Strengthening The RFS For Next-Gen Biofuels

By Michael McAdams | May 01, 2015

There has been a great deal of conversation around the speech I recently gave at the Advanced Biofuels Leadership Conference in Washington, D.C. I would like to further explain some of the key areas of my remarks in today’s column. 

As I stated, members of the Advanced Biofuels Association are facing incredible challenges, including diminishing capital markets, an uncertain tax code, and a patch quilt of state laws and federal regulations. Unfortunately, the renewable fuel standard (RFS)—the very tool that was created to foster our industry—has become one of the greatest obstacles to continued development of the advanced and cellulosic biofuel industry due to inconsistent and poor implementation. This is clearly evident as we are now well into 2015 and still waiting for the administration to publish the renewable volume obligations for 2014. Yes, you have it right, they were due Nov. 30, 2013.

For those of you who invested your hard earned money to build an advanced plant, you believed you had a reliable and stable contract with the federal government. A contract that would help develop the next generation of biofuels, diversify our energy markets, and reduce our dependence on foreign oil. However, this contract is broken, and the federal government is not holding up its end of the deal. This failure has put your business and the investments you have made in harm’s way. Sadly, eight years after its passage, it is easy to see that the RFS is only minimally helpful to advance the promise and potential of next-generation renewable fuels.

We have already waited two years for the administration to move forward, only to continue to be left in suspended animation over the political difficulty of deciding on how to move forward. Repeatedly missing deadlines to set annual RFS requirements, and reducing those requirements below statutory levels, has created significant uncertainty. That ambiguity causes financing for advanced and cellulosic companies to evaporate.

This delay puts those of you seeking financing to build a new plant in a real bind. Even if your company has a business plan that works when a barrel of oil costs $50, at today’s RIN (renewable identification number) prices, capital markets now question whether the support provided by the RFS will exist after 2022.  Investors in the second-generation space need answers and decisions, not more rulemakings and comment periods.

We must have a clear and defined long-range policy in place, well beyond 2022, in order to be able to finance the building of this new industry. In addition, we must be able to count on the RIN values for advanced and cellulosic pools. When it comes to these issues, I’ve been working with EPA since 2009 to attempt to get pathways approved, feedstocks approved, and annual volume requirements released on time. Despite their hard work and commitment to advanced biofuels, I’ve frequently been told by those in the agency that they do not have sufficient legal authority to address these important changes.

As such, it became clear to members of ABFA that statutory changes need to be made to the RFS and that we need to call upon Congress to pass the legislative fixes needed to strengthen the RFS. We recognize that the political climate in Washington is difficult at best, but members of Congress voted, overwhelmingly, in 2007, with former Pesident George Bush’s support, to build an advanced and cellulosic sector. Walking the halls of Congress today still finds overwhelming support for this sector, and we believe that if Congress enacts the changes that ABFA calls for, then the investment community will have the certainty necessary to finance continued development of the advanced and cellulosic industry.

If you are committed to fulfilling this mission, and if you believe like I do that advanced and cellulosic biofuels are still poised to flourish in the right environment, then I ask you to join us and work with the Advanced Biofuels Association to reform and strengthen the RFS so it can deliver the promise of next-generation renewable fuels.

Author: Michael McAdams
President, Advanced Biofuels Association
(202) 289-2001