Trying Again on Celluosic Biofuels

Source: By MATTHEW L. WALD, New York Times • Posted: Friday, February 1, 2013

The Environmental Protection Agency said on Thursday that commercial production of cellulosic fuels would start this year (even though it said the same thing last year and in 2011 and was proved wrong). And it proposed to require that refiners use 11 million gallons of the material this year.

The agency also proposed a system to cut down on fraud in the renewable fuels system and to allow the victims, mainly the refiners, to avoid penalties in some cases.

The proposal comes a week after the United States Court of Appeals for the District of Columbia ruled that when the E.P.A. set a quota of 8.65 million gallons for last year, it improperly allowed its policy goal — getting such fuels to market — to cloud its projection of how much would be commercially available. (None was.)

The proposed new rule, on which the agency will seek public comment for 45 days, also sets standards for bio-diesel and other advanced biofuels.

It drew predictable responses.

Michael McAdams, president of the Advanced Biofuels Association, said the rule would “help bring additional investment into advance biofuels because it builds the marketplace and supports increased production by the industry.”

The American Petroleum Institute meanwhile called the mandate a “stealth tax” on gasoline. “The court recognized the absurdity of fining companies for failing to use a nonexistent biofuel,” said Bob Greco, director of the institute’s group that focuses on refining and retailing. “”But E.P.A. wants to nearly double the mandate for the fuel in 2013.”

The quotas for various biofuels are managed through a system of “renewable identification numbers.” Refiners that are obligated to use the fuel do not have to actually take possession of the physical gallons; they need only purchase the certificates that are generated when the fuel is made.

The problem is that in several high-profile cases, operators gamed the system by simply selling the certificates when they were not really making the fuel. The buyers were hit with penalties for having bought and submitted fake credits, and as a result, have been trying to audit the producers to make sure the credits are real. Generally they have been avoiding small producers because the effort is too great to be worth it.

The E.P.A.’s new proposal would create a “voluntary quality assurance program” that independent third parties would use to audit producers. Buyers who got their credits from a producer under such a program would be protected against fines if the credits turned out to be bogus, and in some cases they would not have to replace the fake credits with real ones.

Celluosic biofuels are made from cellulose, meaning trees, the nonedible portion of food crops or even waste paper and similar materials. Several companies have made strides toward commercial production but have not yet gotten there.