Letters highlight importance of RFS to cellulosic investments

By Erin Voegele | September 12, 2014

As the industry continues to wait for the U.S. EPA to hand down the final rule for the 2014 renewable fuel standard (RFS), political figures and members of the biofuel industry continue to advocate for maintaining a strong RFS program.

On Sept. 9, a group of seven companies active in the cellulosic biofuels industry issued a letter to President Obama highlighting the important role the RFS plays in encouraging investment in advanced biofuel projects. The letter was signed by representatives of Abengoa Bioenergy, DuPont Industrial Biosciences, Fiberight, Mascoma Corp., Novozymes, Poet-DSM Advanced Biofuels, and Quad County Corn Processors.

“The RFS gives the advanced biofuel industry an opportunity to break into a motor fuel supply chain dominated by oil interests,” wrote the companies in the letter. “The long range policy certainty created by the RFS – together with your administration’s commitment to the industry – made it possible for our companies to invest billions of dollars to commercialize our technologies and build the most innovative refineries in the world.”

In the proposed 2014 RFS rule, however, the EPA has not only cut the amount of renewable fuel in America’s gasoline supply but also fundamentally changed how the RFS is administered and how annual targets are calculated. “Instead of basing the targets on our industry’s ability to produce and deliver fuel, the proposal would allow the targets to be reduced if the oil industry refuses to make renewable fuels available to the consumer. The RFS attracted billions of dollars in private sector investment into cellulosic ethanol production because it changes this dynamic, by overrunning the restrictive contracts oil companies impose on distributors and retailers to discourage or block the use of renewable fuels. If the program moving forward reflects rather than mitigates the oil industry’s unwillingness to market renewable fuel, the policy will cease to be effective and the cellulosic ethanol industry will develop overseas in Asia and South America,” the companies continued in the letter.

The letter also stresses that while the administration is expected to increase the proposed 2014 RFS targets in the final rule, the decision about how the EPA derives those targets each year is far more important to investors. “The current EPA proposal froze investment in cellulosic ethanol not because of the 2014 targets; but rather, because it is not clear whether oil companies will be obligated to hit any annual RFS targets going forward. If the proposed methodology is not fixed in the final rule, the United States will no longer be the global leader for advanced biofuel investment and the 2014 rule will have inadvertently done more than your worst critics have to harm a low carbon industry you have always championed,” said the companies in the letter.

“While the current proposal has already curtailed investment and delayed projects, there is still time to get the RFS back on track. Investments that you made during your first term are ready for deployment. The question at hand is whether the return on investment will flow predominantly to the United States, or whether countries like China and Brazil will reap the economic and environmental rewards of technologies pioneered in America. Again, the key to success is preserving the original intent of the program that flexibly but resolutely forces oil companies to introduce low carbon, renewable fuels into the U.S. motor fuel pool,” continued the companies.

On the same day that the cellulosic biofuel companies issued the letter to Obama, Sen. Dick Durbin, D-Ill, issued a letter to Office of Management and Budget Director Shaun Donovan, urging the agency to thoroughly review the proposal and work toward a final rule that promotes investments in the next generation of biofuel and the infrastructure necessary to bring those fuels into the market.

In the letter, Durbin calls the EPA’s 2014 RFS proposal a “significant step backward” that undermines the goal of increase biofuels production as a domestic alternative. “As you review EPA’s final rule, I encourage you to ensure that it maintains strong support for and encourages ongoing growth in domestic biofuels,” he said.

“EPA’s 2014 draft RVOs seriously missed the mark, potentially upsetting the progress made over the last 10 years and creating uncertainty in the biofuels community…To continue building on the success of RFS, the final rule should maintain volume levels at or above the 2013 RVOs and utilize a methodology that creates a clear path for future growth in the biofuels industry,” Durbin continued. “As you complete your review of the final rule, I request that OMB ensure the final 2014 RVOs promotes investments in the next generation of biofuels and the infrastructure necessary to deploy those fuels into the market. Without a strong final rule, domestic biofuel investment may be permanently harmed bringing severe economic consequences and preventing growth of the domestic renewable fuel sector.”

The U.S. EPA delivered its final rule to the White House Office and Budget on Aug. 25. A final decision is expected soon.