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The Oil Industry Just Talked EPA Into Reconsidering Its 2013 Mandate For Cellulosic Biofuel

By Jeff Spross

"The Oil Industry Just Talked EPA Into Reconsidering Its 2013 Mandate For Cellulosic Biofuel"

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In a move cheered by the oil industry, the Environmental Protection Agency agreed last week to consider downgrading its 2013 mandate for cellulosic biofuel production.

Refineries have until June 30 to meet the current 2013 target, which requires them to blend 6 million gallons of cellulosic biofuel into the nation’s fuel supply. The oil industry’s two biggest trade groups — the American Fuel & Petrochemical Manufacturers and the American Petroleum Institute — petitioned the EPA back in October to reconsider the requirement. Last Thursday, EPA head Gina McCarthy sent the groups back a letter saying their case met “the statutory criteria for granting a petition.”

In other words, “we’ll look into it.”

Which seemed to satisfy the oil industry, for the moment: “It’s refreshing that EPA has finally agreed to reconsider bad public policy, mandating biofuels that do not exist,” said Bob Greco, API’s downstream director. “We continue to ask that EPA base its cellulosic mandates on actual production rather than projections that — year after year — have fallen far short of reality.”

A public comment period will be forthcoming. If EPA does ultimately decide to revise the 2013 target, it will be the second time it’s done so. The Renewable Fuel Standard (RFS) — passed in 2007 — initially called for one billion gallons of cellulosic biofuel that year. That target was scaled back massively in August of 2013, to 6 million gallons. (EPA’s initial proposal that January was for 14 million.)

The RFS actually calls for a total of 16.55 billion gallons in 2013. That’s all forms of biofuel, including the traditional corn-based variants. Of that top-line figure, at least 2.75 billion must be advanced biofuels. And of the advanced figure, at least 1.28 billion gallons must be from biodiesel, and 6 million (for the moment) must come from cellulosic biofuel. The top-line number and the advanced biofuel number remain unchanged from the original 2007 RFS, and the biodiesel requirement was actually revised upward from one billion gallons.

The significance of advanced biofuels like cellulosic and biodiesel is that they can be made from plant waste, wood clippings, and other feedstocks that don’t double as food crops. That addresses some of the key problems with traditional corn-based biofuel, namely the threat of spiking food prices from increased demand for corn, and increased carbon emissions from expanding agriculture. There are also limits to how much traditional ethanol the country’s engines and infrastructure can take in the fuel mix — this is the controversial “blend wall.” But advanced biofuels include forms of “drop-in” fuels other than ethanol, that can be mixed into the current supply without limit.

Unfortunately, while most of the RFS’ mandates have remained (mostly) unchanged, policymakers and the biofuel industry grossly underestimated the state of cellulosic technology. The original RFS called for 100 million gallons of cellulosic biofuel in 2010, ramping up to 1.75 billion in 2014. Instead, the mandates collapsed down to 6.5 million in 2010, then all the way to zero in 2012, and are now slowly making their way back to 17 million in 2014.

The American biofuel industry insists it’s on track to easily hit the 17 million target, and domestic commercial-scale production does seem to finally be getting off the ground.

The problem, though, is that the oil industry has inherent incentives to play up the dysfunction as well as the bend wall, and to oppose mandates for both corn-based and advanced biofuels equally. Both forms are an equal threat to oil’s share of the fuel market, and when refineries fall short of the mandates they have to pay extra on credits to cover the gap. The biofuel industry, in turn, views any attempt to cut the RFS in any way as an existential threat.

The end result is a kind of all-or-nothing cage match between the two industries, with little attention leftover for fine-tuning policy to encourage advanced biofuels and wind down corn-based ethanol.

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