Low-Carbon Biofuels Group Backs RFS Reform Push But Divisions Emerge

Source: By Stuart Parker, Inside EPA • Posted: Thursday, March 12, 2015

Advanced biofuels producers, whose members produce cellulosic and other low-carbon fuels, are breaking from other biofuel producers in calling for Congress to overhaul EPA’s renewable fuel standard (RFS), giving a major boost to refiners and others who have long pushed for reforming the program, though there are still strong differences in the policy goals that the various groups are urging lawmakers to include in any RFS reform legislation.

In a March 11 statement, the Advanced Biofuels Association (ABFA) says that the current RFS structure and fuel production targets fail to adequately promote cellulosic and other advanced biofuels, for example by allowing refiners to buy compliance credits rather than purchase the fuels.

That contrasts with oil groups who are pushing RFS reform largely to scrap what they say is an implied corn ethanol “mandate” under the program’s renewable fuel goal.

Bills to either scrap or overhaul the RFS failed to gain traction in the divided 113th Congress and Rep. Ed Whitfield (R-KY), chair of the House Energy & Commerce Committee’s power panel, said recently that the failure to advance such bills last year means they might also face difficulty moving in the 114th Congress.

But American Petroleum Institute (API) Downstream Group Director Bob Greco on a March 11 conference call cited ABFA’s first-time backing of RFS reform as joining a “chorus” of critics of the program. Greco said he believed ABFA’s shift will change the “political calculus” in Congress on RFS reform.

Previously the advanced biofuels sector had resisted the calls for reform and instead pushed EPA to increase the cellulosic targets in its RFS, which sets annual production goals for various fuels which Congress selected based on their carbon footprints. Cellulosic fuels, for example, qualify for credit under the program if they have a 60 percent smaller carbon footprint than conventional petroleum.

But the agency has repeatedly delayed issuing the annual targets, creating significant uncertainty for the biofuel sector, and also drawn criticism for targets that are either too ambitious or too low.

ABFA’s Michael McAdams said in March 11 remarks at the 2015 Advanced Bioeconomy Leadership Conference in Washington, D.C. that there is rising frustration in his industry over what he said were obstacles preventing the program from promoting cellulosic fuels in the same way it has benefited corn-based ethanol.

“After working with EPA since 2009 to attempt to get pathways [to generate cellulosic fuels] approved, feedstocks approved, annual volume requirements released on time, only to frequently be told from the agency that they do not have sufficient legal authority to get the job done, it has become clear that statutory changes need to be made to the RFS,” McAdams said, adding that he believes Congress now needs to reform the program.

Reform Push

ABFA is calling on lawmakers to create a minimum value for renewable identification numbers (RINs) — credits generated by the production of biofuels that are used by refiners to show RFS compliance — that would be indexed to the price of oil, providing more support when oil prices are low and less when oil prices are high.

Also, Congress should make clear that the program extends beyond 2022 when its current authorization expires “to provide sufficient time to develop this industry,” McAdams said. Investors are leery of a potential end to the program in 2022, ABFA says, making finance for new cellulosic production plants hard to obtain.

Refiners can buy a cellulosic biofuel waiver credit when there is insufficient production of cellulosic biofuel instead of a RIN, an option that applies only to cellulosic biofuels. Industry sources note that there has been insufficient supply of the cellulosic fuels in each year of the RFS program.

ABFA wants Congress to close what it calls this “loop hole that allows the oil industry to opt out from buying a cellulosic gallon with its credit and in lieu buying a waiver credit.”

The RFS “should encourage production of all available advanced and cellulosic biofuels. But just as important, oil companies must be required to purchase what is produced,” ABFA says.

But Growth Energy and the Renewable Fuels Association (RFA), representing the corn ethanol sector, on their own March 11 conference call said that ABFM’s strategy is misplaced.

RFA President and CEO Bob Dineen said “we seriously question who AFBA is representing these days, by throwing more uncertainty into the process.” On the same call, Adam Monroe of Novozymes America questioned whether AFBA speaks for even a majority of advanced biofuel makers.

Growth Energy’s CEO Tom Buis in a prepared statement said, “By opening up the RFS for legislative changes, you are opening a can of worms that will only create further uncertainty for the industry, which is the last thing biofuel producers of any kind need. This is a shortsighted proposal that would set the entire renewable fuels industry on the path to a rollback of the RFS.”

AFPM’s Concerns

The American Fuel and Petrochemical Manufacturers (AFPM), representing refiners, in a March 11 statement welcomed ABFA’s position that the RFS is flawed, but rejected the group’s proposed solutions. RINs “were never meant to provide subsidies from one industry to another,” AFPM says. “Despite ABFA’s claims, the RFS does not end in 2022, it goes on in perpetuity,” and hence a “sunset date” is needed to end support for cellulosic fuels.

Further, the “so-called loop hole is in reality one of the few, and certainly and strongest, consumer protection provisions in this broken law,” AFPM says, warning that without them, costs to consumers could soar. ABFA’s proposal “adds to further uncertainty, unnecessary costs, and market distortion,” AFPM says.

An API spokesman tells Inside EPA that the group would consider any reform proposal, but API’s position would depend on the details of any such plan. API says it is currently focused on ending what it calls an implied RFS corn ethanol mandate, and wants cellulosic mandates reduced to reflect actual production.

Among pending measures in Congress, one RFS bill, H.R. 703, introduced by Rep. Bob Goodlatte (R-VA), would eliminate the RFS, while a second Goodlatte bill, H.R. 704, would eliminate what critics say is the implied corn ethanol mandate.

On the March 11 API call, Scott Faber of the Environmental Working Group said the current RFS, based largely on corn ethanol, increases greenhouse gas (GHG) emissions because corn ethanol generates higher GHGs than oil and therefore runs counter to the RFS’ goal of reducing GHGs.

Faber said ABFA’s announcement in support of RFS reform “is the ultimate recognition that the RFS has failed,” calling for a reform of the program to reduce corn ethanol demand.

Kelly Stone, with aid group ActionAid USA, echoed that demand, calling for the RFS to encourage biofuels other than corn ethanol that do not complete with food production.