December 12, 2012

Brighter Horizon for Biofuels

The biofuel industry breathed a big sigh of relief last month when the EPA declined several governors’ petitions to waive the Renewable Fuel Standard. Then, after a herculean group effort, the industry and other interests stood and cheered as the Senate voted last week to clear the path for the Department of Defense to take a leadership role in opening markets for new advanced biofuels.

Additional regulatory and Congressional actions may give the industry even further cause for celebration in the next few weeks and months. After meeting a number of challenges, the biofuels industry’s cohesive, unified efforts are paying off. The industry needs to continue to support efforts, such as Fuels America, in order to fend off biofuels opponents and detractors.

The EPA decision on the RFS waiver requests was driven by the facts in the case and not the politics. The data showed clearly that demand for renewable fuel is higher even than the levels set in the RFS, due to the high price of oil. EPA did not remark on the potential impact of a disruption of the RFS on the development of advanced biofuels, but that potential was great. Companies have made significant investments in accelerating new technologies and building new biorefineries for advanced biofuels, and those investments are coming to fruition.

Steel in the ground

INEOS Bio in Florida and KiOR in Louisiana recently announced progress in starting up their commercial scale biorefineries, while DuPont Cellulosic Biofuel recently broke ground in Iowa on its own large-scale project. A waiver of the RFS would have put those investments at risk. Thankfully EPA made a rational and correct decision by denying the waiver requests.

Wins on the Hill

There were two more big wins for the biofuels industry last week. As Biofuels Digest reported, the Senate’s decisive action to remove biofuels restrictions in the National Defense Authorization Act represents a powerful endorsement for advanced biofuel development. In June 2011, the Navy, USDA and Department of Energy announced a memorandum of understanding to create public-private partnerships to build biorefineries to produce advanced biofuels for military planes and ships.

Under the partnerships, the federal agencies would coordinate matching grants, feedstock development programs, and purchasing contracts to jumpstart construction of new facilities specifically to produce biofuels that meet military specifications. The coordinated action was designed to overcome some of the market development obstacles that advanced biofuel producers have faced in meeting the RFS, such as simultaneously developing upstream and downstream markets while trying to raise significant amounts of capital for construction.

A year and a half later, the funding and spending authorization for this partnership still awaits final approval by Congress and the President. During the Senate Armed Services markup of the legislation, amendments were inserted to the authorization that could have blocked DoD’s participation in the partnerships. The first amendment would have blocked the Pentagon from purchasing biofuel if its price exceeded the price of fossil fuels. The second amendment would have specifically required the Senate’s approval for DoD to participate in the biofuel partnership.

During the Senate floor deliberations on the NDAA, Sens. Mark Udall (D-Colo.), Susan Collins (R-Maine) and Kay Hagan (D-N.C.) took the lead in sponsoring votes to strip the amendments. Senators voted to strip the first mentioned amendment by 62-37, with both Democratic and Republican support. That vote, garnering support from more than 60 Senators, showed strong support for development of renewable biofuels as a remedy to our current reliance on foreign oil.

Sens. Chris Coons (D-Del.) and Jeanne Shaheen (D-N.H.) were among the many co-sponsors of these floor votes, even though they had joined Sen. Hagan last August on a letter to EPA Administrator Lisa Jackson urging her to adjust the RFS. A number of other Senators from the states that requested the waiver – Sens. Barbara Mikulski (D-Md.) and Ben Cardin (D-Md.), Mark Warner (D-Va.), Tom Carper (D-Del.), and Tom Udall (D-N.M.) – supported the measures after previously signing on to the letter requesting the waiver.

This vote may not provide a direct indication on a potential future vote to preserve the RFS, but it is a highly positive predictor of future voting on any biofuels related amendments.

We greatly appreciate the Senators’ championship and support of the public-private partnership for advanced biofuels for the military. The spending legislation passed by the Senate this week must still be reconciled with the version passed by the House, and we hope the final version sent to the President is closer to the Senate’s version. We believe that this vote signals renewed optimism and support among Congress members for the future of advanced biofuels.

Now, the Farm Bill

Another significant piece of legislation that can help to unlock investment and loan capital for the industry is the Farm Bill. That legislation can also support the development of agricultural feedstocks for renewable energy. This year’s effort to write non-partisan legislation that reduces the cost and reforms payments should not go to waste; there is still a chance it may be finalized during the current session of Congress.

All in all, the post-election environment in Washington seems to promise continuation of stable policy support for advanced biofuels commercialization and the robust growth of the industry. There is still heavy lifting to do and challenges to overcome, but 2013 promises a brighter horizon for all biofuels.

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