Bill Bass, 63, harvests corn on acreage near the southern Illinois town of Cobden. Bass is among scores of farmers throughout the region and the rest of the nation’s Corn Belt who in recent years have benefited from pulling millions of acres of farmland out of a federal conservation program and putting it back into corn production, partly to profit from grain prices sent higher by America’s demand for ethanol. (Jim Suhr/AP)
WASHINGTON — The decade-old federal attempt to boost the use of, and industry around, plant-based alternatives to oil and gasoline now finds itself at a key crossroads, with some notable advances offset by headlines that keep giving new grist to powerful foes of “biofuels.”
This week, the Environmental Protection Agency, one of several federal agencies overseeing Washington’s dealings on the issue, severely and retroactively rolled back last year’s requirement for a particularly important type of biofuel.
Originally, producers in 2013 were supposed to have created 6 million gallons of what’s known as cellulosic fuel, which is made from the inedible parts of plants, including crops, weeds and trees.
The industry was actually only able to produce a little over 800,000 gallons, just 13 percent of what had been mandated, leading the EPA to scale back its own requirement to reflect the actual amount produced. The reduction eliminates the possibility that refiners will face penalties for failing to comply with previous mandates, but also prominently acknowledges that the industry is floundering, at least at the moment.
In an explanation published Tuesday, the agency noted that it was making the decision based on a petition filed late last year by two major oil lobbies, the American Petroleum Institute and American Fuel and Petrochemical Manufacturers. These groups have since lauded the move, suggesting that it should guide future mandates from the agency.
“EPA made the right decision … In the first quarter, less than 75,000 gallons of cellulosic biofuel were actually produced – less than one percent of EPA’s projections,” Charles T. Drevna, the president of the manufacturers organization, said in a statement. “We hope that EPA radically adjusts the 2014 mandate to reflect actual production and obviate the need for the industry to continually challenge these unrealistic mandates.”
The EPA has proposed a production goal of 17 million gallons of cellulosic biofuel for this year, but the agency is currently in the process of reviewing that mandate alongside broader federal targets. Under a landmark statute known as the Renewable Fuel Standard, some 36 billion gallons of cellulosic biofuel had been required by 2022.
The American Petroleum Institute went further than the American Fuel and Petrochemical Manufacturers, calling on Congress to “stop the insanity and repeal the unworkable Renewable Fuel Standard.”
Late last year, such calls appeared to be leading to a major reconsideration in Congress of whether its biofuels vision should be significantly scaled back or jettisoned entirely. That talk has since died down, in large part because the EPA stepped in and, early this year, agreed to revisit the broader mandates.
Acknowledging that the country couldn’t stay on the previously decided schedule, the agency is now expected to offer new guidance as soon as June.
Very limited capacity
Meanwhile, the EPA’s setting of yearly biofuel targets — a process that is supposed to take place by November each year — is way behind, owing partly to a series of lawsuits as well as broader confusion over biofuel production capacity and federal mandates.
The agency’s standards-setting takes place in accordance with the Renewable Fuel Standard, which was passed in 2005, as well as an energy security bill passed in 2007. These had initially established long-term goals for alternative fuel use, for which the EPA is required to set yearly requirements for the country’s petroleum importers and refiners.
The requirements offer standards for three types of alternative fuels: biomass-based diesel made from various vegetable or even animal oils; “advanced” biofuels for use, for instance, in planes or ships; and cellulosic biofuels made from non-food items such as inedible grasses.
The new rollback affects only cellulosic fuel. Yet this type is of particular importance, given that legislators in 2007 specifically aimed to preclude any competition between the production of biomass for alternative fuels versus food. However, cellulosic proposals have been repeatedly scaled back from their original goals.
This week’s announcement by the EPA was prompted by a shortfall within a particular company — Kior, Inc. Kior’s production problems were so detrimental to overall supply because the Texas-based manufacturer is one of just two companies actively producing cellulosic biofuel in the United States.
Several multi-million-dollar cellulosic refiners are currently being set up, but the Kior situation underscores the key structural problem that has plagued the industry. It has also complicated the fine line that federal regulators are now walking in trying to figure out how to set new goals.
On the one hand, after all, those goals have to be high enough to offer adequate financial incentive for entrepreneurs. But on the other hand, there is a new realization that these goals also have to be low enough to be realistic — and halt the easy politicization of the apparent “failures” of federal biofuels policy of recent years.
Aligning ambitions
A key issue, of course, was that the 2007 law jumpstarting the biofuel industry was almost immediately followed by an historic downturn in the U.S. investment climate. While the Department of Energy did award multiple grants at that time, production capacity was made up mostly of start-up companies. When the financial crisis hit, these projects were not strong enough to move forward.
“Following the recession, there was a reluctance among institutional investors and large commercial banks to invest or provide capital to build these biorefineries,” Paul Winters, director of communications with the Biotechnology Industry Organization, a trade group, told MintPress News. “The private industry was not able to raise the capital by itself.”
The industry’s structure is different today. It is fuelled not by Wall Street-funded start-ups, but rather by some of the industry’s biggest players, like DuPont. Such companies, however, tend to move much more slowly.
Many suggest this is being exacerbated by a federal policy that is still unable to offer investors long-term stability. In this regard, the EPA’s vacillation in recent years could have been damaging for the industry’s attempts to get off the ground. The current reconsideration is thus a potentially potent opportunity.
“We’ve been saying that we need to make our ambitions line up with reality, that we need to stabilize expectations,” Jeremy Martin, a senior scientist with the Clean Vehicles Program at the Union of Concerned Scientists, told MintPress. “More realistic policy, even if less ambitious, will offer far better support for investments in the future.”
From this perspective, then, a decision by the EPA in coming months to slow down the regulatory mandates for biofuel would be better for the industry in the long term.
“So now the question is whether the EPA can get on a stable path going forward,” Martin, who has testified repeatedly before Congress on the issue, said. “It’s complicated because we’re advising them to slow down but not too much. EPA was wise to make adjustments, but we need to make sure we’re moving forward and not backward.”
The problem with corn
Federal policy on cellulosic biofuel was further complicated by new scientific findings released this week. A new federally-fundedstudy has cast doubt on the underlying motivation to blend biofuel in the first place.
Current federal requirements mandate that cellulosic fuel be 60 percent better for the climate than burning conventional gasoline. Researchers at the University of Nebraska, however, found that a key technique for producing cellulosic fuel could actually produce more greenhouse gas emissions than simply burning the gasoline the biofuel is meant to replace.
The issue here deals with the cornstalks left over after corn is harvested. Traditionally, farmers would leave the stalks in their fields, allowing the plant to decay and thus replenish a host of nutrients in the soil. Of particular interest from both a climate and agricultural perspective is the amount of carbon that gets replenished under this approach — and, conversely, the carbon that is lost when these stalks are themselves harvested and sent to biofuel refineries.
This is currently the most widely used refining technique in the United States, due to both the incredibly high levels of corn production in the country and the fact that using only the stalks does not impact food security. The Nebraska researchers, however, found that unless lost soil carbon is replaced, “life cycle emissions will probably exceed the U.S. legislative mandate of 60% reduction in greenhouse gas (GHG) emissions compared with gasoline.”
Since the report’s release, the federal government and the biofuels industry have attacked its findings. The EPA has suggested that the research “does not provide useful information relevant to the life cycle greenhouse gas emissions” from corn-based biofuel.
Yet Union of Concerned Scientists’ Martin offers a more nuanced view, noting that the study does an important service by focusing on soil carbon. But, he says, the findings need to be seen in the context of a broader critique of modern agricultural habits in the United States.
“The fact is that growing corn is already hard on the environment, and if you keep growing corn the same way but also take the stalks, you’ll make a bad situation even worse,” he said.
“That’s the core system being studied here. But in fact, there are many things you can do to change the way you’re farming to protect or even enhance soil carbon. That includes using cover crops, using manure instead of synthetic fertilizer, crop rotation.”
In ablog post on Friday, Martin expanded this analysis. Shifting cellulosic production away from corn and toward perennial grasses and other crops, instead, he wrote, can “build soil carbon, improve water quality and deliver other benefits even as they can provide a low carbon source of biofuel.”
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