Evan Markel¹, Burton C. English^2*, Chad Hellwinckel³, R. Jamey Menard⁴

¹ Ernst & Young LLP, Seattle, Washington, USA.

^2,3,4 Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, Tennessee, USA.

*Corresponding Author: Burton C. English, Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, Tennessee, USA, TEL: +1 865 974 7486 ; FAX: +1 865 974 7486;E-mail:benglish@utk.edu

Citation: Evan Markel, Burton C. English, Chad Hellwinckel, R. Jamey Menard (2018) Potential for Pennycress to Support a Renewable Jet Fuel Industry. SciEnvironm 1:121.

Copyright:© 2018 Burton C. English, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited

Received date: August 07, 2018; Accepted date: August 14, 2018; Published date: August 17, 2018.

Pennycress, an oilseed plant with high oil content, is being considered as a second-generation biofuel feedstock. The plants lifecycle fits with traditional U.S. crop rotations. This study examines the economic feasibility of pennycress production, its potential to supply a renewable aviation industry and its potential impacts on the U.S. economy. Incorporating pennycress in U.S. crop rotations at a price of $0.20 per pound stimulates 22.1 million acres of pennycress to be planted and increases harvested acreage of corn and soybeans by 3.2 percent and 5.0 percent, respectively. To produce 800+ million gallons of jet fuel, 22 HEFA facilities fed by 43 oil extraction facilities are required resulting in the addition of $19 billion to the nation’s economy and nearly 66,000 jobs.

Pennycress; Alternative aviation fuel; Biojet fuel; IMPLAN; POLYSYS

The commercial aviation industry consumed over 16.2 billion gallons of jet fuel in 2014, accounting for approximately 25 percent of operating expenses [1]. With such a large proportion of operating expenses coming directly from fuel consumption, fuel price uncertainty can have a substantial impact on airline operating strategies. Airlines use various strategies to manage fuel price uncertainty, including adjustments in aircraft size and utilization, flight-route and destination offerings, vertical integration and financial hedges [2]. The use of renewable jet fuel has the potential to decrease fuel-price uncertainties, thereby decreasing fuel-hedging costs, and decreasing profit volatility. The United States Government is actively supporting the development of renewable jet fuels. Two examples of this are the Farm-to-Fly 2.0 program, which focuses on supply chain and infrastructure, and the Commercial Aviation Alternative Fuels Initiative (CAAFI), which facilitates research and development, environmental assessment, fuel testing, demonstration and commercialization. As of 2015, the standard setting organization, ASTM International, has approved five renewable jet fuels for use in aviation [3]. This analysis examines the potential for pennycress (Thlaspi arvense) as a jet fuel feedstock to support a renewable jet fuel industry in the United States.

Pennycress (Thlaspi arvense), commonly referred to as “stinkweed” or “French-weed” and found throughout the United States [4], has the potential to supply both oil and biomass to the biofuels market. Following harvest, seed crushing and pre-processing, pennycress offers a suitable oil to allow conversion to a Hydroprocessed Esters and Fatty Acids (HEFA) fuel. Pennycress provides the benefits of a winter cover crop while also supplying farm producers with direct economic benefits. As a winter cover in double crop rotations, pennycress is established in the fall and harvested in mid-to-late-spring. Pennycress can offer the benefits of weed reduction, excess nutrient uptake and management, disruption of pests and pathogens, and hydrological regulation by aiding in the drying of excessive soil moisture. Pennycress can grow on fallow winter land, providing a valuable cash crop, which avoids the pitfalls of the food-versus-fuel debate [5].

HEFA fuels are a second-generation alternative fuel that can be blended at 50/50 ratio with conventional jet fuels. This fuel can reduce greenhouse gas emissions by 65-85 percent compared with conventional jet fuels and has shown higher energy density in flight, allowing aircraft to fly further on less fuel. It is also a drop-in replacement fuel, which requires no changes to aircraft technology or fuel infrastructure [6].

The objective of this study is to examine the economic feasibility of a pennycress to renewable aviation fuel, plus evaluate the potential economic impacts this industry could have on the U.S. economy. The objective is achieved by developing pennycress enterprise budgets and yields associated with pennycress production (Table A.1) and allowing pennycress rotations to compete for land use with other crops at a range of pennycress prices using POLYSYS, a partial equilibrium simulation model of the US Agricultural Sector. A pennycress scenario was modeled by the addition of a corn/pennycress/soybean rotation with offered prices to pennycress and compared to a baseline without a pennycress price offered. County total land use change was limited to 25 percent. The analysis was simulated from 2015 to 2039 at $0.05 price increments ranging from 0.05 and 0.50/pound. Most of the results presented in this manuscript represent the production levels that occur at $0.20 per pound. The POLYSYS results, under the $0.20 per pound scenario, were placed into a national IO model, IMPLAN [7].

Appendix Table A.1: Pennycress Cost of Production Budget.

1) There is not yet an established market for Pennycress seed. The Agricultural Marketing Resource Center (AMRC) provides an estimate of $0.15 per pound of seed. Field trials have resulted in yields ranging from 1400 to 2200lbs per acre.

2) Seed costs are projected as provided by the AMRC

3) No additional fieldwork is required from the time of planting to harvest because no insecticide or herbicide applications are required for a successful Pennycress crop. As a member of the mustard family and a winter annual, insect pressure is insignificant due to its natural chemistry and the temperatures of the growing season thus limiting an insecticide requirement. (http://www.growpennycress.com/farming.html)

4) Machinery expenses will vary dramatically by operation, financial resources, and land base. The machinery cost estimates provided in Table 3 are provided as an estimate of cost of ownership and operation for specified pieces of machinery that would be available to a "representative" row crop farm in Tennessee.

5) Aerial Seeding over standing corn. Cost per acre represents the per acre hire rate for an aerial seeding operation. Source: [23]

6) Crop insurance is not currently available for Pennycress based on discussions at the Inaugural Pennycress Workshop

7) Operating interest is based on half of all variable expenses.

8) Additional costs may be incurred due to specialized equipment required in the handling, hauling, and storage of pennycress.

9) Semi-Tractor/Trailer Machine Hours are based on an 800-bushel capacity or 40,000 lbs per load. Given a yield of 1600 lbs per acre, one load is equal to 25 acres of yield

Figure 1 provides a schematic of information flow for the study. Two models are used – POLYSYS and IMPLAN. The output from POLYSYS is used to develop economic impact input data for IMPLAN.

Pennycress Supply Over Time

The supply curve generated by POLYSYS shows that if pennycress seed receives a price of $0.20 per pound, enough feedstock could be produced to support an 800-million-gallon per year industry (Figure 2). When the market price for pennycress is $0.00, there is no pennycress production and the other solutions that have a positive pennycress price are compared to it (Without Pennycress or WOP). At a market price of $0.05 per pound of pennycress seed, pennycress comes into production. With a market price of $0.20, POLYSYS simulation results in an estimate of 22.1 million acres planted annually, with a national per acre average yield of 1,193 pounds. This translates to 9,685 million pounds of vegetable oil. Converting the vegetable oil to jet fuel using a hydro-processed renewable distillate facility will yield 813 million gallons of jet fuel, as well as significant levels of diesel (23.5 percent), Naphtha (7.1 percent), and LPG (17.8 percent), assuming nearly 14 gallons of fuel is produced from 100 pounds of oil (Table 3) [11,12].

Table 3: Simulated Pennycress Production by Pennycress Price (million $)

Table 3 provides information on the potential supply curve for pennycress seed and resulting supply of renewable aviation fuel in millions of gallons. Pennycress has the potential to contribute a large supply of renewable aviation fuel to the market, particularly above the $0.08/pound threshold. The representative supply curve (red curve) is shown in Figure 2.

Direct Land Use Change

As pennycress production becomes more profitable, acreage shifts away from other crops while corn and soybean acreage increases. Table 4 presents the simulated results for eight primary crops -- corn, grain sorghum, oats, barley, wheat, soybeans, cotton and rice at a market price of $0.20 per pound of pennycress seed and a maximum yield potential of 1,600 pounds per acre. The baseline figures represent the case where there is no market for pennycress. With an existing market price of $0.20, an annual average of 22.1 million acres of pennycress are harvested. With the addition of pennycress rotation acreage, comes a slight increase in harvested corn and soybean acreage. In this scenario, harvested acreage of corn and soybeans includes single-crop and double-cropping methods. Therefore, total harvested acreage increases by 3.2 percent and 5.0 percent over the baseline scenario for corn and soybean, respectively, which leads to an increase in production and total supply of corn, increasing from 14.83 billion bushels to 15.34 billion bushels. Soybean production increases from 4.0 billion bushels to 4.1 billion bushels as shown in Table 4.

Table 4: Average Annual Direct Land Use Change by Crop for the $0.20 Pennycress Price Solution. Land Planted With $0.20 Pennycress Price.

Corn prices subsequently decline by -9.1 percent to an average price of $3.29 per bushel, down from $3.62 per bushel in the Without Pennycress Scenario (Table 5). The price of soybeans remains relatively flat with an average price of $9.12 per bushel in the Without Pennycress solution and $8.88 per bushel in the With Pennycress solution. Despite the estimated decrease in corn prices, net farm income increased by $6.8 billion. Producers that grow soybeans experienced a one percent decrease in prices and a slight decrease in net returns, driven primarily by flat prices and increased production. An increase in the gross returns per unit sold occurs for wheat, sorghum, barley, cotton and rice producers. Producers selling pennycress seed increase their gross returns by $5.3 billion. Overall, there is a decrease in gross returns of $3.2 billion but an increase in net returns of $6.9 billion, which is caused by the direct land use change, as well as the price changes and pennycress production.

Table 5: Average Price Over 2016-2039 for the Baseline and Pennycress Equal to $0.20 per Pound Solution.

Number of Bio-refineries and Investment and Annual Operating Costs

Given that at $0.20 per pound price is paid for pennycress, an estimated 26.3 billion pounds of pennycress seed is produced. At 38 percent oil content, 10 billion pounds of pennycress oil is produced by 43 oil extraction facilities operating at 29 million gallons per year. The oil is then shipped to 22 hydro-processing with hydrogen purchase facilities to produce 723 million gallons of jet fuel along with 533 million gallons of other fuels.

Annual Operating Impacts Resulting from Changes in the Agricultural Sector

Change in Agricultural Operations

Agriculture impacts are split into four categories – growing the feedstock crop (Pennycress), profit – as defined here as being price minus breakeven cost, change in land use, and change in price impact. Both profit and change in price impacts are estimated by impacting proprietor’s income and the other two are estimated using ABP.

Table 6 contains the direct, indirect, and induced effects for the economic metrics of employment, labor income, value added or Gross Domestic Product (GDP), and economic activity or output. The pennycress to aviation fuel impact resulting from changes in the agricultural sector are estimated to be $12.1 billion if pennycress is sold at $0.20 per pound. Much of the economic activity results from the profit made on the pennycress seed. From this economic activity, almost 42,000 jobs are created. Most of these jobs originate because of growing and selling of pennycress seed. The direct land use change and price impacts had little effect on the nation’s economy.

Table 6: Estimated Economic Impacts from Changes in the Agricultural Sector.

Change as a Result of Investment in Biorefinery and Oil Extraction Facilities

Investment impacts occur because two facility types are needed. The first facility crushes the seed to provide an oil to the fuel conversion facility and the second is to develop the hydro-processing facility. To produce more than 800 million gallons of jet fuel, 22 HEFA facilities are needed and 43 oil extraction facilities are required. Each facility requires investment that has a direct impact on the nation’s economic activity of over 22 and 9 million for the oil extraction and HEFA facilities, respectively. In addition, once constructed, operations require over 39 and 6.8 million for the oil extraction and HEFA facilities, respectively. To achieve capacity, more than one oil extraction facility are required for each hydro-processing facility. The investments for each of these facilities are presented in Appendix Tables A.2 and A.3. To provide sufficient capacity to supply 800 plus gallons of jet fuel, a one-time economic activity increase within the country of an estimated $2.5 billion for oil extraction facilities and $553 million for the hydro-processing facilities is (Table 7). Over 13.7 and 2.8 thousand jobs would be created in constructing the oil extraction facilities and hydro-processing facilities, respectively. An estimated $1.5 billion would be added to the GDP.

^a Impact on jobs is 0 because it is assumed that the same individuals than planted the corn and soybeans plant and harvest the pennycress.

Table 7: One Time Economic Impacts as a Result of Investing in 22 Conversion and 43 Oil Extraction Facilities.

Annual Operating Impacts as a Result of Converting Pennycress Seed to Jet Fuel

Annually, approximately an estimated $6.5 billion is added to the economy through operations of both the oil extraction and hydro-processing facility (Table 8). In addition, 24 thousand jobs are added. However, of the $6.5 billion, $2.8 billion results from the RIN, which is received for both the jet and diesel fuel. The estimated direct is $1.1 billion, which is an induced effect since it is assumed to be spent as proprietor income.

Table 8: Direct, Indirect, and Induced Annual Effects when Converting Pennycress Seed to Jet Fuel.

Total Economic Impacts to the Nation’s Economy

Almost $19 billion would be added to the nation’s economy, along with the creation of nearly 66,000 jobs (Table 9). This industry would add $12.6 billion to the GDP with $9.4 billion in labor income.

Table 9: Estimated Total Economic Impacts for the Oil to Jet Fuel Pathway Using Pennycress as a Feedstock and Hydro-Processing as the Conversion.

Partial equilibrium simulation results from POLYSYS suggest that pennycress has the potential to supply approximately 800-million-gallons per year to the aviation fuel industry. The estimated economic impact of this industry has the potential to increase national economic activity by almost $19 billion and add 66,000 jobs. Many of these jobs will occur in rural areas. Adding value to pennycress seed by converting the oil into biofuel can enhance rural America. Transportation sector analysis is lacking in this analysis because it is not yet known where these oil extraction and hydro-processing facilities will be located, plus the transportation mode to move seed to oil extraction facilities and then oil to the hydro-processing facilities is unknown and therefore not included in the economic impact analysis.

The estimated results are also conservative based on current projections of corn and soybean prices, yield assumptions used and an imposed 6.5 percent soybean reduction. However, previous research has shown that subsequent years of pennycress production can actually improve soybean yields because of the benefits of a cover crop [19]. The model does not account for soil or other environmental benefits through the adoption of a cover crop in corn and soybean rotations. This limitation is acknowledged and left for future research. Another limitation is the use of current projections of commodity prices. As projections are updated, the effect of rising or falling prices in corn, grain sorghum, oats, barley, wheat, soybean, cotton and rice will alter the results. If future prices of corn and soybean rise, the supply of pennycress would rise as producers look to meet market demands of corn and soybean. Furthermore, the maximum yield potential is assumed at 1,600 pounds per acre for pennycress. For the regions that come into production, average yields are approximately 1,200 pounds per acre. However, previous agronomic research has found yield to be as high as 2,200 pounds per acre. Genetic research into this crop is also ongoing. Pennycress shares a similar genetic structure with Arabidopsis. The large body of research around Arabidopsis may allow for rapid advances in pennycress genetic varieties with improved yield and other desirable characteristics [17].

The oil and gas industry pays RINs to alternative or renewable fuel industries, which amounts to a transfer between regions in the United States. In this analysis, the impacts resulting from payment of RINs are not included. If included, negative impacts would likely be similar to positive impacts but in different locations within the U.S.

Finally, the POLYSYS solutions are based on USDA projections. In creating the POLYSYS Baseline to match USDA’s, in some areas crops are planted that are less profitable than other crops. When this occurs, adjustments are made to the model so that regional production matches the baseline. This adjustment is carried through all scenarios and may impact areas that would shift. It is believed that at $0.20 per pound, and a breakeven cost of $0.06 per pound excluding opportunity and additional management costs, additional acreage would be realized once an industry is established.

This work was funded in part by the US Federal Aviation Administration (FAA) Office of Environment and Energy as a part of ASCENT Project 1 under FAA Award Number: 13-C-AJFE-UTENN-Amd 5. Funding also was provided by USDA through Hatch Project TN000444. The authors also wish to acknowledge Nate Brown, FAA program manager, along with the other partners of ASCENT including Manuel Garcia-Perez, Kristin Lewis, Michael Wolcott, and Tim Rials. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the FAA or other ASCENT Sponsors.

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