Cellulosic biofuel set to ramp up production

WASHINGTON – Despite falling short of cellulosic production goals in recent years, producers of ethanol made from crop waste, wood, grasses and other plants said Tuesday they can produce more of the fuel this year than the Environmental Protection Agency proposed last November.

Biofuel companies scheduled to start making cellulosic at four plants this year said the industry finally is poised to ramp up production. But they warned that momentum could be slowed if the EPA chooses to scale back the Renewable Fuel Standard, a 2007 law that mandates a growing amount of ethanol to be blended into the country’s gasoline supply through 2022.

The EPA proposed last year setting cellulosic production at 17 million gallons, far below the 1.75 billion Congress had required in 2007. A final rule outlining 2014 production for the Renewable Fuel Standard is expected in June.

“We’re open to reasonable adjustments to cellulosic numbers, but we think right now they’re low. I think they should be a little bit higher,” said Doug Berven, vice president of corporate affairs with Poet, a Sioux Falls ethanol producer. “Because, as you are seeing, we have a number of production capabilities coming on line, and I do think that they’ll be successful.”

Poet, along with its partner Royal DSM, are expected to complete work on a plant in Emmetsburg, Iowa, in late June that is expected to produce up to 25 million gallons of fuel from corn cobs, leaves, husk and stalks annually, once it is fully operational. Three other facilities, including a 30 million gallons per-year facility built by DuPont in Nevada, Iowa, are expected to be online this year, finally giving the nascent industry a chance to fulfill its long-awaited promise.

Together, those four facilities are expected to have the capacity to make more than 80 million gallons each year from cellulosic material. By contrast, cellulosic biofuel makers produced 810,185 gallons last year, well below the 6 million gallons the EPA required in a plan finalized last August. The cellulosic industry has been slow to boost production as it struggles to develop technology to make it more cost competitive with corn ethanol and other fuels already on the market.

“We think this is going to be a great year for cellulosic, as long as legislators and regulators don’t stand in our way,” said Chris Standlee, executive vice president for global affairs at Abengoa Energy. The company, based in Spain, is opening a cellulosic plant in a month in Kansas.

South Dakota, the country’s fifth-largest ethanol producer, produces more than 1 billion gallons annually.

Citing several years of failing to meet forecasts, the oil industry and other critics of the Renewable Fuel Standard have proposed setting the cellulosic levels based on actual production.

“EPA should base its cellulosic mandates on actual production rather than projections that — year after year — have fallen far short of reality,” Bob Greco, downstream director with the American Petroleum Institute, said last week. “For four years running, biofuel producers have promised high cellulosic ethanol production that hasn’t happened. EPA must also reconsider its unrealistic proposal to mandate 17 million gallons of cellulosic biofuels for 2014.”

Refiners are required to show they have blended in a certain amount of biofuels or purchase credits from other companies who have. They are fined if they fail to do either.

Ethanol producers say establishing cellulosic levels based on production would remove much of the incentive to produce more of the biofuel and tamp down incentives for investors to spend money on new plants and technology.

“With the uncertainty of the RFS as it is today, if the EPA sets it as production levels, there is no pull, there is no incentive for further investment,” Berven said. “There has to be some kind of assurance that there’s going to be market for our product if we build another plant.”