Governors' Biofuels Coalition

Advanced Biofuel Companies Weigh Risks on Future

The confusion the U.S. Environmental Protection Agency has created on the Renewable Fuel Standard has been enough to force advanced biofuels companies to make decisions they may not have made otherwise.

Although these companies remain optimistic about the future of the industry, the expansion of their operations has been slowed in the United States because of RFS doubts, representatives from a number of cellulosic ethanol companies said during a panel discussion Tuesday at the International Fuel Ethanol Workshop in Minneapolis.

A case in point: Abengoa Bioenergy’s recent launch of its first-generation cellulosic ethanol plant in Hugoton, Kansas, has been followed by two other announcements.

The company announced plans to build plants in Brazil and France, although EPA has proposed a step-up in the RFS volumes for cellulosic ethanol from 33 million gallons in 2014, to 106 million in 2015 and 206 million in 2016.

The proposed volumes for advanced and cellulosic ethanol are far below those mandated by the RFS statute, which calls for production in the billions of gallons in the next few years.

An official with Abengoa said the company believes it will build more cellulosic ethanol plants in the United States at some point.

When EPA announced a proposed cutback across the board on the RFS in November 2013, however, Chris Standlee, executive vice president of global affairs with Abengoa, said his company began making other plans.

“The damage was done,” he said. “No question. November 2013 was a clear indicator EPA was not going to stick with the rule. It has impacted the development of new facilities in the United States. Uncertainty has caused damage.”

A recent estimate from the Biotechnology Industry Organization, or BIO, is that EPA delays on the RFS have led to an estimated loss in investment on advanced biofuels in the neighborhood of $13.7 billion.

“The United States has been a leader in advanced technology,” Standlee said. “It’s unfortunate to see that leadership position not being kept.”

Dan Cummings, president of POET-DSM Advanced Biofuels, said corn ethanol technology took decades to perfect, so perfecting cellulosic ethanol could take equally as long.

“There is a sense you need to have patience,” he said. “Even conventional ethanol is 40-plus years old. The regular chemical process technology took about 20 years to reach full commercial scale. We’ve had some great achievements in biomass collection. We have had more challenges in pre-treatment. We still believe we’ll have production in 2015.”

POET-DSM is in the process of launching cellulosic ethanol production at its plant in Emmetsburg, Iowa, using corn cobs, stalks and other materials.

Jan Koninckx, global business director for advanced biofuels with DuPont Industrial Biosciences, said the oil industry knew the day was coming when the RFS would push ethanol markets beyond the blend wall.

DuPont is in the process of launching commercial cellulosic ethanol production at a plant in Nevada, Iowa.

“Oil refiners were all able to see and read the law we see,” he said. “No one should be surprised. We’re going to go past E10. That is the signal that will give confidence to investors.”

In the past decade or so, EPA has been faced with dialing down the RFS for cellulosic ethanol, because the industry has been in the process of readying technologies for commercial scale. The so-called great recession led to a slowdown in investment and progress in advancing technologies for many cellulosic ethanol development companies.

MAKING PROGRESS

Brooke Coleman, executive director of the Advanced Ethanol Council, said during an address to the International Fuel Ethanol Workshop audience that oil companies have fought for a reduction in the RFS because they could see the advanced ethanol industry making progress toward commercialization.

“It’s all about whether or not we’re going to implement RFS2,” he said. “We are crossing from E10 to higher blends. Oil is not fine with higher ethanol past (beyond) where we are today. What oil is fighting for is RFS1” which led to the build-out of corn-based ethanol to the E10 market.

“What’s at stake is whether we can get out of the E10 cage. We want access to the consumer. We want to be rewarded for innovating. What’s really disappointing is how they’ve (oil) found a friend with the president. He has been too weak-kneed to implement it (RFS).”

Despite the uncertainty, Coleman said there are reasons for the industry to be optimistic.

“Hard battles are not easily won,” he said. “By November (when EPA finalizes the RFS) it could be a profoundly different place. We can be angry and engaged.”

Ahead of EPA’s scheduled public hearing on the RFS proposal June 25 in Kansas City, Kansas, Coleman said the outcry from rural America to the agency’s finalization of the waters of the United States rule, could be an impetus to a bigger outcry this time around on the proposed RFS volumes.

“The president has given us a lot of political red meat,” Coleman said. “The Heartland needs to say you don’t get both … EPA has everything it needs to fix this. We need a marketplace … This is about whether RFS2 is going to drive change in the marketplace. There are huge ramifications for what is going to happen in November for the advanced ethanol industry. It’s an EPA problem. It’s a president problem.”

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