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Advanced Biofuel Industry: RFS Proposal is Damaging Industry

Biomass Magazine

September 17, 2015

By Anna Simet

Nearly two dozen top executives from the advanced and cellulosic biofuels industry recently sent a letter to President Obama regarding the U.S. EPA’s renewable fuel standard (RFS) volume requirement proposal, four of whom spoke during a Sept. 16 conference call to discuss its message.

In the letter and during the call, it was emphasized that the May 29th proposal represents a broken promise that is negatively impacting investments and partnerships in advanced biofuels, is sending projects and jobs overseas, and is at odds with the president’s initiatives to combat climate change.

“As you know, the point of the RFS was to require oil companies to buy and sell an increasing amount of renewable fuel to address the fact that the oil industry would otherwise use its market position to cut off market access for competitors and thereby smother investment in cellulosic ethanol and advanced biofuels that have the lowest carbon footprint in the world,” the letter reads. “And yet, for the first time in RFS history, EPA is proposing to change the rules in the middle of the game to allow challenges related to the “distribution” of renewable fuel by oil companies – i.e. the oil industry’s refusal to buy and distribute low carbon, renewable fuel and its willingness to block brand-licensed gasoline retailers from selling higher renewable content blends under their branded canopy to be cause for waiving the RFS on a year-to-year basis. Such a provision would gut the core concept behind the law.”

During the call, Adam Monroe, North American president of Novozymes, said discussed how the RFS was originally set up—participants who chose not to comply were required to purchase RINs. “Basically it rewards those who behave the way the law intended, and penalizes who don’t,” he said. “What has happened with the proposal is that it has turned this whole mechanism on its head, in that those who don’t want to participate are actually rewarded.”

He said the proposal is driving investors away, and commented that it seems pointless to implement the Clean Power Plan when altering the RFS would increase carbon emissions by 25 million metric tons per year, the equivalent of nine coal-fired power plants.

Poet-DSM President Dan Cummings remarked that the RFS has experienced great success over the past 10 years, and as a result, the joint venture invested $275 million to build one of the world’s first commercial-scale cellulosic ethanol plants now operating in Emmetsburg, Iowa. “As we see the proposal moving forward, it has chilled the outlook for us, for further investing,” he said. “We have a network of an additional 25 plants in the U.S. that are eligible to further adapt this technology….but we’re struggling.”

Cummings said Poet-DSM is looking more overseas, particularly in Europe, and discussing licensing the technology there and in other parts of the world as well. “That’s a message I’ve been hearing, now everyone is looking outside of the U.S., due to uncertainly in the market.”

Enerkem CEO Vincent Chornet echoed Monroe’s and Cummings’s statements, adding that the company, which has invested $400 million in its municipal solid waste-to-ethanol and –methanol technology and has a full-scale, commercial plant up and running and making money, isn’t prioritizing projects in the U.S. anymore. “It’s unfortunate, because we’ve viewed the RFS as the gold standard of renewable fuel standards globally—it’s an outstanding piece of legislation and well designed, and it’s unfortunate that the rules may be changing…”

Chris Standlee, executive vice president of global affairs at Abengoa Bioenergy, which owns and operates 15 commercial-scale biorefineries on three continents and is nearing 900 MMgy per year of ethanol production, said that because of the RFS, Abengoa now permanently employs 500 in the U.S. and has invested over $2 billion in developing its eight U.S. production facilities, including a cellulosic pilot plant and one of the world’s first commercial-scale cellulosic ethanol plants in Hugoton, Kansas. “It’s very frustrating for us, and we think just a little but ironic, that the RFS, which is based on the concept of lowering greenhouse gas emissions from motor vehicle fuels, has been undermined by one of the most active administrations in fighting climate change,” he said. “Obama is asking the nation to get behind the Clean Power Plan, but turning his back on only law currently on the books that is directly aimed at climate and clean energy. “

As a result, Abengoa has been forced to change its investment strategy, according to Standlee. He said Abengoa had originally intended to develop other second-generation projects based on the Hugoton model, but is now looking overseas for those opportunities. “While we will continue to purse projects in the U.S., especially from waste-to-biofuels area, we have found interest in U.S. projects from investors and potential partners has been dramatically reduced as a result of the recent proposals.”

Brazil and France are now the most likely locations for the company’s next second-generation projects, Standlee said.

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