There has been plenty of commodity group support for President Obama's recent directive to the USDA, the EPA and the Department of Energy to pick up the biofuels development pace (see Page 14). However, praise hasn't been total: pointed questions — especially from soybean- and corn-based fuel advocates — began almost immediately.
Congress has called for 36 billion gallons of biofuels by 2022. The EPA claims doing so will mean nearly 300 million fewer barrels of imported oil and an annual reduction of 160 tons in greenhouse gas emissions.
There are major concerns amongst biofuel producers regarding the EPA's chosen path to reach those goals. Chief among the worries: the Renewable Fuels Standard (RFS) and Indirect Land Use Change rules.
Even so, Obama's biofuel push “has sent an incredibly important signal that biofuels will be a key component in his strategy to address energy, economic and environmental challenges,” said Bob Dineen, president of Renewable Fuels Association, the national trade association representing the U.S. ethanol industry.
“The biofuels working group he's announced is going to streamline the cooperative efforts between the federal government and private industry. We think it will bring about the accelerated evolution of the biofuels industry in this country.”
The proposed rule “does a number of things. One, it creates the structure through which the RFS tool program will be implemented. It will give some certainty to refiners and our industry as to how the implementation will move forward.”
The most important part of Obama's proposal is “how EPA will address the calculations of biofuels' impact on greenhouse gases. The RFS legislation was the very first public policy in which government agencies were directed with the task of assigning the carbon footprint of an industry. It is a very complex, complicated and increasingly controversial effort.
“Science is trying to catch up with the policy and EPA is putting its best foot forward in trying to lay out exactly what ethanol's carbon footprint is.”
Perusing the rule, “you'll see the direct impacts of ethanol … everything associated with the production and use of ethanol domestically — all the direct effects — demonstrate significant benefits with respect to petroleum. (The average ethanol produced today) is 61 percent lower (in greenhouse gas emissions) than petroleum fuels.”
Where does the 61 percent figure come from? “On page 591 of the proposed rule there's a table that splits out the emissions by phase for both the gasoline baseline and a dry-mill corn ethanol plant producing dry distiller's grains (DDG),” said Jeff Cooper, RFA vice president of research. “When you total all those up and subtract the international land-use change emissions, that's where the 61 percent reduction comes from — based on a 100-year time period and a 2 percent discount rate. They also have a column that doesn't use any discounting and a 30-year time horizon. The reduction is still around 60 percent.”
The EPA is also tasked with calculating indirect effects. “They've done their best to do that,” said Dineen. “That's where there is so much uncertainty, dialogue and debate. Because trying to evaluate indirect effects — particularly international indirect effects — is highly dependent on the assumptions used and data available. That's why the (Obama) administration wisely chose to subject those international indirect effects to peer review. … There are a lot of question about these indirect effects, a lot of questions about how EPA has done this. There are uncertainties about the modeling.”
Lisa Jackson, EPA administrator, said adding indirect effects to the calculation drops the biofuel average from 61 to only 16 percent. That's 4 percent less than the mandatory target legislation calls for.
Dineen wasn't concerned. “We absolutely believe that will change. The (Obama) administration is reflecting the uncertainty of that number itself by taking the unusual, but appropriate, step of directing the international land-use assessment be subjected to a separate peer review beyond the comment period.
“They're not really talking about ethanol production overseas. They're saying if there's increased grain demand for ethanol in this country, it could result in increased grain production someplace else in the world.”
The RFA is also unhappy that the EPA assumes “a direct causal relationship between increased ethanol production here and a farmer's decision to plant somewhere else in the world. There are so many reasons farmers are going to come into production. Tying it back to biofuels is a very tenuous connection. … It could have to do with some small impact of biofuels but, more likely, it has to do with rising demand, exchange rates or rising oil prices driving up commodity prices thus making it more attractive to foreign farmers to participate in a new, growing market.
“That's why everyone is so concerned about having this direct link between increased (U.S.) ethanol production and land-use decisions made in foreign countries. Those decisions could be impacted by any number of factors.”
Asked about specific concerns with EPA's modeling assumptions, Dineen pointed to the co-products credit. “They're assuming a 1:1 displacement of DDG with corn. In fact, DDG is highly concentrated protein and is used much more effectively at 1.5/1.6:1. That will have a huge impact.”
The EPA also used a five-year trend for land conversion values. “We think that the period they looked at was one of high deforestation because of the growing lumber trade. We think it overestimates the impact.”
Contrast that with the fact the EPA is looking at a 30-year trend in crop yields. “If you look at a shorter trend, you'll see crop yields have been increasing at a faster rate over the past (five years) and previously. That tends to understate the progress being made and impacts us.”
Dineen said the EPA has “essentially taken three different models (along with satellite imagery) and cobbled it all together to try to make some projections about international land-use impacts. There are concerns about whether these models were designed to assess carbon, whether the models can work together as EPA is forcing them to do. And there are questions about whether the models can back-cast because if they can't back-cast, they can't forecast very effectively.”
The RFA will “be digging into a lot of the assumptions used, running the models. I think over the next several months we'll get a lot smarter about just what the impact of indirect effects — particularly internationally — means for ethanol's carbon footprint. …I think there will be a pretty robust debate about all of it.”
The lack of EPA scrutiny of petroleum compared to biofuels also stands out.
“The baseline for petroleum includes no indirect effects,” said Dineen. “If they're going to count the angels on the head of pin for biofuels, it seems they should take at least a cursory glance at some of the indirect effects of petroleum use.
“Remember, without ethanol use where will we get our energy needs? Our transportation fuel needs? Increasingly, the incremental gallon is represented by an imported barrel from Canadian tar sands. Yet, none of that is reflected in the baseline. That's unfortunate and we'll be working with EPA over the course of the comment period to make sure some of those indirect effects are included.”
What about government money being made available to aid the ailing biofuels industry?
“We don't have any more information than what (USDA Secretary) Vilsack (has) outlined. Clearly, our industry — like every other across the country — has suffered from the current economic crisis facing our nation. There are programs within USDA that would make capital available under certain circumstances, and I'm assuming it would be through those programs USDA would make additional resources available.”
There are ways for farmers to reduce their carbon footprints, as well: conservation practices, no-till, etc. But “quite frankly, farmers are already engaged in those practices — more than 80 percent utilize some form of no-till or conservation that has dramatically reduced their carbon footprint.
“That's one of the areas where we'll be commenting with EPA. They've very likely underestimated just how much some of those conservation practices are being utilized today. Therefore, they've overestimated the carbon emissions coming from today's modern corn farmer.”
In the EPA analysis, does the U.S. corn industry get a fair shake compared to sugarcane ethanol, which is primarily coming from Brazil?
“I don't think science has gotten a fair shake,” said Dineen. “There are so many questions about how you assess the indirect effects of biofuels. There's a question of balance with respect to indirect effects only being applied to biofuels when market mediated effects like this really impact everything society does.
“If there's going to be deforestation as a result of increased lumber trade, why should that penalize biofuels? I fully think that science has to catch up to the public policy objectives. I believe it will.”
There are “real issues” with the actual energy impacts of Brazilian cane-ethanol production. “There's an assumption that its energy inputs are significantly less because much of the practice in Brazil utilizes bagasse byproduct to fuel plants. But that isn't (nationwide) and there's nothing about the emissions from those plants. Brazil doesn't have to operate under the same emissions controls the U.S. ethanol industry does.”