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Alternative Motor Fuels

Alternative Motor Fuels. Hugh Hughson Doug Shepherd. September 22, 2006. Alternative Motor Fuels. The push for alternatives A brief overview of fuel types Vision for the future Tax Implications Oregon’s alternative approach. The Push for Alternatives. Environmental concerns

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Alternative Motor Fuels

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  1. Alternative Motor Fuels Hugh Hughson Doug Shepherd September 22, 2006

  2. Alternative Motor Fuels • The push for alternatives • A brief overview of fuel types • Vision for the future • Tax Implications • Oregon’s alternative approach

  3. The Push for Alternatives • Environmental concerns • Supply, demand and price concerns • Governments: • Incentives (e.g., tax exemptions, fixed/percentage based blends) • Directives (e.g., mandated fuel blends) • Two approaches: • Improved fuel efficiency (e.g., new engine technology, aerodynamics) • New fuels

  4. Compressed Natural Gas • Underground deposits • Pro’s • Existing distribution network (e.g., pipelines) • Con’s • Non renewable • High octane but low energy content (44,000 BTU) • Significant retooling of fuel station infrastructure and vehicles (must be compressed to 3,000 – 3,600psi., therefore larger, heavier and more expensive tanks) • Existing/competing demand (e.g., home heating)

  5. Ethanol (1 of 2) • Grain alcohol using a distillation process • Pro’s • Higher octane therefore cooler engine • Greenhouse gas neutral • Supports a struggling agriculture sector • Most vehicles can use E10 without modification • Con’s • Lower energy content compared to gas (E85 = 80,000 vs. 124,800 BTU) • Corrosive solvent – need stainless steel or plastic for fuel injection, pumps, tanks and hoses (vehicle and distribution chain)

  6. Ethanol (2 of 2) • Less volatile therefore gas blended for cold weather • Environmental impact - intensive farming/feedstock process (e.g., pesticides, fertilizers, equipment and transport) • Insufficient feedstock to meet demand • One acre of corn can produce 300 gallons of ethanol • Need to dedicate 71% of US farmland to meet current fuel consumption • Notes • US in 2005 produced 4.3 billion gallons (3% of current consumption) (others say 15 billion) • Cellulosic ethanol using enzymes to break down waste grasses (not food) into ethanol

  7. Biodiesel (1 of 2) • Vegetable oils, animal fats and cooking oils • Pro’s • Similar energy content (4% lower for BCTT) • Reduced CO2 emissions (B100 -75%, B20 -15%) • Vehicles can use without modification (any blend and diesel engines more tolerant of varying fuel quality) • Con’s • Blending and clouding issues – therefore additives or heating required (should be heated to 70C to mix properly with cold diesel)

  8. Biodiesel (2 of 2) • High cost to produce ($1/gallon more) (80% of final product is feedstock) • Insufficient feedstock to meet demand • Total agricultural production in Canada could supply B10 to the entire fuel market • Petroleum industry/infrastructure reluctant to handle because of quality, contamination and blending concerns • Notes • Quality of finished product which varies by the type of feedstock and the manufacturing process • 75 million gallons produced in 2005 (compares to 3 billion litres in Europe)

  9. Electricity • Rechargeable battery packs (pure and hybrid - battery packs and electrical generation during slowing and stopping) • Pro’s • Existing distribution network (e.g., power lines) • Inexpensive (2 cents per mile) • Lower emissions (10% of current ic engine) • Con’s • Pure has limited range (100-120 miles per charge) and slow charging • Environmental impact – only 2.3% of electricity comes from renewable resources • Vehicles are expensive and technology breakthrough required

  10. Methanol • Wood alcohol using steam and catalyst • Pro’s • Greenhouse gas positive • Higher octane therefore cooler engine • Con’s • Lower energy content (64,000 BTU) • Corrosive solvent and invisible flame • Less volatile therefore gas blended for cold weather • Notes • Most methanol comes from natural gas (i.e., non renewable) but can be obtained from coal and fermenting organic matter (e.g., sewage, manure)

  11. PuriNOx • Diesel (80%-92%) plus water and emulsifier • Pro’s • Reduced PM emissions (50-60%) • Most vehicles can use without engine modification • Con’s • Lower energy content (power loss 15%-20%) • Fuel must be agitated or fuel/water separates • Cold weather problems

  12. Hydrogen • Water and electricity releasing oxygen • Pro’s • Abundant supply of water • Highest energy per unit of mass of all chemical fuels (120MJ/kg compared to 42MJ/kg for petroleum) • Con’s • Expensive (electricity and mostly non-renewable resources) • Significant retooling of fuel station infrastructure and vehicles (must be compressed 5,000+psi., or must be frozen -423F therefore larger, heavier and more expensive tanks) • Notes • Technology breakthrough required • President Bush wants hydrogen powered cars on the market by 2020

  13. Current Environment • Government targets: • Canada – a 45% E10 and 5% biofuel content by 2010 • USA - a 4% (28 billion) renewable fuel content by 2012 • EU has a 5.7% target by 2010 • There is no clear alternative fuel “winner” (but the days of a single fuel source are gone)

  14. Current Environment • Petroleum Industry • Focused on ultra low sulphur diesel (USLD) • Reluctant to handle alternative fuels because of: • Supply and quality concerns • Infrastructure concerns • Car Industry • Research and development (i.e., more efficient engines, more flexible fuel vehicles - already 34 models E0 – E85, and fuel cells); • To make a variety of power trains; and • To extend warrantees to alterative fuels

  15. Tax Implications/Challenges • Revenue: • If tax incentives are offered (vs. mandated volumes) • If lower taxed “fuels” are used (e.g., electricity, vegetable oil) • If fuels are manufactured below the tax radar (e.g., biodiesel) • If there are difficulties auditing taxpayers • Administration: • Reporting processes (if tax incentives used) • Refunds of new fuels (if tax incentives used)

  16. Tax Implication/Challenge • IFTA: • Licensees required to keep records and report each fuel type separately • Jurisdictions required to provide tax rates for each fuel type • Result: • Infinite number of tax rates • Licensees unable to report correctly • Difficulties auditing fuel records and consumption rates • Potential tax evasion

  17. Tax Implication/Challenge • IFTA Board resolution (2005): • Blended fuels should be reported as one fuel type/tax rate (e.g., diesel) • Use the exempt fuel provisions (R830) to encourage the use of alternative motor fuels

  18. The Future • Fuel costs will rise • Fuel demand will rise (i.e., 2 million barrels /day) • Alternative fuels will not satisfy demand • We will be forced to change how we live: • More high density housing • Softer real estate in bedroom communities • Choose between renewable fuel and food • Demand for food is expected to double in 50 years • Demand for transportation fuel is expected to double in 32 years

  19. The Future • Variables: • Research and development • Cost competitiveness of petroleum fuels to new fuels • Cost competitiveness of new fuel vehicles to existing: • Internal configuration/carrying capacity (e.g., fuel storage) • Life costs • Purchase/resale prices compared current vehicles • Operating costs per kilometre/mile • Additional maintenance costs

  20. Oregon’s Alternative Approach

  21. Thanks

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