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U.S. Department of Energy Energy Efficiency and Renewable Energy

Biomass 2009: Track 3 - Regulation and Policy

The purpose of the Regulation and Policy track was to discuss Federal and state policies that are affecting the development of the biofuels and biomass sectors in the United States. Panelists represented a wide range of entities including private companies, Federal agencies, state government, consultants and non-profit environmental groups.

Each session had a different focus which allowed for concentrated discussion on pertinent topics ranging from the Renewable Fuel Standard (RFS) in the Energy Independence and Security Act of 2007 (EISA), to challenges facing biofuels sectors growth, to initiatives at the state level that seek to expand research and development and use of biofuels. Session titles were as follows:

Presentation slides, if available, are provided in PDF format. Download Adobe Reader.

Track 3, Session I
Federal Government Response for Meeting the Challenges of the Renewable Fuel Standard

Moderator

  • Carol Werner, Executive Director, Environmental and Energy Study Institute

Speakers

Overview

The purpose of the session was to discuss the actions taken by the Federal government to meet the goals of the Renewable Fuel Standard (RFS).

Karl Simon from the EPA presented an overview of the legislative evolution of the RFS from the Energy Policy Act of 2005 to the RFS in EISA and the status of EPA's rulemaking to meet the EISA RFS (referred to as RFS II). Mr. Simon noted that the draft rule would be released in the near future. He discussed the different types of models and data the EPA used to develop the rule. He also discussed the success of RFS I and how the program has improved since its debut.

Joan Glickman from DOE spoke about the various steps DOE has taken to guide research and development in the biofuels area in order to meet the goals of the RFS, particularly in regards to cellulosic ethanol. In addition, Ms. Glickman addressed the issue of the "blend wall," which refers to the maximum amount of ethanol/gasoline allowed to be used in non-FFVs. The current limit is 10 percent ethanol/ 90 percent gasoline (commonly referred to as E10). She explained that the blend wall is preventing further penetration by ethanol into the fuels market. DOE is conducting research on cars, trucks, and small motors to determine if larger ratios of ethanol can be used in non-FFVs with retrofitting them.

Shirley Neff of the Association of Oil Pipelines discussed the current modes used by the industry to transport ethanol from the refinery to the pump. She discussed the limitations of the current system of transportation, which relies heavily on trains and tanker trucks. She discussed the risks posed by transporting ethanol in pipelines that also transport gasoline. A dedicated ethanol pipeline would have to address the challenge of bringing ethanol from refineries in the Midwest to population centers on the east and west coasts. She noted that distribution challenges could also impact the market penetration of ethanol, which may impact meeting the RFS.

David Woodruff of Archer Daniels Midland Company (ADM) presented his company's stance on the current outlook of the ethanol industry. Mr. Woodruff noted that, due to research and innovation, the amount of water needed to grow corn has decreased over the years, while yields have increased. He also noted that ADM has made strides into developing cellulosic ethanol. He noted that thus far, federal policy is working. The challenges that ADM foresees include implementing RFS II by 2010, further exploring the indirect land-use issue, and fitting the RFS (and biofuels in general) into climate-change legislation.

Session attendees raised a number of concerns during the Q&A session. Highlights include:

  • The current blend of E10 is having a negative effect on small motors and boat motors. E10 causes adverse affects on boat motors in particular, such as stalling and corrosion of engine lines. Research focused on motor testing must pay particular attention to these issues.

  • If blend levels are going to increase, research must also be done to determine the effects on underground gasoline storage tanks at retail fueling stations. If tanks need to be replaced, it could be a large financial burden on retail station owners.

  • EPA has been observing the California Air Resource Board's rulemaking pertaining to their low carbon fuel standard. California has also been observing EPA's rulemaking pertaining to the RFS. There will be similarities between both rules.

Track 3, Session II
Policy Options beyond the Renewable Fuel Standard

Moderator

  • Jane Earley, Managing Partner, Earley and White Consulting, LLC

Speakers

Overview

The purpose of this session was to discuss challenges, such as financial, environmental, and infrastructure issues that are facing the biofuels sector and policy options that can address them.

Larry Pearce of the Governors' Biofuels Coalition discussed a letter that the Governors of the Coalition wrote to President Obama regarding the direction of biofuels policy in the United States. Major recommendations included the following: articulating a vision for the Nation's biofuels future, addressing blend wall issues by having the EPA evaluate E13, and creating policies that address sustainability issues relating to biofuels.

Peter Whitman of DOE discussed the World Biofuels Study conducted by his office. The study analyzed various scenarios to determine under what conditions the United States would meet the Renewable Fuel Standard in EISA. The model used to develop the study took into account many policy factors including a carbon tax, the extension of tariffs and tax credits, the certification of E20, and a grower's payment. There were also several market factors evaluated, such as using a low, high, and higher price for oil and low and high feedstock supply. After running various scenarios, the one in which the United States meets the goals of the RFS is the scenario where E20 is certified for use in non-FFVs without needing new pipelines or fueling stations.

Brent Yacobucci of the Congressional Research Service discussed four of the major biofuels issues being discussed in the 111th Congress, which are as follows: (1) the blend wall, (2) biofuels tax incentives, (3) potential for a low carbon fuel standard, and (4) a cap and trade program for greenhouse gases. With the current blend wall, biofuels market penetration may not exceed 15 billion gallons. Mr. Yacobucci sited that the petition from Growth Energy to extend blending to E15 would only allow for penetration of 22 billion gallons, which would not eliminate the blend wall. Mr. Yacobucci made note of several tax incentives set to expire. He mentioned that these credits were likely to be extended; however, no legislative vehicle exists at this point to do so. He suggested that perhaps sustainability criteria can be added to the tax incentives. Mr. Yacobucci noted that the passing of the RFS in EISA was the first step to addressing sustainability concerns related to biofuels in regards to greenhouse gas criteria. He noted that there are several other sustainability criteria that were not addressed by the RFS that must be examined, such as air, water, and food security issues. Mr. Yacobucci stressed that coming to a consensus on the definition of sustainability would be a determining factor in drafting legislation to meet those issues.

The audience raised several issues during the discussion. Topics included the following:

  • The removal of the ethanol tariff could threaten the industry. Mr. Pearce noted that President Obama met with the President of Brazil. The Brazilian president wants the U.S. to remove the tariff. President Obama said the U.S. would eventually remove the tariff.

  • The Governors' Biofuels Coalition's proposal of E13 would cause great detriment to the motorboat industry.

  • Overcoming the blend wall is the issue of greatest concern. Legacy vehicles are an issue when it comes to introducing E20 into the market. Storage tank corrosion is also a concern.

  • There is little discussion in Congress regarding further assistance to the ethanol industry in the face of the United States' financial situation. There was limited support in the Recovery Act.

Track 3, Session III
Meeting the Challenge at the State and Local Level

Moderator

  • David Terry, Washington Representative, Governors' Biofuels Coalition

Speakers

Overview

The purpose of the session was to highlight efforts at the state level to advance research and development of biofuels, particularly cellulosic ethanol. The panel addressed policy measures used by each state to establish a biofuels sector in their states.

Jeff Peterson of NYSERDA noted that the state government is pushing for the development of renewable energy sector in the state. New York is currently funding a biofuels roadmap that is being developed by Pace University. The roadmap will address several issues including best practices for a sustainable feedstock supply, life cycle emissions, the current industrial and research base in New York, and economic development advantages in rural areas. State policies are focusing on distribution of fuel to create public awareness. Another measure to promote biofuels the state has taken is the decision to not tax E85 or B20. New York also wants to encourage the growth of the biofuels industry in the state. So far, the state has co-funded two cellulosic ethanol pilot plants.

Dr. Kelly Tiller, representing the Tennessee Biofuels Initiative, stated that Tennessee has vast switchgrass and forest residue resources that shape the approach the state takes regarding biofuels. The Tennessee Biofuels Initiative was established by the state government, with a five-year, $70 million commitment. The Initiative is a partnership between the state, the University of Tennessee, and Genera Energy, a private company. Dr. Tiller noted that are four main goals of the Initiative: (1) to demonstrate the existence of a dedicated bioenergy crop supply in the state, (2) to demonstrate the pre-commercial production of ethanol from switchgrass, (3) to establish long-term research and development in bioenergy and bioproducts, and (4) to develop a long-term, viable, and sustainable path to biofuels commercialization.

Robert Wegener of Oklahoma also discussed his state. Due to national security concerns related to the use of foreign oil, the state developed the Oklahoma Bioenergy Center. The Center will receive $40 million over four years. Research being done also focuses on cellulosic ethanol and on developing sustainable biofuels feedstocks, as well as on methods to deliver fuel from refineries to the pump.

Many of the attendees were interested in learning more about why companies should do business in their respective states. Attendees were interested in each state's research capabilities. In addition, they were interested in tax incentives offered by each state. Mr. Peterson stated that New York has an abundance of municipal solid waste for a plant to use. In addition, Mr. Peterson noted that there are some incentives available. Mr. Wegener also noted that Oklahoma has a document for tax incentives on renewable fuels.

Attendees were also curious about current switchgrass crop yields achieved by each state. Tennessee has achieved 6–10 dry tons/acre at $45–60/ton, subsidized. Oklahoma has also achieved over 6–10 dry tons/acre.