RFS2 a hot topic at conference in Orlando

By Holly Jessen | February 09, 2010
Posted Feb. 16, 2010

Just two weeks after the U.S. EPA released the final Renewable Fuels Standard rule (RFS2), it's not surprising that the final ruling was a hot topic at the National Ethanol Conference (NEC).

That the RFS changed significantly from the proposed rule to the final rule was, in part, due to the Renewable Fuels Association and people attending the conference, said Sarah Dunham of the EPA. The EPA received real data during the comment period that helped shape the rule, including indirect land use change (ILUC). "I can safely say that this is the area where we got more comment than any other," said the Minnesota native now working in Washington, D.C.

RFA's 15th Annual conference was held in Orlando, Fla., Feb. 15 to Feb. 17. More than 1,300 people attended the event, up only slightly from last year's attendance of 1,250. The event was titled "Climate of Opportunity", something that is especially true considering the EPA's more positive treatment of ethanol, including corn ethanol, in the RFS2.

Dunham told a packed room on the first day of the conference that the peer review process and comments received resulted in several changes to the model used for ILUC. During that process it got "significantly more sophisticated" and will continue to evolve with time.

The final rule reflected that new data resulting in corn ethanol being attributed with significantly less greenhouse gas (GHG) emissions, Dunham said. There are three reasons for this. First, due to increased demand, corn has ever-increasing yields. This means that less land is needed to produce corn than was factored into the proposed rule. Secondly, research was brought to the EPA's attention concerning the value of ethanol coproducts. In the final rule calculations, 1 pound of distillers grains replace 1.196 pounds of total corn and soybean meal in beef and dairy rations in 2015.

The final reason for the change in corn ethanol's GHG emissions score was how land use change is treated. The EPA's previous assumptions were incorrect, she said, in that grassland converted into cropland can actually be replaced by grassland conversion not just forest conversion in the indirect impact modeling.

Dunham also commented on the EPA's proposal to require all biofuels producers to keep records of where feedstocks came from. There was "substantial discussion" on whether that was overly burdensome, she said. The EPA no longer envisions new agricultural land will come online, beyond what was brought into production before 2007. As a result, biofuels producers won't need to prove the agricultural-based biomass they turn into advanced biofuels came from qualifying lands. That will remain the same, she said, unless the USDA indicates that more cropland is being put into production.

Dunham also told the crowd that the EPA realizes it didn't review every possible feedstock that can be turned into a biofuel. There are some feedstocks that are very close to having a completed model, from feedstock to process, and others that haven't been looked at at all. That's why the EPA will have an annual review process. Individuals can petition to have a new feedstock or process added to the list. "We realize the state of scientific research is continuing to evolve in this area," she said.

One confusing thing is that, although RFS2 rules came out two weeks ago, the regulations will go into effect July 1 but the volumes are for starting the beginning of the year. Renewable Identification Numbers (RINS) for RFS1 and RFS2 will also be "floating around" together this year. "We realize that this is going to be a transition," she said.

Overall, the EPA believes that biofuels can result in decreased dependence on foreign oil and reductions in GHG emissions. That's going to come about due to an RFS of 36 billion gallons of renewable fuels by 2022. "We think it's largely going to be met by conventional biofuels," she said.

Charles Knauss, a partner with Bingham McCutchen LLP, was the moderator of the session and introduced Dunham. The RFS2 comes with a price, he warned conference-goers. It puts new obligations on the industry, increased liability possibilities and needs to be taken seriously. For those that think the tax code is long and difficult, Knauss said that RFS2 is actually twice the 2007 tax regulations. "The EPA has seen the tax code and raised it substantially," he said.