ABFA president: RFS proposal is 'industry's worst nightmare'

By Anna Simet | December 04, 2013

As the Advanced Biofuels Association gears up for U.S. EPA’s Dec. 5 public hearing on the renewable fuel standard 2 (RFS) 2014 renewable volume obligation proposal, President Michael McAdams provided a preview on main points the ABFA plans to make during its testimony.

McAdams pointed out that the proposed 2.2-billion-gallon target for next year is a 20 percent reduction from this year’s advanced biofuel requirement of 2.75 billion gallons, and more than a 40 percent cut from the 3.75 billion gals slated in the RFS statute. “When this proposed rule first leaked in October, ABFA did our best to give the EPA the benefit of the doubt,” McAdams said. “It was tough to imagine EPA actually proposing such a woefully inadequate target…the proposal would be a devastating blow to many companies working today to fulfill the promise of the RFS…”

McAdams said the proposal is close to being the industry’s worst nightmare. “If EPA sticks with anything close to the 2.2 billion gallons in final rule, the agency will have pulled the rug out from under the developing advanced biofuel sector and destroy the industry…fortunately, it is just a proposed rule.”

The EPA’s 60-day comment period on the proposal ends Jan. 28.

The AFBA will be actively involved in the Dec. 5 public hearing, which will be held in Crystal City, Va. McAdams said there are three main points the ABFA plans to stress in its comments, one being that the EPA’s proposed RFS reductions fall disproportionally on advanced biofuels. “They have proposed to cut volume requirements for advanced biofuels by more than 40 percent compared to requirements written into the statute,” he said. “In contrast, EPA has proposed to reduce volume requirements for conventional biofuels by less than 10 percent. We’re left scratching our head wondering why the EPA would deliver such a disproportionate large blow to the category of renewable fuels that reduces greenhouse gases the most. It’s unfair and counterproductive to the Obama administration’s stated goal of reducing climate change.”

The second point is that the EPA’s proposed methodology for setting upcoming RFS targets looks backward at the average of historical data, rather than forward, to set future production levels. McAdams said that model “will always roll snake eyes for the advanced and cellulosic biofuels industry. For our evolving industry, such policy will ensure a continuous oversupply of advanced biofuels compared to what the EPA model forecasts. This imbalance, in turn, will crater the value of the renewable identification numbers (RINs) assigned to each eth equivalent gallon of biofuels. RIN prices are instrumental to financing the development of future of advanced and cellulosic biofuel facilities, and the agency cannot support the emergence of a low-carbon innovative industry by looking through the review mirror.”

The last point ABFA plans to make is that the EPA should set RFS standards that encourage production and consumption of all available advanced biofuels. “There are no other fuels available today that deliver greater reductions in GHGs than advanced biofuels,” McAdams said. “For an administration committed to addressing climate change, this proposal leaves low-hanging fruit still in the tree by setting consumption targets below available levels of advanced biofuels, plus the carryover RINs.”

McAdams noted that the administration has spent over half a billion dollars from the U.S. DOE alone to develop the advanced biofuel industry. “To preserve the value of those investments, and continue to support new advanced biofuel production, EPA should set a 2014 AB target that can be met and exceeded by current production, plus the carryover RINs. Anything less than production and consumption of all available biofuels will be a step backward…the EPAs proposed rule is a significant departure from previous RFS proposals, and it is a departure from clear congressional intent to steadily increase the target for advanced biofuels year after year.”

Joining McAdams during the call was Stu Lamb, president and CEO of Viesel Fuel LLC, who discussed the challenges and work that went into starting his biodiesel business, which he said employs a special process using enzymes and resins and has “revolutionized the biodiesel production process.” Lamb, who employs 45 people, described his business as family owned, and said he embarked on the process because he felt it was the right thing to do after serving as a fighter pilot, wanting to continue contributions to the country. All along, Lamb has leaned on the government commitment of the RFS as the tool that would make his business work. “Without these mandates, without these criteria and support, I cannot make this fuel, put it into the marketplace and compete with the major oil companies,” he said. “I can’t provide a cheap fuel, I can’t provide a fuel that meets the criteria of the RFS 2 without these mandates.”

Lamb said once his company finally produced its first gallons it was a proud moment, but finding out the mandates may not be there anymore has been devastating. “They’ve changed the rules…I built this plant, I hired the people, I put the boots on the ground and I made my commitment work. The reason we can’t succeed is not because we did something wrong, or our inability succeed, it’s because the government has changed its commitment to me. So now what do I do? I have to go to the bank and say, ‘when I signed into these documents I had a cosigner in the RFS2 program, an implied partner, but that partner is gone.’ They will look at me and say ‘well, we’re sorry. But we’re looking to you to pay this.’ I am in a position where, without this support—without the RFS—we face bankruptcy and I may have to put 45 people out of work.”

Wayne Simmons of Sundrop Fuels, which is actively fundraising to build Sundrop’s first commercial green gasoline plant, added that the value of RINs is set by the marketplace based on supply and demand. “EPA sets the demand each year through the RVOs. When EPA sets the RVO less than the supply, the RIN value plummets and the intended economic incentives disappear. This is exactly what’s happened with this year’s proposed RVO rule. You remove the RIN value, you remove the economic incentive, you remove the willingness for bankers to lend, and you remove the ability for the industry to grow.”