons next year.

"The Obama administration is hedging and hesitating on finalizing the EPA's proposed volume increase, which really has our industry rattled and confused," said Ben Evans, director of federal communications for the National Biodiesel Board, a trade group.

A more fundamental challenge with aviation biofuels, however, is their scarcity and high price due to lack of commercial-scale production. No American company is producing jet biofuel in significant volumes. One leading supplier, Dynamic Fuels, is a joint venture with Tyson Foods, the chicken behemoth.

What little jet biofuel is available commands huge premiums. Last year, for instance, the Navy signed a contract for nearly half a million gallons of biofuels as part of its Green Fleet initiative — a purchase that works out to about $15 a gallon, four times the price of regular jet fuel.

Research grants

To spur research into jet-fuel alternatives, the federal government has funneled millions of dollars in grants to WSU, the University of Washington and such private companies as Seattle's Imperium Renewables.

Candidates for raw biofuel material range from oilseeds to switch grass, algae to agriculture waste. WSU's Center for Bioproducts and Bioenergy in Richland, for example, is experimenting with wheat straw, corn stalks, sawdust, tree stumps and other milling waste.

Birgitte Ahring, the center's director, said her hope is that such material would prove cheaper than using oil from soy, canola, jatropha and other plants. Feedstock can account for as much as 80 percent of the cost of a biofuel, Boeing's Hurd said.

Biodiesel, which is mainly purchased by school districts and other large-fleet operators, sells for nearly $5 a gallon, almost a dollar more than regular diesel. The price difference between the two isn't as stark at the pumps, because most biodiesel blend contains less than 20 percent pure biodiesel.

Ahring believes private investors are unlikely to bet big on aviation biofuels until someone demonstrates they can be produced at a price competitive with regular jet fuel.

"I think it's too much risk," she said. "Nobody is going to come in and invest millions of dollars" just yet.

John Plaza, chief executive of Imperium, is hoping his biodiesel plant in Grays Harbor becomes a major producer of aviation biofuels. But Plaza argues the industry needs public assistance before it can take root.

One form of help, Plaza said, would be if the government or the military committed to buying a set volume of aviation biofuels for a set number of years. He contends that's the only way that renewable fuels can gain a foothold against fossil fuels.

That view is increasingly encountering resistance both inside and outside of Congress.

Margo Thorning, chief economist with the American Council of Capital Formation, a pro-business economic policy think tank in Washington, D.C., said she supports some public research dollars going to renewable fuels.

But some renewable fuels may never pan out as viable options, she said.

"It's not a good idea for government to mandate a particular technology," Thorning said. "I would want the private sector to decide what kind of energy we should use."

Kyung Song: 202-662-7455 or ksong@seattletimes.com

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