U.S. cellulosic biofuels producer, KiOR, filed its annual report with the Securities and Exchange Commission (SEC) this week. In the report, the company expresses concerns about sufficient funding to continue operations moving forward. Although KiOR has received a conditional funding commitment of up to $25 million from its founder Vinod Khosla, receipt of the funding depends on certain production milestones that may not be met. In December 2013, KiOR reported a $347.5 million net loss, and in January 2014, the company announced that it would temporarily idle its Columbus, Mississippi, plant while it makes plant improvements. KiOR announced this week that it would idle the plant indefinitely. This development is not good news for the biofuels industry, since EPA has largely relied upon KiOR's production estimates to set the annual cellulosic renewable volume obligations for the federal Renewable Fuel Standard.
Tetra Pak, a company providing solutions in food processing and packaging headquartered in Lausanne, Switzerland, announced on March 13, 2014, the launch of the first biobased cap for "gable top" packages (cartons). According to the company's press release, this biobased version of TwistCap OSO 34 is manufactured using high density polyethylene (HDPE) derived from sugar cane. A copy of Tetra Pak's press release on the announcement is available online.
On March 14, 2014, Archer Daniels Midland Company (ADM) and Hawkins, Inc. introduced Chill-Pro, a U.S. Department of Agriculture certified heat transfer fluid. Chill-Pro is made with ADM Evolution Chemicals™ propylene glycol. According to ADM's press release on the announcement, "the benefits of Chill-Pro over petroleum-derived products include the fact that the majority component, propylene glycol, is 100% biobased and has lower cradle-to-gate greenhouse gas emissions." A copy of ADM's press release is available online.
On March 17, 2014, it was announced that British manufacturer Dyson is working with the University of Cambridge's Institute for Manufacturing and the Centre for Process Innovation (CPI) on a project to analyze the high level economic and technical feasibility of using biopolymers in a closed loop process, which may ultimately improve the ability to recycle consumer products. A copy of CPI's press release is available online.
On March 12, 2014, the House Energy and Commerce Environment and the Economy Subcommittee held a hearing to discuss the Discussion Draft of the Chemicals in Commerce Act (CICA). CICA, which was released last week by Subcommittee Chair John Shimkus (R-IL), is designed to reform the Toxic Substances Control Act (TSCA). The Biobased and Renewable Products and Advocacy Group (BRAG™) reported on the release of CICA. That report is available online.
Eleven witnesses testified at the hearing. Several witnesses were critical of CICA, stating that it offered less protections than those included in S. 1009, the Chemical Safety Improvement Act (CSIA), which is the bipartisan Senate TSCA reform bill introduced last May by the late Senator Frank Lautenberg (D-NJ) and Senator David Vitter (R-LA). Senators Vitter and Tom Udall (D-NM) are currently working to revise S. 1009 to address concerns that have been raised over that bill's level of protection. A detailed summary of the hearing prepared by Bergeson & Campbell, P.C. (B&C®) is available online.
The California Department of Toxic Substances Control (DTSC) announced on March 13, 2014, the first draft Priority Products (PP) under the Safer Consumer Products Regulations (SCPR). The three draft PPs are Children's Foam-padded Sleeping Products Containing Tris(1,3-dichloro-2-propyl) Phosphate (TDCPP); Spray Polyurethane Foam (SPF) Systems Containing Unreacted Diisocyanates; and Paint and Varnish Strippers and Surface Cleaners Containing Methylene Chloride. The Initial PP List will include consumer products sold in California that each contains at least one chemical from a list of more than 1,200 chemicals that may cause harm to public health or the environment. Companies that produce the listed products are expected to analyze whether there are safer chemicals that could be used to make them. A more detailed memorandum prepared by B&C is available online. A copy of DTSC's announcement is available online.
On March 8, 2014, the West Virginia legislature passed S.B. 373, a bill to improve the safety and regulation of above ground storage tanks in the state. The bill resulted from the spill on January 9, 2014, of 7,500 gallons of a coal processing chemical, 4-methylcyclohexane methanol, stored in an above-ground tank into the Elk River just upstream from the local water utility's intake pipe serving Charleston, West Virginia. Regulators banned residents' use of the water for five days. After the release, concerns were expressed in West Virginia, in other states, and at the federal level about the adequacy of information regarding the chemical's safety and health risks. BRAG reported on the spill and its impact on a new push to reform the federal TSCA. That report is available online.
West Virginia's newly passed bill to improve chemical safety in the state includes additional inspections for above-ground storage tanks, safety planning for water systems, and long-term health monitoring for those exposed to chemicals.
On March 13, 2014, the U.S. Department of Agriculture (USDA) held a meeting to share information with stakeholders about the 2014 Farm Bill implementation process related to Energy and the Bioeconomy. A copy of the USDA press release is available online.
On March 14, 2014, USDA will hold a listening session on implementation of the Farm Bill's Biobased Markets, or BioPreferred Program. To register for the webinar, please visit online.
The Department of Energy (DOE) has issued a Funding Opportunity Announcement (FOA), which closes on April 22, 2014. Through the FOA, the Advanced Manufacturing Office of DOE's Energy Efficiency and Renewable Energy (EERE) Office seeks to establish a Clean Energy Manufacturing Innovation Institute for Composites Materials and Structures. According to the FOA, "[t]he technical topic area for this Institute is low cost, energy efficient manufacturing of fiber reinforced polymer composites. The Institute will target continuous or discontinuous, primarily carbon and glass fiber systems, with thermoset or thermoplastic resin materials. These types of composites are foundational technologies that are broadly applicable and pervasive in multiple industries and markets with potentially transformational technical and economic impact." A copy of the FOA is available online.
Nearly 30 Democratic Senators participated in an all-night session from the evening of March 10, 2014, through the morning on March 11, 2014, to highlight the need for action to combat the harmful effects of climate change. This session was the first major act of the Senate Climate Action Task Force, which was formed earlier this year by Senators Barbara Boxer (D-CA) and Sheldon Whitehouse (D-RI) to urge action on the issue. The all-night session was organized by Senator Brian Schatz (D-HI).
On March 6, 2014, South Dakota Governor Dennis Daugaard (R) announced that the state will begin incorporating E15 fuel into its state fleet during a test period over the next six months. Currently, E10 is available and used in the state's flex-fuel and other vehicles, but the Governor wants to encourage the greater use of ethanol in his state. Ethanol is a $3.8 billion industry in South Dakota. Greater use of E15 is one potential solution to the E10 ethanol "blend wall." The U.S. Environmental Protection Agency has proposed reducing the 2014 renewable volume obligations for corn-starch ethanol due to blend wall concerns. A copy of the press release on the announcement released by Governor Daugaard's office is available online.
On February 27, 2014, House Energy and Commerce Environment and the Economy Subcommittee Chair John Shimkus (R-IL) released a discussion draft of the "Chemicals in Commerce Act" (CICA), legislation designed to reform the Toxic Substances Control Act of 1976 (TSCA). The release of CICA is significant for several reasons. While the House Subcommittee has held five hearings since last year on various sections of TSCA, CICA would be the first major House bill introduced this Congress to reform the law. In addition, CICA "keys off" S. 1009, The "Chemical Safety Improvement Act" (CSIA), which is the bi-partisan Senate TSCA reform bill introduced last May by the late Senator Frank Lautenberg (D-NJ) and Senator David Vitter (R-LA). Although time for passing legislation this year is passing quickly, increased efforts in the Senate and now in the House to pass a TSCA reform bill also increase the chances that TSCA reform could move forward and pass this year.
In recent weeks, Senator Vitter, who has been leading Senate efforts to pass TSCA reform with Senator Tom Udall (D-NM), has made public statements suggesting that a revised version of CSIA could be made public very soon. Senators Vitter and Udall have been working to revise the Senate legislation to address concerns with it expressed by environmental groups, among others. For instance, some are concerned that the bill would pre-empt and weaken existing strong state chemical safety laws and would not go far enough to protect vulnerable populations. While CICA does include provisions addressing these concerns and others, some environmental groups have already come out against it, and believe it does not go far enough.
It has been reported that Shimkus expects to hold a hearing on CICA this month and hopes that a markup will be held on the bill sometime in April. The legislation could be considered by the full House of Representatives as early as May. As aforementioned, the numbers of days to pass legislation in this mid-term election year are relatively few. While there is clear momentum in the House and Senate, final passage of TSCA reform, while possible, could be challenging this year.
Bergeson & Campbell, P.C. (B&C®) issued a detailed summary and analysis of CICA, which is available online.
A copy of the 91-page CICA is available online. A copy of the Subcommittee's seven page "Highlights" is available online, and a copy of the Subcommittee's brief summary of the legislation is available online.
On March 4, 2014, President Obama released his fiscal year (FY) 2015 Budget request, which includes aggressive proposed funding to carry out the Administration's Climate Action Plan designed to reduce harmful greenhouse gas (GHG) emissions and the impacts of climate change. The President's FY 2015 Budget includes funding for several programs and initiatives to help facilitate the continued development and production of biofuels and biobased products. Consistent with the newly enacted Farm Bill, the Budget for the U.S. Department of Agriculture (USDA) includes increased funding for biobased product manufacturing. Given political realities and this midterm election year, it is not expected that the President's FY 2015 Budget Request will be enacted as proposed. It represents a starting point in the budget process, however, and indicates the Administration's priorities.
Here are highlights from the FY 2015 Budget proposal:
• U.S. Environmental Protection Agency (EPA): While the total budget request for EPA of $7.9 billion represents a decrease of $0.3 billion from last year, the cuts are mostly found within water infrastructure funds, with several programs seeing an increase over last year's levels. EPA's budget summary document notes that the Agency intends on evaluating its workforce and "identifying needed skills for a streamlined EPA." EPA's Appendix notes that under the "TSCA Confidential Business Information [CBI] Fund," the "Budget proposes to expand EPA's existing authority to collect fees to recover a portion of the costs of reviewing and maintaining the CBI."
• U.S. Department Of Energy (DOE): The FY 2015 Budget includes $27.9 billion for DOE, a 2.6 percent increase over FY 2014 enacted levels. This funding includes several programs designed to encourage and facilitate the development and production of advanced biofuels. For instance, the FY 2015 Budget would fund the DOE's:
o Bioenergy Technology Program At $253 Million: A $12 million decrease over FY 2014. This program funds research, development and demonstration (RD&D) projects to advance biofuels technologies and to validate and assist in the commercialization of integrated biorefinery technologies that will help transform the nation's transportation sector.
o Energy Security Trust At $2 Billion Over Ten Years: According to the DOE's FY 2015 Budget Appendix, this trust would be newly created to "support research into a range of technologies -- like advanced vehicles that run on electricity, homegrown biofuels, hydrogen, and domestically produced natural gas -- to allow the Nation to transition from oil towards more secure alternatives. The [t]rust will be funded from existing royalty revenues generated from [f]ederal oil and gas development. Establishing a guaranteed source of funding will allow the Department of Energy to maintain targeted and sustained investments that will directly advance U.S. energy security."
o Energy Efficiency And Renewable Energy At $2.3 Billion: An increase of approximately $0.2 billion over FY 2014. Under this program, DOE invests in the development of renewable generation technologies, sustainable transportation technologies, and advanced manufacturing technologies, as well as in improving energy efficiency in our homes, buildings and industries.
o Advanced Research Projects Agency At $325 Million: An increase of $76 million over FY 2014 levels. This program provides funding for research and development of transformational clean energy technologies.
• USDA: The FY 2015 Budget includes $23.7 billion in discretionary funding for USDA, a decrease of approximately $1 billion from FY 2014. The Budget provides for the USDA launch of three new multidisciplinary agricultural research institutes, one of which would be dedicated to advanced biobased manufacturing. It also includes the mandatory funding provided in the newly enacted Farm Bill for important energy programs designed to help encourage the production of biofuels and biobased chemicals. For instance, the FY 2015 USDA Budget Request provides funding for the:
o Biobased Markets Program At $3 Million In Mandatory Funding, the same level as FY 2014: The Biobased Markets (BioPreferred®) Program creates a procurement preference at federal agencies for biobased products.
o Biobased Research And Development Initiative At $3 Million In Mandatory Funding, a decrease of approximately $2 million from FY 2014: This program provides competitive funding for RD&D of technologies and processes leading to commercial production of biofuels and biobased products.
o Biomass Crop Assistance Program (BCAP) At $25 Million In Mandatory Funding: BCAP provides incentives to farmers, ranchers and forest landowners to establish, cultivate and harvest eligible biomass for heat, power, biobased products, research, and advanced biofuels. Crop producers and bioenergy facilities can team together to submit proposals to USDA for selection as a BCAP project area.
o Biorefinery, Renewable Chemical, And Biobased Manufacturing Assistance Program At $50 Million In Mandatory Funding, a decrease of $80 million from FY 2014: This program provides competitive loan guarantees and grants for the construction or retrofitting of demonstration-scale facilities for the commercial production of biofuels, renewable chemicals, and biobased products.
On March 3, 2014, EPA released its final rule on "Control of Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and Fuel Standards" (the "Tier 3 rule"). A copy of the 1069-page Tier 3 rule is available online. A copy of EPA's five-page fact sheet on "EPA Sets Tier 3 Motor Vehicle Emission and Fuel Standards" is available online.
The Tier 3 rule is designed to reduce air pollution from passenger cars and trucks. Beginning in 2017, the Tier 3 rule will set new vehicle emissions standards and reduce the sulfur content of gasoline. It will treat the vehicle and its fuel as an integrated system. The final Tier 3 rule is very similar to the proposed version of the rule, although the final Tier 3 rule sets the ethanol content for emissions test gasoline at ten percent (E10) instead of at 15 percent (E15) as proposed.
The final Tier 3 rule is a part of the Obama Administration's efforts to combat the harmful impacts of climate change. It is expected to reduce several tons of harmful GHG emissions by 2030.
On February 25, 2014, EPA sent its final rule to "Establish a Voluntary Quality Assurance Program for Verifying the Validity of Renewable Identification Numbers Under the RFS2 Program" to the U.S. Office of Management and Budget (OMB) for final review. EPA is expected to take action to release the final rule as soon as OMB completes its review.
As proposed, the rule would be retroactive to January 2013. It is the result of efforts to help restore investor confidence in the Renewable Identification Number (RIN) market and address the argument of some Renewable Fuel Standard (RFS) opponents that RIN fraud indicates a flaw in the RFS policy. Since 2010, there have been five major cases in which millions in fake biodiesel RIN credits have been generated. Under the current system, refiners (not renewable fuel producers) who purchase the credits to meet their annual RFS requirements are responsible for replacing the fraudulent credits and are vulnerable to steep penalties for failure to do so.
Under EPA's proposed RFS Quality Assurance Program (QAP), a voluntary third party quality assurance program would be established that could be used to verify that RINs have been validly generated. The proposal would provide a recognized means for independent third parties to audit the production of renewable fuel and the generation of RINs. It would include among other provisions: minimum requirements for QAPs, including such things as verification of type of feedstocks, verification that volumes produced are consistent with amount of feedstocks processed, and verification that RINs generated are appropriately categorized and match the volumes produced; qualifications for independent third-party auditors; requirements for audits of renewable fuel production facilities, including minimum frequency, site visits, review of records, and reporting; and, conditions under which a regulated party would have an affirmative defense against liability for civil violations for transferring or using invalid RINs. In addition, it would provide two options that would be available for the verification of RINs through a QAP.
Generally, the refining and biodiesel industries are supportive of the proposal. The ethanol industry is generally concerned that it would create unnecessary financial burdens on its producers. Given the market, the proposed voluntary QAP has reportedly already become almost a requirement for all renewable fuel producers, even though the fraudulent cases all involve only biodiesel.