Moments after EPA issued its final regulations for the expanded renewable fuels standard (RFS2) yesterday afternoon, reaction began to pour in from every affected stakeholder, continuing into the late evening. While the stakeholders hold very different views of the massive, just-released regulation, it's clear they have a lot to say, especially relating to EPA's move to maintain the international indirect land use change (ILUC) assessment in its greenhouse gas lifecycle analysis.
The RFS2 is broken into four segments and each segment would be required to meet a certain lifecycle greenhouse gas reduction threshold. Specifically, conventional biofuels would be required to emit 20% fewer lifecycle greenhouse gas emissions compared to gasoline, while "advanced biofuels" and biomass- based diesel would be required to emit 50% fewer lifecycle greenhouse gas emissions, and cellulosic biofuel would be required to emit 60% fewer emissions.
In its RFS2 proposal, EPA included the calculation of ILUC in its greenhouse gas reduction threshold requirements, much to the chagrin of the biofuels industry. Biofuel groups, agricultural academics and some lawmakers had asked EPA to delay the ILUC requirements until there was a generally accepted method for determining the regulation.
In the final regulation, EPA maintained the ILUC provision, although it is requesting that the National Academy of Sciences continue to assess the lifecycle estimates, and revise if necessary.
Several changes were made to the final rule, including retroactively starting RFS2 on Jan. 1, 2010, and modeling adjustments taking into account crop adjustments. Corn-based ethanol plants operating or under construction in 2007 were already grandfathered into the 20% lifecycle analysis requirement, but new modeling now shows that new ethanol plants using natural gas to power the facility will likely meet the 20% requirement as well. Additionally, biobutanol from corn starch complies with the 20% reduction and ethanol produced from sugarcane complies with the applicable 50% reduction threshold for the advanced fuel category.
"Further, for other fuels we are establishing a process whereby a biofuel producer can petition the agency to consider whether their product would be eligible for use in complying with an EISA standard," EPA added.
While biofuel groups praised EPA for finalizing the RFS2 reg, they continued to question why the agency included the ILUC provision. "This puts the cart before the horse, and our position is that ILUC should not be applied in regulation until we have a thorough, long-term study of the issue," said Growth Energy CEO Tom Buis.
"While the outcome of the EPA's final ruling on the RFS2 is positive, the U.S. biodiesel industry continues to object to the unproven assumptions that international land use decisions should punish U.S. agriculture and the biofuels industry," noted National Biodiesel Board spokesman Michael Frohlich.
Similar comment also came from the Renewable Fuels Association and the American Coalition for Ethanol.
However, some environmental groups praised EPA's inclusion of ILUC. "We now have a yardstick to measure the global warming pollution from different biofuels," said Jeremy Martin, a senior scientist in the Union of Concerned Scientists' (UCS) Clean Vehicles Program.
In its press release, UCS noted that "[d]espite intense pressure from the corn ethanol industry to exclude emissions from indirect-land-use change, the EPA found that such emissions are a major source of heat-trapping pollution from corn ethanol and other food-based biofuels. This finding affirms the view of 200 scientists and economists ... who sent a letter to the EPA in September 2009 arguing that 'grappling with the technical uncertainty and developing a regulation based on the best available science is preferable to ignoring a major source of emissions,'" the group continued.
"The final rule confirms that some biofuels reduce global warming and some pollute more than gasoline and diesel," noted Nathanael Greene, director of renewable energy policy at the Natural Resources Defense Council. "This proves how important it is to put policies in place to make sure public dollars go to support real renewable energy instead of going after options that do not work and could actually do more harm than good. With the tools that EPA has developed, we can finally start to hold biofuel corporations accountable,"
he added.
Similar comment came from the Environmental Working Group.
Meanwhile, the California Air Resources Board (CARB) also praised EPA's inclusion of ILUC -- which CARB has also included in its recently finalized low-carbon fuel standard. "It is notable that both the EPA and CARB have determined that sound science compels the consideration of land use change in any lifecycle analysis of the greenhouse gas impacts of fuels," said CARB Chairman Mary Nichols. "While our regulatory programs differ somewhat, we look forward to working closely with the EPA and with the National Academy of Sciences to continue evaluating the lifecycle analysis of fuels," she added.
From its perspective, Brazilian sugarcane industry association UNICA was pleased with EPA's assessment of sugarcane ethanol. "The EPA's decision underscores the many environmental benefits of sugarcane ethanol and reaffirms how this low carbon, advanced renewable fuel can help the world mitigate against climate change, while diversifying America's energy resources," said Chief Washington Representative Joel Velasco, noting that EPA's calculations show that Brazilian sugarcane ethanol reduces greenhouse gas emissions compared to gasoline by 61%, using a 30-year payback for ILUC emissions. "Perhaps this recognition will sway those who have sought to raise trade barriers against clean energy here in the U.S. and around the world.
Sugarcane ethanol is a first generation biofuel with third generation performance," he added.
However, EPA's revised sugarcane ethanol assessment did not go unnoticed, even causing Growth Energy to include reaction in its press release. "[B]y using skewed ILUC calculations, the RFS gives Brazilian sugarcane ethanol preferred status as an advanced biofuel," said Growth Energy's Buis. "I don't think that was the intent of Congress when it passed the Energy Independence and Security Act. It won't make the U.S. any more energy independent by switching our addiction from foreign oil to foreign ethanol," he added.
Political ILUC Fallout
Congressmen hailing from agriculture states issued similar statements to that from biofuel groups, thanking EPA for releasing the long-awaited final regulation, but reiterating their concern with the inclusion of ILUC.
"Typical of most decisions made in Washington, there is some good and some bad in the renewable fuel standard final rule announced today," House Agriculture Committee Chairman Collin Peterson (D-Minn.) wrote on Wednesday. "To think that we can credibly measure the impact of international indirect land use is completely unrealistic, and I will continue to push for legislation that prevents unreliable methods and unfair standards from burdening the biofuels industry," he noted. The chairman had been a vocal critic of EPA's ILUC provision in its proposed rule, and was able to attach a provision in last year's House-passed climate change bill that would halt the ILUC provision while the issue is studied.
Additionally, Peterson joined with fellow Reps. Ike Skelton (D-Mo.) and Jo Ann Emerson (R-Mo.) in introducing a bill this week (H.R. 4572) to prevent EPA from regulating greenhouse gas emissions under the Clean Air Act. The bill also includes a provision that would stop EPA from using ILUC in biofuel regulations, and would expand the definition of renewable biomass.
"[I]t's irresponsible for the EPA to ignore the intent of Congress concerning the inclusion of 'international' land use changes in calculating the indirect greenhouse gas emissions from biofuels," added Sen. Chuck Grassley (R-Iowa). "By using this unproven and murky theory, the EPA has done a disservice to America's renewable fuel producers by diminishing their benefit to the environment. It's especially disheartening that the EPA is using this modeling because it's contrary to President Obama's numerous pledges to base all decisions on sound science," he added.
It's not clear whether any lawmakers plan to introduce any new bills or amendments specifically addressing or trying to remove the ILUC provision.
Refiners Unhappy With Timing
While refiners were mum on the ILUC issue, they were more vocal on the timing of the provision. "While the U.S. oil and natural gas industry recognizes and appreciates the role of ethanol and other biofuels in the fuel marketplace, we are deeply concerned that the announcement today could result in higher consumer costs," said the American Petroleum Institute (API). "By setting retroactive requirements, refiners and ultimately consumers will be penalized for EPA's inability to get this rule out on time as directed by Congress," the group continued, noting that the refining community is the biggest consumer of biofuels, with almost 80% of all gasoline now produced in the U.S. containing ethanol. "API supports a realistic and workable renewable fuels standard. Given the complexity of this new regulation, we question how realistic and workable it will be," API added.
Similarly, the National Petrochemical & Refiners Association (NPRA) said that its "member businesses would have been better served in terms of investment and regulatory certainty to have known these rules months ago, as prescribed in the Energy Independence and Security Act of 2007." The group said it also believed that combining the biomass-based diesel volumes for 2009 and 2010, "and making portions of the final rule retroactive to January 1, 2010 is unfair and likely unlawful."
EPA Revises Cellulosic Biofuel Carve-Out
In its final rule, as expected, EPA revised the 2010 RFS2 carve-out requirement for cellulosic biofuel. The RFS2 proposal called for 100 million gal of cellulosic biofuel in 2010, but industry estimates projected production levels nowhere near that level. The agency has now revised that standard to 6.5 million ethanol-equivalent gallons, EPA announced.
"While this volume is significantly less than that set forth in EISA for 2010, a number of companies and projects appear to be poised to expand production over the next several years. Since the cellulosic standard is lower than the level otherwise required by EISA, we will also make cellulosic credits available to obligated parties for end-of-year compliance, should they need them, at a price of $1.56 per gallon (gallon-RIN). In addition, while we have lowered the cellulosic standard below the level otherwise required in the Act, we have maintained the advanced biofuel and total renewable standards as that set in EISA for 2010. We are continuing to assess the growth of the cellulosic biofuel industry and intend to issue a notice of proposed rulemaking (NPRM) each spring and a final rule by November 30 of each year to set the renewable fuel standards for each ensuing year," EPA added.
Paul Winters, spokesman for Biotechnology Industry Organization (BIO), said his group was pleased with EPA's reduction in the cellulosic biofuel standard. "The industry worked with EPA over the past months to formulate a more realistic assessment of the amount of cellulosic ethanol that could be produced in 2010 and able to claim Renewable Identification Numbers," he said. "The original legislation gave the EPA the tools to adjust the RFS for potential shortfalls, and they appear to have carefully implemented those tools," he continued.
In September 2009, BIO estimated cellulosic biofuel production would be closer to 12 million gal, Winters explained. "One reason the 6.5 million number may be lower than projections is that we're already a month into 2010.
Obligated parties were asking for the entire cellulosic requirement to be delayed until 2011," he noted. "Our primary ask is that the policy supports using as much cellulosic ethanol as can be made available, rather than buying allowances," he added. |
