Policy issues plague advanced biofuel industry

By Anna Simet | October 13, 2014

2014 was unlike any other that Mike McAdams, president of the Advanced Biofuel Association, has seen in his decades-long career.

And that’s not a positive observation.

During the 2014 National Advanced Biofuel Conference being held in Minneapolis, Minn., Oct. 13-14, McAdams recapped the struggles the industry has faced throughout the year, attributing the bulk of problems to “a Congress that only works 13 percent of the time,” one that will “break every U.S. record for failure to get anything done.”

The old saying “You’re either the bug or the windshield,” has been particularly applicable to the advanced biofuel industry this year, McAdams said, as about 15 percent of its members have “become bugs,” due to uncertainty by federal  government—the proverbial windshield.

It hasn’t just been this year, McAdams reminded attendees, but the last two years, with uncertainty not limited to but surrounding renewable volume obligation  (RVO) numbers, renewable fuel standard (RFS) pathways, the compliance division of the Quality Assurance Program, the on-again, off-again tax code and unpredictability as to whether Congress will get anything done in any amount of time. “It’s been inherently difficult for all of my CEOs to find financing to build new plants in the U.S.,” McAdams said, adding that they have been forced to look elsewhere for financing and other opportunities, such as in China and Brazil, where partnership between government and industry has been somewhat stable.

Despite a dismal reflection on progress over the last year, McAdams expressed optimism for a potential change of direction after the midterm election in a few weeks. Though there’s a good chance of a republican takeover of the Senate, McAdams said the party will have to begin 2015 with a clear agenda, so that “during the 2016 presidential election, there will be points of reference between the two parties. That could break loose some legislative and regulatory circumstances that have taken place over the last couple of years,” he said. “I’m looking forward to delving into some of that—who the players might be, what specific pieces might come out, and the challenges around it—and there are some serious ones.”

But there also could be opportunity in that changeover.

“If it does happen, and we are able to move some things forward, we could reaffirm that the federal government recognizes the importance of cellulosic and advanced biofuels industry…that will clear up this lack of certainty, which would be very, very helpful.”

Following McAdams, National Biodiesel Board CEO Joe Jobe continued to guide the conversation in a positive direction by highlighting the success the biodiesel industry experienced in 2012 and 2013. “2013 really was a demonstration of how fundamentally sound the RFS was, and how well it could work.”

In 2012, the industry produced just over 1 billion gallons, and just under 2 billion gallons in 2013, hitting an equivalent of five percent of the total diesel supply, Jobe said, and achieving the industry’s 10-year, “five by 15” vision two years early. Feedstock prices came down and the industry was drawing investment, he added, all positive market impacts.

Then came devastation, resulting from a leaked U.S. EPA RVO proposal draft. “If it was designed to have a chilling effect on markets and on RIN values, then it achieved its purpose, because RIN values began to drop at that point,” he said.

That, coupled with an expired blenders tax credit, resulted in a very tough year for the biodiesel industry, particularly from small- and medium-sized producers. “Many of whom have been faced with an impossible business decision of either continuing to run at a loss, or stop running, and risk losing employees, losing customers and suppliers,” Jobe said, adding that, luckily, larger- and medium-sized producers have been able to continue to maintain levels.

Though the RVO draft stated that its reason for volume cutbacks were based on attempting to address the ethanol  blendwall and cut volumes by about six percent, biodiesel took a 50 percent cut in the proposal, which Jobe described as ironic, as “biodiesel actually helps alleviate the ethanol blendwall issue.”

Jobe concluded by saying that he’s cautiously optimistic that the EPA will ultimately get it right, even though it will have taken them a year to do so.

Following Jobe, Algae Biomass Organization Executive Director Matt Carr emphasized the huge potential algae has to alleviate some of today’s most pressing sustainability issues, but pointed out that the sector has moved beyond its youthful, exuberance phase that drew many “looking to strike it rich,” and has boiled down to serious players focused on strategic partnerships, diversifying portfolios and looking overseas for first production facilities.

Carr provided several examples of developments amongst companies looking at higher value markets while domestic biofuel policy remains uncertain, but was quick to add that the industry hasn’t moved away from fuels. “It remains a main driver,” he said.

Hindrances on that market coincide with the ones McAdams and Jobe spoke of, including RFS instability, slow-moving pathway approvals,and  failure to extend the second-generation biofuels tax credit, all of which have prompted overseas development trends.

For the algae industry, a big piece of missed opportunity lies within the Clean Power Plan proposed rules for new and existing power plants, from Carr’s perspective. “There is this really dynamic and exciting set of technologies, many of which are biobased, to use waste CO2 to create fuels and products…to really turn CO2 from a problem into an opportunity, a revenue generator opportunity for utilities  and a way to address climate change...”

Carr described algae’s potential to capitalize on CO2 reuse at power plants as “a match made in heaven,” but pointed out that right now,  the way EPA has written proposed rules for existing power plants, there’s some acknowledgement of carbon capture and sequestration  and underground storage, but no discussion at all on reusing that CO2.”

Higher-value products, liquid fuels and a means of mitigating CO2 at power facilities, Carr concluded by adding that “We’ve only  begun to scratch the surface on what algae can do for sustainability issues.”

The National Advanced Biofuel Conference & Expo continues through Oct. 13 at Minneapolis’s Hyatt Regency.