After the Election: Biofuels and the Next Four Years

| November 8, 2012

New opportunities and challenges will present themselves during the 113th Congress.

By Brent Erickson, Executive Vice-president, BIO; head, Industrial & Environmental Section

For the advanced biofuels industry, the 2012 election turned on Senate races. At the top of the ticket, both presidential candidates expressed commitment to maintaining the Renewable Fuel Standard (RFS), which is the most essential public policy tool for the advanced biofuels sector. Republicans retained control of the House of Representatives; Democrats retained control of the Senate. In both chambers, threats remain to the RFS. In the Senate, however, new opportunities and challenges will present themselves during the 113th Congress.

Legislatively, the RFS is under attack by a coalition of assorted interests that have opposed all or part of the policy since its passage. Their efforts have been temporarily bolstered by the unfortunate, but limited, fraud associated with RIN numbers and the U.S. drought this past summer.
The Senate Environment and Public Works Committee has jurisdiction over the RFS.

Sen. Barbara Boxer (D-Calif.) will remain Chairwoman, but recent media reports have raised questions about whether the committee’s ranking Republican, Sen. Jim Inhofe (R-Okla.), will continue to serve in that capacity or make way for Sen. David Vitter (R-La.) to fill that role. Both men are from oil-producing states, but there are some advanced biofuels companies operating in Louisiana. However, the Committee has a history of treading lightly in any efforts to change the RFS and it is likely that this will continue next year (with the potential legislative threat to the RFS being an amendment offered on the Senate floor).

While Democrats added seats to their majority in the Senate, they are short of the 60 votes needed to pass legislation and avoid filibusters. Obtaining the requisite number of votes for passage of legislation will be difficult, which presents an environment where bi-partisan groups of Senators can hold sway on pieces of important legislation. This is why it is so important for the biofuels community to continue to work to secure a solid number of Senate supporters of the RFS who can stop any effort to weaken it. This is the primary goal of the newly created Fuels America coalition (www.FuelsAmerica.org).

Sen. Ron Wyden (D-Ore.) will likely take over the chairmanship of the Senate Energy and Natural Resources Committee. Sen. Wyden has given clear signals that he will not abandon Democratic support of policy or actions to reduce carbon emissions, and it is likely that fostering alternative energy sources will be a priority for him in terms of the committee agenda. The climate change issue was put on the back burner prior to the election, but it will resurface over the next four years.

In addition to focusing a climate change debate on power and industrial facilities, transportation fuels may also be in the sights of some climate change policy advocates. If that scenario plays out, based on their positive carbon profile, biofuels could end up gaining some advantage in the marketplace and benefiting early adopters of this transportation fuel technology. It will be important for biofuels advocates to stay engaged in all matters related to carbon accounting to ensure biofuels are treated appropriately at the state and federal levels.

The biofuel industry is also relying on Congress to maintain its commitment to bringing new technological solutions to bear on problems of energy security and the environment. But the 2012 election started off with the retirement of a number of Senators who had originally passed the RFS, including Sen. Jeff Bingaman (D-N.M.), and the primary defeat of one of the program’s champions, Sen. Richard Lugar (R-Ind.).

The election results on the whole appear to signal the Senate’s continued commitment to renewable energy. Strong champions of the policy such as Sens. Debbie Stabenow (D-Mich.), Amy Klobuchar (D-Minn.), Jon Tester (D-Mont.) and Bill Nelson (D-Fla.) retained their seats. But at least one opponent of the policy joined the Senate – during his tenure in the House, Rep. Jeff Flake (R-Ariz.) introduced legislation to weaken or set aside the RFS, and he was elected to fill the seat of retiring Sen. Jon Kyl (R-Ariz.). Notably, state senator Richard Mourdock (R-Ind.), an outspoken opponent of biofuels, failed in the general election after defeating Sen. Lugar; Rep. Joe Donnelly (D-Ind.) won that seat.

The cellulosic and advanced biofuel industry’s continued investment and progress toward commercial status depends on EPA being consistent in implementing the RFS. But that agency has been under pressure by some members of Congress and governors to change the policy, and it has been sued by the petroleum refining industry in federal court over its past decisions. Changes within the Administration – which almost always occurs in a second term – will be watched closely for signals of change in policy support. I don’t expect the Administration’s support for the RFS to grow weaker and it may even grow stronger.

Any policy change would come as the industry is reaching crucial milestones. The very first commercial gallons of cellulosic biofuel – and the associated Renewable Identification Numbers (RINs) – were registered with EPA in April 2012. INEOS Bio and KiOR have both achieved the regulatory approval necessary to begin producing fuel and RINs, and their facilities are nearing their commissioning dates. Other facilities are under construction and on schedule to open in the next couple of years.

Planned projects that fall by the wayside may still garner the most media headlines, but the real news is that we’re beginning to see companies plan for their second and third biorefineries, building on the blueprints of the first. Advanced biofuels will indeed be a commercial reality by year’s end and the growth curve for these fuels will be robust over the next four years.

The biofuels industry is awaiting EPA’s finalization of new pathways for cellulosic biofuel production along with the proposed rule for the 2013 cellulosic standard, although the biomass based diesel standard has already been finalized. EPA is the gatekeeper for whether new projects can begin production and new pathways can be used.

The agency must continue to set the cellulosic standard at the highest achievable level for the industry, as it has during the first three years of the program. The industry is relying on stability in the program in order to fulfill what Congress intended when it passed the RFS – namely, to speed commercialization of technology for new biofuels. At this juncture stability seems likely to continue so long as the industry stays actively engaged with Congress and the administration.

BIO and its members look forward to working with new and returning Members of Congress and the President to ensure that the policy environment supports the continued progress of the biofuels industry. And we stand ready to demonstrate our continued progress.

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