The U.S. Environmental Protection Agency proposed a new plan to boost biofuel production while requiring biofuel makers to cut greenhouse gas emissions during production.
The proposal to measure greenhouse gas emissions will surely be controversial. It would require refineries to consider the emissions produced by farming or converting forestland into farmland, transporting the feedstock, blending of the biofuels and the market consumption of the fuels. Biofuels would have to be produced with lower emissions than the gasoline and diesel they replace in order meet a national biofuel standard, the proposal said.
California approved a similar rule last month when it approved a precedent-setting low-carbon fuel standard. Ethanol companies lobbied hard against the mandate to count emissions from changes to land use. Vocal opponents to this mandate included big-shot biofuel investor Vinod Khosla and former presidential candidate and general Wesley Clark, who also is co-chairman of the biofuel group, Growth Energy.
The EPA's announcement arrived on the same day that the U.S. Department of Energy said it would dole out nearly $800 million for biofuel research and production projects. The money would provide a good boost for an industry that has struggled to commercialize new technologies or raise enough money to stay in business.
President Obama on Tuesday also directed the DOE, the EPA and the Department of Agriculture to form an interagency group to speed up the development and deployment of advanced biofuels, which refer to fuels made from non-food plants such as switch grass and algae, a well as from wood wastes and even garbage from city dumps. The group also will work on promoting the use of flex-fuel vehicles that can run on gasoline as well as gasoline blended with ethanol.
The government passed legislation in 2007 that set a goal of producing 36 billion gallons of a variety of biofuels for transportation by 2020. Reaching the goal could prove difficult, given the financial and political troubles that corn ethanol producers have been facing and the challenges of commercializing new technologies that new non-food plants or even garbage to make fuels (see U.S. Won't Meet Its Own Biofuel Mandate and Lignol's Cellulose Ethanol Plant Bites the Dust; Valero Seeks to Gobble Up VeraSun).
The legislation led to a flood of private equity investments in producing corn ethanol and developing new types of biofuels. But controversy erupted when environmental groups, cattle ranchers and other industry groups contended that the increase in corn ethanol production had prompted farmers to plant corn instead of other food crops, thereby jacking up food and feed prices. The mandate also drew fears that more forestland would be converted into cropland for making biofuels.
Texas even asked the EPA to modify the biofuel mandate last year, arguing that the requirement would severely harm the economy and environment (see EPA Denies Texas Ethanol Waiver).
On Tuesday, the EPA reaffirmed the production goal but proposed a new plan to reach it. But the EPA changed how the fuels are categorized and the expected production volumes for each category. The proposal also includes metrics for reducing greenhouse gas emissions during biofuel production.
By 2022, the refineries are expected to produce 16 billion gallons of cellulosic biofuels, 15 billion of gallons per year of conventional biofuels (i.e., corn ethanol), 4 billion gallons of advanced biofuels and 1 billion gallons of biomass-based diesel, according to the new proposal.
Refineries, blenders and oil companies would be have to increase their biofuel output incrementally, the amount of which would be determined by the EPA each year.
Refiners must factor in the emissions results from the biofuel production, including the impact by farming, in order to get credit for meeting the biofuel mandate.
The government hopes the new DOE funding for biofuels would help the industry move quicker on meeting the national goal.
The funding is split into four parts. About $480 million is geared for pilot or demonstration projects that combine technologies at each refinery to produce biofuels, heat and power and other bioproducts, according to the U.S. Department of Energy, which is overseeing the funding process. The DOE plans to award money to 10 to 20 applicants that can take their projects up and running in the next three years.
Another $176.5 million is set for companies that received government funding in the last two years and could use more money to build demonstration or commercial refineries.
The DOE is setting aside $110 million for basic science research. Roughly $25 million would go to establishing a small refinery for researchers to experiment with their projects. Another $35 million would be used to set up a research consortium among national labs and universities. Algal biofuel research would receive $50 million.
Last but not least, the DOE plans to give away $20 million to promote the blending of ethanol with gasoline. Some funds would be used for making E85 fuel (85 percent ethanol, 15 percent gasoline) more available at gas stations and figuring out the impact of even higher ethanol blends on regular cars, the DOE said.