EPA proposes doubling cellulosic ethanol quota

Source: Written by Christopher Doering, Argus Leader Washington Bureau • Posted: Monday, March 4, 2013


The Environmental Protection Agency proposed nearly doubling its 2013 quota for biofuels made from grasses, wood chips and other crop residue.

 The Environmental Protection Agency proposed nearly doubling its 2013 quota for biofuels made from grasses, wood chips and other crop residue. / Elisha Page / Argus Leader

WASHINGTON – The Environmental Protection Agency proposed nearly doubling its 2013 quota for biofuels made from grasses, wood chips and other crop residue less than a week after a federal appeals court ruled the government had been too aggressive in setting production levels for the nascent industry.

The agency said Thursday it was proposing 14 million gallons of cellulosic fuel to be included by refiners in motor fuel this year, up from 2012 when it set the mandate at 8.7 million gallons. The 2012 level proved to be overly optimistic with about 20,000 gallons actually being generated as production of the advanced biofuel struggled to get off the ground. The oil and gas industry, which later sued, complained the EPA basically hit them with a tax by requiring them to buy credits needed to produce cellulosic ethanol even though the fuel was not commercially available.

There are cellulosic plants in the late stages of development or under construction in more than 20 states and other countries, a promising sign for the next generation of biofuels. DuPont Industrial Biosciences is building a 30 million-gallon-capacity refinery in Nevada, Iowa. A second cellulosic plant, a joint venture of Sioux Falls, S.D.-based ethanol producer Poet and Dutch-based DSM Advanced biofuels, is under construction adjacent to Poet’s corn-fed ethanol plant in Emmetsburg, Iowa.

“The proposed standard in no way exaggerates the volumes that will be available in 2013 based on current information, and may ultimately prove to be conservative,” said Bob Dinneen, president of the Renewable Fuels Association. “cellulosic ethanol is being produced today at commercial scale in Florida, and with construction nearing completion at several other commercial sites, we fully expect 2013 to be the breakthrough year for cellulosic ethanol.”

The EPA has been gradually increasing how much cellulosic fuel must be blended into automobile fuel since 2010, but in each year there was little to no commercial production. Ethanol made from woody material is more costly to produce than fuel from corn, a factor that has slowed the construction of commercial plants needed to produce it on a larger scale. The cellulosic mandate was part of the broader Renewable Fuel Standard, an 8-year-old law that required refiners to produce alternative fuels from corn, soybeans and other products in an effort to reduce the country’s dependence on foreign oil.

Last week, the U.S. Court of Appeals for the District of Columbia decided in favor of the American Petroleum Institute when it said the EPA’s process for estimating cellulosic biofuel output “did not take neutral aim at accuracy” and “was an unreasonable exercise of agency discretion.”

The court’s ruling in effect said the EPA’s overly aggressive estimate was set with the goal of promoting the growth of cellulosic fuel to spur investment rather than making an accurate prediction of how much could be produced.

The oil and gas industry criticized the EPA for ignoring the recent court decision.

“The court recognized the absurdity of fining companies for failing to use a nonexistent biofuel,” said Bob Greco, API’s downstream director. “But EPA wants to nearly double the mandate for the fuel in 2013. This stealth tax on gasoline might be the most egregious example of bad public policy, and consumers could be left to pay the price. EPA needs a serious reality check.”

As part of Thursday’s proposal, the EPA called for 16.55 billion gallons of renewable fuels, including biodiesel and ethanol made from corn, to be purchased by refiners in 2013, an increase from 15.2 billion in 2012. The 2013 proposals are open to public comment for 45 days.

“The Renewable Fuel Standard is the most successful program in history for replacing fossil fuel use with domestic, renewable energy,” said Jeff Lautt, chief executive of Poet. “We’ve seen oil imports drop, new jobs and economic activity in rural America and new record incomes for farmers. The overall volume numbers from the EPA reflect a logical next step in continuing that success.”

Separately, the EPA also proposed a rule to help verify the legitimacy of “renewable identification numbers” – a special serial number given to batches of biofuels before they are sold to refiners and gasoline importers looking to comply with the federal mandate. The EPA has uncovered more than 140 million invalid RINs generated by three biodiesel companies alone, representing between 5 percent and 12 percent of the biodiesel market.