RFS2: Bridging the Gap to Advanced Biofuels

If corn-based ethanol is the bridge to next generation biofuels, then the U.S. EPA's proposed rulemaking for the second stage of the renewable fuel standard (RFS2) may be the driving force to launch that journey. While still supportive of the corn-based ethanol industry, the RFS2 program clearly requires the biofuels industry to step-up efforts to commercialize next generation technologies.
By Erin Voegele | July 08, 2009
The U.S. EPA published its long-anticipated proposed rule for the second stage of the renewable fuel standard (RFS2) on May 26. In the proposed rule, the agency lays out its strategy for achieving the renewable fuel mandates required by the Energy Independence and Security Act of 2007 (EISA), which requires the use of 36 billion gallons of renewable fuel by 2022.

The current renewable fuel standard (RFS1) was adopted by the EPA in order to implement the Energy Policy Act of 2005. EISA, which was signed into law two years later, required the agency to expand and revise the current program. The EPA was originally scheduled to issue a final rule for RFS2 by Jan. 1, 2009, but announced in July 2008 that the rulemaking would be delayed due to complex new elements that EISA added to the program. Nearly one year later, the agency was finally able to complete its proposal.

In addition to increasing the renewable fuel mandate from 7.5 billion gallons by 2012 to 36 billion gallons by 2022, EISA also specified other changes to the RFS program. These
changes are reflected in the EPA's proposed rule for the RFS2.

As directed by EISA, the proposed rule specifies four unique categories of renewable fuel, each with its own respective mandate. In order to generate renewable identification numbers (RINs) that are used by obligated parties to meet these mandates, renewable fuels must meet certain baseline carbon reduction thresholds and must be manufactured from feedstock meeting the definition of renewable biomass. In addition, the RFS2 program has been expanded to include diesel and non-road fuels. The proposed rulemaking also outlines several changes to the RIN program, which will be detailed in the September issue of EPM.

Fuel Categories
The proposed rule specifies four categories of renewable fuel: cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuel. Each of the four categories has a unique greenhouse gas (GHG) emissions reduction threshold that the fuel must meet in order to qualify for the RFS2 program.

A fuel's life-cycle GHG emissions are defined as the aggregate emissions attributed to all components of fuel production and use, including feedstock production and distribution, fuel production, delivery, use and significant indirect emissions from land use change. The full life-cycle emissions level of a particular fuel is measured against a baseline fossil fuel in order to determine its GHG emissions reduction threshold.

Cellulosic biofuel is defined as any renewable fuel - not necessarily ethanol - that is derived from cellulose, hemicelluloses or lignin. In order to qualify as cellulosic biofuel, the renewable fuel must achieve a life-cycle GHG emission-reduction threshold of 60 percent.

Advanced biofuel is defined as a renewable fuel other that ethanol derived from cornstarch. The advanced biofuel category can apply to a variety of fuels, including biomass-based diesel, biogas, butanol or other alcohols and fuels derived from cellulosic biomass. This may include ethanol derived from cellulose, hemicelluloses, lignin, sugar or any starch other than corn starch. Both advanced biofuel and biomass-based diesel must achieve a life-cycle GHG emission-reduction threshold of 50 percent.

Additional fuel used to meet the total renewable fuel mandate is required to meet a 20 percent GHG-reduction threshold. The majority of this fuel is expected to be corn-based ethanol. Although new corn-based ethanol plants will be required to meet this reduction threshold in order to generate RINs, the proposed rule includes a component that allows many existing plants to be grandfathered. Under the proposed rule, any renewable fuel facilities that commenced construction on or before Dec. 19, 2007, as well as facilities that commenced construction in 2008 or 2009 and are fired with natural gas, biomass, or a combination thereof, are grandfathered. "We expect that a significant number of facilities out there would be grandfathered, and very likely the majority of them out there would be grandfathered," says EPA Senior Policy Advisor Paul Argyropoulos. From a volume perspective, he says the EPA is expecting to grandfather approximately 15 billion gallons of ethanol production, and possibly more.

It is important to note that while EISA limits the participation of corn-based ethanol in the RFS2 to 15 billion gallons, there is not a mandated volume for corn-based ethanol. Excess RINs from cellulosic biofuel, biomass-based diesel and advanced biofuel can be used to meet total renewable fuel mandates in place of corn-ethanol RINs, Argyropoulos says. "Any of the compliant fuels can count toward the total renewable fuels standard."

Definition of Renewable Biomass
As required by EISA, the definition of renewable biomass includes planted crops and crop residue, planted trees and tree residue, animal wastes, algae, and yard and food wastes.

The definition, however, limits these feedstocks according to the management practices of the land they are produced on. To qualify as renewable biomass, crops and crop residues must be harvested from agricultural lands cleared or cultivated prior to Dec. 19, 2007. This land must be actively managed or fallow and non-forested. Feedstocks that do not meet this definition of renewable biomass cannot be used to produce fuel that complies with the RFS2.

Under the definition, feedstocks can be sourced from cropland, pastureland and USDA Conservation Reserve Program land; not rangeland, federal land or other rural land. Trees and tree residues can be sourced from actively managed tree plantations on non-federal land cleared prior to Dec. 19, 2007, as well as slash and pre-commercial thinning from non-federal forestland. In addition, biomass obtained from certain areas at risk for wildfire can be used. The definition does not reference municipal solid waste (MSW), only the yard and food waste components of it. According to Argyropoulos, the EPA is seeking comment on allowing greater flexibility in interpreting the definition of MSW.

It is important to note that the regulation does not prohibit the production of feedstocks and fuels that do not meet these definitions and GHG emissions-reduction thresholds. It does, however, prohibit producers from generating RINs from fuels that do not meet these compliance standards.

The Program in Action
The EPA is proposing to implement the program beginning on Jan. 1, 2010. Under the proposed rule, the party that generates RINs would be responsible for verifying that the feedstock used to produce renewable fuels meets the definition of renewable biomass. The EPA has outlined several processes that could be used to implement this requirement and is seeking comment on each of them. The agency has also proposed that producers who do not generate RINs for their fuel will be required to provide documentation that their feedstocks do not meet the definition of renewable biomass.

In order for EPA to adequately implement the RFS2 program, the agency says it will need to gather information on each producer's feedstocks, facilities and products. This will be accomplished through a new registration requirement, which must be completed by each producer by Jan. 1, 2010, or 60 days prior to the date a producer begins producing fuel.

According to Argyropoulos, the information gathered during the registration process will also help the EPA determine whether a specific facility will be eligible for grandfathering.

The proposed rule also specifies that all renewable fuel facilities will be required to have a third-party engineer review completed by a licensed professional engineer working within the chemical engineering field. In addition to completing this review for registration purposes, each facility would be required to repeat the engineering review every three years.

Under the proposed rule, foreign renewable fuel producers who export fuel into the U.S. market would be required at minimum to meet the same compliance standards as domestic producers in order to generate RINs.

While renewable fuels are required to meet GHG reduction thresholds to qualify for the RFS2 program, these life-cycle emissions are not determined for each individual facility.

Rather, the EPA has determined life-cycle GHG values from specific combinations of fuel type, feedstock and production process. To date, the EPA has focused efforts on developing fuel pathways for fuels initially expected to be high-volume contributors toward the RFS2 mandates, Argyropoulos says. "There are multiple pathways that have been identified," he says. "There are other pathways that are being evaluated right now, between the proposal and the final [rule], so we expect that as new pathways are anticipated - especially to be commercialized - then we are going to need to assess all of those."

The EPA has used a variety of models and data sets to complete these life cycle GHG emissions estimates, or fuel pathways. According to Argyropoulos, this is due to the fact that no one model can currently capture and calculate all of the relevant information that must be considered. Although the ethanol industry has criticized the EPA's inclusion of indirect land use in the life-cycle analysis of biofuels, Argyropoulos says the agency is simply doing what is required by law. "I think from our perspective, that's the intent that Congress wanted - inclusion of indirect land use," he says. "It's written in the law, and we feel it's important that we follow what Congress has intended for us to do. Therefore, we have done that."

The proposed rule details multiple options for assessing these emissions impacts over time. One option is to assume a 30-year time frame with no discounting, meaning all emissions impacts are valued the same regardless of when they occur. A second option would be to assess the impacts over a 100-year time frame while discounting future emissions by 2 percent annually.

According to analysis completed by the EPA, a number of corn-based ethanol natural gas-powered plant configurations would be able to meet the 20 percent GHG reduction threshold when assessing emissions over 100 years with the 2 percent discount rate. However, no corn ethanol pathways analyzed by the agency to date would be able to reach the threshold if the emissions are assessed over a 30-year timeframe with no discount rate.

In order to implement the program, EISA does allow the EPA some limited flexibility to reduce the GHG thresholds for each category of fuel by up to 10 percent. In the proposed rule, the EPA proposes adjusting the GHG threshold for advanced biofuel down to 44 or 40 percent. This would allow sugarcane ethanol to count as advanced biofuel and help ensure that the volume mandated for advanced biofuel could be met.

Erin Voegele is an Ethanol Producer Magazine associate editor. Reach her at evoegele@bbiinternational.com or (701) 373-8040.