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A Call for Statutory Clarity

Is the current regulatory regime hindering commercialization of advanced biofuels?
By Bryan Sims | September 20, 2011

When the Clean Air Act was created by Congress in 1977, most of its statutory regulations and definitions were devised to accommodate the introduction and commercialization of corn-based ethanol, the only economically viable fermentation-based alcohol permitted to be sold and distributed in the gasoline pool at the time. Since then, the CAA has undergone a few amendments related to oxygen content limits and emission control levels allowed in certain vehicles—primarily centered on E10—with the most significant coming in 2007 when the renewable fuel standard was created as part of the Energy Independence and Security Act. As the sole federal authority regulating the lawful commercialization of new fuels and additives, the U.S. EPA subsequently approved E15 for 2007 and newer vehicles last October, and in January expanded it to include 2001 and newer vehicles.

Today, in an industry that’s working to produce high-performance, fungible, drop-in molecules, some on the cusp of commercialization, many involved in the biorefining sector contend that the current regulatory regime needs to be altered to allow advanced biofuels, such as biobutanol, to compete with parity in the marketplace. The rapid evolution of advanced biofuels technologies may have outpaced the current regulatory framework that might have otherwise facilitated the introduction and commercialization of those fuels, which begs the questions: do we need to revisit the RFS2, and do we need to modify the CAA? According to Michael McAdams, president of the Advanced Biofuels Association, answering the latter may be critical.

“As we enter this period in the country, in which we are having serious discussions about what our energy mix is going to be or if we’re going to take a portfolio approach, we may have to, by necessity, revisit the CAA and other policy tools because the technology has moved so rapidly that they’re out of date,” McAdams tells Biorefining Magazine.

To not make changes to essentially allow advanced biofuels unfettered access to the infrastructure, McAdams argues, creates entry barrier for fuels that are, in many instances, better-performing. “This is one example of the way we’ve set up a system of rules to govern gasoline, which was primarily premised with one molecule that we used in gasoline other than a hydrocarbon, which was ethanol,” he says. “Now, we have a series of other molecules, including hydrocarbon molecules made from renewable feedstocks that were never even thought of when we did the original amendment to the CAA in 1990.”

While reaching the CAA may be a high bar to climb, Timothy Slating, regulatory associate at the University of Illinois Energy Biosciences Institute and lead author on a paper titled “Making Regulatory Innovation Keep Pace with Technological Innovation,” which will appear in an upcoming issue of the Wisconsin Law Review in March, agrees that getting regulatory approval to commercialize new biofuels blends is currently a time-consuming and costly process. In the paper, Slating, along with co-author Jay Kesan, professor of law at the University of Illinois and program leader within the Energy Biosciences Institute, focus on biobutanol and discuss how regulatory innovations are needed to keep pace with technological innovations in the biofuels industry. Additionally, the authors discuss how the current regulatory framework might be burdensome for existing biobutanol developers trying to get their product to market. They also outline suggestions about how the current system could be simplified as an avenue to mitigate barriers to entry.

Choosing the Right Certification Path

Determining the extent of how time-consuming and expensive it can be to get regulatory approval for biobutanol fuel blends through the EPA, and be in compliance with the guidelines of the CAA, depends on which path a biobutanol company pursues to get its fuel certified, Slating says. Under existing regulations, biobutanol can lawfully be blended with gasoline in compliance with the CAA in a concentration of roughly 11.5 to 12.5 percent by volume, depending on the density of the finished fuel. Slating refers to this as the “default” regulatory path to commercialization.

Because the CAA requires detailed emissions testing and certification for on- and off-road vehicles and engines, Slating notes that the act also makes it unlawful for a fuel or an additive manufacturer to commercialize a fuel that isn’t “substantially similar” to the fuel that the EPA uses in this emissions  certification process. Since the CAA doesn’t explicitly define what constitutes a “substantially similar” fuel, the EPA has issued its “Substantially Similar Rule,” which lays out detailed requirements that finished fuels must comply with to be considered “substantially similar” to certification fuel. Specifically, one of the requirements found in the rule says any fuel containing alcohol cannot have more than 2.7 percent oxygen by weight. It is this oxygen weight limitation that governs the amount of alcohol-based biofuels that can lawfully be blended in gas.

But where it gets complex, Slating says, is that although the rule specifies an oxygen-by-weight percentage limitation, this  does not translate into a concrete volumetric blending limit for the new finished fuel.

“Essentially, even if a fuel blend contains a set volumetric percentage of a biofuel, the blend’s oxygen weight limitation will fluctuate as the density of fuel naturally changes,” he explains, “so if you’re commercializing via this default path, the blending limit for biobutanol is based on this oxygenate limit, which roughly equates to anywhere between an 11.5 to 12.5 percent by volume limitation.” Slating further explains that “while the EPA has registered some forms of biobutanol with a producer-recommended blending concentration of 12.5 percent, the commercialization of a 12.5 percent blend would only be lawful as long as it contained no more than 2.7 percent oxygen by weight.”

Another path would be to file a fuel waiver application to allow a blend higher than what is allowed under the Substantially Similar Rule. Regulations provide a mechanism whereby biobutanol producers can pursue a fuel waiver from the EPA to allow higher blending limits than what current regulation allow, but this can be a time-consuming and costly process due to extensive data submission to the EPA regarding how the fuels and additives interact with on- and off-road vehicles. While it may be legal to blend 16 to 17 percent biobutanol with gasoline based on preexisting waivers granted in the 1980s that allow some alcohol-based fuel blends to possess 3.7 percent oxygen by weight, Slating doubts that the EPA would permit the commercialization of 16 to 17 percent biobutanol blends under these waivers. But, since the EPA has a long history of granting alcohol-based fuel waivers on condition that the final blend contain no more than 3.7 percent oxygen by weight, Slating and Kesan contend that the default path should allow alcohol-based fuels to contain up to 3.7 percent oxygen by weight.

“All the EPA would have to do is issue a new Substantially Similar Rule to update their interpretation of the term ‘substantially similar,’” Slating says. “Essentially, if they changed the 2.7 percent oxygen weight limitation in the rule to a 3.7 percent oxygen weight limitation, then the default path would allow for the lawful commercialization of 16 to 17 percent biobutanol blends in finished gasoline, which would facilitate the introduction of increased volumes of biobutanol  into the marketplace.”

Thankfully, for current biobutanol producers, like Colorado-based Gevo Inc., the commercial success of its product isn’t exclusively dependent on how the regulation shakes out, according to Jack Huttner, executive vice president of commercial and public affairs. Huttner is also vice chairman for the Advanced Biofuels Association. Gevo is focused on producing isobutanol, a specific type of butanol isomer, derived from starch-based feedstock like corn, but its product can not only be used as an alcohol-based additive in gasoline, but also in chemical applications and as aviation fuel. In addition to Gevo, other biorefining companies such as Cobalt Technologies and Butamax (a joint venture between DuPont and BP) are also leading the biobutanol commercialization effort. Gevo, however, was the first company to have its isobutanol registered with the EPA nearly a year ago.

“Clearly, there are rules and language that were put in place before there were viable alternatives to ethanol,” Huttner says. “Now that we believe there are viable alternatives, we’re going to review all of those because unless they are changed, those would be barriers to new market entry. Now that Gevo and some of our peer group companies are moving to market, this issue has come to the forefront of our activity.”

Slating and Kesan also suggest that a fast-track review process be created for new fuel waivers that involve biofuels with established fuel pathways for purposes of RFS2 compliance. The authors argue that if RFS2 is going to incentivize the deployment of advanced biofuels, then producers will need assurance that there will be no unnecessary delay or cost in the fuel waiver process to get their product sold and distributed into the fuel infrastructure.
“It wouldn’t be an across-the-board fast-track review process,” Slating explains, adding that the proposed regulatory change would reduce impediments biobutanol companies often confront during the application round.

1-Pound Waiver Issue

Another issue at the forefront of discussion by advanced biofuel developers like Gevo and supporting organizations such as the ABFA is specific language found in the CAA that prohibits the blending of biobutanol in E10 gasoline. Currently, fuel that contains between 9 and 10 percent ethanol is granted a 1-pound waiver on Reid Vapor Pressure, a common measurement of gasoline’s volatility, measured in pounds per square inch (PSI). In order to control emissions of volatile organic compounds (VOCs), the CAA amendments of 1990 require all gasoline be limited to max RVP of 9 psi during the summer high-ozone season, which the EPA established as running from June 1 to Sept. 15. Some states have elected to require even more stringent restrictions to achieve local clean air goals.

According to Huttner, this is problematic for biobutanol producers because when another alcohol such as biobutanol, which has a lower RVP than ethanol, is blended with E10 gasoline, the ethanol gets diluted to less than 9 percent, rendering the finished fuel noncompliant with the 1-pound waiver. “Right now,” Huttner says, “you basically can’t blend E10 with any other alcohol.” 

To further illustrate how problematic this regulation is for existing advanced biofuel producers, McAdams provides the following scenario that highlights the point. “Say I’m a gas station owner and my tank in the ground with 89 octane is empty,” he says. “I now have a butanol supplier in my distribution network and they’ve got gasoline with butanol in it. I want to drop that half-a-load of 89 octane gasoline with butanol on top of the half-a-load of 89 octane gasoline I’ve got with ethanol. From a blending standpoint, one can do that. But when you put that half a tank of butanol on top of E10 gasoline, you end up with 5 percent ethanol. The requirement is 10 percent ethanol blended with gasoline to get the 1-pound waiver. So when you blend the low RVP butanol in a tank on top of E10, you’re now out of compliance. Wouldn’t it make sense to change it to where you didn’t have to have 10 percent ethanol if you blended it with other molecules?”

Despite the murky regulatory framework currently facing advanced biofuel developers, McAdams remains optimistic that the EPA will bring clarity and renewed regulatory guidance to help commercialize advanced biofuels. “I have great confidence that the folks who work in the section of the EPA that has jurisdiction over this can thoughtfully work through this with the industry,” McAdams says. “They have a track record of over 20 years working with stakeholders. They’re as good as any agency in the federal government, and I have great confidence that they’ll work with us to address some of these issues, because they believe in advanced biofuels.”

Author: Bryan Sims
Associate Editor, Biorefining Magazine
(701) 738-4974
bsims@bbiinternational.com

 

On the Web: To view the paper “Making Regulatory Innovation Keep Pace with Technological Innovation” by Timothy A. Slating & Jay P. Kesan, visit http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1805008

 

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