Companies threaten to move business overseas without RFS boost

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, September 10, 2014

Executives of seven advanced biofuels companies today warned President Obama that they would take their business overseas if the government isn’t aggressive in supporting their industry.

In a letter, the companies urged the president to both raise the proposed targets for biofuels use this year and adjust the methodology by which they were calculated. U.S. EPA last fall proposed to lower the federal mandates for both conventional ethanol and advanced biofuels, citing limits to the amount of ethanol that can be used in fuel infrastructure and the slower-than-expected ramping up of the advanced biofuels industry.

“The question at hand is whether the return on investment will flow predominantly to the United States, or whether countries like China and Brazil will reap the economic and environmental rewards of technologies pioneered in America,” the companies¬†wrote.

The signatories include Poet-DSM Advanced Biofuels LLC, which last week opened the nation’s largest cellulosic ethanol plant in Iowa, and other big companies that are in the final stages of completing their first large-scale cellulosic facilities in the Midwest.

The companies said they were attracted to the United States because of the long-range policy certainty created by the renewable fuel standard, which was passed into law in 2007 and called for increasing levels of conventional ethanol and advanced biofuels to be blended into petroleum gasoline and diesel. They’ve collectively invested billions of dollars in building biorefineries to produce cellulosic ethanol, a type of advanced biofuel made from plant-based materials such as agricultural residues and switchgrass.

The RFS called for the volume of advanced biofuels to surpass corn ethanol by the year 2022. The production of advanced biofuels emits fewer greenhouse gases than conventional ethanol and does not come with the “food versus fuel” debate of the corn ethanol sector.

EPA is required to determine each year whether to waive the volumes laid out in the RFS. In November, the agency proposed for the first time to lower the refiners’ requirements for blending both ethanol and advanced biofuels. The agency’s proposal called for a 16 percent reduction in the total renewable fuel volume Congress envisioned for 2014. Refiners — which applauded the proposal but called for a wholesale elimination of the RFS — would be required to blend 2.2 billion ethanol-equivalent gallons, compared to the 3.75 billion statutory amount.

EPA Administrator Gina McCarthy has said in recent public appearances that the final rule, which is currently at the White House Office of Management and Budget for review, would contain higher targets.

But in their letter, the advanced biofuel producers said that in order for investment to flow to their industry, the final rule should also incorporate a methodology based on what the biofuels industry is capable of producing and not on infrastructure restrictions. Higher numbers themselves would not be enough to drive investment, they said.

“The current EPA proposal froze investment in cellulosic ethanol not because of the 2014 targets; but rather, because it is not clear whether oil companies will be obligated to hit any annual RFS targets going forward,” the companies wrote. “If the proposed methodology is not fixed in the final rule, the United States will no long be the global leader for advanced biofuel investment and the 2014 rule will have inadvertently done more than your worst critics have to harm a low carbon industry you always championed.”

Last week, Poet-DSM officials iterated similar warnings. The company opened a 25-million-gallon cellulosic ethanol plant in northwest Iowa on Wednesday to great fanfare but said it had not yet made any final decisions about where in the world it would expand. Poet LLC founder Jeff Broin said those decisions would be based on policy stability.

“One of the things that’s critical right now is that the United States stand behind its current policy,” he said (Greenwire, Sept. 4).

The other companies signing the letter were Abengoa Bioenergy, DuPont Industrial Biosciences, Fiberight, Mascoma Corp., Novozymes North America and Quad County Corn Processors. Abengoa is planning to open a 25-million-gallon cellulosic ethanol plant in Kansas next month, while DuPont is finishing construction on a 30-million-gallon plant in central Iowa.