Experts: RFS Likely to Remain

Companies Look Beyond U.S. for Opportunity

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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An Abengoa ethanol plant in Hugoton, Kan. (DTN file photo by Chris Clayton)

GRAPEVINE, Texas (DTN) -- Though Republicans control Congress and a key U.S. Senate committee chairman is a known critic of the Renewable Fuel Standard, the chances of changing the RFS are slim in 2015, panelists said during a discussion at the National Ethanol Conference on Thursday.

There have been rumblings about potential reform or outright repeal of the RFS in Congress early in 2015. Legislation has been introduced in the House and Sen. James Inhofe, R-Okla., who heads the Environment and Public Works Committee, has discussed the possibility of taking action on the RFS.

John Eichberger, executive director of the Fuels Institute and vice president of government relations for the National Association of Convenience Stores, said during the "Washington insiders" panel that it appears unlikely RFS reform will happen this year.

"The committee (EPW) is not going to do anything," he said. "The only thing that could lead to reform is a change in an economic situation...It is extremely doubtful it can make it out of committee."

There was a bit of an uproar in Congress when the prices of renewable identification numbers, or RINS, increased. Eichberger said it raised concerns the RINS market would drive up the price of gasoline, prompting many lawmakers' calls for reform.

As part of the recent debate that led to the passage of a bill to build the proposed Keystone XL pipeline, an amendment was offered to repeal the corn-ethanol mandate, by Sens. Dianne Feinstein, D-Calif., and Pat Toomey, R-Pa. The amendment was not attached to the final bill.

Jon Doggett, executive vice president of the National Corn Growers Association, said he doesn't believe repeal will happen.

"The Senate will wait to see what the House does first," he said. "I don't see it happening. Our folks are very, very concerned about losing the RFS. Corn prices are half of what they were."

INVESTMENTS CHILLED

Brooke Coleman, executive director of the Advanced Ethanol Coalition, said it will be difficult for Senate Majority Leader Mitch McConnell, R-Ky., to "go after the RFS."

Much of the concern about RFS implementation delays and talk of potential reform or repeal, is it puts a chill on potential future investment in the industry. Coleman said the first-generation cellulosic-ethanol plants will continue to produce despite doubts.

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"When you fail to implement the RFS the rate of adding capacity goes down," he said. "I think the RFS is at a crossroads."

Companies that have developed first-generation cellulosic ethanol plants in the U.S. already are looking overseas for potential locations to build second-generation plants.

GROWING CELLULOSIC DEMAND

In an advanced biofuels panel near the end of the day Thursday, cellulosic ethanol and enzyme company representatives said there is growing demand across the world for advanced biofuels.

Adam Monroe, Americas regional president for Novozymes, said his company that produces enzymes for cellulosic ethanol production remains encouraged about the industry's future despite policy questions in the United States.

"Here we are with plants being built -- it's a great day," he said. "It really is a special spot for this industry...We're very confident. We wouldn't have put a billion dollars of capital into it if we weren't confident."

Monroe said the industry no longer faces the technology challenges it faced a decade ago, but rather something entirely different moving forward.

"It is an enormous canyon in lack of knowledge about this industry in the public," he said. "That's the canyon we can fill."

When it comes to public policy, Monroe said doubts about the future of the RFS have come at a time when companies have invested hundreds of millions of dollars to make cellulosic ethanol technologies commercially competitive.

"You can't pass a law that says we want 15 billion gallons (for corn ethanol) by 2015, then tell them when you get there we don't know if we want that much," he said. "Do we have a battle for market share now?"

The future of cellulosic ethanol will depend largely on the development and expansion of higher ethanol blends beyond E10. Right now the ethanol industry has maxed out the U.S. market with the current RFS. This means expanding exports become increasingly important. Without higher blends, chances are cellulosic and corn-based ethanol will be competing for the same market share.

CALIFORNIA LCFS

William Feehery, president of DuPont Industrial Biosciences, said although there has been much concern about what California's low-carbon fuel standard will mean for biofuels, it provides an opportunity for the cellulosic ethanol industry.

California's low-carbon fuel standard has made it difficult for corn-based ethanol produced in the Midwest to find its way into the California market. Still, ethanol accounts for more than 50% of the state's low-carbon fuel. That's because ethanol producers across the country have appealed to the California Air Resources Board to take a closer look at the greenhouse gas emissions of individual ethanol-producing processes. As a result many plants have qualified for entrance into the state's market.

Feehery said his company has not given up on the RFS.

"We believe the RFS will get sorted out in the U.S. and move forward," he said.

Christopher Standlee, executive vice president of institutional affairs for Abengoa Bioenergy Corp., one of a handful of companies commercializing cellulosic ethanol production, said his company is looking at building second-generation cellulosic ethanol plants wherever there is demand.

"We think there are opportunities everywhere," he said. "We see potential on a global basis."

Todd Neeley can be reached at todd.neeley@dtn.com

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(CC/CZ)

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Todd Neeley

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