New U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy is working hard this month to carry out the President's Climate Action Plan, which is available online. The plan is designed to "cut the carbon pollution that causes climate change and affects public health." This week, Administrator McCarthy participated in a town hall event at the University of Colorado at Boulder to discuss the plan and EPA's work on new emissions rules for new and existing power plants.
The American Petroleum Institute (API) this week launched its second ad in selected markets against the federal RFS. The ad is being aired in California, Colorado, Illinois, Kentucky, Michigan, Ohio, and Washington, D.C. It comes just after EPA issued its final 2013 RFS rule (more information is available online), and as the House Energy & Commerce Committee leadership is working on potential modifications to the RFS (more information is available online). The ad continues the message of the refining industry that the RFS mandates "unworkable" volumes of renewable fuel in the U.S. fuel supply. The renewable fuel industry continues to argue that the RFS law contains sufficient flexibility to account for changes in the market. The industry points to the final 2013 RFS rule to illustrate this, as EPA significantly lowered the cellulosic volumes to adjust for market realities.
Also this week, API and the American Fuel and Petrochemical Manufacturers (AFPM) jointly petitioned EPA to lower its 2014 total ethanol requirements to 9.7 percent of total gasoline supply in the country. This request follows language in EPA's final 2013 RFS rule suggesting that the Agency is considering lowering renewable fuels obligations to help account for the impending blend wall in its upcoming 2014 rule. API and AFPM argue that lowering the 2014 renewable volume obligations would reduce the cost burden of the RFS to the refining industry.
This week, Brazilian biotechnology company GranBio and Solvay Group company Rhodia announced they have signed an agreement to partner to produce bio n-butanol, used to manufacture renewable chemicals and biobased products, including paint. Under the agreement, the companies intend to build the first biomass-based n-butanol plant in Brazil, with operations planned to come online in 2015. The press release is available online.
Beta Renewables, a joint venture between chemical company Gruppo Mossi & Ghisolfi and investment company TPG, announced that it had begun commercial production at its cellulosic ethanol plant in Crescentino, Italy, at a price competitive with corn ethanol and gasoline. Novozymes, the leading producer of enzymes used for biofuels production, has invested in Beta Renewables. Beta Renewables expects to export the technology to develop about 20 new plants by 2017.
On August 8, 2013, the Fifth District Court of Appeals denied a petition from the California Air Resources Board (CARB) for a rehearing of the case in which the court found on July 15, 2013, that CARB had improperly approved California's Low Carbon Fuel Standard (LCFS) in violation of administrative procedures (more information is available online). The July 15 decision stands and while CARB may continue to implement the LCFS, it must hold a new 45-day public comment period to receive input on the LCFS regulations, including CARB's calculation of indirect land use from the increased use of biofuels.
Biofuels trade associations, including the Brazilian Sugarcane Industry Association (UNICA), Renewable Fuels Association (RFA), and Advanced Biofuels Association (ABFA) announced last week that they will be leading a trip with 15 companies to Brazil September 30-October 2, 2013, to help foster opportunities for U.S. biofuels. The trip is part of the U.S. Chamber of Commerce's Export Green Initiative. Companies that wish to participate may apply by August 30, 2013. Up to two representatives from 15 companies with biofuel operations in the U.S. may participate. More information about the trade mission and how to apply is available online.
On July 31, 2013, Senator Barbara Boxer (D-CA), Chair of the Senate Committee on Environment and Public Works (EPW) held a hearing on "Strengthening Public Health Protections by Addressing Toxic Chemical Threats." The exceptionally long hearing included three panels of 19 witnesses and focused on potential reform to the Toxic Substances Control Act of 1976 (TSCA). The detailed report of the hearing issued by Bergeson & Campbell, P.C. is available online.
The hearing largely focused on bipartisan legislation to reform TSCA, recently introduced by Senator David Vitter (R-LA) and the late Senator Frank Lautenberg (D-NJ) -- S. 1009, the "Chemical Safety Improvement Act" (CSIA). A Law360 article recently published by Lynn Bergeson contains a detailed discussion of the significance and provisions of this legislation. With 25 bipartisan co-sponsors, CSIA is "a potentially politically viable framework for TSCA reform and renewed hope that badly needed modernization of this ancient law may occur."
Any legislative vehicle to reform TSCA will need to go through the EPW Committee. While many believe the CSIA represents a bipartisan move in the right direction toward TSCA reform, Chair Boxer does not support the legislation as written. She is concerned about its potential to preempt Proposition 65, California's law to regulate unsafe chemicals. During Wednesday's hearing, several witnesses opposed to CSIA in its current form expressed similar preemption concerns, as well as concerns that the bill could provide chemical companies too much protection from requirements to release confidential business information and fail to protect vulnerable populations. Proponents argued that the bill would not preempt state laws until the U.S. Environmental Protection Agency (EPA) has made a safety determination.
Senator Vitter and Senator Tom Udall (D-NM) are working to move CSIA forward through the legislative process. They have committed to work to address the concerns raised at this week's hearing in the version of CSIA which may be voted on by the EPW Committee later this year. Their revised version of the bill, or manager's amendment, is expected to be released early this fall, after the August Congressional recess.
On July 31 and August 1, 2013, the U.S. Department of Energy (DOE) held its sixth annual "Biomass 2013: How the Advanced Bioindustry is Reshaping American Energy." Over two days, attendees heard from Senators, Representatives, Obama Administration officials, and representatives of industry on the current and future progress of the biofuels, renewable chemicals, and biobased products industries. The Biomass 2013 website, including detailed information on the conference and its program is available online.
During the conference, speakers discussed the immense progress that has been made in just the last few years within the biofuels, renewable chemicals, and biobased products industries, as well as the legislative, financing, and other challenges that still lie ahead. They discussed the benefits that have accompanied the growth of these industries, including the thousands of well-paying jobs created throughout the country, particularly in rural communities. In addition, brief descriptions of some of the key announcements made and stories of success told during the conference further demonstrating the growing progress and maturity of the industry are summarized below.
INEOS Bio announced that it is now the first company producing cellulosic ethanol on a commercial scale at its Indian River BioEnergy Center in Vero Beach, Florida. A copy of this announcement is available online. Algae biofuels producer Sapphire Energy announced that it has paid off its entire United States Department of Agriculture (USDA) Loan Guarantee under the Biorefinery Assistance Program in the amount of $54.5 million. A copy of this announcement is available online. These two announcements help to reinforce the message that the advanced and cellulosic biofuels industries are real and are progressing toward commercialization, especially with the help of policies including the federal RFS and loan guarantee programs.
Sue Hager, Myriant, discussed how a $50 million cost sharing cooperative agreement from DOE helped the company successfully start up its flagship bio-succinic acid plant located in Lake Providence, Louisiana. A copy of this announcement is available online. Hager reported that Myriant's bio-succinic acid plant is the first of its kind and scale in North America and has an annual nameplate production capacity of 30 million pounds of bio-succinic acid, which can be used to make numerous consumer products, including paints. Hager stressed several policy initiatives that would help promote biofuels, renewable chemicals, and biobased products, including one that would broaden the Real Estate Investment Trusts (REIT) to value biorefineries as real property and passage of the Senate version of the Farm Bill, with mandatory funding for biorefinery assistance.
Attendees heard from the heads of all the major biofuels trade associations. They echoed the success and progress that has been made in the last few years and discussed their efforts to advocate on Capitol Hill and within the Administration to ensure continued support to facilitate research, development, and commercialization of the biofuels, renewable chemicals, and biobased products industries. All leaders mentioned the importance of the RFS and the current threat to it led by the refining industry and its supporters.
Several policymakers also presented during the conference touting their support for the U.S. biofuels, renewable chemicals, and biobased products industries. They all remarked on the tough battle industry is facing, as opposition is ramping up against the RFS, federal funding for biofuels, renewable chemicals, and biobased products and other programs designed to promote the industry. USDA Secretary Thomas Vilsack reiterated his support for the RFS and encouraged attendees to urge Congress to pass the Senate version of the next Farm Bill, which includes mandatory funding for biofuels, and for the first time broadens eligibility to renewable chemicals and biobased products. In addition, Secretary Vilsack discussed how USDA is working hard to find funding to help industry, especially in light of the budget sequester. For instance, he told the audience how USDA had recently restarted the biobased labeling program after having to pause it due to the sequester. He commended the recent successes of INEOS Bio and Sapphire Energy noted above.
Senator Charles Grassley (R-IA) expressed support for the biofuels industry and touted Iowa's renewable energy production, including growth in ethanol plants and wind energy. He mentioned that renewable fuels help reduce dependence on foreign sources of oil. He also asserted his continued support for the federal RFS and called the audience to advocate that: (1) the RFS and biofuels are saving consumers money at the pump; (2) RFS and biofuels are not diverting food to fuel, any such suggestion is "hogwash"; (3) production of corn is at a record high because of biofuels; (4) biofuels are contributing to clean air and clean environment; (5) the RFS is necessary to drive investment in advanced and cellulosic biofuels, which have even greater environmental benefits; and (6) the RFS is needed to ensure a level playing field for alternative fuels.
Representative John Garamendi (D-CA) talked about his background as a rancher in California. He expressed his support for industry and made the point that biomass is used for many things beyond biofuels, including renewable chemicals and biobased products. He stressed the importance of these industries and called on the audience to urge policymakers to continue their support. To make his point that such advocacy is needed now more than ever to help protect support for the promotion of biofuels, renewable chemicals, and biobased products, Representative Garamendi detailed several provisions in various appropriations bills industry opponents have successfully passed. These provisions include several on which we have reported this year such as those in the House, which passed a version of the National Defense Authorization Act, which would limit DOD's ability to procure and promote advanced drop-in biofuels for military use.
Michael Carr, Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, U.S. Department of Energy (DOE) discussed the importance of public-private partnerships and need for continued investment for the ongoing development and commercialization of biofuels, renewable chemicals, and biobased products. He made the point that there is much momentum and now is not the time to stop government support. In addition, Dan Utech, Deputy Director for Energy and Climate Change at the White House Domestic Policy Council discussed the President's commitment to take action against climate change. As part of this effort, the Administration recognizes the importance and opportunity of biofuels, renewable chemicals, and biobased products.
Valerie Reed, Acting Director, Bioenergy Technologies Office, DOE opened and closed the first day of the conference. She spoke of DOE's commitment to industry and discussed its efforts to help promote development and commercialization, including the renewable carbon fiber initiative and upcoming workshop taking place on September 3, 2013, in Chicago, Illinois on natural gas-biomass to liquids. Reed remarked that DOE workshops and funding opportunities are some of the most important tools DOE uses to get information to industry about potential assistance.
Newly sworn-in DOE Secretary Ernest Moniz spoke on the last day of the conference. The press release detailing his complete remarks is available online. Secretary Moniz described various DOE initiatives to help facilitate further development of renewable chemicals, biobased products, and biofuels. He also announced that DOE is making an investment of more than $22 million in four projects intended to help "develop cost-competitive algae fuels and streamline the biomass feedstock supply for advanced biofuels."
Algae Fuels Investments
Secretary Moniz announced that DOE would invest a total of $16.5 million on the following algae biofuel projects:
• Hawaii Bioenergy ($5 million DOE investment): Based in Lihue, Kauai, Hawaii Bioenergy will develop a cost-effective photosynthetic open pond system to produce algal oil. The project will also demonstrate preprocessing technologies that reduce energy use and the overall cost of extracting lipids and producing fuel intermediates.
• Sapphire Energy ($5 million DOE investment): Headquartered in San Diego, California, Sapphire Energy will develop a new process to produce algae-based fuel that is compatible with existing refineries. The project will also work on improving algae strains and increasing yield through cultivation improvements.
• New Mexico State University ($5 million DOE investment): For its project, New Mexico State University will increase the yield of a microalgae, while developing harvesting and cultivation processes that lower costs and support year-round production.
• California Polytechnic State University ($1.5 million DOE investment): California Polytechnic State University will conduct research and development work to increase the productivity of algae strains and compare two separate processing technologies. The project will be based at a municipal wastewater treatment plant in Delhi, California that has six acres of algae ponds.
Investments in Feedstock Chain for Advanced Biofuels
Secretary Moniz also announced the following nearly $6 million investment:
• Project led by Columbus, Ohio-based FDC Enterprises to reduce harvesting, handling, and preprocessing costs across the entire biomass feedstock supply chain. The project will receive a nearly $6 million DOE investment. The FDC Enterprises project will work with independent growers and biofuel companies in Iowa, Kansas, Virginia, and Tennessee -- including POET, ADM, Clariant International, and Pellet Technology USA -- to develop new field equipment, biorefinery conveyor designs and improved preprocessing technologies. The project will also develop and deploy feedstock quality-monitoring tools to reduce sampling and analysis costs, and conduct real-time analysis of feedstock characteristics such as moisture content and particle size.
The House Energy & Commerce Committee's Subcommittee on Energy and Power held its much anticipated two-day hearing on the RFS, with 16 witnesses from both sides testifying. The following is the full list of witnesses:
• Mr. Jack N. Gerard, President and CEO, American Petroleum Institute
• Mr. Charles T. Drevna, President, American Fuel & Petrochemical Manufacturers
• Mr. Bob Dinneen, President and CEO, Renewable Fuels Association
• Mr. Michael McAdams, President, Advanced Biofuels Association
• Dr. Jeremy I. Martin, Senior Scientist, Clean Vehicles Program, Union of Concerned Scientists
• Mr. Tom Buis, CEO, Growth Energy
• Mr. Shane Karr, Vice President, Federal Government Affairs, The Alliance of Automobile Manufacturers
• Mr. Todd J. Teske, Chairman and CEO, Briggs & Stratton Corporation
• Mr. Robert Darbelnet, President and CEO, AAA
• Mr. Joseph H. Petrowski, CEO, The Cumberland Gulf Group, on behalf of Society of Independent Gasoline Marketers of America and National Association of Convenience Stores
• Mr. Joe Jobe, CEO, National Biodiesel Board
• Ms. Pam Johnson, President, National Corn Growers Association
• Mr. Bill Roenigk, Senior Vice President, National Chicken Council
• Mr. Ed Anderson, CEO, Wen-Gap, LLC, on behalf of National Council of Chain Restaurants
• Mr. Scott Faber, Vice President of Government Affairs, Environmental Working Group
• Mr. Chris Hurt, Professor, Department of Agricultural Economics, Purdue University
Information on the hearing and the witness statements are available online.
The Subcommittee's background memo on the hearing is available online.
The hearing follows the five white papers recently released by the Subcommittee requesting stakeholder input on various aspects of the RFS. It is believed that Subcommittee Chair Ed Whitfield (R-KY) is working to ultimately modify the RFS through the legislative process. In fact, on the first day of the hearing, Subcommittee Member John Shimkus (R-IL) asserted that the petroleum and biofuels industries must work toward advocating in good faith for constructive modifications to the law. He also mentioned that he does not believe there are enough votes to repeal the law. The petroleum industry is advocating for the law's repeal, while the biofuels industry generally is advocating that the RFS is working as intended and that any changes to it should be made under the existing law and within the regulatory process.
Witnesses representing these industries made these points during the hearing on July 23, 2013. On July 24, 2013, witnesses from the livestock industry argued that the RFS negatively impacts the cost and availability of feed. The livestock industry helped lead the charge for EPA to temporarily waive RFS requirements due to the drought which affected crops last year. EPA denied the waiver request, which came from governors of states heavily involved in the livestock industry. It found that the RFS requirements would not severely harm the economy or environment of a state, a region, or the United States. EPA's Fact Sheet on this waiver decision is available online.
On July 18, 2013, the Senate voted 59-40 to approve the nomination of Gina McCarthy to lead the U.S. Environmental Protection Agency (EPA). Six Republicans voted for the nomination, including Senators Lamar Alexander (R-TN); Kelly Ayotte (R-NH); Susan Collins (R-ME); Bob Corker (R-TN); and Jeff Flake (R-AZ). McCarthy was sworn in to her new position as EPA Administrator on July 19, 2013.
McCarthy's confirmation came after four months of debate, with several Republicans, including members of the Senate Committee on Environment and Public Works (EPW), opposing her nomination out of protest for the perceived lack of transparency at EPA as the Agency works to issue rules to promote alternative forms of energy and combat climate change. McCarthy's nomination moved forward after one of the key opponents, Senator David Vitter (R-LA), announced his satisfaction that EPA was making progress on this transparency issue.
McCarthy served as the Assistant EPA Administrator for Air and Radiation since 2009. Before that, she served as Connecticut's Environmental Commissioner during which time she played an instrumental role in the development of the Regional Greenhouse Gas Initiative (RGGI). The RGGI is an initiative among nine Northeastern states to reduce harmful greenhouse gas (GHG) emissions in that region. In her new role, McCarthy is expected to work diligently with all stakeholders to issue rules designed to carry out President Obama's new climate change plan. These rules will include new controls on GHG from new and existing power plants, as well as the final 2013 renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS) and the proposed 2014 RFS RVOs.
Activity on the federal Renewable Fuel Standard (RFS) is in full swing on Capitol Hill. Last week, the House Energy & Commerce Committee's Subcommittee on Energy and Power issued its fifth and final white paper on the RFS seeking input from stakeholders on "implementation issues" with the policy. The white paper is available online.
The white paper follows the Subcommittee's hearing last month at which government witnesses testified on the effectiveness and implementation of the RFS. Specifically in this latest white paper, the Subcommittee is requesting, among other things, input on the effectiveness of EPA's annual process of setting the required volume obligations (RVO) for each of the four types of fuels under the RFS: biodiesel, conventional, advanced, and cellulosic. The questions appear to target oil industry criticisms that EPA sets the annual RVOs for cellulosic biofuels too high compared with the availability of those biofuels on the market.
On Monday, June 15, 2013, the Subcommittee announced that it will hold a two-day hearing on the RFS beginning on July 23, 2013, to examine stakeholder input on the policy. The hearing details, which will be updated closer to the hearing date, are available online. A witness list has not yet been published, but witnesses are expected to include representatives from all sides of the debate, including refiners, biofuel producers, and environmentalists. Comments made by Subcommittee Chair Ed Whitfield (R-CA), combined with the white papers and hearings, suggest that legislation may be introduced to modify the RFS.
Members of the Fuels America Coalition, including many in the biofuels industry, are working to avoid this result and protect the RFS in its current form. The group is advocating this message on Capitol Hill this week ahead of next week's House Subcommittee hearing, and as the Senate Energy and Natural Resources Committee this week held a hearing "to explore the effects of ongoing changes in domestic oil production, refining and distribution on U.S. gasoline and fuel prices." In response to expected criticisms during the hearing of the RFS and its impact on gas prices, members of the Fuels America Coalition made public statements attempting to "dispel the myths" the refiners portray about the policy, including its impact on gas prices. The group argues that the RFS has had only a positive effect on gas prices, with the increase in ethanol helping to reduce gas prices.
In the meantime this week, the refining industry announced that it is strengthening its campaign for the repeal of the RFS.
On July 12, 2013, the U.S. Court of Appeals for the District of Columbia issued its decision in Center for Biological Diversity v. EPA. In a 2-1 decision, the court vacated the U.S. Environmental Protection Agency's (EPA) rule (the Deferral Rule) exempting bioenergy and other biogenic sources of greenhouse gas emissions from new greenhouse gas permitting requirements under EPA's Tailoring Rule for a period of three years. This deferral was meant to allow EPA time to study and develop a proper method of accounting for greenhouse gas emissions from these sources. The court held that EPA did not meet the standards to justify its Deferral Rule under any of the four doctrines it had invoked.
According to EPA, biogenic carbon emissions are "emissions of CO2 from a stationary source directly resulting from the combustion or decomposition of biologically-based materials other than fossil fuels and mineral sources of carbon." Examples of biogenic CO2 include: CO2 generated from the biological decomposition of waste in landfills, fermentation during ethanol production, combustion of the biological fraction of municipal solid waste or biosolids, combustion of the biological fraction of tier-derived fuel, and combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material, among others. Therefore, carbon emissions from some facilities producing biofuels and renewable chemicals could be subject to these new permitting requirements under the Tailoring Rule. The requirements of the Tailoring Rule are triggered when stationary sources meet certain emissions thresholds.
This decision is important for industry and creates uncertainty going forward. Without future legal, legislative, or regulatory action, it appears likely that stationary sources meeting the emissions thresholds under the Tailoring Rule will be subject to the new permitting requirements.