Biofuels; EPA Regulations (“Tailoring Rule”); Climate Change; and Crop
Insurance
Posted
By Keith Good On February 4, 2010
Biofuels
John
M. Broder reported in today’s New York Times that, “President Obama moved on Wednesday to bolster the
nation’s production of corn-based ethanol and other alternative liquid fuels and
ordered the rapid development of technology to capture carbon dioxide emissions
from the burning of coal.
“The president is trying
to expand the portfolio of American energy sources to reduce emissions of
greenhouse gases, a factor in global warming, and spur advances in alternative
technologies. Last week he expressed support in his State of the Union address
for increased generation of nuclear power and offshore drilling for oil and
gas.
“Mr. Obama’s motives are environmental, economic and
political. He is trying to address climate change by replacing
dirty fuels with cleaner sources, jump-start an American clean-energy industry,
reduce dependence on foreign oil and attract Republican votes for legislation
to do all three.”
Margaret
Kriz Hobson reported yesterday at the National Journal’s Energy and
Environment Blog that, “President Obama today announced a multi-agency effort
to expand
“At a meeting with 11
governors [transcript, video], Obama released a roadmap for expanding biofuels
production to meet the federal goal of 36 billion gallons
in 2022, with 21 billion gallons to come from advanced biofuels. Last year,
To listen to specific
comments Pres. Obama made regarding biofuels at yesterday’s meeting with the
governors, just
click here (MP3- 1:44).
More specifically, a White
House news
release from yesterday indicated that, “President Barack Obama
today announced a series of
steps his Administration is taking as part of its
comprehensive strategy to enhance American energy independence while building a
foundation for a new clean energy economy, and its promise of new industries
and millions of jobs.
“At a meeting with a
bipartisan group of governors from around the country, the President laid out three measures that
will work in concert to boost biofuels production and reduce our dangerous
dependence on foreign oil. The
Environmental Protection Agency (EPA) has finalized
a rule to implement the long-term renewable fuels standard of 36 billion
gallons by 2022 established by Congress. The U.S. Department of Agriculture has
proposed a ruleon the Biomass
Crop Assistance Program (BCAP) that would provide financing to
increase the conversion of biomass to bioenergy. The President’s Biofuels
Interagency Working Group released its first report
– Growing
America’s Fuel. The report, authored by group co-chairs, Secretaries
Vilsack and
“In addition, President
Obama announced a Presidential
Memorandum creating an Interagency Task Force on Carbon Capture and
Storage to develop a comprehensive and coordinated federal strategy to speed
the development and deployment of clean coal technologies. Our nation’s economy
will continue to rely on the availability and affordability of domestic coal
for decades to meet its energy needs, and these advances are necessary to
reduce pollution in the meantime. The President calls for five to ten
commercial demonstration projects to be up and running by 2016.”
DTN writer Todd
Neeley provided an overview of some of these executive branch actions
in an article from yesterday: “The
Environmental Protection Agency released a much-anticipated new Renewable Fuel
Standard Wednesday that penalizes corn-based ethanol for international indirect
land use changes, despite an aggressive push back from biofuels and agriculture
groups.
“At the same time,
administration officials announced the findings of an interagency biofuels
group created by President Barack Obama that are supportive of the biofuels
industry but also point the finger at the federal government for the slow
development of the cellulosic ethanol industry.
“Under the new RFS, EPA
said 12.95 billion gallons of biofuels will have to be added this year, up 17 percent from last year, Dow
Jones newswire reported. Some
6.5 million gallons must come from cellulosic ethanol — much less than the
original goal of 100 million gallons. And 1.15 billion gallons
must come from biomass-based diesel over the two years from 2009 to 2010.”
Mr. Neeley explained that,
“On balance, the news is good for
“Though the U.S. ethanol industry would much rather
not be penalized for so-called international indirect land use change, or ILUC,
one ethanol industry group said the new RFS was ‘workable’ for corn ethanol.
“The theory of ILUC is
that expanded
Yesterday’s DTN article
stated that, “U.S. Agriculture
Secretary Tom Vilsack said the new RFS has made it so ‘corn ethanol has a
future’ in the biofuels industry.
“According to EPA’s
modeling, corn-based ethanol achieves a 21-percent greenhouse-gas reduction compared to
gasoline when international indirect land use change is included.
“Without ILUC, the
Renewable Fuels Association said corn-based ethanol achieves a 52 percent GHG reduction.
Cellulosic ethanol achieves GHG reduction of 72 percent to 130 percent
depending upon feedstock and conversion process. All GHG reductions for ethanol
exceed those mandated by the RFS2.”
The article also added
that, “In a written
statement, the RFA praised the U.S. Environmental Protection Agency for
passing the regulations to provide regulatory certainty for the biofuels industry.
“However, RFA expressed its disappointment about the
inclusion of ILUC.”
RFA also released a
summary titled, “RFS2
Final Rule Lifecycle GHG Analysis ‘By the Numbers,’” which contained
additional detail on the GHG reduction issue.
RFA’s Matt Hartwig
provided additional analysis on the RFS2 rule yesterday in a brief conversation
with Cindy Zimmerman; an audio replay of this short conversation was
posted yesterday at the Domestic Fuel Blog.
In a separate update
posted yesterday at the Domestic Fuel Blog, Growth Energy CEO Tom Buis discussed his
perspective on yesterday’s executive branch action, a replay of
his comments can be heard
here.
Meanwhile, Bloomberg
writers Mario
Parker and Daniel Whitten reported yesterday that, “The Obama
administration slashed the nation’s 2010 cellulosic ethanol mandate by 94
percent and included a method criticized by the ethanol industry to set
standards for biofuel use through 2022.
“The U.S. Environmental
Protection Agency reduced the nation’s cellulosic goal to 6.5 million gallons
from the 100 million required under a 2007 energy law. The rule issued today
found that corn-based ethanol produces lower greenhouse gases emissions than
were anticipated in a May proposal, clearing the way for more use of the fuel.
“‘This is at its root an
effort to reduce greenhouse gas emissions,’ EPA Administrator Lisa P. Jackson said in a
White House conference call. ‘The numbers we used in the proposal were not
right.’”
Steven
Mufson reported in today’s Washington Post that, “The nation’s farmers got a big boost Wednesday when
the Obama administration issued new biofuels guidelines that could open the way
for large increases in the production of corn-based ethanol.
“The Environmental
Protection Agency said new data showed that, even after taking into account
increased fertilizer and land use, corn-based ethanol can yield significant
climate benefits by displacing conventional gasoline or diesel fuel.
“The new renewable-fuel standard issued by the EPA
drew criticism from some environmentalists as well as oil industry
representatives, who accused the Obama administration of catering to farm
interests. In an earlier draft of the standard, the
administration had said that corn-based ethanol output should be limited
because its direct and indirect greenhouse gas emissions exceeded renewable
fuel standards.”
Mr. Mufson indicated that,
“Congress and many experts have long taken a wary view of corn-based ethanol,
because of concerns that it might drive up food prices and because it could be
counterproductive to reducing greenhouse gas emissions. Existing legislation
sets a target of 36 billion gallons of ethanol use by 2022, but corn-based ethanol
is slated to account for less than half that total while cellulosic ethanol is
slated to account for much more.
“For this year, Congress
had set a target of 100 million gallons of ethanol made from cellulosic raw
materials such as switchgrass, corn cobs or wood chips. But the EPA said
Wednesday that cellulosic production will amount to 6.5 million gallons, equal to a few pilot projects.”
Russell Gold and Siobhan Hughes reported yesterday at The Wall Street
Journal Online that, “In 2007, Congress had mandated that 100 million gallons
of cellulosic ethanol—a fuel additive to gasoline made from switchgrass, sugar
cane bagasse and other plants—be blended into the nation’s fuels this year. By
next year, the mandate was for 250 million gallons, heading up to 16 billion by
2022.
“‘It is certainly going to
be a challenge,’ said Michael J. McAdams, president of the Advanced Biofuels
Association, a trade group that represents companies working on cellulosic
ethanol and other technologies.
“The failure of the cellulosic ethanol industry to
even come close to meeting the mandated goals could give a boost to advocates
and lawmakers who believe setting goals for individual fuel technologies is the
wrong approach.”
Ben
Geman reported yesterday at The Hill Online that, “The new rules,
which implement the expanded fuels mandate, are not a complete victory for ethanol lobbyists,
who along with several farm-state lawmakers object to the way EPA measures the
carbon footprint of biofuels.
“Specifically, they’re
upset that EPA didn’t give up on weighing ‘international indirect land use
changes’ as part of emissions calculations. The phrase refers to emissions from
clearing grasslands and forests in other countries for croplands, in order to
compensate for increasing use of U.S. corn and soybeans for making fuels.”
Mr. Geman added that, “EPA
said several factors went into the revised emissions calculations. For
instance, the agency said that better satellite data allowed more precise
assessments of the types of land converted internationally.
“The battle over the land use emissions is hardly
over. Two senior House Democrats — Agriculture Committee Chairman Collin
Peterson (Minn.) and Armed Services Committee Chairman Ike Skelton (Mo.)
— introduced
a bill this week that would block EPA from considering the land-use changes.”
A
statement by Rep. Peterson from yesterday indicated that, “‘Typical of most decisions made in Washington, there
is some good and some bad in the Renewable Fuel Standard final rule announced
today. I am pleased that ethanol and biodiesel will qualify as
advanced biofuels under the RFS. However, I am concerned about some provisions
in the final rule that fail to use science-based standards,’ Chairman Peterson
said. ‘To think that we can credibly
measure the impact of international indirect land use is completely
unrealistic, and I will continue to push for legislation that prevents
unreliable methods and unfair standards from burdening the biofuels industry.’
“Chairman Peterson joined
House Armed Services Chairman Ike Skelton (D-MO) and Representative Jo Ann
Emerson (R-MO) to introduce a bill this week to prevent the Environmental
Protection Agency (EPA) from regulating greenhouse gas emissions under the
Clean Air Act. The bill, H.R.
4572, also includes provisions that would stop the EPA from using international
indirect land use calculations in biofuels regulations and would expand the
definition of renewable biomass.”
A separate response
yesterday from three farm state Senators noted that, “Senators Chuck Grassley, John Thune, and Mike
Johanns today reacted to the Obama administration’s
approval of the final rule issued by the Environmental Protection Agency (EPA)
to implement the new Renewable Fuels Standard (RFS) following Congressional
passage of the 2007 energy bill. Sadly,
the final rule includes flawed indirect land use models in an attempt to
discredit the positive environmental impacts of domestically produced
corn-based ethanol.”
“Johanns said, ‘I am deeply disappointed that the Administration
remains fixated on their flimsy, untested, and unreliable theory that holds our
farmers and ethanol producers responsible for land use decisions made half way
around the world. I am additionally disappointed that with all
of today’s announcements, there
was no mention of E-15. Increasing the percentage of ethanol in
gasoline to as much as 15 percent is the next logical step in the expansion of
this nation’s ethanol production capacity. It would not only benefit the
economy, but also our nation’s energy security.’”
And Iowa Senator Tom Harkin (D) noted yesterday
that, ““EPA has concluded that the existing biofuels do meet the lifecycle
greenhouse gas emission limits imposed as a part of the RFS2 in the 2007 Energy
Independence and Security Act. This
clarity is very important given the uncertainty over whether indirect land use
change emissions calculations that had been included in the proposed rule
issued last spring might make some biofuels ineligible for inclusion under the
mandate.
“Despite this, I am
disappointed that the Environmental Protection Agency continues to use
questionable data and methods for calculating ‘indirect land use changes’ at
all. These methods are not
adequately developed, and thus should not be used in ways making it harder for
ethanol and biodiesel to meet requirements of the Energy Independence and
Security Act of 2007. If we continue to do this, we’ll exclude some good
biofuels and stifle the investment that is so essential to our national
renewable fuels strategy.”
POET CEO Jeff Broin indicated yesterday
that, “We welcome the commitment of the President to continue growing the
domestic ethanol industry. He correctly noted that producing home-grown ethanol
creates jobs in America at a time America most needs them. However we are
concerned that some pieces of the rules put out by EPA today run contrary to
that stated effort. Although the
international indirect land use change penalty has been lessened somewhat, EPA
still relied on the disproven theory when all of the data shows that ethanol
production continues to improve and isn’t requiring new land.”
A National
Corn Growers news item from yesterday stated that, “‘We’re pleased the
U.S. Environmental Protection Agency recognizes that corn ethanol provides a
distinct advantage over conventional gasoline when it comes to greenhouse gas
emissions, with a reduction of more than 21 percent in some cases,’ said NCGA
President Darrin Ihnen. “This means that all corn ethanol including existing
grandfathered capacity and new production will qualify to meet the conventional
biofuels targets in the RFS.’
“NCGA continues to be disappointed that EPA chose to
use the flawed theory of international indirect land use change in their
calculations. Ihnen stressed that the EPA should reject the
unproven theory of international indirect land use change, which assumes that
growing more corn means planting corn on a proportionately greater amount of
acreage and will impact other crops or natural resources on a global basis.
Today’s yield trends show this to be false. 2009’s record corn yield was 165.2 bushels per
acre, according to the U.S. Department of Agriculture, more than 11 bushels
higher than 2008 and nearly 15 bushels higher than 2007.”
A news release
issued yesterday
by the American Soybean Association noted that, “The American Soybean
Association (ASA) today applauds release of the Environmental Protection
Agency’s (EPA) Final Rule for the Renewable Fuel Standard Program (RFS2) that
provides a positive outcome for biodiesel and soy biodiesel. ASA has worked
hard to educate EPA and policymakers to correct flaws in the original RFS2
Proposed Rule issued in 2009. Achieving a favorable outcome was vitally
important as demand for domestically produced soybean oil and the future of the
biodiesel industry in the United States hinged on the outcome.”
“While stressing the importance of the EPA’s RFS2
final rule to the biodiesel and soy industries, [ASA President Rob Joslin, a
soybean producer from Sidney, Ohio] emphasized that biodiesel production likely
won’t resume until Congress extends the biodiesel tax incentive.”
An update posted yesterday
at the
AgMag Blog (The Environmental Working Group) noted in part that, “Unfortunately, much of the short-term benefit of
EPA’s courageous stance is gutted by the cynical and politically driven
exemption that Congress gave to the corn-ethanol industry.
Congress made sure that 15 billion gallons of corn-ethanol will be forced into
the gasoline market regardless of its failure to reduce green house gas
emissions.”
EPA Regulations-
“Tailoring Rule”
Robin
Bravender of Greenwire reported yesterday at The New York Times Online
that, “U.S. EPA’s air chief said today the agency would roll out greenhouse gas
emission standards for automobiles and the ‘tailoring’ rule for
the heat-trapping gases next
month after considering a raft of public comments.”
Yesterday’s article stated
that, “The agency is also poised to issue the tailoring rule in tandem with the
auto rule, [Assistant Administrator Gina McCarthy] said. That controversial rule aims to limit New Source
Review and operating permitting requirements to only the largest industrial
sources of greenhouse gases. The agency has sought to
coordinate those rules because the auto standard would trigger those permitting
requirements for stationary sources.
“McCarthy said the final
tailoring rule will take into account a host of recommendations and concerns
presented in some 420,000 comments submitted to the agency.
“Critics — including industry associations, GOP
lawmakers and conservative think tanks — have expressed concerns about EPA’s
legal authority to limit the permitting requirements to the largest sources
when the Clean Air Act’s thresholds would require the agency to regulate
smaller emitters.
“State and local air
regulators have also asked EPA to delay permitting requirements for stationary
sources to ensure that conflicts between the tailoring rule and state programs
do not overwhelm permitting authorities.”
More background on the
“tailoring rule” is available here and here.
Climate Change
Ben
Geman reported yesterday at The Hill’s Energy and Environment Blog
that, “President Obama on Wednesday
urged the Senate not to shelve climate change legislation, a
day after he acknowledged that the chamber may proceed with a package
of energy measures that omits limits on greenhouse gas emissions.
“‘Don’t give up on that,’
Obama said in a televised question-and-answer session with Senate Democrats. ‘I
don’t want us to just say the easy way out is for us to just give a bunch of
tax credits to clean energy companies.’”
Crop Insurance
DTN Ag Policy Editor Chris
Clayton reported yesterday (link
requires subscription) that, “Although the crop insurance industry has been
negotiating for weeks with USDA on a new contract for expenses and underwriting
gains, it wasn’t until President Barack Obama released his budget that crop
insurers knew USDA was looking to move $8 billion out of the industry’s
government payments over 10 years.
“‘That basically confirms
to us what had been depicted to us on the Hill,’ said Keith Collins, a
consultant for the National Crop Insurance Services and former USDA chief
economist.
“The crop insurance industry finds itself on the
chopping block as the Obama administration tries to cut programs and shift
money to other administration priorities. The president’s
proposed budget renegotiatingthe standard reinsurance
agreement, or SRA, with insurers would save $800 million a year, just as
the administration is seeking to boost spending on child nutrition programs by
$1 billion a year.”
Mr. Clayton added that, “The insurance industry points out that insurers
took a $3.1 billion cut in the farm bill over 10 years in the projected growth
of both underwriting gains and administrative and operating (A&O) expenses.
The legislation also delayed $3.3 billion in payments to insurers by as much as
nine months in 2012-13. Companies may have to rely on credit to manage costs
while waiting for government payments.”
“Insurance officials say
cutting as much as $800 million will
affect the services farmers receive and will hurt the
smaller crop insurance companies more than larger ones. USDA officials have
stated that even with the proposed cuts, crop insurers will continue to receive
strong underwriting gains and increases in what USDA pays for administrative
and operating costs to the industry,” the DTN article said.
--
Keith Good
President
FarmPolicy.com, Inc.
(t) 217.356.2269
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