Cellulosic ethanol makers turn on corn industry

Source: By Darren Goode, Politico • Posted: Friday, March 13, 2015

Corn ethanol has a new foe in the battle to preserve EPA’s renewable fuels mandate: the makers of cellulosic ethanol.

Frustrated by the growing confusion around Washington’s RFS policy, the trade group for the small industry that’s seeking to turn non-food crops into energy called on Congress to change the rules backed by the giant ethanol industry that contributes about 10 percent of the nation’s transportation fuel supply.

Advanced Biofuels Association President Michael McAdams Wednesday said the group is starting a campaign to lobby Congress to extend and revamp the RFS to better help cellulosic and other advanced biofuels because the current policy quagmire was stunting their growth.

Eight years after Congress first created it, McAdams said, “it is easy to see that the RFS may be working for some, but it is only minimally helpful to advance the promise and potential of next-generation renewable fuels.”

Corn ethanol production, which averaged 935,000 barrels per day last year, has generated complaints from oil companies and some green groups that the fuel was costing consumers too much, raising food prices and damaging the environment. But supporters have called for the EPA to continue to step up the volume of ethanol used in the U.S., saying the criticisms were overblown and that the domestically produced fuel had displaced imported energy sources.

McAdams told POLITICO “the time is now,” to change the RFS, and he cited the EPA delays in issuing the annual fuel blending requirements for 2014 and 2015, which was hurting the industry’s efforts to raise the money needed to develop the infrastructure to produce the next generation of biofuels.

The RFS “has become one of the greatest obstacles to continued development of the advanced and cellulosic biofuel industry due to inconsistent and poor implementation,” McAdams told a biofuels conference this morning.

Producers of corn ethanol and biodiesel have benefited from the RFS, he said.

“They’re the incumbent industry, if you will, and so the status quo is fine for them. And the status quo isn’t fine for the people that I represent,” McAdams said.

But Renewable Fuels Association CEO Bob Dinneen, whose association backs corn ethanol, said the lobbying push by McAdams “is throwing more uncertainty into this process by calling for legislative action when legislation is not needed to secure improvements in the program.”

EPA already has the authority to extend the mandate beyond 2022, he said, “as well as to address the very real concern of oil companies choosing to rely on a waiver credit in lieu of purchasing a gallon of cellulosic ethanol.”

Adam Monroe, president of Novozymes America, which makes enzymes for the biofuels industry, dismissed McAdams’s group as not representing “even the majority of the advanced biofuels producers.”

“It’s the politics that are broken, not the legislation,” he added.

Growth Energy CEO Tom Buis warned that “by opening up the RFS for legislative changes, you are opening a can of worms,” which would set the “entire renewable fuels industry on the path to a rollback of the RFS.”

But for green advocates, the move was a huge push for their effort to rein in corn ethanol. The Environmental Working Group’s government affairs vice president Scott Faber called McAdams’ lobbying announcement “a huge political game changer.”

“Today’s announcement reflects the first time that the second generation fuels industry has announced publicly that the RFS is broken and that Congress needs to fix it,” Faber said. “That is a remarkable shift.”

And it may be another sign that corn ethanol’s political muscle is waning.

Several Republican presidential hopefuls gave fairly positive reviews to the RFS at last week’s agriculture forum in Iowa that was hosted by Bruce Rastetter, an outspoken supporter of the RFS.

Former Florida Gov. Jeb Bush and Wisconsin Gov. Scott Walker said they supported the mandate for now, even though both had been skeptical of state or federal ethanol subsidies in the past. Former Texas Gov. Rick Perry acknowledged that he had opposed the mandate in the past, but warned against going too far, too fast in cutting it back without addressing other federal energy subsidies, like those supporting wind. Others like Mike Huckabee and Rick Santorum, the past two winners of the Iowa caucuses, remained unabashed in their support.

Still, the issue is not likely to be a deciding factor in the Iowa presidential caucus, not to mention in the national contest.

A recent POLITICO survey found that about two-thirds of Iowa insiders think a presidential candidate could win the caucuses while opposing the RFS. Most Democrats and Republicans said it is an “important” issue, but they noted that the state GOP has become more conservative, and that Iowa has become less agrarian and the economics surrounding biofuels have shifted.

Ethanol had already lost some of its most powerful congressional allies, such as former House Speaker Dennis Hastert (Ill.), Senate Republican leader Bob Dole (Kansas) and Senate Democratic leader Tom Daschle (S.D.).

But the best hope still for the corn ethanol coalition is apathy and regional disagreements that continue to divide Capitol Hill.

“Any EPA measures to substantially adjust the corn ethanol mandate could face heavy opposition in the Senate, because many GOP Senators up for reelection in 2016 hail from corn and ethanol producing states,” said Kevin Book, managing director at the analyst firm ClearView Energy Partners. That includes probably ethanol’s biggest Senate booster, Iowa Republican Charles Grassley.

Any real movement on updating the law may depend on whether oil companies and refiners who have sought a full repeal of the law can join with those like McAdams who are aiming only to amend the RFS.

McAdams said he’s willing to talk to anyone who wants to make changes to the mandate, and he’s already talking to allies on Capitol Hill in “discussing conceptional fixes and ideas for bills.”

A handful of oil refiners have been on board with McAdams for months about creating a broader coalition, though they haven’t sorted out their differences on issues such as how long the RFS should be extended or how to give financial help to advanced biofuels investors.

McAdams himself may be instrumental in getting Senate Democrats like Ben Cardin (Md.), Sheldon Whitehouse (R.I.) and Tom Udall (N.M.) to join the movement to update the law, as well as key House lawmakers like Minority Whip Steny Hoyer (D-Md.) and Energy and Commerce ranking member Frank Pallone (D-N.J.).

House Energy and Commerce Chairman Fred Upton said his panel will continue to consider options.

“I’ve long said that this law is broken and needs to be fixed, but stakeholders must be willing to come to the table and work with us,” he said. “The fact that we still don’t know what the targets were for 2014, let alone for 2015, underscores the flaws in the system.”

And it may be that a serious effort to update the law will have to wait until EPA releases its promised update to the mandate. The agency is expected by early June to release a final fuels blending mandate for 2014 and propose volume mandates for 2015 and 2016.

“His announcement today will not change the calculus on the Hill,” said Stephen Brown, vice president of federal government affairs at oil refiner Tesoro. “I don’t think that chasing legislative reform in this session of Congress at the end of the day is going to be all that productive, so his time would be better spent chasing capital right now.”

But the current inertia on Capitol Hill won’t last forever, Brown said. “And when it turns, it turns fast. And Michael will be part of that.”