Big Biofuel News

I was writing about DuPont Danisco’s big cellulosic ethanol news from last week when President Obama just announced the government’s plans to boost biofuels production in the USA.

Coinciding with the speech is the announcement from the US Environmental Protection Agency (EPA) about its final ruling on the expanded Renewable Fuels Standard (RFS2). Under RFS2, biofuels production is expected to increase from last year’s 11.1 billion gallons to 36 billion gallons in 2022, with 21 billion gallons coming from advanced biofuels.

The revised RFS2 establishes new specific annual volume standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that must be used in transportation fuel. It also includes new definitions and criteria for both renewable fuels and the feedstocks used to produce them, including new greenhouse gas emission (GHG) thresholds as determined by lifecycle analysis. The regulatory requirements for RFS will apply to domestic and foreign producers and importers of renewable fuel used in the U.S.

The 2010 RFS volume standard calls for 12.95 billion gallons, with cellulosic standard set at 6.5 million gallons, and biomass-based diesel standard 1.15bn gal.

With regards to the GHG threshold, the EPA said corn starch-based ethanol complies with the 20% GHG emission reduction limit for renewable fuels as long as the natural gas-fired facility producing the biofuel uses advanced efficient technologies.

Corn starch-based biobutanol already complies with the 20%threshold; sugarcane-based ethanol also complies with the applicable50% GHG reduction threshold for the advanced fuel category; biodieselfrom soy oil and renewable diesel from waste oils, fats, and greasescomplies with the 50% GHG threshold for the biomass-based dieselcategory; algae-based diesel also complies with the 50% GHG thresholdfor the biomass-based diesel category; and cellulosic ethanol anddiesel also comply with the 60% GHG reduction threshold applicable tocellulosic biofuels.

The giddy reactions coming from the biofuel industry is definitelypalpable along with their sigh of relief that their long, torturouswait for this mandate is finally over. According to this article from ICIS news,biofuel makers, especially those who deal with corn-based ethanol andsoybean-based biodiesel, had been worried whether their fuel would comebelow EPA’s GHG threshold to qualify under the RFS2 programs.

The National Biodiesel Board (NBB)embraced the new RFS2 rule stating that many of their concernsespecially the GHG emission calculations have been addressed. Biodieselproduced from domestic soybean oil is now assumed to reduce GHGemissions by 57% compared to petroleum diesel fuel with the newcalculation, says NBB.

According to the Renewable Fuels Association (RFA),corn-based ethanol achieves a 21% greenhouse gas reduction compared togasoline even when international indirect land use change (ILUC) areincluded. Without ILUC, corn-based ethanol achieves a 52% GHGreduction. Cellulosic ethanol achieves GHG reduction of 72-130%depending upon feedstock and conversion process.

In its GHG calculations, the EPA says it will still consider ILUCwhich analyzes the unintended carbon emissions from the loss ofcarbon-capturing forest land induced by the expansion of croplands forbiofuel production. Both the RFA and the NBB say that they are dubiousabout the scientific basis of ILUC.

ICIS News reports that the National Petroleum & RefinersAssociation (NPRA) also questions the overall methodology and sciencebehind the new mandates and states that they are in the process ofreviewing the regulations.

Meanwhile, this EPA mandate probably made the DuPont Danisco Cellulosic Ethanol (DDCE)joint venture very happy yesterday as the company formally startedtheir new 250,000 gallons/year demo facility in Vonore, Tenn. DDCE saidthis is one of the world’s first cellulosic ethanol demonstration plant(so which is the real first one??).

The 74,000-square-foot plant is reportedly now producing low-costethanol from agricultural residue and bioenergy crops, including corncobs and switchgrass. The facility costs more than $50 million. TheVonore facility currently has a full-time staff of about 20.

Regarding feedstock, plans are for Tennessee farmers to place anadditional 4,000 acres of switchgrass into production this spring,bringing the total production in the state to nearly 7,000 acres of thededicated energy crop.

In another news, Shell announcedon Monday its $12 billion joint venture deal with Cosan S.A. to produceethanol, sugar and power as well as the supply and distribution ofbiofuels in Brazil.

Shell will contribute to the JV its 50% share interest in cellulosicethanol company Iogen as well as 14.7% of its stake in biotechnologycompany Codexis; a $1.625 billion in cash paid over two years, andShell’s Brazilian downstream assets including fuel distribution andretail sites.

Cosan will put to the table its 60 million tonnes/year sugar canecrushing capacity; 2 billion liters/year ethanol production capacity;co-generation plants; Brazilian downstream assets including retail anddistribution; ethanol logistics assets, share in ethanol tradingcompany, and net debt of $2.5 billion.

Even with just these three announcements, it looks like 2010 is beginning to be a good year for biofuels!

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