EPA proposes aggressive cellulosic target for 2013

Source: Amanda Peterka, E&E reporter • Posted: Friday, February 1, 2013

U.S. EPA today announced on Thursday an ambitious target for cellulosic biofuel production this year, a move that was welcomed by the renewable fuels industry but immediately drew heat from oil interests.

The proposed rule requires refiners to blend 11 million gallons of cellulosic biofuel, or the equivalent of 14 million gallons of ethanol, into the nation’s supply of petroleum-based gasoline during the calendar year. The number takes into account the production from each facility expected to come online in 2013, as well as projections given by the Energy Information Administration, EPA said.

“We believe the sum of these volumes expected by the specific companies noted in the proposal … is a reasonable representation of expected production,” EPA said. “This projection reflects EPA’s current estimate of what will actually happen in 2013, and we will consider public comments before setting the final cellulosic standard.”

The volume requirement set under the renewable fuel standard comes less than a week after a federal court ordered the agency to revise its 2012 cellulosic requirement of 8.65 million gallons, finding the agency’s methodology in calculating it was not accurate enough. The oil industry, which brought the challenge, had argued that the number was too aggressive, given the actual production of cellulosic fuels last year of about 22,000 gallons.

The American Petroleum Institute doubled down on its criticism of the renewable fuel standard shortly after the agency released today’s numbers.

“For four years running, biofuel producers have promised high cellulosic ethanol production,” Bob Greco, API’s director of downstream activities, said in a statement. “EPA uses these aspirational claims to set mandates, but the promised production hasn’t happened. With today’s announcement, EPA has proven yet again that its renewable fuels program is unworkable and must be scrapped.”

Cellulosic biofuels are those made from plant-based materials; they are considered the next generation of fuels after ethanol. In its calculations, EPA said it took into account the production at four new cellulosic facilities, two of which were completed late last year.

In its proposed rule, EPA also set a requirement of 2.75 billion gallons of ethanol-equivalent volume for overall advanced biofuel, of which cellulosic fuels are a subset. Biomass-based diesel production was set at 1.28 billion gallons, a number announced last year. By statute, corn ethanol is set at 13.8 billion gallons.

The Biotechnology Industry Organization, which represents companies working in the advanced biofuel space, said it welcomed the requirements and warned of attempts by oil interests to overturn them.

“We fully expect the trade organizations for oil companies and their allies to continue to use every regulatory and legalistic ploy at their disposal to delay finalization of these rules, block the growth of the renewable fuel industry and attempt to preserve their control of the fuel market,” the organization said in a statement.

Ethanol trade group Renewable Fuels Association also applauded EPA for the cellulosic requirement, saying in a statement that it “in no way exaggerates” the volumes that will be available in 2013.

The group, though, expressed concerns with the overall advanced biofuel requirement, saying it would open the door for more imports of Brazilian sugar cane ethanol, which EPA allows U.S. refiners to use to meet their obligations.

“Every gallon of imported ethanol is one less gallon of domestically produced ethanol that will be used,” said Bob Dinneen, president and CEO of the Renewable Fuels Association.

Growth Energy, the other major ethanol trade group, withheld comments on the specific volume proposals, saying only that it was reviewing the announcement and that it would submit formal comments to EPA. The proposed rule is open for public comment for the next 45 days

Sen. David Vitter (R-La.), the ranking member of the Senate Environment and Public Works Committee, blasted the proposal.

“The EPA continues to make up unicorn-like standards in this area of renewable fuels production, and clearly are ignoring last week’s appellate court ruling,” Vitter said in a statement. “EPA has been getting away with mandating exaggerated fuel standards based on a pie in the sky wish, and even after last week’s embarrassing loss, they persevere in ignoring the cold hard facts.”

Fraud program

Also this afternoon, EPA proposed to create a quality assurance program to address several fraud cases that have occurred over the past year and a half in the biodiesel credit marketplace

Under the voluntary program, EPA would authorize third parties to certify that renewable fuel credits, which are identified by unique 38-digit renewable identification numbers (RINs), are legitimate. Refiners that purchase certified credits would not be penalized with fines if those credits were later found to be fraudulent.

The proposed rule also lays out who would be responsible for replacing invalid credits should fraudulent credits cause refiners to fall short of meeting the volume requirements under the renewable fuel standard.

EPA maintained that it is not changing its “buyer beware” approach to the purchase of credits and proposed two options for the replacement of invalid credits, which would be decided upfront with the audit. Under the first option, the third-party auditor would be required to replace the credits, while under the second, refiners would be liable for replacing faked credits.

“The quality assurance program would help to reduce the number of invalidly generated RINs in distribution, and thus ensure that valid RINs are traded and used for compliance,” EPA said. “As a result, it would help to ensure that the renewable fuel volumes mandated by Congress are actually used.”