EPA cuts 2012 cellulosic biofuel target

By Kris Bevill | June 21, 2011

For the third year in a row, the U.S. EPA is proposing to slash the expected volume of cellulosic biofuels to be produced in the coming year. The agency proposed its 2012 renewable fuel standard (RFS) volume targets on June 21, unsurprisingly suggesting that the original 500 million gallon cellulosic biofuel target, set in 2007, should be slashed to a volume ranging from 3.45 million gallons (3.55 million ethanol-equivalent gallons) to 12.9 million gallons (15.7 million ethanol-equivalent gallons). In 2010, the first year cellulosic biofuel production was included in the RFS, the EPA reduced the initial 100 million gallon cellulosic target to 6.5 million ethanol-equivalent gallons. This year, the 250 million gallon target was reduced to just 6 million ethanol-equivalent gallons. Actual amounts of cellulosic biofuels produced in the past two years have come nowhere close to the volume requirements.

In its proposed rule, the EPA admits that projecting future cellulosic biofuel production continues to be an extremely difficult task. “Biofuel producers face not only the challenge of the scale up of innovative, first-of-a-kind technology, but also the challenge of securing funding in a difficult economy,” the EPA stated. “The cellulosic biofuel industry also is influenced by various tax credits and subsidies, and changes to these programs could have an impact on cellulosic biofuel production.” Additionally, the agency stated, new project announcements, project delays and cancellations occur frequently and can be hard to track.

Despite these difficulties, the EPA has identified a short list of producers it expects to contribute to next year’s cellulosic volume. Eight companies operating nine facilities have the potential to produce 15.7 million ethanol equivalent gallons of fuel next year, the agency said. Six of the eight companies listed are cellulosic ethanol producers, but their combined anticipated production volume is just slightly more than the two remaining listed cellulosic biofuel producers. Ethanol producers expected to contribute next year are: DuPont Danisco Cellulosic Ethanol LLC, Fiberight LLC, Fulcrum Bioenergy Inc., Ineos Bio, KL Energy Corp. and ZeaChem Inc. Together, those facilities could produce up to 8 million ethanol-equivalent gallons. Two Texas-based companies, renewable diesel producer KiOR Inc. and biogasoline producer Terrabon Inc. are pegged to potentially provide a combined 7.7 million ethanol-equivalent gallons of cellulosic biofuel.

While the drastic reduction in anticipated volume clearly illustrates the stunted progress of the cellulosic industry, the 2012 projections do also demonstrate a certain level of forward momentum. The number of facilities expected to produce cellulosic biofuels next year is nearly double the number expected to produce this year. Several companies included in the EPA’s 2012 list, including DDCE, Fiberight and KL Energy, were on this year’s producer list, but the 2012 group also includes newcomers Fulcrum, Ineos and ZeaChem. The EPA also noted the potential for game-changing technology to enter the marketplace next year, specifically that of EdeniQ Inc.

EdeniQ is expected to begin commercial trials of its bolt-on cellulosic ethanol technology later this year and claims its technology, which converts the cellulosic portion of the corn kernel to ethanol, will allow corn ethanol facilities to increase production by up to 2 percent. “This technology has the potential to be implemented rapidly and produce significant amounts of cellulosic ethanol in 2012 as it requires relatively small capital additions to already existing corn ethanol facilities,” the EPA stated. However, the agency noted that EdeniQ has not yet announced agreements with corn ethanol producers to install the technology and said a RIN pathway also needs to be developed for ethanol produced using that particular feedstock.

It should also be noted that Range Fuels Inc., which made the EPA’s 2011 list, was omitted from the 2012 production list. The company produced small amounts of methanol earlier this year and claimed it would produce cellulosic ethanol shortly thereafter, but was forced to shut down to address technological difficulties before significant amounts of ethanol were produced. The EPA said Range Fuels has not provided the agency with a timeline for the facility’s re-start, so no volume can be projected from the plant for 2012.

Brooke Coleman, executive director of the Advanced Ethanol Council, said the proposed volume reduction is necessary but also urged for long-term tax credits to spur the advancement of the industry. “There is no question that the RFS is a forward-looking policy that will drive significant usage of cellulosic biofuels once the industry hits the requisite production levels,” he said in a statement. “America needs the same kind of forward-looking tax policy to ensure these technologies can commercialize and compete in a marketplace where oil production is still subsidized. The cellulosic and advanced ethanol industry will hit the mark and achieve the goals of the RFS if Congress aligns our tax code with the RFS and sends a clear message to the marketplace that advanced biofuels will be a cornerstone of the broader strategy to create jobs and reduce oil dependence.”

The EPA said in its proposed rule that it does not expect to reduce the total 2012 renewable fuel volume of 15.2 billion gallons. That statutory total includes 13.2 billion gallons of conventional biofuel, 2 billion gallons of advanced biofuel, 1 billion gallons of biomass-based diesel and 500 million gallons of undifferentiated advanced biofuel. The agency is requesting comments, however, to determine whether it should reduce the advanced biofuel category or the total RFS to reflect the reduced cellulosic volume.

Comments are being accepted on the proposed rule through August 11. A public hearing on the proposal is also being planned for July 12 in Washington D.C. The EPA is required to finalize the 2012 volume requirements by Nov. 30. For more information, visit the EPA's website.