Economy The Socialist - The Economics of Producing Gasoline From Hemp

Published on February 12th, 2014 | by Troy Thompson


The Economics of Producing Gasoline from Hemp

It’s no secret that I prefer the idea of producing carbon neutral gasoline from hemp over consumer-end attempts to reduce gasoline use. Penalizing gasoline use has a disproportionate effect on rural workers, who are uniquely disadvantaged in regard to transportation. The extension of mass transit services into most rural areas would be needlessly expensive, and that idea can generally be forgotten for the simple reason that it’s infeasible. Rural workers are also caught between a rock and a hard place in regard to penalizing carbon emissions from gasoline use — most rural workers simply cannot afford new vehicles. It’s common for working-class people in rural areas to drive automobiles that are 20+ years old. In this way, simply reducing gasoline use is not a feasible goal.

Having a rural perspective myself, I found it necessary to seek out other alternatives for attacking the environmental problems with gasoline use. The main ecological issue with fuels derived from fossil fuels is that their combustion releases into the atmosphere carbon atoms, which have been locked beneath the surface of the planet for millions of years. This has resulted in a growing surplus of carbon dioxide in the Earth’s atmosphere, which has thus far been the major driving factor in global climate change. But what if gasoline wasn’t produced from the fossils of organisms that have been dead for millions of years?

There is much promise in finding a new way to produce gasoline in ExxonMobil’s Methanol-to-Gasoline process. ExxonMobil has at least shown the MTG process to be economically feasible in the facilities it developed for gasoline production in New Zealand decades ago. The problem is that, while the process necessarily could use methanol from any source, ExxonMobil has only used methanol derived from coal gasification.

The Question of Methanol from Biomass

We know that methanol can be produced from biomass, and we know that we can produce gasoline from methanol via the MTG process. The question is the cost of producing gasoline from methanol derived from biomass. In 2009, the Pacific Northwest National Laboratory ran a simulation attempting to determine the economic feasibility of using methanol derived from biomass (specifically poplar chips). They found that the process of producing gasoline from the poplar chips by producing methanol from the wood and using the MTG process to convert the methanol into gasoline would produce a gasoline priced at $3.20 per gallon.

Considering the average price for a gallon of gasoline in the United States is, as of February 11, 2014, $3.29 per gallon, obviously that’s not a great amount of savings. However, the PNNL was kind enough to break that price down, showing what specifically factored into such a price. The largest chunk (34 percent, or $1.07 per gallon of gasoline produced) of the price ended up being locked up in the price of the particular biomass material they used in their simulation — poplar chips, at a cost of $60 per short ton.

Some of the other costs factoring into the price were catalysts and chemicals (29 cents), waste disposal (4 cents), electricity and other utilities (13 cents), fixed costs (50 cents), and capital depreciation (47 cents). The production of LPG as a byproduct credited 30 cents, while it was assumed that tax would cost 33 cents and a 10 percent ROI would require adding another 65 cents to the price for the end consumer.

If we were to seek socialized production in a non-profit manner, through nationalized or state production facilities, both tax and ROI would be unnecessary, as the entire purpose for public concern is to provide transportation fuels that reduce ecological toll. Subtracting the tax and ROI from the price would result in a price of $2.31 per gallon.

Using Hemp

With the lion’s share of the price still being the cost of biomass, it would be important to try to consider a better biomass material to use. This is where hemp comes in. Hemp would be the most efficient biomass material to use in the production of methanol simply because it has a higher cellulose content than anything else that’s available. Poplar is only 43 percent cellulose; hemp can be as much as 77 percent cellulose. This means that substantially less hemp is necessary to produce the same amount of gasoline.

Hemp has a special problem, however, in that there is no determined price for industrial hemp in North American markets. It could stand to reason that, if the government inaugurates a program of buying dry defoliated hemp stalks from farmers, the government would very well be in a position to set that price. But then comes the problem of what a sufficient price would be to make it economically sustainable for the farmer.

It’s worth noting that stalks aren’t the only product that can be taken from hemp; hemp seed is a very lucrative product in its own right. A 1999 fact sheet from the British Columbia Ministry of Agriculture and Food noted that, at that particular time, US processors were willing to pay $1,000 per metric ton for clean harvested hemp seed. Seed yields range from 1.54 to 2.64 metric tons per hectare (or about 0.69 to 1.18 short tons per acre). In all, a farmer growing 40 acres of hemp could harvest as much as 47.2 short tons of seed in a single harvest, valued at around $43,000 according to the 1999 prices.

Assuming prices have remained relatively static (unlikely, but for the purpose of this analysis it doesn’t make a huge difference), hemp seed by itself would be more lucrative a crop than, for example, corn. An acre produces 4.2 short tons of corn, which currently sells at $191.38 per ton. Hence, 40 acres of corn would produce a harvest worth $32,152. Moreover, the short time it takes for hemp to reach full maturity means the number of harvests, and the revenue generated for farmers, could be doubled.

With the value of hemp seed considered, even if the price of hemp seed has fallen, hemp stalks do not need to be priced very high for a hemp farmer to be relatively economically secure. Even if hemp stalks were priced at as little as $30 per ton, an acre of hemp can produce ten tons of stalks in a single harvest, meaning that a single semi-annual harvest in a 40 acre plot could then render $12,000 worth of hemp stalks, and two harvests in a year could render $24,000 worth of stalks. In addition to the revenue from the sale of seeds, the hemp farmer would be in a very good position compared to a corn farmer, and it would make economic sense for corn farmers (and farmers in general) to use marginal lands on their property to grow.

If we can, through a combination of subsidies and price controls, set the price of hemp stalks at $30 per ton, that would be half the price of poplar chips. Meanwhile, hemp’s higher concentration of cellulose would mean that we would need 44 percent less hemp biomass to produce a gallon of gasoline. With all of that considered, even if the tax and ROI are still part of the price, gasoline produced from hemp biomass could be sold for as little as $2.41 per gallon. If the production was public, and tax and ROI were not an issue, the price could then be further reduced to $1.43 per gallon.

Added Benefits

There is another important benefit to using the MTG process to produce gasoline: it produces LPG as a byproduct. With propane prices in the neighborhood of $4 per gallon, any added source of propane would be beneficial, as it would relieve pressure from households that are struggling with high heating bills.

ExxonMobil’s sell sheet on the MTG process shows that the vast majority of the methanol hydrocarbons are converted into gasoline, while most of the remaining methanol hydrocarbons are converted into LPG. If this country were to use just the 116 million acres of marginal land that are present in the central regions of the country to grow hemp specifically for use as biomass for production of gasoline, and if there were annually two harvests of hemp, the result would be the annual production of 208.8 billion gallons of gasoline and 23 billion gallons of LPG.

The United States annually consumes 133 billion gallons of gasoline and 13.4 billion gallons of propane. So, not only would it be possible to supplement the supply of gasoline and propane with green products, but it would also be possible to entirely replace all of the expensive and dirty gasoline and propane burned in the United States with cheap and clean gasoline and propane, while establishing absolute independence with regard to these fuels.

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