Gateway to Cooperation and Parity
St. Louis is not only the Gateway to the West, it also acted as the gateway to the future of the biomass industry in May as nearly 1,400 professionals representing all aspects of the sector descended upon its America’s Center conventional hall to network, conduct business and learn about recent technological and agronomic breakthroughs.
A highlight of the event was the Tuesday morning plenary session, titled Association Executive Roundtable: Our Industry in a Changed Political Landscape. Leaders of seven biomass trade associations shared the stage during the session, discussing policy objectives, cooperation strategies and methods to overcome common obstacles. Those participating in the discussion included Algal Biomass Organization Executive Director Mary Rosenthal, Biomass Thermal Energy Council Chairman Charlie Niebling, Biomass Power Association President and CEO Robert Cleaves, American Biogas Council Vice Chair of External Affairs Norma McDonald, Renewable Fuels Association President and CEO Bob Dinneen, National Biodiesel Board CEO Joe Jobe, and Advanced Biofuels Association President Michael McAdams.
While different segments of the biomass industry have, at times, unintentionally worked against rather than with each other, the tide seems to be shifting. In fact, McAdams commented on how far the organizations represented in the panel had come in a single year, noting that many cooperative policy efforts between the organizations were a direct result of a similar session at last year’s 2010 International Biomass Conference & Expo. Today, organizations like the ABFA, NBB, RFA and BIO are working together to support areas of common policy goals and objectives.
To open the panel, each association leader provided the audience with an overview of its respective near-term policy goals. Rosenthal kicked off the discussion by stating the ABO will continue to push to achieve parity for the algae industry with regard to tax credits. “[The algae industry] receives no fuel credits at this point in time,” she said, noting that it is imperative algae-based fuels are eligible for the same tax incentives that cellulosic fuels and other advanced biofuels qualify for. “The other key with this 112th Congress is education,” Rosenthal continued. There is a continual need to educate federal lawmakers on the energy security benefits and advantages of algae-based fuels. According to Rosenthal, the ABO will also continue to advocate for continued renewable fuels funding through the U.S. DOE, USDA and the U.S. Department of Defense.
While the RFA also has plans to focus on educating members of Congress, Dinneen stressed that his organization must also work to maintain certainty for the ethanol industry. “It’s not that we don’t support parity—we do—but, we’re looking at a situation where our tax incentive expires at the end of this year,” he said. “When the tax incentive was extended [last year] it was made clear by friend and foe alike that going into the future there needs to be a fairly significant meaningful reform of that tax incentive. That’s what we’ve been working on.” According to Dinneen, the RFA is working to reform some of the existing incentives in a way that reflects the fact that the ethanol industry has grown. “There needs to be a fiscally responsible approach to this that will allow the industry to continue to grow, and more important to evolve,” he added.
Extending tax incentives is also a primary goal of the NBB, Jobe said. “Our top priority is successful implementation of the RFS2, and a big part of that is extension of our tax credit in order to help buffer the cost of compliance and get this program more mature,” he said. “It’s going to be very difficult given the focus on debt reduction in this Congress, but we believe that we’ve got a good chance…Our tax credit is a quarter of a century younger than the ethanol tax credit. We just need a little bit more time to get a little bit more mature.” Responding to a question posed by a member of the biomass industry regarding speculation that some members of the biodiesel industry would prefer to see the credit lapse, Jobe reiterated that extending the biodiesel tax credit is the No. 1 goal of the NBB. He elaborated by explaining 2011 is the first full implementation year of the RFS2 program. “Really, this is the first year—and the only year—we’ve ever had the tax credit and the RFS2 working in tandem,” he said. “And guess what? It works.” In addition to helping to increase the favorability of blending economics, Jobe also noted that the tax credit also plays an important role in driving investment in next-generation feedstocks, such as algae.
Although many of the association leaders taking part in the panel spoke about policy goals, McAdams said the primary goal of ABFA members is to get plants built. “The number one objective of the advanced and cellulosic industries is to deploy new technologies to build new plants—put steel in the ground,” he said. One policy element that McAdams said could help support this objective would be for federal lawmakers to alter the fuel procurement requirements of the U.S. military in a way that would allow the formation of long-term off-take agreements. “What we are really trying to do is deploy these technologies,” McAdams said. “If we could extend the procurement process, particularly with the Department of Defense, by extending the period of time in which the military can buy renewable fuels or jet, for instance, that would be enormously helpful.”
New Sectors, Old Debates
Industry leaders who participated in the panel also briefly discussed recent energy-related environmental disasters, such as Japan’s nuclear crisis and the oil spill in the gulf. These events did not spur a significant, widespread public demand for renewable technologies, and seem unlikely to do so in the future. There has also been a noticeable lack of renewed political support for renewable sources of energy following these disasters.
“I think it’s just a reflection of the dysfunction that is the United States Congress today,” Dinneen said. “Congress does not do thoughtful policy on much of anything. It reacts to negative events, they give speeches, there is a lot of fervor but not much that really happens as a consequence. Biofuels are not radioactive; they are not going to degrade the ecological system of the Gulf of Mexico; you don’t need a no-fly zone for biofuels and bioenergy, and yet trying to get members of Congress to focus on the importance of growing these domestic clean energy supplies has been a real challenge,” he said. “There are entrenched, powerful, well-healed interests that like the status quo. We have to accept that, but we also need to figure out what we can to do change it. It doesn’t happen overnight, and it doesn’t happen because of a catastrophic event. You have to build support for these clean-burning energies. It takes time. We will this week—on average—top $4 a gallon gasoline. If that’s not a clarion call for doing more to extend our domestic energy supplies, I don’t know what would be.”
The panelist also addressed the food vs. fuel debate. While on the surface it may seem as though second- and third-generation biorefining industries should be immune to the issue, Dinneen cautions the ABO and others to be wary. “You need to take a much more educated and robust look at what is really driving food price inflation and then you need to consider that the food vs. fuel debate isn’t about food; it’s about land,” Dinneen said. “As soon as there is land that is being used to produce algae, if [that land] could be used to produce a food crop [the debate will focus on algae]…I think we all have a responsibility right now to make sure that this debate doesn’t continue to undermine the growth and evolution of our industry.” According to Dinneen, the food vs. fuel debate has focused nearly exclusively on corn ethanol to date because it was the first biofuel to achieve commercial success. That will change as other forms of biofuel find increasing success.
A Look Ahead
RFS2 was also a hot topic addressed by the panel. Dinneen noted that he doesn’t think the U.S. EPA has done a particularly stellar job implementing the program, specifically when it comes to some areas of congressional intent around carbon scoring. “They’ve [also] been overly restrictive on feedstocks,” he said. “They’ve been very slow to certify some of these new pathways, and when they’ve done it, they’ve done it in a way that almost defines some of these technologies out of existence before they get going.”
However, Dinneen also noted that the agency can’t be faulted for lowering the cellulosic targets within the RFS2. “The RFS was never intended to be something that cellulosic companies could take to the bank to help them gain financing,” he said, noting, however, that the targets do create an important market lenders should consider.
McAdams also spoke about the reduced cellulosic targets under RFS2. It was very significant that the agency shifted the cellulosic volumes into the advanced biofuel pool rather than reducing the volume targets as a whole. “That is verification that they believe that biodiesel and renewable diesel and advanced fuels are going to fill that number for the advanced pool,” McAdams said. “That looks good going forward.”
In addition, McAdams stressed the importance of EPA moving forward to certify new feedstocks, molecules and pathways in a swift, efficient manner. “EPA needs to get in place…the [regulations] that allow these feedstock processes and products to be compliant with RFS2,” he said. “That is a key mission for them in the next six to eight months.”
During the panel discussion, McAdams also responded to a question posed by a member of industry regarding possible competition between biofuel and biochemical producers for investment funds. McAdams stressed he disagreed with the assertion that the financial and investment communities are showing a reluctance to support the developing advanced biofuels industry while support for biochemical is flowing exclusively from traditional chemical companies. “I would suggest to you that biobased chemicals and biofuels go hand in hand—particularly with a lot of the synthetic biology companies,” McAdams said. “What they may be able to do in the short-term is actually make a chemical that will make them profitable to where they can get the funding to do the fuel following the chemical.”
Furthermore, McAdams noted that several ABFA members have completed highly successful IPOs in recent months. “What you are beginning to see with those technologies that have really done their R&D and have really done their homework, you are beginning to see private capital fly in to give them the wherewithal to build commercial facilities,” McAdams continued. “All those companies have models in conjunction with fuels and chemicals. I think they leverage each other. It’s very similar to our current refining chemical structure and I think you’ll see more of it, not less of it.”
Author: Erin Voegele
Associate Editor, Biorefining Magazine