Renewable Fuel Standard News: March 25, 2013

Here’s an update on recent news items and other public policy developments relating to the U.S. Renewable Fuel Standard (RFS), and the efforts to produce commercial quantities of cellulosic biofuels which qualify to generate Renewable Identification Numbers (RINs) under the RFS. The week of March 18 saw an unusual amount of activity on the policy front in Washington, DC, as the petroleum industry and renewable fuels interests continue to trade accusations of blame over the rising RIN prices for cornstarch ethanol. This update will highlight those recent developments, as well as others not so recent.

Recent Developments in the “War Over the RFS”


Corn ethanol RIN prices apparently stabilize but are still at historic highs
. The price for Renewable Identification Numbers (RINs) for cornstarch ethanol have reached record levels, sharply escalating in a matter of weeks. The price reportedly closed above $1.00 per gallon on March 8, up from  of $0.53 per gallon on February 26 and $0.79 per gallon on March 5. There were even reports that the price exceeded $1.10 per gallon in early March (see links below), but the price appears to have stabilized at around $0.70 per gallon as of the week of March 18, according to fuelsnews.com and other reports. Nevertheless, the psychological impact of a dollar-a-gallon RIN was, in no small measure, responsible for much of last week’s flurry of activity.

There is general consensus that the sharp rise in RIN prices is due to factors like the anticipation of lower than usual ethanol production in 2013 due to last year’s drought, and the impending ethanol blend wall, which together may cause an increased need for obligated parties to use RINs, rather than actual gallons of ethanol, to satisfy their volume obligations. Even before last week, this price escalation triggered a “blame game” between the oil industry and the ethanol industry, with each blaming the other. For example, a recent online editorial from the head of the Renewable Fuels Association blames the oil industry for this price run-up and for creating the circumstances leading to the blend wall, as “little more than a convenient excuse for their refusal to move to higher-level ethanol blends.” An academic assessment from the University of Illinois of this price escalation can be found here.

New API attack on RFS draws swift industry response. On March 20, the American Petroleum Institute issued the results of a study conducted by NERA Economic Consulting, which asserts that the RFS will have significant economic consequences by 2015 due to its conflict with the ethanol “blend wall”. Among its dire predictions were decreased U.S. GDP, decreased worker take-home pay, and increased gasoline costs. Trade associations representing the renewable fuels and ethanol industries swiftly countered the report by conducting a “prebuttal” phone call with reporters refuting the study’s conclusions.

Congressional interest in rising ethanol RIN prices. U.S. Senators David Ritter (R-La.) and Lisa Murkowski (R-Alaska) have written to EPA Administrator-designate Gina Murphy to ask that EPA “utilize any and all existing regulatory authority and flexibility to address the issue of rising RIN costs and alleviate the threat of increased consumer fuel costs”. The letter also called for a detailed plan for addressing these issues within 14 days. The letter refers to reports that ethanol RIN prices had exceeded $1.10/gallon in March, but the linked article above from Reuters refers to prices of “more than a dollar” during the month.

House committee issues first of three white papers on the RFS. On March 20, the House Energy and Commerce Committee released a white paper discussing the ethanol blend wall. This is reported to be the first of a series of papers to be published at the initiative of Committee Chairman Fred Upton (R-Mich.) and ranking minority member Henry Waxman (D-Calif.). After setting forth the issues relating to the RFS mandates, the alleged problems with E15 fuel and other matters, the document posed a series of questions for stakeholder comment, with responses requested by April 5.

Other Regulatory Developments


EPA vacates 2012 cellulosic mandate
. On February 27, EPA announced that it was vacating the 2012 RFS cellulosic standard, following the decision of the District of Columbia Circuit Court of Appeals earlier this year. Obligated parties will therefore not need to address the 2012 cellulosic biofuel standard in their compliance demonstrations that were due on February 28, and for any parties who filed early and had already submitted payment for 2012 cellulosic biofuel waiver credits, EPA will issue a refund.

Other Legislative Developments


Governors voice support for RFS, oppose legislative modifications. The Governors’ Biofuels Coalition has sent a letter to Congress supporting the RFS and urging legislators to “reject any modifications to the RFS”. The Coalition is a group of 30 governors, led by Iowa Gov. Terry Brandstad, and the letter arose from a March 13 meeting at the headquarters of POET. The letter stressed the benefits that the RFS has brought to their states since its enactment in 2005, and rebutted some of the recent arguments against the law, which the letter called “unrelenting and false”.

Commercialization of Cellulosic Fuels


New CRS reports issued on RFS
. The Congressional Research Service has issued two new reports on the RFS: “Renewable Fuel Standard – Overview and Issues”, which updates previous CRS reports on the RFS, and “Meeting the Renewable Fuel Standard Mandate for Cellulosic Biofuel”. (Please contact David Glass if you have trouble obtaining these reports from the CRS website).

New report on cellulosic biofuel commercialization. At the request of Biofuels Digest, Tristan R. Brown and Robert C. Brown at the Bioeconomy Institute at Iowa State University have written a 5-page summary of commercial-scale cellulosic biofuels projects expected in the U.S. by 2014. This report covers some of the same ground as my February 21, 2013 post on the Advanced Biotechnology for Biofuels blog, in which I summarized cellulosic ethanol plants in operation, nearing operation, and under construction in the U.S. and Canada.

Bloomberg report on ethanol blend wall. Bloomberg New Energy Finance has issued a report analyzing the ethanol blend wall. The report notes that in 2013, the minimum amount of ethanol required under the RFS is essentially equal to the maximum amount of ethanol allowed in U.S. gasoline supplies under E10 policies. The report analyzes different scenarios in which the RFS mandate may be met.

EIA reports on cellulosic biofuel capacity. On February 26, the Energy Information Administration posted a report on its website estimating U.S. capacity for producing cellulosic fuels this year. The report notes that several companies combined to produce about 20,000 gallons of cellulosic fuels in late 2012, and that output could grow to more than 5 million gallons this year. EIA further estimated that aggregate nameplate capacity in the U.S. could reach 250 million gallons by 2015, although the report noted that its past projections of cellulosic output have proven to be overly optimistic.

Previous Biofuel Policy Watch posts on RFS policy:

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 also serves 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 Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels

 

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One thought on “Renewable Fuel Standard News: March 25, 2013

  1. Advanced BioFuels USA » Senators Ask McCarthy to Outline Response to RIN Price Increase

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