EPA’s newly proposed targets are bad for climate, assert industry heads

Source: Tiffany Stecker, E&E reporter • Posted: Wednesday, April 23, 2014

That was the message from the heads of biofuel trade groups yesterday, speaking on a panel at the Advanced Biofuels Leadership Conference in National Harbor, Md. Last fall, U.S. EPA — the agency responsible for overseeing the blending of biofuels in the national fuel supply — changed course on what had been a upward trend for companies making fuels from traditional feedstocks like corn and soybeans, but also from grasses, household waste, wood, algae and agricultural residues.More recently, the agency has also placed a six-month moratorium on approving new pathways, technologies that comply under the renewable fuel standard (RFS). Approval of technologies is valued by the industry, as it can stimulate demand for a particular fuel.

“It’s really disheartening to see a president that was less of a cheerleader on biofuels than President [George W.] Bush was,” said Brent Erickson, president and CEO of BIO, a biotechnology trade group.

BIO recently published findings that indicate that the changes in the federal renewable fuel standard could lead to greenhouse gas emissions equivalent to about 5.9 million additional cars on the road (Greenwire, March 26).

In its draft proposal for 2014 targets under the RFS, the agency slashed targets by 41 percent for advanced biofuels, compared with the 3.75 billion gallons set aside for this year in the Energy Independence and Security Act of 2007. Janet McCabe, EPA assistant administrator for air and radiation, said in a blog post that the agency cut the targets because of a lack of infrastructure for high-ethanol blends, like E15 and E85 (15 percent and 85 percent ethanol, respectively). This glut of ethanol was driving up the price of Renewable Identification Numbers (RINs), credits that oil companies buy and trade to comply with the RFS, said the oil industry, which has called for a repeal of the RFS.

A squeeze play?

By definition, advanced biofuels reduce greenhouse gas emissions by at least 50 percent compared with gasoline.

“They say that they’re focused on climate change, but on fuels that deliver 60 percent reductions, or 50 percent reductions, they’re trying to squeeze them down by the very numbers they put,” said Michael McAdams, president of the Advanced Biofuels Association.

Today, the pool is made up mostly of biodiesel and Brazilian sugar-cane ethanol, with smaller companies hoping to take advantage of the advanced biofuels’ higher-value credits under the RFS. EPA Administrator Gina McCarthy has said the agency will issue a final rule in June.

The benefits of biofuels for reducing greenhouse gases has been a contentious issue globally. A recent Intergovernmental Panel on Climate Change report acknowledged that biofuels could help reduce carbon emissions, but that using plant matter to run vehicles could still pose risks to the environment. A study released Sunday found that ethanol from corn stover and cobs could emit more carbon than gasoline in the short run (ClimateWire, April 22).

Last year, the advanced biofuel industry produced 3.23 billion gallons, more than 1 billion more than what EPA has proposed as its target for 2014. If EPA follows through with this figure in the final rule, it could be taken to court, said McAdams. The U.S. Court of Appeals for the District of Columbia Circuit said last year that EPA could not project unrealistically high volumes for advanced and cellulosic fuels to propel the industry (Greenwire, Jan. 25, 2013).

The reverse is true, too, said McAdams.

“The court specifically said to you, you can’t put your thumb on the heel to push this industry. Well, the converse of that is you can’t push your thumb on our head to push us down, either,” said McAdams.

The Advanced Biofuels Association is preparing to use all means possible to turn the RFS in its favor. “We’re going to be in a place where we can fight on the Hill as well as fight in the administration,” said McAdams.

For the biodiesel industry, federal policy plays a critical role in production gallons. When the biodiesel tax credit was not renewed in 2010, the number of gallons dropped to 315 million, less than half of what was made two years prior. Since the RFS came into effect that year, production has soared to 1.8 billion gallons. EPA has proposed a 1.28-billion-gallon target for 2014.

Hope that final numbers will change

The RFS numbers in the proposed rule “could cut our industry in half,” said Anne Steckel, vice president of federal affairs for the National Biodiesel Board.

There are a number of uncertainties that face the algae fuel industry, said Tim Zenk, vice president of corporate affairs for Sapphire Energy Inc., which makes an algae-based product that is chemically similar to crude oil and can be processed in a standard petroleum refinery.

The industry saw a glimmer of opportunity in EPA’s recent performance standards for power plants, which will require all new coal-fired power plants to install carbon capture and storage technology. Algae thrive on CO2, and Zenk saw his industry as a potential recipient of coal emissions.

However, EPA has established carbon storage as the only method that electric utilities can use for compliance.

“We think that what they’re doing is impermissible,” he said. EPA has also made it difficult for intermediate feedstocks — liquids that are not actual fuels — to generate RINs.

Despite the RFS snub, biofuels producers should look beyond the immediate situation, said Erickson of BIO. Given the administration’s focus on climate change, it’s possible there will be more regulation around reducing greenhouse gas emissions, like a national low-carbon fuel standard or a carbon tax.

“We need to be ahead of that, not behind it,” said Erickson.

There is still hope that the White House and EPA will increase the numbers in the final 2014 RFS, said Brooke Coleman, executive director of the Advanced Ethanol Council. A more difficult task is to convince the administration that the RFS shouldn’t be tampered with when fuel prices rise because of high RIN costs. Instead, it should be used to require changes within the oil industry.

“If RIN prices don’t change behavior among incumbents and they change behavior at EPA and the White House, investors are going to have a hard time thinking that the RFS is what is going to change the space,” he said.