Biofuel stakeholders speak out at hearing on 2018 RFS proposal

By Erin Voegele | August 01, 2017

The U.S. EPA held a hearing Aug. 1 on its proposed rule to set 2018 renewable volume obligations (RVOs) under the Renewable Fuel Standard, along with the 2019 RVO for biomass-based diesel. Those representing the biofuel industry commended the agency for issuing an on-time proposal and maintaining the statutory 15 billion RVO for conventional biofuels, but criticized reduced RVOs for advanced and cellulosic fuels.

Prior to the hearing, Fuels America hosted press call during which Nebraska Gov. Pete Ricketts, Iowa Gov. Kim Reynolds, and several others shared their opinions of the EPA’s 2018 RFS proposal.

Brooke Coleman, executive director of the Advanced Biofuels Business Council, opened the call by noting it’s never been more important for the biofuels industry to makes is voices heard on the RFS. “EPA is proposing to hold strong on the conventional biofuel standard, but it appears to be less committed on the advanced biofuel side,” he said.

According to Coleman, cellulosic biofuels are poised to drive the next great wave of manufacturing investments across the heartland of the U.S. “For the administration to succeed in rebuilding the rural economy, the EPA must set forward-looking targets for cellulosic production,” he said. “Any retreat sends an unmistakable signal to investors that the U.S. is no longer fertile ground for innovation.”

Ricketts stressed how important ethanol is to the U.S, noting that it provides a less expensive, cleaner, safer alternative to fossil fuels. He also commended the EPA for its on-time proposal. “The importance of creating certainty and stability in the marketplace can’t be overstated,” he said. “The worst thing for business is uncertainty.” By releasing the volume proposals in a timely manner, the EPA is allowing businesses to plan and creating stability in the marketplace, he added.

While he offered support for the EPA’s 15 billion gallon target for conventional biofuels, he stressed it is a mistake to go backwards with regard to the advanced biofuel targets. When you set the targets high, he said, the industry will meet those goals.

Reynolds spoke about impact of the RFS on Iowa’s economy and thanked the EPA for delivering the proposed rule on time, bringing stability to the industry. Like Ricketts, she expressed support for the 15 billion gallon target for conventional biofuels, but said she is disappointed in the proposed RVOs for advanced and cellulosic fuels. She also urged the EPA to increase the 2019 RVO for biomass-based diesel to 2.75 billion gallons.

Brent Erickson, executive vice president of the Industrial & Environmental Section of the Biotechnology Innovation Organization, said that the EPA’s past delays in RFS rulemaking and disastrous methodology flip-flops, which have now been struck down by the courts, have undercut billions of dollars of investment and hindered the production of advanced biofuels.

In the 2018 rule, he said, EPA cannot use a methodology that limits future market space to a prior year’s performance. “That would have a chilling effect on new cellulosic biofuel production,” he said.

According to Erickson, the EPA has identified 105 million gallons of new cellulosic ethanol capacity that is under development, but gives the companies building that capacity approximately a 1 percent chance of starting up before the end of 2018. However, he noted most of these plants use proven cellulosic biofuel technology with a track record of consistent production. “The major hold up is EPA’s unwieldly approval process,” he said, adding the agency should do everything it can—including changing the efficient producer application process—to allow fast-track approval of bolt-on technology to give these companies a better chance of beginning production in 2017 or 2018.

Erickson also noted the EPA is proposing to waive the majority of this year’s advanced biofuel obligations while withholding new approvals for new advanced biofuel pathways. He said BIO continues to advocate for the pathway approval process to be expedited, noting many advanced biofuel companies have waited up to three years to receive pathway approval from the agency.

Finally, Erickson stressed that the 2018 RFS proposal again provides relief to obligated parties for a blend wall that doesn’t exist. The agency is failing to increase the use of biofuels this year, he said.

During the EPA’s hearing, nearly 150 individuals and organizations were scheduled to provide testimony. In his testimony, Bob Dinneen, president and CEO of the Renewable Fuels Association, thanked the agency for maintaining the 15 billion gallon requirement for conventional biofuel, but asked the EPA to increase the proposed RVOs for cellulosic ethanol to reflect growing bolt-on technologies at existing ethanol plants.

“We understand the agency’s dilemma in establishing an appropriate RVO for cellulosic ethanol, but we truly believe the agency has erred on the side of pessimism with regard to the potential for significant growth in cellulosic ethanol commercialization,” Dinneen told EPA. “We know that many plants are in the process of adding bolt-on fiber conversion technology to their existing facilities that could dramatically increase cellulosic ethanol production next year, and we intend to provide you with updated projections during the comment period.”

In EPA’s proposal, the agency noted that it will initiate a separate re-set rule, since a reduction in both the cellulosic ethanol and advanced biofuel requirements have triggered this authority. “We respect the agency’s obligation to reset the advanced and cellulosic biofuel targets to provide greater long term stability and certainty in these markets,” Dinneen testified. “But we caution the agency that reset does not mean repeal, and the agency must be faithful to the spirit and intent of the RFS, which is to maximize the nation’s use of these fuels, to drive marketplace innovation and investment in these new technologies, and to make the U.S. more energy diverse and lower carbon emissions from transportation fuels.  Congress entrusted EPA with the ability to reset the RFS, not to gut the RFS,” he told EPA.”

Jonathon Lehman, legislative council for the American Coalition for Ethanol, also offered testimony at the hearing. “As an advisor to Senate Majority Leader Tom Daschle, Lehman helped develop and craft the original version of the RFS that was eventually enacted by Congress in 2005.  As such, Jonathon is uniquely qualified to help EPA understand that strong blending targets are needed to help restore confidence to the rural economy and reassure retailers that it makes sense to offer E15 and flex fuels like E30 and E85 to their customers,” said Brian Jennings, executive vice president of ACE.

Lehman’s testimony highlights points which will be detailed in ACE’s written comments to the proposed rule. Four of the issues include conventional biofuel levels; discussion of the general waiver authority as it relates to inadequate domestic supply; the use of the reset provisions; and updating the greenhouse gas modeling for corn ethanol as it relates to Brazilian sugarcane ethanol.

“Enactment of the RFS in 2005 restarted a teetering rural economy in the early 2000s,” Lehman said. “Ensuring a properly functioning RFS and increasing demand for renewable fuels in 2018 and beyond is critical to the economic success in rural America.  Maintaining 15 billion gallons in 2018 is critical to this effort.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, told the EPA that the recent verdict in Americans for Clean Energy v. EPA should radically alter the factors EPA considers when determining RFS levels this year, and going forward.

“The court clearly affirmed that Congress’ intent for the RFS from the very beginning was to crack the petroleum monopoly and to push biofuels into the marketplace,” Shaw said.  “The recent proposal from EPA was littered with red herrings like ‘consumer demand,’ ‘market constraints’ and ‘feedstock diversions.’ The letter of the law and the Court ruling clearly leave no place for backdoor excuses to maintain the petroleum monopoly. The new EPA leadership must flush this discredited approach from their thinking and from the final rule. Whether in a reset discussion or in setting biodiesel and ethanol levels, the EPA must act according to the clear directive from the court.”

According to the Coalition for Renewable Natural Gas, the renewable natural gas (RNG) industry was also heavily represented at the hearing. "RNG has supplied 98 percent of the RFS’s cellulosic biofuel market since it received the D3 RIN designation in 2014," said Ashley Patterson, vice president of government relations and public policy with Ameresco.

The RNG Coalition said nearly 40 of the stakeholders preregistered to testify at the hearing carried its message to the EPA.  RNG stakeholders advocated that EPA's cellulosic biofuel calculation methodology in the final rule account for both increased cellulosic biofuel generation from projects currently producing fuel, and the projected production from 24 additional RNG projects nearing completion of construction that are planned to begin generating RIN credits under the RFS program later this year and throughout 2018.

Kevin Dobson, VP of Business Development with DTE Biomass explained to EPA that, "DTE Biomass is increasing production 18 percent in 2018 compared to 2017 due to plant upgrades and facility expansions currently underway at our existing projects."

"Across the country, RNG projects are under construction and anticipated to generate new cellulosic biofuel next year," added Patterson. "We are concerned that a 2018 Final RVO which does not take into account RNG projects under construction and increased generation from registered facilities has a strong risk of high inaccuracy— which can impact the RNG market, affecting jobs and slowing investments."

The RNG Coalition also noted it compiled data from RNG producers across the industry, and presented a packet of 62 signed project affidavits to EPA at the hearing.