OPIS Biofuels Headlines

March 12, 2015
ABFA RFS Reform Message: 'We Can't Wait Any Longer'

Michael McAdams, president of the Advanced Biofuels Association (ABFA), began publicly discussing his support for reform of the Renewable Fuel Standard (RFS2) in the fall of 2014, but Wednesday's more public splash, both in remarks to an industry conference and in a preview story to The Wall Street Journal, indicates the group's ramped-up efforts on the issue, sources explained to OPIS.

"It's the right time. We have seen enough time go by," McAdams told OPIS on Wednesday, shortly after his announcement at the Advanced Bioeconomy Leadership Conference in Washington, D.C., that the RFS needs to be reformed.

McAdams began publicly talking about the need for reforming the RFS last fall and in November 2014, telling the Advanced Bioeconomy Leadership Conference in San Francisco that there had been growing calls to reform the provision. "I'd rather be in a place to reasonably negotiate," he said at the time.

EPA has yet to finalize the 2014 RFS targets, despite being statutorily required by Nov. 30, 2013, and the agency recently said it plans to issue the 2014, 2015 and 2016 targets this spring.

"Conversations I have had suggest no one is in a hurry to complete the 2014, 2015 and 2016 targets. We cannot continue to be in suspended animation," McAdams told OPIS on Wednesday.

Among recommendations, McAdams is calling for:

--Congress to extend the RFS beyond 2022;

--"A minimum renewable identification number (RIN) value for cellulosic fuels that will provide enough certainty and stability for our members to build facilities and commercialize their innovative products;" and

--A requirement for obligated parties to purchase cellulosic biofuel RINs

"Eight years after its passage, it is easy to see that the RFS may be working for some, but it is only minimally helpful to advance the promise and potential of next-generation renewable fuels.  We need to acknowledge the simple fact: that the RFS is not equally helpful to all sectors of the biofuels industry," McAdams said at the conference.

ABFA member companies, which include Gevo, Solazyme and recently bankrupt KiOR, have been struggling due to continued policy uncertainty surrounding the RFS, McAdams explained.

Meanwhile, in October 2013, then-ABFA member DuPont, which operates biobutanol technology company Butamax through a joint venture, dropped its membership in the group, saying the company has wide interests across the spectrum of renewable fuels and wanted to focus its efforts on maintaining the RFS.

In his remarks on Wednesday, McAdams highlighted the continued uncertainty in his industry. "Repeatedly missing deadlines to set annual RFS requirements and reducing those requirements below statutory levels has created significant uncertainty, and that ambiguity causes financing for advanced and cellulosic companies to evaporate," he said.

As an ABFA member company source told OPIS Thursday morning, "ABFA is now the only 'pure' voice in Washington for cellulosic and advanced biofuels. Mike represents his member companies, which are the innovative cellulosic and advanced producers, which did not come out of the corn ethanol industry. Yesterday's speech is important because his companies have been waiting for two years for the 2014 RVOs [renewable volume obligations]. As Mike pointed out, the advanced and cellulosic sector have been disproportionately impacted by the lack of certainty in having the mandates in place. We can't wait any longer and just hope that the administration or EPA starts to fix things," the source said.

"Our companies need access to capital and the issues Mike focused on would certainty aide our sector in being able to find the financing to build new plants. Some of us will not be here in another year if this continues," the source added.

"On a strategy level, I'd say ABFA's opening salvo is a good proposal aimed help the advanced, drop-in biofuels industry distinguish itself from ethanol and biodiesel," added a second source familiar with ABFA. "Practically, there's no doubt the RFS and its implementation are not working as originally envisioned," the source added.

"Improving the effectiveness of the RFS would be a good thing for all," Glenn Johnston, vice president of Regulatory Affairs at Gevo, an ABFA member company, told OPIS. "It would make it easier to plan and enforce," he added.

As Stephen Brown, vice president and counsel of federal government affairs for Tesoro, said, McAdams reiterated his RFS reform announcement because "the uncertainty surrounding the RFS program today is freezing further investment into technologies that his member companies are hoping to take to commercialization. Clearing this uncertainty will require RVOs to be issued and for Congress to take stock of them prior to deciding whether and how to legislate additional reforms," he added.

ABFA continues to be the only group in the biofuels space supporting RFS reform. Multiple biofuel interests hit back at McAdams on Wednesday, acknowledging that while the RFS isn't perfect, allowing Congress to re-open the provision would make for a much worse situation.

As Advanced Ethanol Council (AEC) Executive Director Brooke Coleman told OPIS Thursday morning, "This fabricated spat is not about substance, it's about process. We all want the RFS to work as designed. AEC worked hard to get EPA to table a 2014 proposal that would have collapsed the RFS and is now working hard with the administration to get a multiyear rule back on track.... We can pretend that a legislative fix will solve these problems, perhaps for attention or membership development, but any basic understanding of the political process and our current political state comes to the conclusion that changing the law will not be quick, and will result in a program that is significantly weaker than it is today if it survives for advanced biofuels at all," he said.

"We could use ABFA's help fighting entrenched industry on the administrative side, because trying to change good law in a hostile Congress is a really bad idea," Coleman added.

 

-Rachel Gantz, rgantz@opisnet.com

 

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