UPDATE: US EPA: Some Corn Ethanol Plants Won't Meet CO2 Rule
May 05 2009 - 1:32PM
Dow Jones News
The U.S. Environmental Protection Agency Tuesday proposed a new
alternative-fuel standard that will likely prohibit some
corn-ethanol production processes based on their greenhouse-gas
emissions and encourage other advanced biofuels.
The EPA proposal walks a fine political line that attempts to
placate a very large ethanol voter base, especially in the Midwest
where corn for ethanol is an economic staple, and carves out a
pathway to biofuels that emit fewer greenhouse gases over the
production life-cycle.
The proposed rule, required under the Energy Independence and
Security Act to set a standard for greenhouse-gas reductions
compared to conventional gasoline, outlines two different emission
scenarios for a range of biofuels and production methods. One
scenario largely favors the ethanol industry, and the other would
prohibit all but one corn-ethanol production process, but would
accelerate alternatives such as cellusic ethanols.
EPA Administrator Lisa Jackson said investors "can look towards
the future and realize that we are moving toward next-generation
fuel stocks, but you can also make the current generation...energy
and greenhouse-gas competitive as well."
By not favoring one scenario over another, analysts say the EPA
has bought the administration time for a special inter-agency panel
to triage the issue with the ethanol industry and an influential
environmental base, as well as opening the door for more heavy
lobbying efforts. The panel will review and make recommendations on
the proposed scenarios.
"They're leaving their options open and booting the fundamental
question: Is corn-based ethanol good for global warming?" said
Frank O'Donnell, president of the environmental advocacy group
Clean Air Watch. "Any reasonable analysis would say it's not."
Although existing corn-ethanol facilities will be grandfathered
in, accounting for the majority of the early renewable-fuel mandate
schedule to be met, the EPA has proposed a rule that would prohibit
some corn-ethanol production processes such as the "dry gas mill"
and "coal dry mill" methods.
But by restricting some ethanol-production processes, it
provides a greater market incentive for advanced biofuel
technologies such as sugarcane and corn-stover ethanols.
Of the 36 billion gallons of renewable fuels that Congress
ordered to be blended into the fuel supply by 2022, 21 billion
gallons of the total must be advanced biofuels. In the early years
up to 2015, up to 15 billion can be met through corn ethanol.
To qualify as an advanced biofuel, each type must have
greenhouse-gas emissions that are at least 50% lower than the
emissions associated with ordinary gasoline. New biofuel plants
must produce fuels with emissions that are at least 20% lower.
The corn-based ethanol industry was concerned about how the EPA
would consider the entire production process, including the use of
fossil-fuel-based tractors to cultivate and harvest crops, the use
of energy-intensive fertilizer, the energy used to distill ethanol,
the loss of emissions from the soil and land-use changes. Pastures
and rainforests tend to absorb relatively high levels of greenhouse
gases.
Businesses such as ethanol maker POET LLC, Archer Daniel
Midlands Co. (ADM) and seed-corn seller DuPont Co. (DD) have been
complaining that regulators may be improperly focusing on the
worst-case scenarios. They have said that some models that deal
with the effects of land conversion are flawed and that forecasters
have failed to account for idled cropland or look at the chances of
making more productive use of existing land.
The Renewable Fuels Association, which largely represents the
corn-ethanol industry, said it would be pressing the EPA against
using the scenarios that take into account the entire life-cycle.
RFA President Bob Dineen said there was too much uncertainty about
how the EPA made the indirect land-use calculations and questioned
the validity of the data the government used in those
calculations.
"The science of market-mediated, secondary impacts is very young
and needs more reliance on verifiable data, and less reliance on
unproven assumptions. Done correctly, such an analysis will
demonstrate a significant carbon benefit is achieved through the
use of ethanol from all sources," Dineen said. The RFA calculates
that, not including indirect impacts, all the ethanol processes
would meet both scenarios.
But Dineen said he believes EPA will be willing to make changes
once it better understands how to calculate indirect land use.
Advanced biofuel companies such as Verenium Corp. (VRNM) and
Blue Fire Ethanol Fuels Inc. (BFRE), whose fuels have much lower
greenhouse-gas emission profiles compared to corn ethanol, will
likely get a boost from the proposal, especially if the more
stringent scenario is used.
To help encourage the ethanol industry, which has hit a major
slump as both demand and financing has hit the sector hard in the
recession, U.S. Agriculture Secretary Tom Vilsack said his agency
would be accelerating credit programs for restructuring some firms
in dire need. U.S. Energy Secretary Steven Chu also said his agency
would be moving ahead with nearly $800 million in stimulus funding
for the sector.
On The Web:
http://http://www.epa.gov/otaq/renewablefuels/index.htm#regulations
-By Ian Talley, Dow Jones Newswires; 202-862-9285;
ian.talley@dowjones.com;
(Siobhan Hughes and Bill Tomson contributed to this report.)