EPA Proposal Pulls the Rug on Advanced Biofuels

Joanna Schroeder

Advanced-Biofuels-Association-LogoAccording to the Michael McAdams, president of the Advanced Biofuels Association, if the Environmental Protection Agency (EPA) sticks with the 2.2 billion gallons in the final rule, the agency will pull the rug out from underneath the growing advanced biofuel industry.

This was in response to the EPA’s proposed 2014 fuel for the Renewable Fuel Standard (RFS) that proposed the target for advanced biofuels at 2.2 billion gallons with a range from as low as 2 billion gallons and as high as 2.51 billion gallons. The 2.2 billion gallon target represents a 20 percent cut from the 2013 level and a disheartening 1.55 billion gallon reduction from the volume as outlined by statue.

“Innovative companies have responded to the challenge of producing cleaner, low-carbon fuels by investing a collective $14 billion in the development of advanced and cellulosic biofuels. However, today’s proposal reveals that EPA might still deliver a devastating blow to this nascent sector and a victory for the oil industry by cutting the volume requirements for advanced biofuels. Such a move will chill future investments necessary to produce large-scale quantities of renewable fuels that cut greenhouse gas emissions by at least 50 percent compared to gasoline,” said McAdams.

McAdams explained that RFS compliance is tracked by assigning renewable identification numbers (or RINs) to each ethanol-equivalent gallon of biofuel. “ABFA conservatively estimates that our industry will generate at least 3.5 billion RINs in 2013 that qualify as advanced biofuels, exceeding this year’s target of 2.75 billion advanced RINs by at least 750 million gallons. To continue to support new advanced biofuel production, EPA should set the 2014 advanced biofuel target at 3.75 billion gallons as contemplated by statute. This target can be met and exceeded by current production plus carry-over RINs.”

Anything less than requiring 3.75 billion gallons from advanced biofuels in 2014, he noted, would be a step backwards from the Obama administration’s commitment to address climate change. He also stressed that ensuring the success of the advanced biofuels industry is his top concern and as such will actively engage in the comment period.

As McAdams pointed out, companies still in the development and construction phases will also be significantly affected. James Moe, Chairman of the Board for POET-DSM POET DSM logoAdvanced Biofuels, whose cellulosic ethanol plant is under construction and set to begin full operations by mid-year 2014 noted that next year, for the first time in history, the U.S. will produce meaningful volumes of cellulosic ethanol.

“With a number of new plants coming online including POET-DSM’s Project LIBERTY, we can finally say that commercial cellulosic ethanol production has arrived,” he said.

“Unfortunately, the latest Renewable Volume Obligations (RVOs) from the EPA underestimate the volume of cellulosic ethanol that will be produced next year. We understand the intention to not overestimate capacity, but the proposed numbers released today hurt efforts to expand this cutting-edge technology and deny Americans new alternatives to fossil fuels. We ask the EPA to continue to engage closely with the cellulosic biofuels industry during the comment period so that we can demonstrate our confidence in our ability to scale up these processes so that the Final Rule uses the best information possible to support the growth of this new and important industry.

“Additionally, explained Moe, by cutting opportunities for grain ethanol producers and conceding arguments for maintaining the blend wall, the EPA takes away opportunities for cellulosic biofuel development. POET-DSM is already discussing cellulosic licensing options with other grain ethanol producers in an effort to grow our nation’s capacity to use new feedstocks for fuel production. Because this process takes advantage of synergies in infrastructure, transportation, feedstock logistics and other areas, the grain ethanol industry must remain strong in order to build cellulosic capacity. The poor signal from Washington today makes that work more challenging.”

The Advanced Ethanol Council also expressed disappointment. Executive Director Brooke Coleman, noted that although this is a proposed rule at this point, its the first time the Obama Administration has shown any sign of wavering when it comes to implementing the RFs.

aeclogo“EPA is in the right ballpark for cellulosic biofuels, and we are confident that the final number will be the right one for the industry in 2014. But bigger picture issues must be resolved in the final rule because advanced biofuel investors also pay attention to the big picture.”

The Council pointed to unnecessary reductions to the advanced biofuel pool, unfounded concern about imaginary blend walls, and not enough faith in the mechanics of the RFS program among certain Administration officials as the primary issues that need to be resolved during the comment period.

“What we’re seeing is the oil industry taking one last run at trying to convince administrators of the RFS to relieve the legal obligation on them to blend more biofuel based on clever arguments meant to disguise the fact that oil companies just don’t want to blend more biofuel. The RFS is designed to bust the oil monopoly. It’s not going to be easy,” added Coleman.

The Council added that the catalyst for too conservative a proposal is higher RIN prices in 2013.

“We hope that the Obama Administration will realize that reasonably higher RIN prices are a good thing instead of a bad thing. Higher RIN prices are a sign that the oil companies are predictably refusing to blend actual liquid gallons of fuel to comply with the RFS. But higher RIN prices are encouraging those unwilling to obstruct on RFS compliance to actually blend more renewable fuels. Investors are starting to see the RIN program drive more demand for renewable fuels with consumer savings at the pump. Now is not the time to depressurize the program,” concluded Coleman.

The advanced biofuels industry has committed to banding together to fix the final rule.

advance biofuels, AEC, Cellulosic, Ethanol News, POET, RFS