Final RFS rule qualifies all corn ethanol, launches new online RINs system

By Holly Jessen, Luke Geiver and Susanne Retka Schill | March 16, 2010
Corn ethanol dodged a bullet when the final rule to implement the revised renewable fuels standard was released Feb. 3. Under the proposed rule, no corn ethanol made the greenhouse gas (GHG) reduction target in the U.S. EPA modeling used to evaluate different fuel pathways. While plants were grandfathered in that were in production or had begun construction at the time the Energy Independence and Security Act became law in Dec. 19, 2007, the poor performance of corn ethanol in the proposed rule's GHG calculations would have been devastating for plants that began construction after that date.

"We listened to public comment and worked closely with the USDA," said EPA Administrator Lisa Jackson at the news conference announcing the release of the rule. She noted there were three major areas that changed the GHG ratings for corn ethanol. "On crop productivity, the data we used was not right," she said. The EPA also changed the way it considered coproducts, and the indirect land use modeling was broadened beyond the initial 40 nations to include 160 nations, which changed the numbers, she said. Jackson admitted the low GHG scores for corn ethanol and soy-based biodiesel constricted market investment, and said the final rule should give investors renewed confidence in biofuels. "Based on what we know now, including indirect land use change (ILUC), there is no basis to exclude these fuels."

In releasing the final rule, the EPA said it had made multiple modifications to the models used and quantified the uncertainty associated with many components. "EPA is confident that its modeling of GHG emissions associated with international land use is comprehensive and provides a reasonable and scientifically robust basis for making threshold determinations," the background statement to the life-cycle analyses portion of the final rule says.

The EPA determined:
>Ethanol produced from corn starch at a new natural gas, biomass, or biogas-fired facility using advanced efficient technologies will meet the 20 percent GHG emission reduction threshold compared to the 2005 gasoline baseline
>Biobutanol from corn starch also meets the 20 percent threshold
>Ethanol from sugarcane complies with the applicable 50 percent reduction threshold for advanced biofuels
>For cellulosic ethanol and cellulosic diesel, the pathways modeled by EPA for feedstock and production technology would comply with the 60 percent GHG reduction threshold for cellulosic biofuel
>Similarly, biodiesel from soy oil also will meet the 50 percent GHG threshold.
In addition to the feedstocks and fuel pathways that were modeled in the development of the rule, the EPA mentions five categories of feedstock that are expected to have less or no ILUCs including:

>Crop residues such as corn stover, wheat straw, rice straw, citrus residues
>Forest material including eligible forest thinning and solid residue remaining from forest product production
>Secondary annual crops planted on existing crop land such as winter cover crops
>Separated food and yard waste including biogenic waste from food
>Perennial grasses including switchgrass and miscanthus

Other feedstocks were not yet sufficiently modeled, EPA said, but will be included in a rulemaking later this summer. Among the crops named were grain sorghum ethanol, woody pulp ethanol and palm oil biodiesel. EPA is also establishing a process where by biofuel producers or importers can petition the agency to consider a new fuel pathway for eligibility. "EPA will use the data supplied in the petition to evaluate whether the information for the fuel pathway, combined with information developed in this rulemaking for other fuel pathways, is sufficient to allow EPA to determine whether the new fuel pathway qualifies," the background to the rule says.

While the industry was pleased that corn ethanol (and soy biodiesel) would meet GHG reduction targets, it was not happy that international indirect land use impacts were still part of the GHG analysis. "While we appreciate that EPA recognizes the uncertainty of ILUC, the fact remains that ILUC is still in the rule," said Tom Buis, CEO of Growth Energy. "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." The Renewable Fuel Association also reported disappointment over "oft-challenged and unproven theories on ILUC." However, the RFA called the final rule a workable program that showed GHG benefits of ethanol compared to gasoline. "At the end of the day, the RFS is public policy that can and will work effectively," the RFA said. The American Coalition for Ethanol also said it was pleased that the final rule reflected the fact that corn ethanol has an advantage over gasoline. Still, ACE said, the regulations seriously underestimate ethanol. "We don't believe the agency's overall assessment of ethanol's GHG reduction potential was good enough or accurate," said Brian Jennings, executive vice president of ACE. ILUC is a theory based on computer modeling, not real-life data and if removed from the RFS, corn ethanol would represent a 61 percent reduction in GHG emissions, ACE said.

On the same day the RFS final rule was released, the heads of the USDA, U.S. EPA and U.S. DOE demonstrated the administration's support for biofuels in the first report from the Biofuels Interagency Working Group, created in May. "First-generation corn grain ethanol is a critically important renewable fuel source that is lowering our reliance on foreign petroleum dependent fuels, and cellulosic ethanol will soon be contributing as well. Advanced next generation biofuels will be one of the nation's most important industries in the 21st century," the report says. The interagency working group calls for greater coordination of efforts across the agencies and "strong management for results using a regional supply chain systems approach that ensures all fuels produced are compatible with the U.S. transportation fuel infrastructure."

Two weeks after the final rule was released, conference goers at the National Ethanol Conference packed an early morning session Feb. 17 to learn more details. EPA representatives laid out the new EPA Moderated Transaction System, a Web-based reporting system that will be used to generate, sell, buy, separate or retire renewable identification numbers (RINs). The new platform expands the existing RINs system used for conventional corn ethanol to also track advanced biofuels, cellulosic ethanol and biomass-based diesel. Those producers already using RINs 1 were encouraged to register immediately and begin testing EMTS. RINs 1 will continue to be traded until July 1 when the RFS2 takes effect. All parties will have to register anew, since there is no mechanism to import those already using RINs 1. Producers must register 60 days prior to beginning production, or by July 1. Ethanol plants grandfathered into the act must register their permitted capacity to determine the gallons of qualifying fuel production. Any expanded capacity will be required to meet the 20 percent GHG reduction threshold.

The final rule and supporting background and documents can be found on the EPA Web site at www.epa.gov/OMS/renewablefuels/#regulations.