ClimateWire -- BIOFUELS: Administration revamps biofuels strategy to meet lagging mandate

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BIOFUELS: Administration revamps biofuels strategy to meet lagging mandate  (Thursday, February 4, 2010)

Jessica Leber, E&E reporter

In its broad new vision to advance biofuels development unveiled yesterday, President Obama's administration has thrown a lifeline to an industry struggling to bring climate-friendly fuels from the lab bench to gas stations, cellulosic ethanol producers said.

Administration officials acknowledged the failures of federal agencies, sometimes working past each other, to facilitate ambitious production targets set by Congress.

In revamping their biofuels strategy, they promised to ease the confounding financial, technological and logistical challenges faced by the nascent industry and pledged to sort out the muddle of federal bureaus in charge.

Without such changes, the mandate -- 36 billion gallons of biofuels produced by 2022, an amount three times greater than is available today -- is on track for failure, the administration's biofuels interagency working group said.

In a sign of these struggles, U.S. EPA yesterday pushed down the 2010 requirements for cellulosic fuels to 6.5 million gallons, instead of the 100 million Congress intended, because there is little supply.

"You have to have a system in which you work backwards from the 36 billion numbers with definitive steps and mileposts to determine whether or not progress is being made. And if not, you have to accelerate the progress," said Agriculture Secretary Tom Vilsack, representing one agency on the panel. In issuing a report yesterday, officials set out a plan to do that.

Most of the current 12-billion-gallon biofuels supply is corn-based ethanol. Much of the remaining mandate will be met by cellulosic fuels that have a smaller carbon footprint and aren't made with food or feed grains.

Companies relieved to get some certainty

During a meeting with 11 governors, Vice President Joe Biden, and administration officials, President Obama outlined the strategy to promote biofuels as part of his clean energy and jobs agenda.

EPA simultaneously unveiled the long-delayed rules to implement the 36-billion-gallon mandate. Uncertainty surrounding the regulation, spurred by fierce disagreements about how to calculate the carbon footprint of the fuels, has helped stymie the biofuels industry's growth, advocates have said.

Biofuel companies were relieved to see the regulation, which adds some certainty to their future.

"People now know that the resolve and commitment to getting cellulosic ethanol into the market is there," said Wes Bolsen, chief marketing officer of Coskata Inc. The company is now running a Pennsylvania cellulosic ethanol demonstration plant and working to secure financing to scale up.

Still, the controversial regulation drew simultaneous praise and criticism from special interests on all sides of the issue, from the biofuels industry itself and from environmental groups.

Corn and soybean producers see carbon footprints reduced

Corn ethanol and soy biodiesel companies came away winners after a hard-fought lobbying push.

In its final rule, EPA decided their fuels do meet the greenhouse gas reduction thresholds required under the mandate. The agency's earlier proposal branded the fuels with too big a carbon footprint to qualify, though today's existing facilities would have been grandfathered in under a clause that allows up to 15 billion gallons of conventional fuels.

The change ensures that new, state-of-the-art corn-ethanol and soy-biodiesel plants could also participate in the mandate, said EPA Administrator Lisa Jackson.

Advocates, including prominent trade associations and House Agriculture Chairman Collin Peterson (D-Minn.), cheered the change. Some environmentalists, long skeptical of the water, land and carbon impacts of corn ethanol, questioned the agency's reasoning, saying it relies on projected improvements not yet in place.

"The EPA's greenhouse gas emissions model should be greeted with skepticism," said Friends of the Earth campaigner Kate McMahon. "This mandate is a huge gift to the biofuels industry. The industry does not need and should not receive other handouts," she said.

In the face of intense lobbying, Jackson defended the change as based on sound science.

Fight continues over indirect emissions

"The one thing we wanted to make sure is that they really are renewable fuels -- that we weren't dumbing down the standard in order to favor any particular industry or any particular outcome. I feel certain that that's exactly what happened here," she said.

The improved footprint of conventional biofuels, Jackson said, came after EPA revised models to incorporate updated crop yield estimates and the use of animal feed co-products. What also helped, said Jackson, was that agency scientists included 120 additional countries in their estimates of the international carbon emissions spurred by an expanded domestic ethanol market.

That the agency even included these indirect emissions, caused when farmers abroad clear their forests, brought the reversed reactions from interest groups. Environmentalists thanked EPA for leaving in the emissions estimates, which industry advocates have tried hard to nix entirely.

They were unsuccessful, at least with EPA. "To think that we can credibly measure the impact of international indirect land use is completely unrealistic, and I will continue to push for legislation that prevents unreliable methods and unfair standards from burdening the biofuels industry," Peterson said in a statement. This week, he introduced a bill to legislate the indirect land-use emissions away.

While the controversy has swirled around this debate, others cautioned that the administration will need to live up to its longer-term pledges, laid out in the interagency report.

Private investors sit on checkbooks

Producers saw the report's strategy as a good start. "I think they are addressing the issues that have been systemic in trying to implement these commercial plants," said Arnold Klann, CEO of BlueFire Ethanol, which is working to build a 19-milllion-gallon cellulosic ethanol plant in Mississippi and recently received a government grant.

But, Coskata's Bolsen said, those promises need to be made a reality for advanced biofuels to go anywhere.

Private investors, especially during the economic recession, have been largely unwilling to finance such unproven technologies. Government loan guarantee and grant programs have also been slow in doling out funds, said Matt Carr, the Biotechnology Industry Organization's policy director.

The Energy Department, for example, has $500 million in loan guarantee funds dedicated to advanced biofuels. But because of overly stringent requirements better suited to solar and wind projects, DOE has not yet made any deals, said Carr.

The emerging industry faces chicken-and-egg hurdles on other fronts. Without the fueling infrastructure and flex-fuel vehicles that are needed to add more ethanol into the transportation fuel mix, there will be no market to meet the 36-billion-gallon mandate.

In its interagency report yesterday, officials promised to grow the government's own use of biofuels and help secure private customer purchases.

Also, farmers who would produce next-generation biofuel crops, such as switch grass, must work out the logistics of growing, harvesting and delivering them. The Agriculture Department yesterday announced rules for a new Biomass Crop Assistance Program to finance these projects.

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