Biofuel groups debate fate of renewable fuel standard

By Anna Simet | October 28, 2015

Agreeing to respectfully disagree was one of very few assenting points reached by association heads representing the biodiesel, ethanol and advanced biofuel groups during a candid debate about the renewable fuel standard (RFS), policy amendments and the best course of action to maintain and grow the industry.

At the National Advanced Biofuel Conference being held in Omaha, Nebraska, on Oct. 26-28, Advanced Biofuels Association President Michael McAdams found his beliefs at odds with major viewpoints of National Biodiesel Board CEO Joe Jobe and Iowa Renewable Fuels Association Executive Director Monte Shaw, mainly the potential amending of the RFS, which ABFA supports.

McAdams said that as a result of the fight between Big Oil and the corn ethanol industry, the advanced biofuel industry has had a black cloud over it for several years, and that the groups have damaged the entire RFS overall in the eyes of every member of Congress. “I appreciate your efforts with E15—I have nothing against corn ethanol—but what you’ve done is created a malaise, and you’ll find when we finally have votes on the House and Senate floor, you’re not going to like the results…You guys have had 40 years and American taxpayer support, and you’ve had a pretty good go—14.5 billion gallons last year…But those folks who I represent, they don’t have a statute in place that works for them at all, and they need statutory changes. I appreciate why the first-gen guys don’t want to open up the RFS, but without major statue changes, we won’t see an advanced biofuel industry.”

McAdams said the main changes ABFA would like to see made to the RFS are an extension from 2022 to provide clarity to financers, addressing of the cellulosic waiver credits and amending of the pathway approval process. “With the [long] time to get pathways approved and under the program, on top of $43 crude, my guys are running out of money,” he said. “The capital markets have shut down—they try to build that innovative plant, but the banks say ‘We’ll give you a seven-year note, but we don’t know what happens with the program after 2022, and by the way, the tax credits are on again off again.’ Even where people have made tremendous strides on technology development, they can’t get across that valley of death to commercialize. They’re feeling the pinch and running out of money, so this is a last-ditch effort…you can’t build a half a billion dollar plant with a seven-year note.”

Renewable volume obligation (RVO) numbers are expected to be out by the end of November, and McAdams said he believes the numbers will be pumped up slightly, but not quite to what the Renewable Fuels Association and Growth Energy have called for. “So we’ll see a lawsuit filed by the ethanol industry because they didn’t get their 15 million gallons,” he said. “We’ll also see the oil industry sue, because they think that 14.2 or 14.3—which will likely be the number—is too much, and will break the blend wall. “

Jobe said he disagrees with McAdams’ assertion that without legislative changes, the U.S. won’t see an advanced biofuel industry. “We already have one in the biomass-based diesel sector, and contrary to what has been said, up until 2014, the biomass-based diesel sector caused the advanced biofuel category goals to be met every year of the program up until 2014. Were it not for EPA’s failure to implement volumes for ‘14 and ‘15, we would have met them as well."

The RFS is working as is, Jobe said, adding that he is optimistic the program will get back on track by the end of November. “I’m hopefully the administration will see to increase the biomass-based diesel and total advanced volumes, and we’ve made an extremely good case why that will improve the overall success of the program.”

Shaw said that when Big Oil files a lawsuit, it won’t be because corn ethanol will break the blend wall. Rather, it will be because it simply just does not want to give up market share, and will eventually turn its sights to the advanced biofuel industry. He gave the example of the blender tax credit the ethanol industry used to benefit from. “They used to harp on us all of the time about it. We thought if we let it go and focus on the RFS, they’d leave us alone. How’d that work out? The tax credit is gone.  If you’re in the advanced biofuel industry and are in favor of opening up the RFS…the oil Industry doesn’t just dislike just one thing…just as soon as they take care of one sector, they’ll train their guns on the next sector. They’re doing what’s in their best interest for making money.”

Shaw emphasized that the reason the ethanol industry will file a lawsuit is not because it is afraid the corn ethanol industry “will get a haircut,” as McAdams had stated, but because the industry doesn’t believe the EPA has legal authority to lower the statute numbers. “We think that turns the RFS on its head,” he said. Shaw also said that fixing the pathway approval process does not require opening up the statute—rather, an administration that wants the program to work. McAdams countered, saying EPA itself has said that that the statute has to be changed to fix the problem.

Shaw pointed out the fact that not all advanced biofuel producers are in line with ABFA’s position on the RFS, and that two major cellulosic ethanol producers in Iowa—Poet-DSM and DuPont—do not want to see the RFS modified. “There are producers who do not want to open it up,” he said. “It comes down to where people find themselves. If I were king for a day I’d make changes that everyone would like, but if we open it up again, the patient will die on the table. It will ruin it for a whole lot of people already benefiting from it. Is it perfectly implemented? No, but it’s still giving a pathway for some advanced biofuels to move forward.”

McAdams closed his remarks by stating that the advanced biofuel industry can’t “get off of first base without major regulatory and statutory change. I understand what a threat it is to open up RFS to the first generation…but I don’t represent that industry. I represent people with visions of a different fuel, a more sustainable fuel, rocket fuel, using wood as a feedstock, pyrolysis technology...I’m telling you, we can’t get to where we need to go, and our last hope is to open up the statute.”