Industry faults EPA as cellulosic ethanol production lags

Source: Marc Heller, E&E News reporter • Posted: Thursday, August 23, 2018

EPA is sharply underestimating the amount of cellulosic ethanol that U.S. companies could produce — and its own administrative lag is partly to blame, industry sources say.

The agency faces a backlog of applications from companies that want to make cellulosic biofuel from various feedstocks and have them qualify under the federal renewable fuel standard’s mandates. That’s discouraging investment and undermining the RFS, said the Biotechnology Innovation Organization, a trade group supporting biofuels.

“Cellulosic biofuel companies have waited on average more than 29 months for EPA to address their petitions for approval. Due to these delays, six have abandoned plans to produce biofuels due to the impact of petition approval delay. Three additional companies simply withdrew their petitions for the same reason,” the organization said in comments submitted to EPA for the agency’s proposed 2019 biofuel volumes.

“A wait time of multiple years can be fatal for commercialization of new technology,” the organization said. “Without a pathway to the fuel market, companies find it difficult to attract the investment necessary to initiate, continue, and complete the construction and startup of new facilities.”

In some cases, companies using feedstocks already allowed as “pathways” under the RFS are waiting for EPA to approve related applications, such as for registering facilities that plan to make ethanol from corn kernel fibers.

At EPA, the challenge may be both bureaucratic and technical. The agency said it received more than 1,700 requests for fuels registrations last year and already a similar number to handle this year.

“Registration applications under the cellulosic pathways are typically among the most complicated and resource intensive to evaluate,” an EPA spokesman said. “A number of the registration requests for cellulosic pathways involve novel regulatory and technical issues that must be resolved prior to facility registration.”

The pipeline wasn’t always so slow, said Brian Thome, president and CEO of Edeniq Inc., a Visalia, Calif., company that develops ways to produce and measure cellulosic ethanol from corn kernel fiber. In 2017, the agency typically moved applications along within six to eight months, and the Trump and Obama administrations each approved applications for the company’s clients, he said.

Still, Thome said, he believes factors other than staffing shortages and technical issues may be at play. And while he declined to speculate on what those are, the administration has sent mixed signals on ethanol generally. EPA recently approved an RFS pathway for sorghum, for instance, but the agency’s increased granting of RFS waivers to small petroleum refineries has irked the ethanol industry.

Several applications are pending at EPA for Edeniq clients, Thome said, adding that his interactions with the agency over time have been positive. EPA officials haven’t told him of any staffing shortages, Thome said, but they have said the agency is trying to decide how to approach applications from multiple companies using very similar technologies.

Edeniq outlined some of its concerns in comments submitted to EPA on the proposed 2019 biofuel volumes.

EPA has also projected, overall, that cellulosic ethanol production will increase in 2019. The proposed volumes in the agency’s published rule would climb from 288 million gallons this year to 381 million gallons in 2019, although most of that represents compressed natural gas and liquefied natural gas derived from biogas, EPA said.

The agency proposed 24 million gallons of liquid cellulosic ethanol for next year. With approvals in place, the industry could provide as much as 50 million gallons more than that, Edeniq said in comments submitted to the agency. Thome told E&E News that as much as 100 million gallons of the biofuel could be at stake.

“This is real volume and growth that appear to be sitting still now,” Thome told E&E News.

Overall, cellulosic ethanol trails far behind where Congress thought it would be as a fuel source when the RFS was updated in 2007. The RFS mandated 8.5 billion gallons for 2019, and EPA proposed to use its waiver authority, as it has done in prior years, to set a lower level.

In its proposed rule, EPA said it bases the cellulosic biofuel volumes on facilities already registered, as well as ones officials believe will come on line. The projections aren’t always on target; for 2015, the agency underestimated production. Then, estimates for 2016 and 2017 turned out too high, EPA said.

The “somewhat inaccurate” track record, the agency said, reflects the inherent difficulty with projecting cellulosic biofuel production. “It also emphasizes the importance of continuing to make refinements to our projection methodology in order to make our projections more accurate,” EPA said.

This year, the agency has made improvements to the registration review system, including a more streamlined approach and posting a pending application list, a spokesman said.