EPA issues long-awaited RFS volume obligations

On Friday, May 29, 2015, EPA finally issued a proposed rule setting the annual volume obligations for renewable fuels under the Renewable Fuel Standard (RFS). This proposal included the long-delayed volume mandates for 2014 as well as newly-proposed mandates for 2015 and 2016. More details on EPA’s proposal can be found at the agency’s website, and the yearly volume mandates are shown in the table below, taken from the Fact Sheet available at the EPA website. This is only a proposed rule, which EPA intends to finalize by November 30, 2015.

EPArvo

The proposal is being widely reported and commented upon, so my observations today will be brief. I’ll primarily make two observations. First, as expected, EPA pulled back somewhat from its original proposed mandates for 2014, which attracted considerable controversy when issued in November 2013, but the current proposal for 2014 still falls short of the original Congressional mandates. For example, in November 2013 EPA proposed a total mandate of 17 million gallons for cellulosic biofuels: the current proposal is for 33 million; in 2013 the proposed mandate for advanced biofuels was 2.2 billion gallons; the current proposal calls for 2.68 billion. EPA based the 2014 mandates on its estimates of actual production for the year, but these targets still represent a substantial pullback from the volumes originally called for in the 2007 RFS2 legislation, to the detriment of several sectors of the biofuel industry, particularly including corn starch derived ethanol. Although arguably moot, so long after 2014 has ended, this proposal is sure to continue to generate controversy within the industry.

My other observation is that, through its modestly-escalating proposed mandates for 2015 and 2016, EPA has attempted to preserve the spirit and intent of the RFS law, which was to encourage the growth of the renewable fuel industry in order to reduce greenhouse gas emissions and the nation’s dependence on foreign fossil fuels. But here too, the volumes fall short of what is specified in the original law, and are sure to be opposed by many in the biofuel industry, particularly the corn ethanol sector. Industry representatives have, so far, expressed concern that these mandates were influenced by undue concern over the so-called ethanol blend-wall, which has effectively limited the amount of ethanol in the nation’s fuel supply to about 10% of the volume of gasoline sold.

This is only a proposed rule, and EPA will be taking public comments and holding a public hearing, all before making the rule final later this year. Expect much further controversy. In fact, I’m heading today to the Fuel Ethanol Workshop in Minneapolis, where I expect that EPA’s announcement will be a major topic of discussion, particularly in tomorrow’s plenary sessions. I hope to report on the FEW either in this blog or in Advanced Biotechnology for Biofuels later this week.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass previously served as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

Update: EU Action Amending Renewable Energy Directive

Here’s a quick update to developments in Europe, reported in my April 16, 2015 blog entry.

EU Renewable Energy Directive


Proposed revisions to the RED. On April 28, the full EU Parliament approved the final compromise for amending the Renewable Energy Directive (RED) that had previously been announced on April 14. The approved amendment to the RED will cap food-based biofuels at 7%, will set an optional target of 0.5% for advanced biofuels (which would count double towards meeting each member state’s targets), and would require reporting of indirect land use change (ILUC) but not require that ILUCs be taken into account when calculating carbon intensities under the directive. The amendment apparently needs to be ratified by the Council of the EU in June. More details on this most recent action can be found here.

According to press reports, this amendment remains controversial. Most industry groups have endorsed it as a useful next step in moving EU biofuel usage towards second generation fuels; while NGOs and environmental groups expressed disappointment that stricter limits were not placed on food-based fuels and that accounting for ILUC was not made mandatory. My view pretty much corresponds to the industry consensus — it’s far from a perfect law, and I would have preferred to see much stronger incentives for second generation biofuels such as cellulosic fuels, photosynthetic fuels, etc. And it’s somewhat distressing that it took 3 long years of debate and controversy to get to this result, which unfortunately doesn’t bode well for the prospects for further reform in the coming years. But what’s the famous quote about a long journey starting with a single step? Maybe that will prove to be the case here.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass previously served as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

 

Recent Developments on Renewable Fuels Policies

It’s been a busy start to 2015 for me, and so I haven’t had much free time for new posts to the blog. However, there have been numerous developments relating to the regulations and policies affecting renewable fuels. The following are brief summaries of some of these developments.

U.S. Renewable Fuel Standard


Schedule announced for issuance of annual volume mandates
.The U.S. EPA has still not issued a final rule to set the volume mandates under the RFS for 2014. Instead, the agency has been working on a single proposal to cover volume mandates for 2015, 2015 and 2016. More recent developments have affected these plans. On March 18, the American Fuel & Petrochemical Manufacturers and American Petroleum Institute filed suit against EPA in the U.S. District Court of the District of Columbia, asking the Court to require EPA to promptly issue the delayed volume mandates for 2014 and 2015. Late last week, it was reported that EPA will enter into a consent agreement with AFPM and API to settle this suit, under which EPA will commit to a schedule for issuing the delayed mandates. According to EPA’s website, this schedule is as follows.

  • Finalize the 2014 volume mandate by November 30. In addition, although not covered by the consent order, EPA said that it would issue a new proposal for the 2014 mandates by June 1, reflecting the volumes of renewable fuel that were actually used in 2014, to be the basis for the final rule due by November.
  • Issue proposed 2015 and 2016 volume mandates by June 1 and finalize them by November 30 (the 2016 commitment is outside the scope of the consent decree).
  • Also outside the consent decree, EPA said it will finalize the biomass-based diesel volume requirements for 2017, as required under the law, on the same June-to-November schedule.

Cellulosic waiver credits. In the meantime, the agency has announced other activities, including issuance of a direct final rule clarifying how EPA calculates cellulosic waiver credit prices under the RFS. Cellulosic waiver credits are available for obligated parties to show compliance with the cellulosic biofuel standard in any year in which EPA reduces the cellulosic volume mandate, as it has done for the past several years.

New RFS pathway petitions. EPA has also begun granting petitions for new fuel pathways under the RFS, under the procedures it announced in September 2014 (as described in my October 2, 2014 entry and follow-up posts in Advanced Biotechnology for Biofuels). Most of the approved petitions are for corn starch-to-ethanol pathways under the newly-instituted Efficient Producer program, but recent approvals have also included a new pathway for production of ethanol from algae, submitted by Algenol Biofuels.

EU Renewable Energy Directive


Proposed revisions to the RED. There’s been quite a bit of back-and-forth about the proposed amendment to the EU Renewable Energy Directive (RED) and its companion legislation the Fuel Quality Directive, but it appears that a political compromise has been reached. As last reported in Biofuel Policy Watch, European legislators and bureaucrats have been trying to reach agreement on amendments to these directives that would cap the contribution that food-based biofuels could make to the EU-wide goal of deriving at least 10% of energy in the transport sector from renewable fuels by 2020, while also finding a way to encourage the development and use of advanced biofuels not relaying on agricultural feedstocks. On April 1, 2015, representatives of the European Commission, the Parliament and the individual member states, meeting in so-called “trilogue” sessions, have agreed to cap food-based fuels at 7%, up from the original level of 5% first proposed in 2012. However, there appears to be no binding target for the percentage of the fuel supply to be attained by advanced biofuels.

A final compromise appears to have been reached by members of Parliament on April 14. According to reports, the amendment to the RED will cap food-based biofuels at 7%, will set an optional target of 0.5% for advanced biofuels, and would require reporting of indirect land use change (ILUC) but not require that ILUCs be taken into account when calculating carbon intensities under the directive. The proposal still needs the approval of the full Parliament, which is reportedly scheduled for April 29.

Oregon Low Carbon Fuel Standard


Oregon Clean Fuels Program will be fully implemented
. The early months of 2015 saw a great deal of activity regarding the Oregon Clean Fuels Program, a state law similar to the low-carbon fuel standard that has been in place in California for some time. It was last reported in the blog that the state’s Environmental Quality Commission had issued regulations to implement the Program, but that the legislature was about to again begin work on passing legislation to remove the “sunset date” under which the law would have expired at the end of 2015. A bill to remove the sunset date was approved by the Oregon Senate in February and debate in the House took place through early March, amidst a political scandal that drove newly-reelected Governor John Kitzhaber from office. Final House approval of the bill came on March 4. Kitzhaber’s successor, Governor Kate Brown, signed the bill on March 12, ensuring the continued implementation of the law going forward. I hope to analyze the regulations in a future blog post, but it is good to see that this law will remain on the books and will begin to be implemented. If progress can also be made in Washington State, we may yet see a situation where the entire U.S. and Canadian west coast would maintain incentives for adoption of renewable transportation fuels.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass previously served as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

 

Update: Oregon Low Carbon Fuel Standard Approved

This post is an important update to my year-end wrap-up of news relating to Low Carbon Fuel Standards in individual U.S. states, to report that Oregon’s LCFS program has been approved by that state’s Department of Environmental Quality.

Low Carbon Fuel Standards in Other States and Provinces


Oregon Clean Fuel Standard
. As previously reported in Biofuel Policy Watch, Oregon has had an LCFS program known as the Clean Fuels Program on the books since 2009, but it has not been fully implemented and is scheduled to “sunset” in December 2015. As reported in the year-end wrap-up in the previous post, the state’s Department of Environmental Quality has proposed new rules for this program, and these rules were considered by the Environmental Quality Commission on January 7-8, 2015.

In this meeting, the Oregon Environmental Quality Commission approved the rules which lay out the next phase of the Oregon Clean Fuels Program, with the stated goal of cutting greenhouse gases by lowering the carbon content in Oregon transportation fuels. The rules will go into effect Feb. 1, 2015. According to the agency’s website, the approved rules:

  • Establish clean fuel standards to reduce greenhouse gas emissions from Oregon’s transportation fuels by 10 percent over a 10-year period, implementing House Bill 2186, which the Oregon Legislature passed in 2009.
  • Require importers of transportation fuels – owners of the fuel when it crosses into Oregon – to reduce the average carbon intensity of fuels they provide in Oregon to meet the annual clean fuel standards. To meet the standards, regulated parties can choose a variety of strategies, including incorporating more lower-carbon biofuels, natural gas, biogas, propane or electricity into their fuel mix, or purchase clean fuel credits from providers of clean fuels.
  • Allow providers of clean fuels to generate and sell clean fuel credits for the fuels they provide in Oregon.
  • Establish fuel supply and fuel price deferrals to contain the program’s cost.

Continuance of the program is still contingent upon the State Legislature removing the December 31, 2015 sunset date, an effort which failed in the legislature last year.

This is clearly only the first step in what will be a long, possibly complex process for Oregon to develop a strong LCFS along the lines of the California program. However, it is very encouraging to see the state take this action, and coupled with other positive news coming out of Washington State in the latter months of 2014, it creates the strong possibility that in the near future, renewable fuel usage can be promoted by LCFS policies throughout the west coasts of the U.S. and Canada. with programs in all three U.S. states and British Columbia.

Other coverage of Oregon’s action can be found at http://www.opisnet.com/offers/images/opis_issue.pdf.

Previous Blog posts on Low Carbon Fuel Standards:

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass previously served as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

 

End-of-Year News Wrap-up: Low Carbon Fuel Standards

As 2014 draws to a close, the following are some recent stories that have caught my attention, relating to several renewable fuel policy issues that I’ve followed from time to time in this blog. This entry will focus on issues relating to Low Carbon Fuel Standards in individual U.S. states and the Canadian province of British Columbia.

California Low Carbon Fuel Standard


Updates on California LCFS regulations. The staff of the California Air Resources Board (ARB, or CARB) has been working since early in 2014 on a series of potential amendments to the state’s Low Carbon Fuel Standard. This is being undertaken partially to address a court ruling directing ARB to take steps to cure some administrative deficiencies that the court found in the regulations. According to an ARB staff document, ARB staff is proposing that the Board re-adopt the LCFS regulation along with a proposed “suite of amendments [intended] to provide a stronger signal for investments in and production of the cleanest fuels, offer additional flexibility, update critical technical information, and provide for improved efficiency and enforcement of the regulation”. Among these proposed new regulations is a revised procedure for ARB review of applications to certify new fuel pathways under the LCFS. I have previously reported on the staff’s original (April 2014) proposal in a post earlier this year: aimed at reducing the substantial backlog of Method 2A and 2B applications, the April proposal would have classified first-generation biofuels (e.g. corn ethanol, renewable biodiesel) as Tier 1 fuels and advanced biofuels as Tier 2 fuels, and further would have created “bins” for the Tier 1 fuels– for example, assigning all Tier 1 fuels with carbon intensities of 80-90 in one bin with an assigned credit at the midpoint of 85. However, this proposal attracted some controversy because it might have accomplished a reduction in the number of petitions at the cost of losing the incremental advantage afforded to fuel developers by small improvements in carbon intensity.

ARB staff went back to the drawing board, and unveiled a revised proposal at a May 30 public meeting. In the May proposal, the staff was still proposing to distinguish between Tier 1 (1st Gen) fuels and Tier 2 (2nd Gen) fuels, but the “bin” concept for Tier 1 fuels was no longer being considered. Instead, all new Tier 1 fuels would use a proposed new “Tier 1 Calculator” spreadsheet under the CA-GREET 2.0 model to establish a carbon intensity value, with no need for filing a formal petition. Second generation (Tier 2) fuels would follow much the same procedures for submission of Method 2A or 2B applications as is currently the case. The proposal would also streamline the process by consolidating pathway application with the procedures needed for registration of fuel producers. I discussed this May 2014 proposal in a little more detail in my talk at the 2014 BIO Pacific Rim Summit on Industrial Biotechnology: you can find the slides from that presentation here.

At this writing, this remains only a proposal, which presumably would be adopted only as part of the larger regulatory overhaul that staff has been orchestrating. Those regulatory revisions were intended to be completed during 2014, which does not appear likely at this time, so the possible timing of the implementation of new procedures for fuel pathway approvals is not clear. More details on the various components proposed for the regulatory re-adoption can be found on the ARB website.

Low Carbon Fuel Standards in Other States and Provinces


Washington State Clean Fuel Standard
. On December 17, 2014, Governor Jay Inslee of Washington announced a number of legislative and regulatory proposals designed to “transition Washington to increased energy independence through use of clean energy, to reduce carbon pollution in Washington and to meet the statutory greenhouse gas limits adopted by the state Legislature in 2008”. Most prominent among these is a proposed cap-and-trade program to limit carbon emissions. Also among the proposals, Gov. Inslee has directed the state’s Department of Ecology to draft proposed regulations for a Clean Fuel Standard that would require a transition to cleaner fuels over time. Input will be sought from legislators, affected and interested parties and the public before formal rulemaking begins. The proposal for a Clean Fuel Standard follows on a revised analysis of the impact of a potential Clean Fuel Standard, prepared for the state by Life Cycle Associates LLC, Jack Faucett Associates and the Center for Climate Strategies, which was issued on December 12. This report analyzes several scenarios to achieve a 10% reduction in transportation fuel carbon intensity by 2026 relative to 2012 levels.

Oregon Clean Fuel Standard. Environmentalists are hopeful that, with Democratic gains in the State Senate, a favorable vote can be achieved to keep the Oregon Clean Fuel Standard in operation. As previously reported in Biofuel Policy Watch, the state has had such a program on the books since 2009, but it has not been fully implemented and is scheduled to “sunset” in December 2015. A bill in the Senate that would have extended the program failed to pass in 2014, but according to a recent press report, Senate Democrats plan to reintroduce such a bill when the new legislature convenes in January. According to this report, the state’s Department of Environmental Quality has proposed new rules for this program, which are expected to be approved by the Environmental Quality Commission on January 7-8, 2015. This proposal has continued to be controversial, in particular attracting opposition from oil industry groups and their allies.

British Columbia Renewable and Low Carbon Fuel Regulations. I briefly described this program of the Canadian province of British Columbia in a February 6, 2013 posting on my Advanced Biotechnology blog. According to the website of the province’s Ministry of Energy and Mines, this regulation led to the use of renewable and low carbon fuel in 2012 that “saved 904,868 tonnes of greenhouse gas emissions from being released into the environment, the equivalent of about 190,499 cars being removed from the road”. According to a recent editorial in The Globe and Mail, current Energy Minister Bill Bennett is reviewing this low-carbon-fuel regulation, with his report expected soon. The editorial writer expressed concern that, since former B.C. Premier Gordon Campbell left the provincial government, there may be less enthusiasm within the present government for environmental causes. In the meantime, the Low Carbon Regulation continues to be in effect, with the California company Trestle Energy being the latest firm to obtain a carbon intensity rating for its fuel under the British Columbia regulations. The company’s fuel is reported to be a a corn ethanol product with a very favorable carbon intensity compared to other corn-derived ethanols.

Previous Blog posts on Low Carbon Fuel Standards:

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass previously served as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

 

Biofuels Law Conference: Discussion of International Biofuel Policies

On May 2, 2014, I presented a talk at the Energy Bioscience Institute (EBI) 6th Annual Biofuels Law and Regulation Conference at the University of Illinois, summarizing a number of key legal, policy and regulatory issues affecting the development of the biofuels industry in the U.S. and internationally. The slides from that presentation can be found here. In this series of posts in Biofuel Policy Watch, I’m elaborating on the issues I discussed in the presentation.  These posts are not meant to provide comprehensive summaries of the issues at hand, but instead to highlight some key aspects of my presentation and other discussions at the EBI conference. For most of these policy issues, you can find background information in other posts on this blog and my Advanced Biotechnology for Biofuels blog, and I’ll provide links such previous posts where possible.

In today’s post, I’ll briefly cover some of the international issues I discussed in the EBI presentation. I’ll also provide some brief updates on important international developments that have occurred in the weeks since that presentation. The two issues I highlighted in my talk were the EU Renewable Energy Directive and its importance in promoting the use of biofuels, particularly advanced biofuels, in the EU, and the need for consistent, broader, enforceable mandates for ethanol and biodiesel use in countries around the world. My talk also touched on issues relating to international trade harmonization.

European Union Renewable Energy Directive.  As I’ve described in several previous blog posts, the EU Renewable Energy Directive (along with its companion legislation the Fuel Quality Directive) is the major regulatory policy promoting the use of renewable fuels in the EU. As discussed last year in Advanced Biotechnology for Biofuels, the EU RED was put in place in 2009 to establish the goal for all EU member states to derive 20% of their overall energy consumption from renewable sources by 2020, including 10% of energy consumption within the transportation sector by the same year. This would be accompanied by concomitant reductions in greenhouse gas emissions as these targets are met. Companies selling transportation fuels to the public would be required to utilize fuels certified as renewable in order to meet these goals, while developers or producers of fuels had certain requirements to meet in order to demonstrate that the fuel is indeed produced renewably and sustainably.

As is the case with all EU directives, the 28 EU member states are obligated to adopt national laws containing all the provisions of the RED, and so the directive is enforced at the national level in all EU states. Compliance to date has therefore varied considerably from country to country, although it seems clear that the directive has led to increased adoption of renewable transportation fuels across the EU, and a number of renewable fuel producers have had their fuels certified as complying with the requirements of the directive.

However, most of the renewable fuels used to date in the EU have been first-generation fuels such as corn or sugar beet derived ethanol, or biodiesel or other renewable diesel fuels largely derived from vegetable oils or oilseed crops, so the mandates of the RED have become entangled with the politics of the “food vs. fuel” debates that are prominent in Europe. This led to the proposal, in October 2012, of an amendment to the RED that was aimed at discouraging the use of food-derived biofuels and encouraging the use of advanced biofuels not produced from food crops. The main feature of this proposal, which was originally described in a January 2013 post on this blog, was to establish a ceiling on the amounts of food-derived fuels that could be included in the volume of renewable fuel that each EU member state would count towards meeting its volume obligations. As originally proposed, this ceiling was 5%, meaning that, regardless of how much food-based biofuel was used in any country, the amount that could be applied towards the overall goals of renewable fuel use would be limited to 5% of the total transport fuel usage in the country.

In the months that followed, this proposal was debated at various levels within the EU, including by several different committees of the EU Parliament. On September 11, 2013, the full EU Parliament adopted a proposal which would set a limit of 6% for food-derived fuels, while setting separate targets for the use of advanced biofuels in the overall transport sector at 0.5% by 2016 and 2.5% by 2020. However, in meetings in December 2013, the Energy Ministers from EU nations failed to reach agreement on the path forward for these amendments, after considering compromise language that would have raised the limit on crop-based biofuels to 7% but would also have required mandatory reporting of indirect land use change (ILUC), the latter generally being opposed by the industry.

This stalemate persisted until only recently. In May 2014, a group of EU diplomats proposed a revised version of a proposed amendment which was agreed to by the Energy Council of the European Council in June 2014. The key provisions of this policy are a 7% cap on food-based biofuels as of the 2020 target date, an invitation to member states to promote the adoption of second and third generation biofuels by setting a national target for advanced biofuels of 0.5% of total fuel usage, among several other provisions. This proposal apparently still needs to be ratified by the Parliament, but the general reaction to this development was that the logjam was broken and that these are the changes that will be adopted as policy.

During my talk at the EBI conference, I didn’t come out in favor of any particular proposed amendment to the RED. However, I did stress the importance of maintaining the RED and the incentives it creates for biofuel usage, and, if amendments are to be adopted to the Directive, to be sure that they adequately address the goal of promoting the use of advanced (second or third generation) biofuels. It seems like the recent developments (which came after my talk at the conference in early May) are taking the policy in the right direction, although the final word will be written by the ultimate action by the EU Parliament.

International Trade Harmonization. The other broad international issue I touched upon in my talk is the issue of international trade policies. There have been recent developments relatating to some of the ongoing trade disputes between the EU and different regions of the world, several of which I’ve reported on in previous blog entries. One development has to do with the anti-dumping duties imposed in February 2013 by the EU on ethanol imported from the U.S. Apparently, companies were getting around this requirement by shipping U.S. ethanol to Norway, for subsequent importation into the EU. As a result of an investigation into this practice, on June 4, 2014, the European Commission decided to apply the duties on U.S.-originated ethanol coming into the EU from Norway. This action had been requested by the European trade association ePURE, which welcomed the news of the new duties. According to Ethanol Producer Magazine, a compliant in EU court filed in May 2013 by the Renewable Fuels Association and Growth Energy challenging the decision to impose an anti-dumping duty is still ongoing.

Other recent developments relate to EU anti-dumping duties on biodiesel coming from Argentina and Indonesia. These sanctions were imposed by the EU in 2013, a decision which Argentina had already challenged in December 2013. In June 2014, it was announced that Indonesia had also begun to challenge these duties, by filing a notice with the World Trade Organization, requesting consultations with the EU about these anti-dumping measures. Even more recently, the European Commission announced that it may renew for another five years anti-dumping tariffs already in place against U.S. biodiesel exporters. These duties were to have expired on July 11, but in announcing its intent to launch two new inquiries to see how the situation may have changed since 2009, the tariffs will remain in effect for as long as the investigations last.

Although I don’t have any unusual perspective into these trade controversies, during my talk at the EBI conference I highlighted the need to resolve international trade disputes so that renewable fuels produced anywhere in the world could be imported to any other region of the world where there might be a market. I acknowledge each nation’s right to protect its domestic industries from cheaper foreign imports, but climate change and energy security are global issues facing all countries, which demand global solutions, and it seems to me that these frequent disputes only serve as roadblocks to accomplishing those goals.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

Biofuels Law Conference: Discussion of Ethanol Blend Wall

On May 2, 2014, I presented a talk at the Energy Bioscience Institute (EBI) 6th Annual Biofuels Law and Regulation Conference at the University of Illinois, summarizing a number of key legal, policy and regulatory issues affecting the development of the biofuels industry in the U.S. and internationally. The slides from that presentation can be found here. In this series of posts in Biofuel Policy Watch, I’m elaborating on the issues I discussed in the presentation.  These posts are not meant to provide comprehensive summaries of the issues at hand, but instead to highlight some key aspects of my presentation and other discussions at the EBI conference. For most of these policy issues, you can find background information in other posts on this blog and my Advanced Biotechnology for Biofuels blog, and I’ll provide links such previous posts where possible.

In today’s post, I’ll briefly discuss issues related to the so-called ethanol “blend wall” that I discussed in the EBI presentation. As has been widely reported, the blend wall represents a somewhat artificial (yet real) limit on the amount of ethanol that can be blended into the U.S. gasoline pool. This limit, which is roughly 10% of the total volume of gasoline-based fuel sold in the U.S., arises largely because until recently, EPA regulations did not allow the blending of concentrations of ethanol greater than 10% into gasoline for use with conventional motor vehicles. Higher blends of ethanol, particularly E85 (85% ethanol, 15% gasoline) are sold for use in specialized “flex-fuel” vehicles that are designed to utilize such blends, but these vehicles comprise only a very small share of the U.S. automobile fleet. Almost all the gasoline sold in the U.S. today includes 10% ethanol (E10), for use with automobiles, light trucks, as well as motors on boats, lawn mowers, snowmobiles, etc. The blend wall poses a challenge to compliance with the U.S. Renewable Fuel Standard, since the yearly-escalating volume mandates under the RFS cannot be met in the short term without the use of amounts of ethanol that well exceed the blend wall limits.

EPA is responsible for setting limits on the amounts of ethanol in gasoline, under its responsibilities under the Clean Air Act. In 2010 and 2011, EPA announced that it had granted waivers under the Act to allow ethanol blends of up to 15% (E15) to be used in all cars and light trucks of model year 2001 or later. However, E15 was not allowed to be used in older cars and in other motors, so that EPA’s regulations allowing the sale of E15 additionally included some requirements aimed at preventing misfueling of E15 into vehicles or motors for which it was not permitted. See my January 11, 2013 posts on Biofuel Policy Watch and Advanced Biotechnology for Biofuels for more details about E15.

In spite of EPA’s action, adoption of E15 around the country has been slow, for a variety of reasons. Some of these are quite legitimate: in order to sell E15 along with E10 (and in some cases also E85), gas stations may need to retrofit their gasoline pumps to offer the different blends, and may also need to install new tanks or piping to accommodate the increased corrosiveness of the higher ethanol blends. Along with the labeling requirements of EPA’s regulations and other factors, the needed infrastructure changes to individual gasoline stations can be extensive and expensive. Furthermore, many states also regulate their gasoline supplies and had existing laws or regulations that placed the blend limit at 10% — those states would need to explicitly authorize the use of higher blends, often through legislative action.

Beyond these legitimate barriers, the acceptance of E15 has been hindered by the lobbying and (quite frankly) misinformation efforts of various parties opposed to the use of E15. Although EPA’s action to approve E15 was based on the results of extensive engine tests showing that the fuel can be used safely, opponents have funded and widely publicized studies purporting to show that E15 damages engines. The resulting publicity has cast doubt on the safety of E15, including concerns over whether use of E15 might invalidate the warranties on engines.

So, as long as E15 struggles to gain acceptance, the blend wall of 10% remains a reality, thus causing the conflict with the obligations under the Renewable Fuel Standard. During my talk, I made several suggestions for policies that might promote the use of higher ethanol blends, to help break through the blend wall. These included the following.

Adopt state legislation to guarantee that E15 can be sold; block state bills that would prohibit sale of blends greater than E10. There has been a fair amount of state legislative attention directed at E15 in recent years, some of which I’ve discussed in earlier entries on this blog (for example, my posts of May 23, 2013 and February 27, 2014). According to recent news reports, there are now 14 states which allow E15 to be sold, although in many of these states there are very few gas stations yet selling this fuel. On the other hand, the last 18 months or so have seen a flurry of activity in state legislatures that were considering bills to prevent the sale of ethanol blends greater than 10% — please see the May 23, 2013 post and others preceding it on the blog for summaries of activities in 2013, particularly in some of the New England states. The biofuel industry has lobbied hard against these bills, and has successfully defeated or neutralized most of them, but in general the bills that have passed impose limits that would only go into effect in that state if a specified number of neighboring states adopted similar bans. Among more recent (winter-spring 2014) activities and developments in state legislatures are the following.

  • In Missouri, a law was scheduled to go into effect at the end of May, allowing E15 to be sold in the state. According to press reports, Missouri will become the 13th state to allow E15 to be sold. However, as reported elsewhere, the law generated some controversy from groups opposed to the use of higher ethanol blends.
  • The first gasoline station to offer E15 in Ohio opened in late May, making Ohio the 14th state in which E15 is commercially available.
  • In Iowa, Governor Branstad signed a bill on May 21, 2014 that promotes biofuel usage in several ways, including extending the state’s biodiesel production tax credit, and enhancing the retailer tax credit for gasoline sellers who want to offer E15 during the summer driving season.
  • Earlier this year, South Dakota announced that it would begin incorporating E15 into its state vehicle fleet. This six-month test period was announced in March 2014 by Governor Dennis Daugaard
  • In New Hampshire, the state House passed House Bill 1220, which would limit the use of corn-based ethanol to 10 percent of the fuel mix used in New Hampshire, but only if two other New England states adopt similar legislation. However, on May 15, 2014, the State Senate voted to send the bill to an interim study, which effectively kills the bill for the current legislative year.

Adopt policies mandating use of alternative fuels and high ethanol blends in captive government fleets. One potentially powerful strategy available to federal, state and local governments would be to adopt policies mandating or favoring the use of higher ethanol blends in captive government fleets: the cars and trucks used by government agencies for internal purposes, as well as mail delivery vehicles and other motor vehicle fleets owned and operated by governments. There are a handful of examples of this (e.g. see the South Dakota news report mentioned above), but to my knowledge such policies are not common, but more widespread adoption of such policies could go a long way towards creating a market for E15 as well as E85 and the flex-fuel vehicles that can utilize E85.

Education and consumer communication about the safety and utility of higher ethanol blends. The efforts by those interest groups opposed to biofuel adoption have been successful in sowing doubt about whether E15 can safely be used in most automobile engines. Rigorous studies have been done establishing safety, but it has been hard for the industry to publicize and disseminate these results against the tide of misinformation coming from the opponents. Ethanol and biofuel advocacy groups are doing what they can: among other activities, the Renewable Fuels Association maintains a webpage promoting E15, and the American Coalition for Ethanol recently issued a press release aimed at E15 education for the public. However, these efforts need to be broadened and intensified, and ideally should be joined by the government agencies whose studies have shown efficacy and safety, and which maintain regulation promoting or authorizing use of higher ethanol blends. That being said, I know this is not an easy task, and that the efforts of many stakeholders will be needed.

Promoting infrastructure upgrades. As mentioned above, the most important tangible barrier to the acceptance of higher ethanol blends is the need for costly infrastructure improvements at gasoline stations around the country. Governments at all levels should adopt programs that allow, encourage or support the infrastructure upgrades that are needed for E15, E85 and other high ethanol blends, by providing grants, tax breaks and other types of assistance for retailers to improve infrastructure. Some efforts along these lines have taken place, but more are needed.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels