Critical policy recommendations mentioned above (Flex Fuel GEM mandate, Alternative fuel infrastructure tax credit, and Government vehicle purchase mandate).
We must solve the “chicken and egg” problem of the alcohol fuel market by forcing demand.
Any newly built gasoline station should be able to carry any alcohol fuel in all pumps.
Improve the methanol distribution infrastructure.
Eliminate anti-competitive practices in gasoline distribution. Exempt gas station owners from exclusivity clauses if they cannot bu1y mixed blends from their exclusive supplier. The current law is not sufficient.
Gasoline companies’ use of anti competitive practices to stifle blended fuel distribution should be stopped, by legal means if necessary.
An alcohol purchase mandate for gasoline distributors – force them to buy any quantity of blending alcohol like ethanol and methanol offered to them (similar to the electric utilities mandate for wind and solar).
It will cause distributors to offer incentives to their franchise gas station owners to convert pumps (since they will need to sell the blended gasoline).
If the pace of fuel pump conversion is not satisfactory, then it could be mandated, although we do not believe it will be necessary.
Requires monitoring of both supply and demand.
New regulations/standards for fuel transport and dispensing to support the more corrosive nature of methanol.
Methanol regulations are a step behind ethanol. Government should create a level playing field.
Maintain the current producers’ and blenders’ tax credit programs and extend them until 2018.
Investors in methanol production need a stable horizon. Incentives that have to be renewed frequently discourage investment.
Modify EPA regulations that give preferential treatment to gasoline.
It is just one of the ways the gasoline monopoly is maintained.
The government should not be in the business of selecting methods of methanol production. Government intervention is required to reduce GHG. Therefore, any methanol production and use cycle should have better global warming effect than the current gasoline production and use cycle, or it should be on a clear technological path to achieve that ratio in three years. This law should not be enforced by a permit procedure, but rather by a fine or conditional stop work order.
The President should have the authority to remove this restriction in case of an oil shock (e.g., shortages caused by a terror attack).
Currently, methanol is produced from natural gas (mainly for industrial use). This process is relatively clean and relatively cheap. We do not recommend that our limited natural gas resources will be used for this purpose and do not suggest intervening in the market forces at this point.
Natural gas is used across our energy and chemical markets. Its use is expected to rise and loading an additional use on it is dangerous.
If the natural gas is found in the Arctic, we should consider the option of converting it on the spot to methanol and shipping it as liquid to the mainland.
All other alternative methods for shipping Arctic natural gas are not practical (including LNG).
If demand for methanol will grow (as result of the flex fuel mandate), we can expect that flared gas from Africa will be converted to methanol and increase our supply.
Methanol can be produced from many sources. Examples:
Waste wood – estimated potential of 40 billion gallons a year.
Black liquor (a byproduct of paper pulping). Estimated annual potential is 9.3 billion gallons a year (most of it is already used by the industry, but producing fuel may become more economical).
Any organic material like waste (garbage).
The development of these sources is rather straightforward. It is really a question of market demand (i.e. cars than can run on it and delivery infrastructure). The most price competitive solution will win.
Methanol can be produced from coal. It is currently the cheapest available fuel, but its GHG impact is twice that of conventional oil. See the discussion and recommendations in the next section.
Methanol is only one type of fuel that can be produced from coal.
Alternative methods for producing methanol – government intervention is not required except in research (see Research Priorities).
The government should stay away from choosing which Methanol production method is better. Let the market decide.