Mandate drives wedge between conventional ethanol, advanced sectors

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, April 16, 2013

Producers of next-generation biofuels are bristling over recent calls by the nation’s two largest ethanol trade groups to lower this year’s federal advanced biofuels mandate.

The requests by the Renewable Fuels Association and Growth Energy are making it difficult for advanced biofuels CEOs to obtain financial commitments, said Michael McAdams, president of the Advanced Biofuels Association. McAdams, whose group represents 40 companies in the advanced biofuels space, expressed feelings of betrayal over the actions by the major ethanol groups, which have traditionally been strong allies to his industry.

“By suggesting that the advanced and cellulosic pools be lowered, my colleagues perhaps unintentionally have created a needless uncertainty in the marketplace,” McAdams said today at the start of a three-day biofuel industry conference at the National Harbor resort in Maryland, just outside Washington, D.C.

The split between the conventional corn ethanol and advanced biofuel sectors over the renewable fuel standard’s advanced target, which EPA proposed earlier this year, has long been rumored. McAdams’ comments today are the first time he has publicly acknowledged the divide.

The Renewable Fuels Association and Growth Energy last week asked EPA to lower its proposed 2.75-billion-gallon advanced biofuel standard for the year to reflect lower expected domestic cellulosic biofuel production, or fuel made from plant-based materials like agricultural residues and switchgrass.

In written comments to EPA about the agency’s proposed 2013 renewable fuel standard volumes, the ethanol trade groups say they are trying to halt increased Brazilian sugar cane ethanol imports, which EPA says meet the required greenhouse gas reductions needed to count for credit toward the advanced biofuel target (Greenwire, April 9).

“We do not believe the intent of the RFS was to create a market for imported cane ethanol, but instead was meant to drive production of domestic cellulosic biofuel and domestic biodiesel and to create more American jobs,” Growth Energy said. “However, without an adjustment to the total advanced biofuel pool — EPA will be doing just that — guaranteeing a market for cane ethanol imports in 2013 and reducing domestic ethanol demand.”

The Renewable Fuels Association has also called on EPA to lower the cellulosic biofuel target for this year.

While it may have been inadvertent, McAdams said, the ethanol groups’ comments have caused “consternation” among investors who have backed advanced biofuels companies in the past. It has sent a signal that ethanol groups doubt whether domestic advanced biofuels production can meet the targets proposed for the standard this year.

“Asking to lower the advanced biofuels pool in order to back out the Brazilian ethanol hinders the opportunity to finance the growth of the advanced and cellulosic industry at home,” McAdams said.

The Advanced Biofuels Association and other advanced biofuel producers, including joint cellulosic biofuel venture Poet-DSM — a key member of Growth Energy — and the Advanced Ethanol Council — a subset of the Renewable Fuels Association — have asked that EPA retain the advanced targets originally proposed.

The split between the conventional and advanced biofuel sectors comes after months of collaboration between the two industries as they’ve fought to defeat attempts to reform or repeal the renewable fuel standard.

McAdams said that last year, for example, the advanced biofuels sector agreed to not weigh in when several livestock-state governors called on EPA to waive the corn ethanol requirements on the heels of the drought and the impending “blend wall,” or the level of ethanol saturation in the market that is technically feasible.

He suggested that he expected the same from ethanol groups as the refining industry continues its criticism over the delays in bringing next-generation fuels to the market. The oil industry has specifically targeted cellulosic biofuels, charging that EPA has forced refiners to pay penalties for not using fuels that are not yet widespread in the marketplace.

The advanced biofuels industry “agreed to corn ethanol’s request to remain silent” during the waiver discussions “and allow them to wage and win that fight,” McAdams said. “We did so despite many in our association believing that a waiver would potentially address the blend wall issues.”

“But when the tables were turned, they did not reciprocate,” he said.

McAdams also today called on ethanol groups to tone down their language attacking the oil industry over the renewable fuel standard, saying that they’ve given investors the impression that the RFS is under more pressure than it actually is.