October 26, 2016
BY Michael McAdams
As I sit down to write this column, I first want to ask that you to go vote! No matter who you support, make sure you take advantage of that special opportunity to cast a ballot in the upcoming election. In the event you have the opportunity to speak to candidates at any level, tell them you work for the biofuels and products industry. The USDA recently reported that the U.S. bio-based products industry, which includes renewable fuels, contributed $393 billion and more than 4.2 million jobs to the American economy in 2014.
Those are pretty impressive numbers, and we have plenty more in store for the future, as long as federal policy continues to support and broaden the existing framework to bring these products to market. This year has continued to see a great deal of development in the bioproducts area. The diversity of these products is wide and deep. On the fuels side, with the challenges of low oil prices, we have still seen continued growth in both the ethanol and biodiesel sectors. In fact, the recently proposed renewable volume obligation rule for setting the mandates in 2017 raised the amount for ethanol to 14.8 billion gallons, and biomass-based diesel fuels to 2.1 billion gallons. That means the biodiesel pool is now twice the original statutory mandate, which Congress foresaw in 2007. This is quite an accomplishment in just a short period of time.
Yet, still there is a lot that can be done on the federal policy side to continue to grow this sector of the American economy. In early October, the U.S. EPA released a new set of proposed rules entitled Enhancement and Growth Support Rule for revisions to the renewable fuel standard (RFS). The rule is 374 pages long and seeks to address a number of complicated issues that have been under consideration and discussed for several years. First among them for the advanced biofuels sector is the section that addressed bio-intermediates. In the past, EPA has been reluctant to allow a facility, which produced a renewable oil, (e.g. Pyrolysis, algae, others) to ship the renewably created feedstock to a second, not colocated facility, and upgrade it to a renewable-based fuel (e.g. biodiesel, diesel, gasoline) and be qualified to receive a renewable identification number (RIN) under the RFS program. This rule seeks to move in the direction of creating a demonstration period in which to establish the procedure and allow such a RIN to be granted moving forward. The concern has been the ability to avoid the double counting of RINS from plant A and plant B. This will go a long way to encouraging commercialization of a number of companies’ plants, which can make these renewable oils from feedstocks such as wood or algae.
The rule additionally, seeks to expedite the ability to utilize short-rotation trees as potential feedstock, broadening the current applicability of the “woody biomass” definitions currently followed under the EPA-approved pathways. The rule also allows utilizing renewable fuels for the purpose of space cooling, in addition to the already approved space heating provisions under the regulations. Another area that has caused heart burn for many was the exclusion of coprocessed fuels in refineries that are not able to count toward the cellulosic diesel or the biomass-based diesel fuels. In the proposal, EPA states, “The EPA is proposing a new pathway that would allow fuels to qualify as cellulosic biofuel and generate cellulosic (D-3) RINS, as cellulosic biofuels that are not prohibited from being derived from biomass crop-processed with petroleum.”
As for what is left to do after Congress returns on Nov. 15, tax credits are number one on the list. With all of the existing biofuels tax credit expiring on Dec. 31, Congress must extend them if we are to continue to have support in 2017. This year is more questionable than the last time the Congress passed the extenders in 2015, as they have already reduced the number of extenders by making a number of them permanent. In addition, the House leadership has been reluctant to revisit the extenders outside the conversation of an overall tax reform bill. Nevertheless, all of the biofuels groups have called on Congress to extend the current credits upon their return and prior to adjournment.
In my conversation with EPA, they continue to believe they are on track for finalizing the RVO rule prior to the Nov. 30 deadline. Given all the politics in the election, I will bet this falls after the election, but prior to the Nov. 30 deadline. Despite a great number of comments, I would not anticipate major changes from the current rule.
As you can see, there is much to do moving forward without respect to the election. So stay engaged, vote, and I look forward to writing my next column after we know the results.
Author: Michael McAdams
President, Advanced Biofuel Association
michael.mcadams@hklaw.com
www.advancedbiofuelsassociation.com
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