In a blow to the U.S. biofuels industry, the EPA has cut the mandated amount of cellulosic biofuel that must be blended in the nation’s fuel supply to 810,185 gallons. That figure is down from the six million gallon mandate issued by the agency just last fall.

The announcement is a victory for oil interests, which have fought against the mandate -- designed to help establish the fledgling biofuel refining sector -- for years. A major point of contention is the fact that oil refiners are required to pay for biofuel “credits” even if the fuel is unavailable. Those credits can cost the refiners millions of dollars.

Read more about the federal biofuel regulatory set-up.

In a second punch to the gut, a government report recently found that cellulosic ethanol is actually more environmentally unfriendly than gasoline. Biofuel backers strongly rejected the study’s conclusion that, in the short-term, ethanol has a larger carbon dioxide footprint.

On April 8, a Senate Agriculture Committee hearing tackled the expected EPA action. “We’ve heard for years that advanced biofuels are just around the corner,” said Michigan. Sen. Debbie Stabenow, chairwoman of the committee. “Well, we’re here. We’re at the point where it’s actually happening. American companies are creating jobs and growing rural economies while producing advanced biofuels, which ultimately help us become more energy independent and lower our gas prices at the pumps.”

A study by Iowa State University backs Stebanow’s contentions saying ethanol use reduced the cost of gas by 89 cents across the country, and by as much as $1.37 in the Midwest.

“These are enormous savings for American families,” continued Stabenow. “In the U.S., we consumed about 138 billion gallons of gasoline in 2010. That comes out to about 446 gallons per person, or 892 gallons for a family of four. That family would have saved $794 in 2010 because of biofuels. According to USDA figures, that $794 comes out to be the cost of two to five weeks’ worth of groceries.”

No pump access

Latching onto a common complaint of biofuel backers, Stabenow hammered oil companies’ intransigence and unwillingness to ease the move of alternative fuels into gas stations. “I often think what a crazy situation we’re in. We’re trying to create more competition so prices will go down at the pump for consumers. Yet, the folks that don’t want the competition control the pumps.”

Brooke Coleman, Executive Director of the Advanced Ethanol Council, said Stabenow, “hit the nail on the head: the oil companies do control the pumps. So, there’s a situation where there’s no competition without policy.

“The RFS (Renewable Fuels Standard) is actually designed to push higher renewable fuel blends into the marketplace. One of the things that’s happened is the EPA has decided that what happened (in 2013, when biofuel production targets fell short) is a bad thing so they’re dialing the program back. In fact, what happened last year was the oil industry refused to comply with the program and (biofuel credit) prices went up. Independents were just getting into the game and were going to grease the skids to comply with the program.

“So, the program was actually working as designed. If EPA sees that, reacts to it and decides to make changes, to convert an ‘obligated’ party to a ‘non-obligated’ party, the investors will see that and run away. That’s the situation we face.”

And the EPA plan “unfortunately makes things worse,” testified Jan Koninckx, Global Business Director for Biorefineries, DuPont Industrial Biosciences. “The real problem here is that the EPA has used a method of logic to restrict or limit the RVOs (Renewable Volume Obligations, the targets for each refiner or importer of petroleum-based gasoline or diesel fuel) on the basis of the supply chain, which the incumbent industry controls.

“That’s more devastating than any other aspect of their proposals. This would really put biofuels in a downward movement. It would slow down and stop the positive impact (biofuels) have had on agriculture and the energy prices by lowering the demand for oil.

“Also, immediately, it would have an increase on greenhouse gas emissions, which would increase.

“There’s really no blend-wall -- I call it the ‘blend step.’ The technology to go beyond E-10 is there. There are numerous options.”

The South

Mississippi Sen. Thad Cochran, ranking member of the committee, pointed out that in the Southeast there are many opportunities to use emerging biofuel feedstocks that are readily available but not traditionally used for food or feed. “Can you elaborate on some of the barriers to development of advanced biofuels in the South?”

Biofuels offer good options for regional strategies, answered Sumesh Arora, Vice President of Innovate Mississippi and Director of Strategic Biomass Solutions in Ridgeland, Miss. Instead of the regional approach, however, “we’re trying, I think, to pursue a one-size-fits-all strategy for the whole country. We should be looking at ethanol, which works beautifully in the Midwest as well as for other applications. We should be looking at biofuels in the Southeast where the feedstocks are different -- woody biomass or poultry industry biomass and convert it to ethanol. We should be looking at this on more of a regional basis.”

Arora also testified that the South is capable of growing many different types of feedstocks “like switchgrass and grasses like miscanthus. Actually, one of them was developed at Mississippi State University and licensed commercially. But when we say ‘commercially’ we’re still talking about relatively small penetration.”

Tennessee, for example, has more than 6,000 acres of switchgrass. “But that’s very small compared to, say, corn. We need much greater penetration of the acreage of these feedstocks.”

Poultry litter also has great potential. “It’s generated all the way from Maryland to Arkansas. The numbers I’ve seen show over 26 billion pounds of litter generated. That’s often considered a liability for the country. But it could lead to over $550 million worth of methane gas.”

Five points, Southeast perspective

Arora also gave the committee a list of things that should be considered “for furthering the domestic development of advanced biofuels and biomass-based energy options.” Those are:

  • The industry is still in its infancy.

“Currently there is no ‘dominant design’ for advanced biofuels technologies or feedstocks, which means that many different technologies are being perfected that can use a wide variety of feedstocks. This opens up opportunities for many technical and business innovations in this sector from deploying very large scale systems to small modular and even on-farm systems. Achieving the concept of dominant design makes a technology more bankable and much easier to be adopted by the masses.”

  • Many parts of the country, especially the Southeast, are well suited to generate current and emerging feedstocks in an ecologically sustainable manner, which can provide very effective regional solutions.

“For example, forestry and poultry are two of the biggest industries in the Southeastern United States that can supply feedstocks currently for advanced biofuels. Emerging dedicated energy crops such as grasses and algae also grow well in this climate, but additional research and market development is still needed to optimize the feedstock supply chains.”

  • Deployment of these technologies will lead to an increase in the number of STEM (science, technology, engineering and mathematics) related jobs across the country, which will be difficult to off-shore and will also lead to rural wealth creation.

“However, we need to better connect and leverage federal research assets with local universities, schools, business and nonprofit organizations to accelerate the development of these technologies.”

  • Advanced biofuels should not be limited to just liquid fuels, but should be viewed in a more comprehensive manner to include viable biomass-based energy and biochemical options in gaseous, liquid and solid forms, thereby necessitating a long-term and stable policy that provides clear market certainty.

“The announcement by President Obama March 28 unveiling a strategy to curb methane emissions does that to a great extent; however, the national Biogas Roadmap scheduled to be released in June this year is expected to focus primarily on the dairy industry, which is quite small in the south compare to poultry.

“Millions of tons of poultry waste is generated in states from Maryland to Arkansas and the contributions to biogas production from this very viable feedstock have largely been ignored. There are tremendous entrepreneurial opportunities in developing such systems that can lead to rural job growth and keep energy prices low for farmers, while improving soil health.”

  • A large enough volume of advanced biofuels and biomass-based energy options in the overall mix will help keep fuel prices in-check by diversifying our energy supply and enhancing our national security, but market conditioning efforts led by various federal agencies must continue for greater adoption of such fuels.