EPA sends 2013 cellulosic blending requirement sharply downward

Source: Tiffany Stecker, E&E reporter • Posted: Thursday, April 24, 2014

It’s a drastic reduction from the amount EPA had decided on eight months ago — 6 million gallons — and an even larger decline from the 1 billion gallons the industry was meant to produce in 2013, according to the 2007 law that put the federal renewable fuel standard in place.The adjusted amount — the number of Renewable Identification Numbers (RINs) registered with EPA minus 8,332 RINs considered to be invalid — reflects the most accurate figure for the sector, said representatives from both oil trade groups and biofuels associations. Cellulosic biofuel makers produce fuels from agricultural wastes, wood, household trash and energy grasses. The fuel is considered to be more environmentally sustainable than biofuels from food crops like corn and soybeans. RINs are credits that represent ethanol-equivalent gallons of biofuels that can be bought and traded by oil companies to comply with the RFS.

The decision is a win for the oil industry, which took the agency to court over EPA’s 2012 renewable volume obligations. The U.S. Court of Appeals for the District of Columbia Circuit ruled that EPA could not set its numbers to promote the growth of biofuels beyond a realistic capacity (Greenwire, Jan. 25, 2013).

“Nearly five months after the end of the year, EPA has finally agreed to reconsider its 2013 mandate for biofuels that do not exist,” said Bob Greco, downstream group director for the American Petroleum Institute, in a statement.

Oil companies are subject to penalties if they do not blend the required amount of cellulosic fuel in the greater fuel supply, and unrealistic figures from EPA can create uncertainty in the market.

The Energy Independence and Security Act of 2007 sets yearly targets for biofuels from 2008 and 2022, by which time the nation should be on track to produce 36 billion gallons per year. However, it allows the agency enough flexibility to make year-to-year adjustments. This ability to make changes to the mandate lets EPA base targets on current market conditions, say biofuel backers. Oil companies disagree and say the RFS must be repealed outright.

Projections fall short of ‘reality’

“EPA should base its cellulosic mandates on actual production rather than projections that — year after year — have fallen far short of reality,” Greco said.

EPA has proposed a 17-million-gallon target for the 2014 cellulosic gallons, a number the oil industry says will not be met.

“In the first quarter, less than 75,000 gallons of cellulosic biofuel were actually produced — less than one percent of EPA’s projections,” said American Fuel and Petrochemical Manufacturers President Charles Drevna in a statement. “We hope that EPA radically adjusts the 2014 mandate to reflect actual production and obviate the need for the industry to continually challenge these unrealistic mandates.”

In its original assessment, EPA expected cellulosic production to come from two firms: INEOS Bio, which makes ethanol from farm and household waste at a facility in Vero Beach, Fla.; and KiOR, which makes renewable gasoline and diesel from Southern yellow pines at a refinery in Columbus, Miss.

KiOR alone represented 80 percent of EPA’s cellulosic projection. But the company fell on hard times in the second half of 2013, and its production estimates fell from 3 million to 5 million actual gallons of cellulosic biofuel to 1 million to 2 million, according to an August conference call. INEOS Bio only began to generate RINs in January 2014, holding KiOR accountable for all 810,185 RINs from 2013.

Representatives from the cellulosic industry supported EPA’s decision to revisit the numbers.

“The retroactive adjustment for 2013 is the right thing to do based on unique circumstances,” said Brooke Coleman, executive director of the Advanced Ethanol Council.

But he added that EPA should be wary of backing down from future projections for cellulosic fuels.

“It’s important for people to understand that this is a one-time adjustment,” Coleman said. “Going forward, the agency will continue to base targets on expected volumes in forthcoming years, which is the only way to grow the advanced biofuels industry.”

EPA’s acknowledgment sets a good precedent, said Michael McAdams, president of the Advanced Biofuels Association.

“We look forward to producing more gallons in the future,” he said.