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What do we do with Rufus? RFS, that is, the elephant in the room

| February 13, 2012

Biofuels industry splits over RFS. What are the options?

Could a new technology expected this spring change the conversation forever?

Around the halls of the Digest, we call him Rufus, the elephant in the room. Elsewhere, RFS, or the Renewable Fuel Standard, is the accepted descriptor.

Under any name, there’s been an awful lot of talk of late, and the jungle drums are talking louder and louder, on the subject of exactly what to do with Rufus, and the targets and rules for the renewable fuels mandate in the United States.

Last April, at the Advanced Biofuels Leadership Conference in Washington, DC, four industry associations (BIO, the Advanced Biofuels Association, the Advanced Ethanol Council and the Renewable Fuels Association) pledged themselves to a “don’t mess with the RFS” policy with respect to the future of the Renewable Fuel Standard.

Since then, the trade groups have stuck to their guns. In fact, the leadership of the ABFA, AEC and BIO will hold a roundtable this Thursday to discuss the potential impact on advanced and cellulosic biofuel producers if EPA grants a petition to retroactively waive the 2011 cellulosic renewable volume obligation.

BIO’s Brent Erickson has said, “The RFS is the bedrock policy foundation for both advanced and conventional biofuels. BIO will continue to work for maintenance of the RFS as the stable, long-term policy necessary for continued progress for all biofuels.”

Threats to the RFS: external to the industry

In a policy speech last week in Iowa, Secretary of Agriculture Tom Vilsack warned: “Big oil is pushing back against the Renewable Fuel Standard. If they succeed, the consequences could be very serious for the Midwest.”

Critics like Charles Drevna of the American Fuel & Petrochemical Manufacturers group have called the RFS “an anachronism.” Groups like the National Corn Growers Association have wrote of cellulosic biofuels: “Much as parents may tell stories about unicorns and fairies, some players in the ethanol and environmental industries pushed a product which they were not prepared to deliver.”

On a related effort to approve E15 ethanol blending, as a means to ensure meeting RFS targets without hitting the ethanol blend wall, biofuels campaigner at Friends of the Earth, Michal Rosenor, wrote last week: “Yesterday the House Science, Space, and Technology Committee approved a bill that would require the EPA to do a more thorough analysis on the effects for consumers, the economy, and the environment of increasing the amount of corn ethanol in gasoline by 50 percent before it is sold at pumps. Friends of the Earth, along with a diverse coalition, supported the bill, H.R. 3199, with a letter to the committee earlier this week.

Threats to the RFS: internal to the industry

The Algal Biomass Organization writes: “The Renewable Fuel Standard should be amended to include algae to the same extent as it currently does other advanced biofuel feedstocks. Currently, the RFS excludes algae-based fuels from nearly 80% of the 21 billion gallon advanced biofuels mandate, due to a 16 million gallon carve-out for cellulosic biofuels.”

Supporters of municipal solid waste as a biofuel feedstock support changes to the RFS to allow for the use of paper and cardboard in generating cellulosic biofuels credits, pointing out that the loss of biomass and added cost of separation makes it highly difficult to couple with current RFS rules. The EPA’s Donna Perla writes: “Under EPA’s recently promulgated Renewable Fuel Standard, advanced fuels must be derived from feedstocks that meet the definition of renewable biomass. Producers can use separated MSW (defined as material remaining after separation actions have been taken to remove recyclable paper, cardboard, plastics, rubber, textiles, metals, and glass) as feedstock to generate Renewable Identification Numbers (RINs) for their fuel.”

Wets, Drys, Demi-Secs, and a fourth option

But since last April, the industry has split into three groups on the question of what to do about Rufus, the elephant in the room.

At the heart of the issue – a slow uptick in the capacity building for cellulosic biofuels, compounded by the limitations for delivering fuels into the marketplace, creating a case for revising RFS targets.

But a fourth option is now emerging from technologists that may bolster hopes that workarounds may be found quickly to surmount problems in developing 16 billion gallons of cellulosic biofuels, under current definitions, by 2022.

The Drys – no change

The Drys, led primarily by BIO, ABFA, the Advanced Ethanol Council and the National Biodiesel Board, continue to hold to a “don’t mess with the RFS” line. While acknowledging problems with meeting RFS targets, they counsel the industry that opening up the RFS to correct known problems is a flawed strategy – saying that the RFS would be, instead, be rewritten by the industry’s critics, who would focus on massively reducing targets and narrowing industry options on feedstocks.

The Wets – adjust a flawed RFS

The Wets, led primarily by the ABO and MSW-oriented producers, say that the RFS should be improved to make it more realistic, and more technology and feedstock neutral – which would bolster chances of its targets being met.

The Demi-secs – adjust now, before it gets worse

A new group has emerged – generally, composed of former Drys who have not yet publicly broken with the “don’t mess with the RFS” policy line. Privately, there are those who have told the Digest that the outlook for the November elections does not bode well for protecting the RFS in the next Congress, and it may well be a good idea to open up the RFS now, rather than later, when the forces opposing the RFS are stronger and the gap between cellulosic biofuels targets and performance is even wider.

New technology could well re-shape the debate this year.

At the Advanced Biofuels Leadership Conference this year in Washington, we are expecting to see a new technology option emerge – a new capital-light, built-in technological option for the production of drop-in cellulosic biofuels at massive scale, and with rapid scale-up options for industry.

No, it is not just an expectation that companies like Sapphire Energy and Joule Unlimited will be scaling their technologies using their advanced microorganisms – or that pyrolysis technologies like KiOR’s will find affordable project financing to massively accelerate their build-out. Just to mention a number of companies who already have known technologies that may scale drop-in fuels before 2022.

What we are expecting is a new technological option. More on this we are unable to say, at this stage, but we definitely see good reasons for industry to wait until early April to make a definitive move on RFS policy, until the new technology option is formally announced, and both the biofuels industry and its critics – who would be expected to also realign — have had an opportunity to evaluate the new options.

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