Biointermediates: Production Opportunities and Regulatory Challenges

While biointermediates present opportunities for biofuel producers, close attention should be paid to regulatory requirements.
By Sara M. Herman | June 02, 2022

The U.S. EPA published the proposed Renewable Fuels Standard annual rules in December. Within the proposed rules, EPA included a section on biointermediates—feedstocks that are partially processed at one location and further refined at another—and outlined a number of requirements related to the use of approved biointermediates. Allowing biofuel producers to use biointermediates as a feedstock source expands the current pool and gives producers additional options when it comes to managing their upstream sourcing. However, there are several requirements that both biofuel and biointermediate producers should be aware of as they plan for future production.

Current State of Play
The growth of the biofuels industry has always been tied to feedstock growth. Biofuels continue to play an impactful role in the global challenge to decarbonize, and feedstock innovation is a necessary component of industry growth. Biointermediates have long been low-hanging fruit for biofuel producers seeking to transform wastes into energy and grow the feedstock pool, whether it be from coproducts of biofuel production or biocrude from woody biomass. Traditional biofuels are also finding new applications, such as corn ethanol being upgraded to sustainable aviation fuel (SAF).

EPA does not currently allow biointermediates as qualified feedstocks for renewable fuel production under the RFS. Innovative solutions, like biocrude, cannot be used to produce biofuel that generates renewable identification numbers (RINs) under the current RFS. Lack of approval from EPA effectively bars biointermediate producers from participating in the biofuels industry, and also stifles development of additional feedstock sources.

Originally, EPA intended to make biointermediate feedstocks an integral part of the RFS in 2010 with the transition to RFS2, and again in 2016 with the Renewables Enhancement and Growth Support rule. Since the 2010 regulations were promulgated, the cellulosic category has stagnated, and—while EPA cites technology limitations—inflexible regulation around biointermediate inclusion in the program has more likely contributed to the lack of growth. EPA made another attempt to promote cellulosic growth and increase the economics and efficiency for biofuel producers, particularly for advanced and cellulosic fuels with lower carbon footprints through the REGS rule, but it was never finalized.

In its most recent proposed rulemaking, published on Dec. 10, EPA included a regulatory change that could result in the approval of three types of biointermediates for biofuel production: biocrude, free fatty acids (FFAs), and undenatured ethanol. Incorporation of these three biointermediates would increase the overall feedstock pool for biofuel production, help to spur cellulosic production, supply more low carbon fuels domestically, and potentially result in deeper decarbonization through biofuels in the transportation fuel pool.

Approved Biointermediates
Biofuel producers who wish to use biointermediates are initially limited to the three included in the most recent rulemaking: biocrude from renewable biomass processed by pyrolysis or gasification; FFAs from biogenic waste fats, oils and greases, distillers corn and sorghum oil, food wastes, oil crops and algal oil; and undenatured ethanol that meets U.S. Department of Treasury requirements. The industry has always been opportunistic and innovative in the feedstock arena, and the biointermediates subject to approval would continue this legacy.

Biocrude represents a waste-to-energy opportunity for processing woody biomass and agricultural wastes in an intermediate facility for generation of D3 and D7 RINs, as long as the renewable biomass is predominately cellulosic. FFAs separated through pretreatment in an intermediate facility could now be used by producers to generate D4 and D5 RINs, and this approval would allow for a larger portion of the raw feedstock source to be transformed into energy. Finally, ethanol producers could sell undenatured ethanol to other producers to be upgraded into other products and generate RINs, including sustainable aviation fuel through alcohol-to-jet technologies.

Biointermediate and biofuel producers who seek to expand the current proposed list of biointermediates must go through a formal rulemaking process—including notice and comment periods—that will closely mimic the process required to add a Table 1 pathway today. Approvals for new Table 1 pathways often take years to move through rulemaking, and it is likely that the same will be true for additional biointermediates.

Regulatory Requirements for Biointermediates
Biofuel and biointermediate producers alike will have new requirements in conjunction with their production and using biointermediates after the rule is finalized. Biointermediate producers will need to register their facilities to participate in the RFS, and biofuel producers will need to update their registrations to reflect the use of biointermediate feedstocks. Both types of producers will be subject to a mandatory Quality Assurance Plan and will each have new reporting requirements related to the EPA Moderated Transaction System. Biofuel and biointermediate producers will need to work together to ensure their activities under the RFS meet these new requirements.

Biointermediate producers must register their facilities with EPA and provide information related to their company, the types of biomass used to produce their biointermediate, and the qualifying Table 1 pathway for the biointermediate product. Biointermediate facilities will also need to conduct an initial on-site, third-party engineering review as a condition of their registration. Biofuel producers are required to amend current registrations to include any biointermediates used in their production processes and provide additional information related to the upstream production and purchase of these biointermediates. Also, it’s important to note that EPA requires registration updates and approvals 60 days prior to using a biointermediate.

Biointermediate producers will also be required to designate a single biofuel producer in their registration for the offtake of their biointermediate product. EPA has proposed a limitation on the transfer of biointermediates in an effort to avoid potential situations for fraudulent RIN generation. While biofuel producers will be able to procure biointermediates from various suppliers, biointermediate producers will be limited in the sale of their product to a single biofuel producer. This limitation will require both types of producers to coordinate their registrations and approval activities and have appropriate contracts in place. The regulation allows for biointermediate producers to change their designated biofuel producer once annually. Given the requirements in place to complete registration, it is unlikely that more than one registration amendment could be completed in the allowed timeframe.

In addition to limitations on transfers, EPA will require all biointermediate producers and biofuel producers using biointermediates to be audited under a Quality Assurance Plan. The QAP for biointermediates will closely resemble the voluntary QAP program currently in place for biofuel producers, and will validate feedstock origins, processing and the transfer of product to the biofuel producer. EPA will require that both the biointermediate producer and the biofuel producer use the same third-party auditor for the program’s QAP requirement. Third-party auditors providing QAP services for biointermediates will need to establish pathway-specific plans approved by EPA prior to completing the required audit.

Finally, both biointermediate producers and biofuel producers using biointermediates will need to report specific information related to biointermediates in EMTS. Biointermediate producers will report volumes of biointermediates produced, as well as information on the entity taking title of the product, and characteristics associated with processes for each batch. Biofuel producers will be required to report the type and quantity of biointermediates used for each batch of fuel, and include the EPA facility registration number for each biointermediate production facility. The current EMTS platform will require updates to allow program participants to comply with reporting requirements. Any delay in system modifications could potentially delay reporting, though EPA has stated that it believes the system will be ready for implementation.

Conclusion
EPA’s biointermediate provisions present opportunities for the biofuels industry and its supply chain if finalized. Biofuel producers will have additional sources of feedstock and new end markets for traditional fuels that undergo additional processing. Many of the requirements within the proposal can only be achieved through close coordination between biointermediate and biofuels producers. Additionally, both types of these producers will need to coordinate current and future business activities with third-party auditors to ensure RINs generated meet regulatory requirements.

The biofuels industry has always been ready to meet regulatory challenges in order to capture additional value, grow the industry, and increase the air quality improvements and health benefits of biofuel production. As demand for energy increases—clean energy in particular—biointermediates will provide an avenue for value-added raw materials, additional production volumes and more decarbonization opportunities.

Author: Sara M. Herman
Senior Consultant, Christianson PLLP
[email protected]
www.christiansoncpa.com

 
 
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