Readying for a Regulatory Landing

June 24, 2015

BY Katie Fletcher

Climate change has evoked carbon emission reduction strategies worldwide. In the U.S., seven of the top 10 warmest years on record have occurred since 1998, with carbon pollution deemed its biggest driver. Recognizing that, President Obama’s Climate Action Plan directed the EPA to work closely with states, industry and other stakeholders to establish carbon pollution standards for both new and existing power plants, which currently account for roughly one-third of all domestic greenhouse gas emissions (GHG). On June 2, 2014, the U.S. EPA proposed the Clean Power Plan to help reduce carbon emissions by 30 percent from 2005 emission levels by 2030. The federal initiative began making headway in 2010, and although biomass could serve as one of numerous methods to help achieve this aim—and its landing in the mandate looks favorable—nothing is certain until touchdown.

The current status of the mandate is best understood by stepping through the preceding chain of events. In 2010, the EPA issued its GHG Tailoring Rule, which aimed to tailor default emissions levels contained in the Clean Air Act to make them applicable to GHG emissions. However, the rule did not distinguish biogenic emissions from fossil fuels, and did not exclude biogenic carbon dioxide (CO2) from applicability under prevention of significant deterioration (PSD) and Title V permitting thresholds. “That created great concern for the forest products industry—land owners, biomass power, all of the people in the larger value chain,” says Paul Noe, vice president of public policy with American Forest and Paper Association. “We went to the EPA and voiced those concerns and they agreed to step back and do a more detailed science review of this issue.”

The agency responded by issuing a three-year deferral of biogenic CO2 regulations in July 2011. A few months later, the EPA drafted the Accounting Framework for Biogenic CO2 Emissions from Stationary Sources, which was reviewed by the EPA’s Science Advisory Board, a panel of scientists and experts representing several areas of forestry and agriculture. The SAB panel was tasked  with reviewing the EPA’s overall approach and accounting practices, as well as suggesting improvements to the original framework accounting model.

Last November, EPA issued a revised framework, informed by the SAB’s report and public comments, for a second round of targeted peer review with the SAB. This round of analysis is ongoing and could be for a while. Current review is focusing on charge questions pertaining to specific areas of the framework that were not addressed in the prior revised report, and where the EPA would like further guidance. Specifically, the EPA requests the panel examine and offer recommendations on future anticipated baseline specification issues in assessing the extent to which the production, processing and use of forest and agriculture-derived biogenic material at stationary sources for energy production results in a net atmospheric contribution of biogenic CO2 emissions. This framework presents an equation called the biogenic assessment factor (BAF) equation, which includes terms representing different aspects of the biological carbon-cycle dynamics associated with biogenic feedstock growth, harvest, processing and use at stationary sources.

The second draft of the framework was also accompanied by a memorandum issued by Janet McCabe, acting assistant administrator for the Office of Air and Radiation, to the EPA’s Regional Air Division directors describing the agency’s current thinking regarding biogenic CO2 emissions in the context of the CPP and the PSD Program. It is these two documents the biomass industry has looked to as a means of gauging what role biomass will play in upcoming policy.

Overall Optimism    
Bob Cleaves, CEO of the Biomass Power Association, believes the revised framework and accompanying memo support a clear, science-based approach that provides regulatory certainty while deferring important policy implementation to the states. “It’s hugely positive what the EPA did in November, because it essentially gave the industry a kind of carbon stamp of approval,” Cleaves says. “We’re starting to put a price on carbon, recognizing the environmental benefits of the industry and providing the industry with the same kind of benefits that solar, wind and other renewable technologies receive.”

Noe says the AF&PA also finds the documents favorable. “We’re pleased that while it has been a long path, EPA has recognized the carbon neutrality of biomass derived from certain forest products manufacturing residuals, and we think that it’s clear when you look at the McCabe memorandum and the revised framework.”

All in all, players in the biomass industry are taking the news from the EPA as a good sign. Even so, the industry seeks certainty in regulatory text. The memorandum clarifies what biomass energy qualifies as carbon neutral in some respects, but doesn’t definitively answer the question across the board. In the documents, EPA makes a preliminary finding that the use of certain forest-derived industrial byproducts and waste-derived feedstocks for energy are carbon neutral, and shows specific analysis that use of spent pulping liquor for energy is carbon neutral. The agency intends to apply these findings in future Clean Air Act regulations. However, AF&PA hopes for certainty on the carbon neutrality of energy derived from certain forest products manufacturing residuals, and how EPA will determine whether trees that may be used for energy are sustainably derived.

One of BPA’s requests is for the EPA to broaden its definition of waste-derived materials by including nonforestry cellulosic materials—like urban wood, wood-derived construction and demolition debris and railroad ties—since these are organic materials that do not cause land use changes and do not deplete carbon stocks. The association also encourages the EPA to state that biomass power plants that use the feedstocks covered by the McCabe Memorandum be exempt from regulation under the CPP. 

In the testimony BPA submitted to the SAB panel, it argues that the use of fuel is a function of price, rather than carbon accounting. In the words of the association, if the EPA were to conclude that all biomass is carbon neutral, the fear that biomass electricity would undertake major harvests and compete with the value of pulp and sawlogs is fantasy. “It’s virtually inconceivable that power prices would reach the point where it would make economic sense to harvest natural forests,” Cleaves says.
In order for the industry to use merchantable fiber, Cleaves estimates power prices would have to reach somewhere between 15 to 20 cents a kilowatt hour (kWh).  “The idea that by the EPA somehow giving us the green light to harvest natural forests is going to—with a wave of a magic regulatory wand—allow us to go out and use any type of biomass is just patently absurd on the economics.”

Chance to Cofire
Besides fear of overharvesting, some may question whether U.S. coal plants will rapidly convert to biomass with supportive policy. William Strauss, founder and president of FutureMetrics, recently published white papers making the case that the CPP is not a war on coal, and that a gradual transition to cofiring at coal plants can be made without the assumed negative impacts. Strauss states in his paper, “If the coal industry and the power stations that use coal follow a strategy that is proven successful in Europe and South Korea, coal plants will not close and coal producers may see their margins improve.”

Strauss says the generation company that cofires wood pellets with coal to achieve a 10 percent reduction in CO2 will increase its cost of production by less than one penny per kWh, significantly less than the current cost of wind or solar power for achieving the same reduction. He uses the example of a 325-MW power plant cofiring at 89 percent coal and 11 percent pellets for a 10 percent CO2 reduction. Strauss refers to this as a rational and pragmatic off-ramp to a decarbonized future, or a gradual transition to a less carbon-intensive power generation sector. “It’s a low-cost, decarbonizaiton pathway, but it’s still about a penny per kWh more than just plain old coal, so unless the utility is going to get either approval from the ratepayer or get support from policy, they are just going to burn coal,” Strauss says. “They’ll take the cheapest generation path forward if there is no incentive for them to change from business as usual.”

Strauss affirms there will still be the need for other carbon mitigation solutions. “You couldn’t cofire in all plants, there are not enough sustainable feedstocks to produce that quantity of pellets,” he says. “Right now the market is overseas. There are underutilized wood baskets further inland that are either underutilized because they’ve lost their traditional customers in the pulp and paper business or they never had those customers to begin with.”

Strauss adds that coal producers can benefit from the Clean Power Plan if they engage with pellet manufacturers. “It is a strategy that unites the states with the power plants, the coal producers and the pellet producers.”

Slow and Deliberate
Because price defines biomass feedstock options, the BPA submitted comments advising the SAB and EPA to focus on the low-value feedstock currently in use when finalizing the current framework. Greg Morris of the Green Power Institute testified at the latest SAB meeting, calling for clarity on how the fuels the existing industry uses—residues and byproducts—are going to be treated in respect to carbon accounting. A section of Morris’s prepared comments reads, “In the opinion of the GPI, the SAB has a real opportunity to provide a valuable service to the biomass industry and the renewable energy industries in general by expeditiously memorializing its consensus that biomass fuels derived from residue and byproduct forms of biomass should be assigned a BAF value of zero.”

The latest SAB teleconference was held May 29, where four other registered public speakers joined Morris, followed by a discussion of general conclusions about the framework and ending with a debate on the specific charge questions. Three more teleconferences have been slated to discuss the charge questions this summer. Still, there is no timeline set for when SAB’s conclusive advice on the charge questions must be offered to the EPA. Holly Stallworth, designated federal officer with the SAB, says, “We’re going slower and in a more deliberate fashion.”

She commented that the revised framework is more of an academic exercise and that it has been declared by the EPA as policy neutral. “They are saying that they do not plan to channel it into policy and not into the CPP at this time,” Stallworth says. 

The framework released in November maintains the policy agnostic approach from the first version and does not provide a detailed discussion of specific policy and implementation options. The language in the framework reads, “EPA has not yet determined how the framework might be applied in any particular regulatory or policy contexts or taken the steps needed for such implementation.”

The framework does explain particular elements of the framework equation where policy-relevant choices would need to be made for application to a specific policy or program, but ultimately it’s a technical document that does not set regulatory policy. SAB members are split on the issue. Some on the panel agree the accounting framework should be policy neutral, while others believe it can only be useful or contextual if it is specifically designed to address the policy issues for which its use is intended to provide reliable input. Madhu Khanna, chair of the biogenic carbon emissions panel, noted during a March 25 meeting that the panel’s responses to the charge questions could be better answered if policy context that affects scale, targets and mix of feedstocks were provided, because answers would differ depending on the policy. 

During the May meeting, Khanna stated that the framework doesn’t explicitly state a policy context. However, “You could implicitly get from this that the policy context is regulation of CO2 emissions from stationary sources under the Clean Air Act,” she says. “We really need to focus on this narrow question of whether more details about the policy context, other than this implied one of the Clean Air Act, are needed in order to determine the BAF that is defined in this framework.”

Cleaves’ stance is that “by keeping the process completely separate from policy considerations, the panel may be keeping biomass power in a policy limbo at a time we can’t afford uncertainty,” he says. “We need a clear understanding of how biomass will count under the CPP.”

Besides policy context and implementation, the more comprehensive discussion and analysis the SAB is conducting as it prepares its report for the EPA includes detailed technical appendices on the following topics: baseline approaches, spatial- and temporal-scale decisions and implications, inclusion of alternative fate analysis for certain feedstocks and methane, leakage and illustrative regional feedstock-specific calculations using existing data sources and models, and resulting regional biogenic assessment factor values. 

During its last meeting, the SAB panel was only able to begin discussing the first charge question regarding temporal scale, essentially considering over what time horizon the impact of using biogenic sources should be measured. The meeting concluded with plans to begin discussion there at the next meeting in July.

It is clear, deliberation over the framework is a difficult and timely process. If the EPA does not make a definitive decision on biomass in its CPP and defers to the SAB’s judgement, which could be years down the road, Cleaves and others believe it could have an adverse impact on the biomass industry. If not included at all, which most deem unlikely, Cleaves believes the effects could be negative or even catastrophic. “The negative effects would be that states aren’t encouraged to include biomass and that would not be helpful in terms of continuing to recognize biomass in state renewable portfolio standard programs. The catastrophic effect would be, if we aren’t included, then almost by definition we’re part of the problem, and we would be regulated like a coal plant, required to purchase offsets or install pollution control technology.”

If regulated like a coal plant, Cleaves says, biomass plants would have no way to pass on those costs to ratepayers, as they are independent power producers. “We would close down, material would get landfilled, forest fires would proliferate, methane emissions would increase—the climate would be worse off.”

Noe says that it’s also important that whatever policy comes about in this context and others that it doesn’t cause market distortions. “If you think about how the forest products industry uses manufacturing residuals for energy, every bit of the tree that can be used for higher value products like pulp paper packaging and wood products are used for that purpose,” he says. “It’s just these residuals that don’t have a higher value use and would otherwise go to waste if not used for energy that wind up being used. We think the market is the best way to ensure that biomass is being used for its best and highest use.”

The biomass industry calls for certainty this summer with the release of EPA’s CPP. “We have a good story,” Cleaves says. “It’s backed by science and I think we are kind of creeping towards a resolution that is going to be favorable to the industry, as it should be. I think what we see this summer in the CPP is going to be really important.”

Author: Katie Fletcher
Associate Editor, Biomass Magazine
701-738-4920
kfletcher@bbiinternational.com

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