Industry examines EPA's proposed rule to implement RFS2

The biodiesel industry is mustering its experts and supporters to comment on U.S. EPA's proposed rule to implement the Renewable Fuels Standard (RFS2) from the 2007 Energy Independence and Security Act. With the voluminous document officially published in the Federal Register on May 27, comments must be offered before July 27.

Soy-based biodiesel's poor showing in EPA's greenhouse gas (GHG) calculations causes concern, but one positive, according to National Biodiesel Board CEO Joe Jobe, is that obligated parties can purchase biodiesel today, and it will count toward the 2009 500-million-gallon requirement. "The notice is very clear-obligated parties can buy biodiesel from whatever feedstock, and it will generate RINs," Jobe said. The industry currently is operating under the regulatory structure for RFS1, using higher volumes mandated in RFS2.

Another positive is that biodiesel sold for off-road use can generate RINs for RFS2 compliance, according to Paul Argyropoulos, an EPA senior advisor. Also, the number of obligated parties under the RFS2 has been expanded to include diesel refiners, blenders and importers-RFS1 applied to gasoline only. EPA is requesting comments for several policy options outlined in the proposed rule, one of which is whether RFS2 should continue treating energy content as RFS1 did. This would credit biodiesel with 1.5 times the value of ethanol. The other option is to move towards a volumetric measure.

Perhaps the biggest change under RFS2 is the addition of GHG targets for renewable fuels, which calls for a 20 percent reduction of GHG emissions relative to petroleum fuels for general renewable fuels, a 50 percent GHG reduction target for advanced biofuels and biomass-based diesel, and a 60 percent target for cellulosic ethanol. All biofuel facilities that were built or under construction before Dec. 19, 2007, are grandfathered in and aren't required to meet the minimum 20 percent GHG threshold. Biodiesel produced in that category would be added to corn ethanol production to meet the 15 billion gallon RFS for conventional biofuels in 2015 and beyond. While that may seem positive, Jobe said trying to incorporate biodiesel with ethanol under the RFS1 did not work well for biodiesel. "Biomass-based diesel is where we fit, and that's why it's critical we make that category work," he said. Under RFS2, biomass-based diesel will increase to 1 billion gallons by 2012.

It was widely expected that biodiesel would have no problem meeting the 50 percent GHG reduction requirement for biomass-based diesel since earlier GHG modeling of a life cycle analysis for biodiesel showed a 78 percent GHG reduction compared to petro diesel. However, under EPA's new modeling, soy-based biodiesel showed just a 22 percent reduction in GHG impact in one analysis projecting over 100 years, and a 4 percent increase over conventional diesel in another projecting GHG results over 30 years. Waste grease biodiesel fared much better in showing an 80 percent decrease in GHG emissions compared to the diesel baseline. Much of the work underway by the NBB and the American Soybean Association involves dissecting the EPA model, looking at assumptions and data inputs.

The biggest issue by far is the use of international indirect land use change impacts, outlined in an accompanying story, but others are emerging. For one, Jobe points out EPA calculations don't assign a credit for glycerin, the biodiesel coproduct that amounts to about 10 percent of the total product. "We also have found EPA is grossly overestimating the nitrogen emissions from domestic agriculture," he added. The Intergovernmental Panel on Climate Change protocol suggested that GHG emissions for agriculture be kept to the contribution from fertilizers and decomposing plant matter, and not include nitrogen from nitrogen fixation in the soil. "But that's just what EPA did," Jobe said. Correcting those two flaws should account for a significant percentage increase for biodiesel GHG benefits.

The ASA is concerned about another dimension of the proposed rule triggered by the requirement in EISA that eligible biofuels come from eligible "renewable biomass" as defined in the bill, which requires crops be grown on existing cropland only. "There is a proposal to require producers certify where their feedstock comes from," said Tom Hance, ASA's Washington representative. No system exists for tracking soybeans from thousands of farms comingled in high-volume, bulk grain storage facilities. "I've been told 99 percent of the land in the U.S. would be in compliance," he says. "EPA would want to put an onerous burden of proof on the 99 percent in compliance for the 1 percent that may not be."

With July 27 pegged as the close of the comment period, Jobe said NBB staff is working to get its analysis to NBB members for its June 15-17 meeting in Washington, D.C. After that NBB will be reaching out broadly to all biodiesel industry stakeholders with a goal of generating a large response of informed and consistent comments.