The Biobased and Renewable Products Advocacy Group (BRAG) helps members develop and bring to market their innovative biobased and renewable chemical products through insightful policy and regulatory advocacy. BRAG is managed by B&C® Consortia Management, L.L.C., an affiliate of Bergeson & Campbell, P.C.

On April 8, 2014, House Committee on Ways and Means Chair Dave Camp (R-MI) held a hearing on the "Benefits of Permanent Tax Policy for America's Job Creators." The hearing focused on the expiring business tax provisions that are made permanent or extended under Camp's recently released discussion draft of the "Tax Reform Act of 2014" (TRA). Unlike his Senate counterpart -- Senate Committee on Finance Chair Ron Wyden (D-OR) -- Camp is not very supportive of passing a tax extender package to extend retroactively the approximately 50 incentives that expired at the end of 2013, including several for advanced biofuels development. In fact, the TRA would eliminate most clean energy incentives. The House Ways and Means Hearing Advisory is available online.


Last week, the Senate Finance Committee approved its version of tax extender legislation, the "Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act." The EXPIRE Act includes extensions through December 31, 2015 (and retroactive to January 1, 2014) of the following key biofuels incentives that have expired: the Alternative Fuel Refueling Property Credit; the Second Generation Biofuel Producer Tax Credit; the Special Depreciation Allowance for Second Generation Biofuel Plant Property; the Biodiesel and Renewable Diesel Fuels Credit; and the Alternative Fuel and Alternative Fuel Mixture Excise Tax Credit. A copy of the EXPIRE Act is available online. A summary of the bill is available online.


Whether a tax extenders package will pass this year depends on several factors. It is likely to be more difficult to pass in the House of Representatives than in the Senate.
 


 

On April 8, 2014, the Senate Committee on Agriculture, Nutrition and Forestry held a hearing on "Advanced Biofuels: Creating Jobs and Lower Prices at the Pump." The following witnesses testified at the hearing: Mr. Richard Childress, CEO, Richard Childress Racing, LLC; Mr. Jan Koninckx, Global Business Director for Biorefineries, DuPont Industrial Biosciences; Mr. Brooke Coleman, Executive Director, Advanced Ethanol Council; Dr. Sumesh Arora, Vice President, Innovate Mississippi, Director of Strategic Biomass Solutions; and, Ms. Nancy Young, Vice President, Environmental Affairs, Airlines for America. More information about the hearing is available online.


Senate Agriculture Committee Chair Debbie Stabenow (D-MI) held the hearing to highlight positive developments in the advanced biofuels space. Stabenow's home state of Michigan has a heavy biobased manufacturing sector and the Senator has been working hard to garner federal support for the industry. She is opposed to the U.S. Environmental Protection Agency's (EPA) proposed 2014 Renewable Fuel Standard (RFS) rule that would lower the 2014 renewable volume obligations (RVO) for corn ethanol, cellulosic biofuels, and advanced biofuels. At the hearing this week, witnesses warned that lowering the 2014 RVOs for corn ethanol and advanced biofuels will chill investment in U.S. biofuels.


EPA Administrator Gina McCarthy made a recent public statement suggesting that the 2014 RFS rule is expected to be finalized by June.
 


 

On April 7, 2014, the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in Monroe Energy, LLC v. EPA (No. 13-1265). In the case, Monroe Energy, a subsidiary of Delta Airlines, the American Petroleum Institute (API), and the American Fuel & Petrochemical Manufacturers (AFPM) are challenging EPA's final 2013 RFS rule. The plaintiffs' arguments include that the rule should be overturned because EPA improperly considered the availability of carryover Renewable Identification Numbers and illegally issued the rule in final nine months after the statutory deadline to do so.


Several large biofuels trade associations intervened in the case on behalf of EPA, including the Biotechnology Industry Organization, Renewable Fuels Association, Growth Energy, and the National Biodiesel Board. They asked the court to uphold the 2013 RFS rule, but to not address the bounds of EPA's discretion to reduce RFS volume requirements due to concerns related to the E10 "blendwall."


Plaintiffs have asked the court for an expedited ruling before the June 30, 2014, compliance deadline for the 2013 RFS requirements.
 

Tags: RFS, RINs, biofuels

 

On April 3, 2014, the Senate Committee on Finance marked up its version of a tax extenders package, the "Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act." The EXPIRE Act includes extensions through December 31, 2015 (and retroactive to January 1, 2014) of the following key biofuels incentives that have expired: the Alternative Fuel Refueling Property Credit; the Second Generation Biofuel Producer Tax Credit; the Special Depreciation Allowance for Second Generation Biofuel Plant Property; the Biodiesel and Renewable Diesel Fuels Credit; and the Alternative Fuel and Alternative Fuel Mixture Excise Tax Credit. A copy of the EXPIRE Act is available online. A summary of the bill is available online.


 

The U.S. Environmental Protection Agency (EPA) has announced that it will take approximately the next six months to evaluate and improve the petition process for new fuel pathways under the federal Renewable Fuel Standard (RFS). Every producer that wants their renewable fuel to qualify under the RFS must have its fuel pathway, including feedstock and technology process, approved by EPA. EPA intends to make the process more efficient and transparent, and thereby reduce the amount of time it takes to make determinations on new fuel pathway petitions. The Agency also intends to develop and issue improved guidance for petitioners, and to have a more automated review process for petitions using previously approved feedstocks and well known production process technologies.


EPA suggests that parties intending to submit new fuel pathway petitions wait to do so until after the Agency issues its new guidance. EPA will continue to review petitions currently under review, but will prioritize them based on the following criteria:


* Ability to contribute to the cellulosic biofuel mandate.

* Potential for reducing greenhouse gas emissions on a per gallon basis, for example by using feedstocks that likely do not have significant indirect land use change emissions (such as non-food feedstocks).

* Ability to contribute to near-term increases in renewable fuel use. This criterion would include, for example, consideration of the ability of the intended biofuel product to be readily incorporated into the existing fuel distribution network.
A copy of EPA's announcement is available online. EPA is accepting input on the RFS new fuel pathway petition process via e-mail to the EPA Fuels Programs Support Line at .(JavaScript must be enabled to view this email address) with "Petition Process Input" as the subject line.


This review comes after years of criticism that the petition process for new fuel pathway approvals under the RFS takes too long and impedes progress of projects that could produce fuels that meet the annual RFS volumetric requirements. Some companies have been waiting for over two years for EPA's determination on their petitions.
 


 

On March 24, 2014, seven leading biofuel trade associations sent a letter to Senate Committee on Finance Chair Ron Wyden (D-OR) and Ranking Member Orrin Hatch (R-UT) -- as the Committee works to develop a tax extenders bill -- urging the retroactive extension of the following biofuel incentives, which expired on December 31, 2013: the Second Generation Biofuel Producer Tax Credit, the Special Depreciation Allowance for Second Generation Biofuel Plant Property, the Biodiesel and Renewable Diesel Fuels Credit, and the Alternative Fuel and Alternative Fuel Mixture Excise Tax Credit. A copy of the letter is available online.


The letter stresses that the advanced biofuels industry is at a critical stage of development and is a critical innovation sector that depends on the incentives and their stability for continued development. It also points out that the continued availability of the tax credits is needed to continue to attract development of advanced biofuels and their associated jobs in the U.S.
 


 

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.


 

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 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.
 


 

The Director of the U.S. Environmental Protection Agency's (EPA) Office of Transportation and Air Quality, Christopher Grundler, made public comments recently stating that he expects EPA to issue the final rule setting the 2014 Renewable Fuel Standard (RFS) volumes by midnight on June 20, 2014. The final rule is much anticipated among industry stakeholders. The biofuels industry generally has urged EPA to revisit the proposed reductions to the advanced and corn ethanol 2014 RFS volumes, while RFS opponents, including generally the oil and gas and livestock industries, have been supportive of EPA's proposed 2014 RFS reductions. The Biobased and Renewable Products Advocacy Group (BRAG™) recently reported on the comments EPA has received on its proposed 2014 RFS rule. A copy of that report is available online.


EPA Administrator Gina McCarthy is expected to discuss the upcoming RFS rule during a visit to North Dakota on February 28, 2014.
 


 
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