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- DTN Headline News
Cellulosic Certainty Sought
Tuesday, November 25, 2014 11:18AM CST

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- Upon announcing the 2014 final Renewable Fuel Standard would not be released until 2015, the EPA stated it would try to play catch up next year with plans to finalize RFS volumes for 2014, 2015 and 2016 in an attempt to stabilize the law designed to drive innovation in the renewable fuels sector.

During a press briefing organized by Sen. Dick Durbin, D-Ill., Monday in Washington, D.C., leaders of key ethanol advocacy groups said the EPA's announcement was good because it delayed what the industry thought would be a game-changing alteration to the RFS. Finalizing the volumes for three years next year, they said, would go a long way in providing stability to the biofuels industry. EPA has indicated that the RFS for all three years could be completed by November of 2015.

"What it tells us is it will be another year of missed opportunity," said Bob Dinneen, chief executive officer and president of the Renewable Fuels Association, "because the RFS won't be driving the market as it was intended to do. It clearly hurts the next generation."

The corn-based ethanol industry has continued to be profitable and productive despite RFS question marks. The landscape for advanced biofuels companies, however, has started to take a turn for the worst as some companies that have built first-generation commercial cellulosic ethanol plants in North America have decided to build second plants in other countries. For example, recently a Canadian trash-to-ethanol company announced that doubt about the future of the RFS led to a decision to build a second plant in China instead of the U.S.

Poet-DSM was one of a handful of companies that launched commercial cellulosic ethanol production this year at a plant in Emmetsburg, Iowa. During a celebration to launch the plant last summer, the company said it was working on licensing the technology throughout the Corn Belt using corn stover and stalks as a feedstock.

Poet Chief Executive Officer Jeff Lautt said in a statement to DTN that his company still has doubts about whether EPA will provide the stability the industry needs in the law.

"What remains unclear is if this action suggests that in future rulemakings they will avoid the same fatal flaws that would have stifled consumer choice, fuel diversity and advanced biofuel development," he said. "As such, there is still a great deal of uncertainty in the minds of ethanol producers, investors and farmers. The administration needs to quickly validate that they stand behind the statutory levels and bring order back to a law that had been moving our nation away from foreign oil."

PROPOSALS MATTER

Brooke Coleman, executive director of the Advanced Ethanol Council, said during the briefing the mere idea that EPA may cut the RFS immediately affected the budding industry.

"Proposals count," he said. "Things came to a pause in October last year when the policy leaked out." Without RFS stability, Coleman said, the U.S. market for cellulosic ethanol would struggle to develop.

"We're talking about dozens of plants," he said. "Each of these companies wants to build as many as 10 of these things. You don't get into the business of building one of these things, having a ribbon-cutting ceremony and calling it a day."

Back in April 2014, EPA announced it was cutting the 2013 cellulosic ethanol mandate from 6 million gallons to 1 million gallons based on actual production. The total RFS volume for 2013 was originally set at 16.55 billion gallons. That would include 1.28 billion gallons of biomass-based diesel. Advanced biofuels constituted 2.75 billion gallons of the RFS and cellulosic ethanol accounted for 6 million gallons.

EPA CHANGE

Growth Energy Chief Executive Officer Tom Buis said he believes the outpouring of support for the RFS during the public comment period was the reason why EPA walked away from the proposal.

"If you'd had an odds-maker make odds on this thing, I think most people would have bet they were going to proceed with the final rule," Buis said. "I think that's a good sign that they're still thinking about how to deal with it. I'm fully convinced, and I think all of us here are, that once that proposed rule came out and people analyzed it, it was so flawed that even in some of their public statements they recognized they got it wrong and how to make corrections."

Dinneen said EPA "bent over backwards" for the oil industry in not making a decision. For example, oil companies have until the end of 2014 to "true-up" their 2013 RFS blending obligations. He said they can use 2012 renewable identification numbers, or RINS, to comply with the RFS, although the 2012 RINS expire at the end of the year.

"So they maintained all flexibility the oil companies already had in this program," Dinneen said.

Though there was concern following the EPA announcement that there wouldn't be a 2014 RFS, he said the agency will at some point promulgate a rule. "Now it's more than likely going to be what was produced and sold in 2014, will ultimately be what they promulgate," Dinneen said. "That's clearly not driving the marketplace in the way the program was intended to be."

Ethanol groups are claiming a victory in the EPA announcement, but it's not clear whether EPA will change the methodology used in drafting a proposal to cut RFS volumes. The EPA proposal came about based on the oil industry's concern that it did not have proper infrastructure to handle a larger volume of biofuels.

"I think it's pretty clear that if they were comfortable with the methodology that they would have gone ahead and promulgated the rule," Dinneen said. "I don't think it is necessarily a given that they're willing yet to abandon that methodology. What we have now is an opportunity to work with them to figure out how we can get this program back on track, and I take that as a good sign."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow Todd on Twitter @toddneeleyDTN

(CC/AG)


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