08/16/22 by Mike Taylor 0 Comments
CO2 Shortage & General Update
An update to keep you informed of the difficulties we’re all facing currently with CO2.
National Crisis: As you may be aware there is a national CO2 shortage. The main causes of this includes a decrease in ethanol production in the USA as the federal government moves forward with decreasing the usage of fossil fuels. Secondly, fertilizer production is down in the USA due to rising energy costs squeezing farmers budgets. Most of the CO2 in the USA comes from these two industries which are under pressure in the bigger picture to decrease production in the federal government’s goal to reduce carbon emissions. In addition, naturally producing ground sources in the Southeast have been experiencing purity contamination problems reducing the production of “beverage grade” CO2. Several large producers in both categories are experiencing maintenance issues, unable to get needed repair parts to run at capacity or at all while others are closing shortly for scheduled annual maintenance with questionable reopening dates.
Northeast: New York had two ethanol facilities pre-pandemic, one closed due to decreased gasoline production and didn’t reopen. There are zero other ethanol production facilities in NY, NJ or all of New England – all must come from primarily the Midwest via railroad or truck. Losing 50% of New York’s production is huge for the Northeast. Our own tractor trailers are now driving to the Midwest to pick up CO2.
Transportation: The USA is experiencing unprecedented delays in railroad shipping with a reported labor shortage for rail companies. A lack of CDL drivers as many either retired during the pandemic or left the industry. In addition, on February 7th, 2022 the Federal USDOT implemented strenuous new training requirements to obtain a CDL (commercial driver’s license) that in most cases requires applicants to enter a training school or program. In many rural areas, training doesn’t exist or costs thousands of dollars compounding the driver shortage. Getting new trucks is difficult, our own company has 7 new trucks on order since Oct 2021, still waiting. Parts for broken trucks can now take months as existing fleets age and we simply can’t get repaired.
CO2 supply across the USA is normally “tight” with all the sources up and running, rail working timely and delivery trucks on the road. Today all factors are in discourse compounding the problems. We’re receiving calls from all over the Eastern USA looking for CO2 as their suppliers can’t provide, willing to “pay anything” to keep production going. We simply can’t help them as we’re treading water daily to keep our customers supplied.
Future: Unintended Consequences: The Federal Government is devising a system of “green credits” where it will be more lucrative for “clean” CO2 producers (ethanol & fertilizer) to put their CO2 by-product INTO THE GROUND in abandoned oil wells & salt caverns earning them “green credits”. These credits will be sold to other businesses that will be forced to off-set their carbon emissions. It’s reported that these green credits will be valued at 1100% more than selling to the market we all buy from. The intention is to stop CO2 release from flue gas emissions but these markets that are already ‘capturing’ their CO2 will soon be able to gain much more value as we compete for this product vs pumping into the ground. The elimination of gasoline powered cars will decrease ethanol production, a huge concern. If the USA follows other nations in Europe and Asia with pushing “ESG” (environmental, social, governance) ratings, it could force the discontinuance use of nitrogen / ammonia fertilizer for crop production. Less fertilizer means less CO2 byproduct we use and less crop production (less food). Big issues and Europe is experiencing CO2 shortages currently. The pressure is on for investment funds to NOT invest in anything fossil fuel related here in the USA keeping closed ethanol plants shuttered and causing diminished supply of now expensive feedstock natural gas for fertilizer producers.
CO2 is used for not only beverage carbonation – but also food flash freezing production, pH control in water systems, crop enrichment in greenhouses, fire suppression systems, welding applications, theatrical productions, production blasting, dry ice for food shipping and endless research & development of medical pharmaceuticals.
Time will tell, unchartered waters and evolving. Something has to give.
Our own company: As in every business today, attracting, hiring and retaining great employees is a challenge. Now add in they must have a hard to get CDL license with a hazardous materials endorsement and remain 100% drug-free as we legalize marijuana in most states. Drive long hours, deal with traffic and sometimes understandably angry customers that are seeing delivery delays & cost increases – the challenges increase.
What we’re doing at Tri-State Carbonation:
- Offering free CDL training to attract new delivery drivers as we’ve become a DOT authorized training center for classroom and on-the-road training
- Have new trucks on order, hoping to see relief soon
- “Hot Seating” delivery trucks with part time drivers on off hours to make deliveries
- Paying increased wages in order to attract & retain delivery drivers
- We’ve added storage capacity at our various depots where our trucks refill
- Working with our suppliers and traveling long distances in our own tractor trailers to bring CO2 back to our depots in the Northeast
- We’ve purchased close to 800 tons storage capacity in huge tanks we’re working to install on rail to help bring in CO2 more efficiently and give us a supply cushion when shortages occur. This will be the largest storage facility in the Northeast.
- Adding cellular telemetry shortly on customer tanks to better gauge usage
- Steadily increasing tank sizes at our customers over the last 5 years
- Working with our suppliers for various supply options further into the Midwest to do our best to have CO2 and keep our customers supplied
- Ordering new tanks & cylinders up to a year in advance to be able to service customers
- Added more customer service reps and service techs in the field
The Tri-State team’s been working extremely hard in these challenging times and apologize for any delivery or service delays. This has been hands-down the most difficult of our 35 years servicing CO2 customers but we’re looking forward to best handling whatever the future throws at us.
Thank you for your continued patience and patronage. We’re striving to stay ahead of the curve and deliver the best possible service to our customers in these challenging times.
Please reach out to us if we can be of any assistance.