Some producers complain they’re shut out of RFS credit program 

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, May 20, 2015

Some advanced biofuels producers yesterday complained that their fuel is barred from receiving credit in the renewable fuel standard program because of U.S. EPA’s interpretation of where the fuel must be produced.

Congress passed the RFS in 2007 to require the increasing use of ethanol and advanced biofuels. EPA rules require that, in order for a fuel to be used by refiners to meet yearly RFS requirements, all activities that go into the production of the fuel take place at one location.

In a white paper yesterday, the producers said that the agency’s requirement affects companies that make crude oil substitutes from plants or algae and then send them to a petroleum refinery to get upgraded into transportation fuel.

Those producers can’t sell RFS credits for fuel, according to the white paper, even though shipping the intermediate crude away to a refinery is often more economical than doing the upgrading on-site.

“The RFS calls for increasing amounts of advanced, non-corn starch biofuels to be blended into gasoline by 2022 in order to diversify our nation’s fuel sources, lower costs at the pumps and reduce greenhouse gas emissions,” the paper says. EPA’s interpretation “works against this goal.”

The American Council on Renewable Energy led the effort. Among its contributors were Algenol Biofuels, Cortus Energy, Fulcrum BioEnergy, LanzaTech and Solena Fuels — all advanced biofuels startups seeking to make drop-in biofuels that can be used directly in existing fuel infrastructure.

The biofuel entities sent the paper to EPA, along with the White House Council on Environmental Quality and the departments of Energy, Defense and Agriculture. Jeramy Shays, ACORE’s director of transportation, said that biofuel producers have also met directly with EPA to press the issue.

At issue is EPA’s interpretation of “feedstock materials” within its broader definition of “facility” in the RFS regulations. EPA doesn’t consider crude intermediates made out of plants and algae to be feedstock materials, according to the white paper.

Florida-based Algenol, one of the authors, says that the interpretation means that it cannot generate RFS credits for about 20 percent of its expected product. Algenol has developed technology to produce both ethanol and drop-in biofuels from blue-green algae.

“The ability of Algenol to generate [credits] from all of our products is critical for us and for our investors, and to support the intent of the renewable fuels standards,” Algenol CEO Paul Woods said in a statement. “We need EPA to expedite resolution of this major impediment to commercial production of our renewable fuels.”

The coalition wants EPA to clarify in its upcoming rule setting refiners’ 2014-2016 renewable fuel requirements that “feedstock material” means “whatever arrives at the final refining location for processing into a renewable fuel” and could include crude intermediates, oil extracted from algae and industrial sugars.