Meeting the Renewable Fuel Standard (RFS)
Mandate for Cellulosic Biofuels:
Questions and Answers
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy
March 11, 2013
Congressional Research Service
7-5700
www.crs.gov
R41106
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
Summary
The Renewable Fuel Standard (RFS) was expanded under the Energy Independence and Security
Act of 2007 (EISA; P.L. 110-140) in an effort to reduce dependence on foreign oil, promote
biofuel use, and stabilize transportation fuel prices, among other goals. Over 15 years, the RFS
requires that increasing amounts of biofuels—36 billion gallons by 2022—be used in
transportation fuel. The mandate is to be accomplished in part with advanced biofuels, including
cellulosic biofuels—fuels produced from cellulosic materials including grasses, trees, and
agricultural and municipal wastes—which would increase over time to comprise some 44% of the
RFS in 2022.
The U.S. Environmental Protection Agency (EPA) is required to set the annual standard for
cellulosic biofuels under the RFS for the following year by November 30. If projected cellulosic
biofuel production is less than the volume specified in the statute, EPA can lower the cellulosic
biofuels standard. EPA concluded that the nation lacked sufficient production capacity to meet the
RFS cellulosic biofuels mandate for 2010, 2011, 2012, and 2013. EPA reduced the mandate
(actual volume) for 2010 (from 100 million gallons to 5 million gallons), 2011 (from 250 million
gallons to 6.6 million gallons), and 2012 (from 500 million gallons to 8.65 million gallons, later
vacated by a federal court decision). EPA proposes to lower the 2013 mandate from 1.0 billion
gallons to 11 million gallons.
The 2010, 2011, and 2012 reduced mandates were not met by actual cellulosic biofuel production,
which EPA reports was limited. Instead, these mandates were met with renewable identification
numbers (RINs) generated under the original RFS, and with cellulosic biofuel waiver credits. The
cellulosic biofuels industry may be able to produce the EPA mandates if certain obstacles are
overcome: lowering the cost of conversion technology at the initial stages of commercial
application, easing access to financing, removing feedstock supply uncertainties, and creating
certainty for tax incentives. EPA reports that the industry front-runners—eight production
facilities—have addressed many of these concerns, and that their success “will significantly
decrease the perceived risk associated with similar future facilities and could potentially lead to
the rapid deployment of cellulosic biofuel production facilities around the United States.”
Another challenge for the cellulosic biofuels industry—and all biofuels industries—is the
petroleum industry’s opposition to the RFS, in part because it views the RFS as unworkable.
Other industries—livestock and poultry in particular—have joined the petroleum industry in
requesting that the RFS be modified. Another constraint is the need to comply with the blend
wall—the upper limit to the total amount of ethanol that by law can be blended into U.S. gasoline.
Several federal programs assist the cellulosic biofuels industry, including the U.S. Department of
Agriculture’s (USDA’s) Biorefinery Assistance Program and Biomass Crop Assistance Program,
and the U.S. Department of Energy’s (DOE’s) Loan Guarantee Program. EPA reports that some of
the cellulosic biofuels front-runners received or were offered significant federal financial support
(approximately $637 million) in the form of grants and loan guarantees from USDA and DOE
between 2009 and 2012.
Many questions regarding cellulosic biofuels and the RFS may arise as Congress debates energy
legislation. Can the RFS mandate for cellulosic biofuels be met? If so, when would it be met?
What impact will the continued lowering of the cellulosic biofuels mandate by EPA have on
investment in production? Should Congress continue to provide support for cellulosic biofuels,
and if so, how? Might Congress statutorily increase the number of qualified feedstocks for the
Congressional Research Service
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
RFS cellulosic biofuels category, given the 112th Congress amendment of the definition of
cellulosic biofuels to include algae for some tax incentives? What impact will other legislative
discussions (e.g., military support for biofuels) have on the RFS cellulosic biofuels mandate?
This report, in a question and answer format, discusses some challenges facing the cellulosic
biofuels community, including feedstock supply estimates, and potential legislative options to
address cellulosic biofuels production uncertainty for the RFS.
Congressional Research Service
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
Contents
Introduction ...................................................................................................................................... 1
What Are Cellulosic Biofuels? ........................................................................................................ 2
What Is the Relationship Between Cellulosic Biofuels and the Renewable Fuel Standard? ........... 2
What Challenges Are Associated with Production of Cellulosic Biofuels? ..................................... 4
How Much Cellulosic Feedstock Exists for Conversion to Biofuels? ............................................. 5
What Federal Financial Assistance Is Available for the Cellulosic Biofuels Industry? ................... 6
Were the Revised 2010, 2011, and 2012 RFS Mandates for Cellulosic Biofuels Met? Will
the 2013 Mandate Be Met? ........................................................................................................... 8
What Impact Will Significantly Lowering the 2010, 2011, 2012, and 2013 RFS Mandates
Have on Investment in Cellulosic Biofuel Production? .............................................................. 11
How Many Commercial Cellulosic Biofuel Plants Exist? ............................................................. 12
What’s Next for the RFS Cellulosic Biofuels Mandate? ............................................................... 12
The Role of Congress .............................................................................................................. 13
The Role of EPA ...................................................................................................................... 15
Tables
Table 1. RFS Biofuels Mandate in EISA: Total Renewable Fuels and Cellulosic Biofuels ............ 3
Table 2. Selected Proposed Legislation from the 111th and 112th Congresses Pertaining to
Cellulosic Biofuels ..................................................................................................................... 14
Contacts
Author Contact Information........................................................................................................... 17
Congressional Research Service
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
Introduction
The Renewable Fuel Standard (RFS), created by the Energy Policy Act of 2005 (EPAct05, P.L.
109-58) and expanded under the Energy Independence and Security Act of 2007 (EISA; P.L. 110-
140), mandates that domestic transportation fuel contain a specified volume of biofuels—
including advanced biofuel, cellulosic biofuel, and biomass-based diesel—in an effort to reduce
dependence on foreign oil, promote biofuel use, and stabilize transportation fuel prices, among
other goals.1 The mandate is to be accomplished in large part with cellulosic biofuels. The RFS
requires that increasing amounts of biofuels be included in transportation fuel over a 15-year
period, with the goal of using 36 billion gallons of biofuels annually by 2022, including 16 billion
gallons of cellulosic biofuels.
The U.S. Environmental Protection Agency (EPA) is required to set the annual standard for
cellulosic biofuels under the RFS for the following year by November 30. If the projected volume
of cellulosic biofuel production is less than the volume specified in the statute, then EPA is
required to lower the cellulosic biofuels standard. Due to a lack of U.S. production capacity, the
EPA, in successive years from 2010 to 2012, issued final rules under its waiver authority for the
RFS established in EISA, which lowered the 2010 cellulosic biofuel mandate (actual volume)
from 100 million gallons to 5 million gallons,2 the 2011 mandate from 250 million gallons to 6.6
million gallons,3 and the 2012 mandate from 500 million gallons to 8.65 million gallons.4 A
January 25, 2013, federal court decision vacated the 2012 RFS cellulosic biofuels standard.5 EPA
issued a proposed rule to set the 2013 actual volume standard for cellulosic biofuels at 11 million
gallons (14 million ethanol-equivalent gallons) on January 31, 2013.6
Some have questioned whether cellulosic biofuels can be produced in sufficient quantity to
satisfy the RFS mandate in future years. Feedstock supply, financial viability and financing, and
technology advancement are considered among the limiting factors for cellulosic biofuel
production. More than five years after EISA was enacted, progress toward meeting the cellulosic
biofuels mandate has been delayed on multiple fronts (e.g., financial, administrative, and
technical). Following three consecutive years of RFS cellulosic biofuels mandate reductions and
1 For more information on the expanded RFS, see CRS Report R40155, Renewable Fuel Standard (RFS): Overview
and Issues, by Randy Schnepf and Brent D. Yacobucci.
2 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel
Standard Program; Final Rule,” 75 Federal Register, March 26, 2010.
3 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards;
Final Rule,” Federal Register, December 9, 2010.
4 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards;
Final Rule,” Federal Register, January 9, 2012.
5 American Petroleum Institute v. Environmental Protection Agency, USCA Case #12-1139, January 25, 2013. The
American Petroleum Institute (API) petitioned the court about two aspects of the RFS. The first aspect, which is
directly related to cellulosic biofuels, was an objection to EPA’s 2012 cellulosic biofuels projection. The court agreed
with API that “because EPA’s methodology for making its cellulosic biofuel projection did not take neutral aim at
accuracy, it was an unreasonable exercise of agency discretion.” The court went on to explain that EPA is tasked with
establishing “a projection that aims at accuracy, not at deliberately indulging a greater risk of overshooting than
undershooting.” The second aspect of the petition was an objection to EPA not providing a reasoned explanation for its
refusal to reduce the 2012 advanced biofuels volume standard.
6 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013. EPA had a two-month delay in issuing the 2013 RFS proposed
rule. 42 USC 7545(o)(3)(B)(i)
Congressional Research Service
1
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
EPA’s current proposal to reduce the 2013 mandate, some contend that Congress should
reconsider the configuration of the RFS, determine whether additional resources are necessary for
cellulosic biofuel production, and assess the success rate of this effort compared to other
renewable energy efforts. Others assert that the current structure provides adequate incentives.
What Are Cellulosic Biofuels?
Cellulosic biofuels are liquid, solid, or gaseous fuels made from materials containing cellulose.
Cellulose—a complex carbohydrate—is the organic matter found in plant walls that, along with
hemicellulose and lignin, helps to give a plant its rigid structure. Cellulose feedstock includes
agricultural residues (e.g., corn stover), forestry residues (e.g., wood chips), dedicated energy
crops (e.g., switchgrass, hybrid poplar), and urban sources of waste (e.g., municipal solid waste).
The most widely discussed cellulosic biofuel is cellulosic ethanol for transportation.7 Cellulosic
ethanol differs from the corn-starch ethanol currently blended into transportation fuel; it is made
from feedstock with no or only limited food value, potentially results in fewer greenhouse gas
emissions, and has a higher lifecycle energy balance.8 Converting cellulosic feedstock to ethanol,
however, is more expensive and difficult than converting corn starch to ethanol. The conversion
of cellulose to ethanol generally happens in three phases—pretreatment, hydrolysis, and
fermentation to ethanol. Pretreatment weakens the plant wall structure so that the cellulose is
easier to obtain during hydrolysis. Hydrolysis—acid or enzymatic—separates the cellulose into
sugars. Fermentation converts the sugars into ethanol. Cellulose can also be converted to liquid
fuels through processes other than fermentation (e.g., thermochemical processes).9
Proponents suggest that increased use of cellulosic biofuels for transportation could potentially
help to reduce U.S. dependence on foreign oil, strengthen rural economies, and improve the
environment. In addition, they contend that cellulosic feedstocks may fare better in the food-
energy debate, since crop residue, and not the crop itself, is used for cellulosic biofuel production.
In contrast, others argue that cellulosic biofuels at RFS volumes require a substantial feedstock
supply that has yet to be verified and may never be cost-competitive without government support.
What Is the Relationship Between Cellulosic
Biofuels and the Renewable Fuel Standard?
The RFS established in Section 202 of EISA called for 100 million gallons of cellulosic biofuels
to be included in the national transportation fuel supply in 2010 (see Table 1). The mandate
increases to 16 billion gallons by 2022.10 Despite the RFS mandate for cellulosic biofuels starting
7 For more information on cellulosic biofuels, see CRS Report RL34738, Cellulosic Biofuels: Analysis of Policy Issues
for Congress, by Kelsi Bracmort et al.
8 For more information on ethanol, see CRS Report RL33290, Fuel Ethanol: Background and Public Policy Issues, by
Brent D. Yacobucci.
9 Cellulose feedstocks can also be used to provide heat or generate electricity via gasification, combustion, anaerobic
digestion, and other conversion processes. For more information, see CRS Report R40667, Anaerobic Digestion:
Greenhouse Gas Emission Reduction and Energy Generation, by Kelsi Bracmort; and CRS Report R41440, Biomass
Feedstocks for Biopower: Background and Selected Issues, by Kelsi Bracmort.
10 For more information on the RFS, see CRS Report R40155, Renewable Fuel Standard (RFS): Overview and Issues,
(continued...)
Congressional Research Service
2
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
in 2010, the first registered production of cellulosic biofuels in the United States was not achieved
until 2012, when 20,069 gallons were reported to the EPA.
Table 1. RFS Biofuels Mandate in EISA: Total Renewable Fuels and Cellulosic Biofuels
(in billions of gallons)
Cellulosic biofuels
EPA revised
Year
Total renewable fuels
Original
(actual volume)
2006 –– –– ––
2007 –– –– ––
2008 9.00 0.00 ––
2009 11.10 0.00 ––
2010 12.95 0.100 0.005a
2011 13.95 0.250 0.0066b
2012 15.20 0.500
0.00865c
2013 16.55 1.00 0.011d
Source: EISA (P.L. 110-140), Section 202.
a. U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel
Standard Program; Final Rule,” 75 Federal Register, March 26, 2010.
b. U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel
Standards; Final Rule,” Federal Register, December 9, 2010.
c. U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel
Standards; Final Rule,” Federal Register, January 9, 2012.
d. U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel
Standards; Proposed Rule,” 78 Federal Register, February 7, 2013.
Data and analysis presented during the RFS debate and ultimate passage of EISA in 2007
supported the idea that these levels of cellulosic biofuel production capacity could be achievable.
Some argued that plentiful feedstock was available11 and that the conversion technology was
close to being certified as commercially viable. Moreover, some presumed that the federal
government would provide substantial financial support and enhance the infrastructure needed to
spur a commercial cellulosic biofuels market.12 Others were leery about the time frame provided
to meet the RFS cellulosic biofuels mandate given the as-yet-undeveloped production capacity.13
(...continued)
by Randy Schnepf and Brent D. Yacobucci.
11 U.S. Dept. of Energy, U.S. Dept. of Agriculture, Biomass as Feedstock for a Bioenergy and Bioproducts Industry:
The Technical Feasibility of a Billion-Ton Annual Supply, April 2005, http://www1.eere.energy.gov/biomass/pdfs/
final_billionton_vision_report2.pdf.
12 Diane Greer, “Creating Cellulosic Ethanol: Spinning Straw into Fuel,” BioCycle, April 2005; Biotechnology Industry
Organization, Achieving Sustainable Production of Agricultural Biomass for Biorefinery Feedstock, Washington, DC,
2006, http://www.bio.org/ind/biofuel/SustainableBiomassReport.pdf; and Biotechnology Industry Organization,
“Energy Bill Biofuels Mandates Will Be Achievable with Biotechnology Advances,” press release, November 18,
2007, http://bio.org/news/pressreleases/newsitem.asp?id=2007_1218_01&p=yes.
13 Ian Talley, “Renewed Energy: US Biofuel Mandate Calls for Big Production Boost,” Dow Jones International News,
(continued...)
Congressional Research Service
3
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
EPA has the authority to waive completely or in part the consumption mandates for cellulosic
biofuels established in EISA, under certain circumstances.14 For instance, the cellulosic biofuels
requirement may be waived if the Administrator determines, after public notice and opportunity
for comment, that there is an inadequate domestic supply.15 EPA may also waive the RFS or any
specific category of the RFS if there is evidence that full implementation may cause economic
harm. EPA generally conducts its cellulosic biofuels volume assessment by using information
from the Departments of Energy and Agriculture, and by monitoring the funding, production, and
construction status of select companies with planned and existing cellulosic biofuel facilities.16
EPA also responds to petitions for specific waivers from a state or a fuel provider, or at the EPA
Administrator’s own discretion.
What Challenges Are Associated with Production of
Cellulosic Biofuels?
Since the RFS was expanded under EISA,17 U.S. production of cellulosic biofuels has had a slow
start. Impediments to increasing capacity include technology setbacks and financial support.
Commercial cellulosic biofuel facilities are estimated to cost hundreds of millions of dollars,
significantly more than a traditional corn ethanol plant, especially when measured in terms of the
amount of biofuel produced (measured in million gallons per year, or mgy). For example, the
company INEOS Bio reports that its Indian River 8 mgy production capacity plant cost
approximately $130 million.18 American Process, Inc., reports that its Alpena 0.8 mgy pilot plant
cost approximately $36 million.19 In comparison, a 40 mgy corn ethanol plant cost approximately
$80 million to construct in 2006.20 Some lenders find it extremely risky, perhaps even cost-
prohibitive, to provide financial backing to cellulosic biofuel plants, mainly because the
conversion technology has not been applied or proven on a commercial scale.21 These costs are
likely to decrease if a significant number of commercial-scale plants come online and prove to be
economically viable.
(...continued)
December 18, 2007, at http://www.factiva.com/.
14 For more information on EPA’s waiver authority, see CRS Report RS22870, Waiver Authority Under the Renewable
Fuel Standard (RFS), by Brent D. Yacobucci.
15 42 U.S.C. 7545(o)(7).
16 In its proposed rule for Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards, EPA reported it
tracked the progress of more than 100 biofuel production facilities.
17 The original RFS established by §1501 of EPAct05 required 4.0 billion gallons of renewable fuel for 2006, ascending
to 7.5 billion gallons by 2012. The original RFS would have required that 250 million gallons of the renewable fuel be
derived from cellulosic biomass starting in 2013; whereas the expanded RFS, or RFS2, required 250 million gallons of
cellulosic biofuel in 2011.
18 E-mail from Bryan Stockton of ML Strategies, December 13, 2012.
19 E-mail from Kim Nelson of American Process, Inc., December 11, 2012.
20 Clean Fuels Development Corporation, Nebraska Ethanol Board, and U.S. Dept. of Agriculture, A Guide for
Evaluating the Requirements of Ethanol Plants, 2006, http://www.ethanol.org/pdf/contentmgmt/
guide_for_evaluating_the_requirements_of_ethanol_plants.pdf.
21 For more information on federal spending for cellulosic biofuels, see CRS Report RL34738, Cellulosic Biofuels:
Analysis of Policy Issues for Congress, by Kelsi Bracmort et al.
Congressional Research Service
4
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
In addition to financing issues, other challenges to cellulosic biofuel production include multiple
definitions of biomass in various laws, which may confuse investors and lead to legal disputes
over what constitutes a “qualified feedstock.” For example, incentives for cellulosic biofuel
production in the tax code are relatively broad. The renewable biomass definition for the RFS
under EISA does not allow for biomass removed from federal lands, and excludes crops from
forested lands.22 Some argue that opening federal lands for biomass removal could provide an
inexpensive supply of cellulosic feedstock that would be immediately available to biorefineries
for cellulosic biofuel production. Others contend that biomass removal from federal lands is a
short-term response to the cellulosic feedstock source problem and might not be carried out in a
sustainable manner, leading to deterioration of the nation’s parks and recreation areas. The
definition of biomass under EISA also excludes most municipal solid waste (MSW), which some
view as a potential source for conversion to biofuels.
Also challenging for cellulosic biofuel production are feedstock contracts, which will likely cover
multiple years. Agricultural and forestry producers may not agree to a contract for a cellulosic
feedstock that requires a lengthy time commitment. For example, it generally takes three years for
switchgrass crops to reach maturity.23 As a result, a producer would have to commit his land to
one particular cellulosic feedstock crop for a number of years, thus limiting the producer’s choice
to grow other, potentially more remunerative crops during that period. The Biomass Crop
Assistance Program (BCAP) is designed to assist producers with annual payments that could
mitigate some of the risks involved with shifting from traditional crop production to energy crop
production. In early 2013, EPA reported that the industry has made significant progress regarding
feedstock supply, citing companies that have secured feedstock contracts with local agricultural
producers.24
How Much Cellulosic Feedstock Exists for
Conversion to Biofuels?
An important factor in evaluating whether a commercial cellulosic biofuel production plant will
be a favorable investment is whether a steady feedstock supply exists for a biorefinery.25
However, determining actual availability of feedstock is difficult. Quantifying the amount of
feedstock available for conversion to biofuels requires information about feedstock sources,
production rates, accessibility, and location restrictions (e.g., public versus private lands if the
feedstock is to be used for certain energy purposes). Investors must make feedstock predictions
based on data from weather patterns and land use change, as well as an uncertain supply chain
(e.g., handling, storage, and transportation costs), among other things. This is particularly
important when a biomass feedstock growth season of four to five months must provide biomass
feedstock for 12 months of plant operation.26 To make the supply available throughout the year,
22 For more information on biomass definitions, see CRS Report R40529, Biomass: Comparison of Definitions in
Legislation Through the 112th Congress, by Kelsi Bracmort.
23 University of Tennessee, Growing and Harvesting Switchgrass for Ethanol Production in Tennessee, SP701-A,
http://www.utextension.utk.edu/publications/spfiles/SP701-A.pdf.
24 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013.
25 A biorefinery is a facility that processes biomass into biofuels.
26 One company, POET, has devised a feedstock supply plan whereby the feedstock would be stored by the producer,
(continued...)
Congressional Research Service
5
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
special equipment may be required for feedstock harvest, handling, collection, storage, or
transport, as cellulosic feedstock is often too bulky for average farming equipment to handle.
The amount of cellulosic feedstock necessary for conversion to a biofuel depends on the
feedstock type, the conversion process, and the desired biofuel.27 Biofuel conversion yield is
measured in gallons per ton. Feedstock, or crop, yield is measured in tons per acre. Total yield,
measured in gallons per acre, depends on both the feedstock yield and the conversion yield.
Yields are typically much higher on prime cropland than on marginal lands. However, if
cellulosic feedstocks are produced on prime cropland, then they likely compete with food crops
while significantly raising their cost of production due to the opportunity cost of land.
Some argue that current estimated cellulosic feedstock yields will need to increase markedly over
the next decade to meet the RFS mandate of 16 billion gallons of cellulosic biofuel production per
year by 2022. Others contend that a significant growth of cellulosic feedstock is not essential, as
advances in conversion technologies will afford the opportunity to produce more cellulosic
biofuel with less feedstock. If cellulosic feedstock yields do increase, the traditional geographic
areas for feedstock cultivation may be subject to additional energy, environmental, and
agricultural policy scrutiny.
What Federal Financial Assistance Is Available for
the Cellulosic Biofuels Industry?
Several forms of federal government financial support exist for production of cellulosic biofuels,
including the DOE Loan Guarantee Program, the USDA Biorefinery Assistance Program, the
USDA Biomass Crop Assistance Program, and tax incentives. Other sources of financial
assistance include smaller grants awarded by federal agencies for unique initiatives.28
To help promote cleaner energy technologies, including cellulosic biofuel production
technologies, Congress established the Department of Energy (DOE) Loan Guarantee Program
(LGP).29 Loans may not exceed 80% of total project costs. The DOE Section 1703 loan program
(...continued)
under a four-year contract, and delivered to the biorefinery as needed. Jim Lane, “Should the Renewable Fuel Standard
be Scrapped, or Revised?” Biofuels Digest, November 2, 2011, http://biofuelsdigest.com/bdigest/2011/11/01/are-you-
any-less-worried-about-energy-security-today-than-you-were-4-years-ago-asks-bp/.
27 Several studies have estimated the current or long-term cellulosic feedstock supply available for conversion to
biofuels on a national basis. The estimates provided in each study are based on numerous assumptions and modeling
techniques unique to each study. DOE studies include the U.S. Billion-Ton Update: Biomass Supply for a Bioenergy
and Bioproducts Industry, ORNL/TM-2011/224, August 2011; and Biomass as Feedstock for a Bioenergy and
Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply, April 2005. Non-DOE studies include
the National Academy of Sciences, Renewable Fuel Standard: Potential Economic and Environmental Effects of U.S.
Biofuel Policy, 2011; National Academy of Sciences, National Academy of Engineering, National Research Council,
Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts,
Washington, DC, 2009; and Biomass Research and Development Initiative, Increasing Feedstock Production for
Biofuels Economic Drivers, Environmental Implications, and the Role of Research, December 2008.
28 For example, the DOE awarded $10 million for five advanced biofuel and bio-based product projects. U.S.
Department of Energy, Energy Department Awards $10 Million to Develop Advanced Biofuels and Bio-based
Products, January 3, 2013, http://apps1.eere.energy.gov/news/progress_alerts.cfm/pa_id=822.
29 A loan guarantee is defined as a “pledge with respect to the payment of all or a part of the principal or interest on any
(continued...)
Congressional Research Service
6
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
supports clean energy technologies that are high technology risks (e.g., biomass, solar, alternative
fuel vehicle technologies). In addition, the DOE Section 1705 loan program, which expired in
2011, supported renewable energy systems, electric power transmission systems, and leading-
edge biofuels. Some in the industry are concerned that the LGP is not being carried out at a pace
responsive to market momentum for cellulosic biofuels.30
The Government Accountability Office (GAO) reviewed DOE’s execution of the Loan Guarantee
Program in 2010 and again in 2012.31 In 2012, GAO found that DOE “improved the speed at
which it was able to move section 1705 applications through its review process” and that DOE
had “not closed any section 1703 loan guarantees or otherwise demonstrated that the program is
fully functional.” Even though Section 1705 expired in 2011, GAO issued three recommendations
for the overall loan guarantee program, including that DOE “implement a consolidated system
that enables the tracking of the status of applications and that measures overall program
performance.”
The USDA Biorefinery Assistance Program (BAP) assists in the development of new and
emerging technologies for advanced biofuels.32 BAP provides competitive grants and loan
guarantees for construction and/or retrofitting of demonstration-scale biorefineries to demonstrate
the commercial viability of one or more processes for converting renewable biomass to advanced
biofuels. Because BAP has not received any discretionary funding needed to implement the grant
portion of the program, USDA has only implemented the loan guarantee portion of the program
using mandatory funding. USDA reports that seven biorefineries were granted a BAP conditional
commitment for a loan guarantee at a total of approximately $704 million from FY2009 through
FY2012.33
Another federal government program, focused on feedstock development, is the USDA Biomass
Crop Assistance Program (BCAP).34 The two main program objectives of BCAP are to support
the establishment and production of eligible crops for conversion to bioenergy in selected areas,
(...continued)
debt obligation of a non-federal borrower to a non-federal lender.” The LGP was first authorized under Title XVII of
EPAct05 and then amended under the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). DOE may issue
loan guarantees to eligible projects that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of
greenhouse gases” and “employ new or significantly improved technologies as compared to technologies in service in
the United States at the time the guarantee is issued.” Eligible projects include commercial-scale renewable energy
systems. EISA authorized the DOE to issue loan guarantees in part to support renewable energy projects. For more
information on loan guarantees, see CRS Report R42152, Loan Guarantees for Clean Energy Technologies: Goals,
Concerns, and Policy Options, by Phillip Brown.
30 Renewable Fuels Association, “2010 State of the Industry Address,” 2010 National Ethanol Conference, Orlando,
FL, February 16, 2010, http://ethanolrfa.3cdn.net/b76292e4bf133edd34_e1m6bhh33.pdf.
31 U.S. Government Accountability Office, Further Actions Are Needed to Improve DOE’s Ability to Evaluate and
Implement the Loan Guarantee Program, GAO-10-627, July 2010, http://www.gao.gov/new.items/d10627.pdf; U.S.
Government Accountability Office, DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking and
Review of Applications, GAO-12-157, March 2012, http://www.gao.gov/assets/590/589210.pdf.
32 For more information, see CRS Report R41985, Renewable Energy Programs and the Farm Bill: Status and Issues,
by Randy Schnepf.
33 Email from Ashley Martin, USDA, March 1, 2013.
34 BCAP receives its authorization from Title IX of the Farm Security and Rural Investment Act of 2002 (P.L. 107-171)
and was amended by Title IX of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246). For more information
on BCAP, see CRS Report R41296, Biomass Crop Assistance Program (BCAP): Status and Issues, by Randy Schnepf,
or visit http://www.fsa.usda.gov/FSA/webapp?area=home&subject=ener&topic=bcap.
Congressional Research Service
7
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
and to assist agricultural and forest land owners and operators with collection, harvest, storage,
and transportation of eligible materials for use in a biomass conversion facility. USDA issued the
BCAP final rule on October 27, 2010, implementing both program components. BCAP was one
of several farm bill energy programs set to expire at the end of FY2012. The American Taxpayer
Relief Act of 2012 (ATRA, P.L.112-240) extended BCAP through FY2013. Since the program’s
inception, 11 BCAP project areas have been established.35 According to USDA, BCAP matching
payments36 totaled $557,443 for the transportation of nearly 10,320 dry tons of herbaceous crop
residue (i.e., corn stover) in FY2012.37
Additionally, the government provides tax incentives to support cellulosic biofuel production.38
The 2008 farm bill offers a production credit of $1.01 per gallon of biofuel produced from
qualifying second-generation biofuel feedstocks, including cellulosic matter. The credit expired
on December 31, 2012, but ATRA extended it and expanded the credit to include fuels produced
from algae. The credit is set to expire at the end of calendar year 2013. There is also a special
depreciation allowance for a new cellulosic biofuel plant that originated under the Tax Relief and
Health Care Act of 2006 (P.L. 109-432). ATRA amended the allowance to include algae as a
qualified feedstock for the special allowance. The allowance also expires at the end of 2013.
Were the Revised 2010, 2011, and 2012 RFS
Mandates for Cellulosic Biofuels Met? Will the 2013
Mandate Be Met?
EPA’s analyses concluded that the United States did not have sufficient cellulosic biofuel
production capacity to meet the scheduled RFS mandates for 2010-2012. Therefore, EPA reduced
the mandate (actual volume)39 for 2010 from 100 million gallons to 5 million gallons,40 the
mandate for 2011 from 250 million gallons to 6.6 million gallons,41 and the mandate for 2012
from 500 million gallons to 8.65 million gallons.42 EPA proposes to lower the 2013 mandate from
1.0 billion gallons to 11 million gallons.43
35 BCAP project areas are specific geographic areas where producers may enroll land to grow specified biomass crops.
Participants may be eligible to receive financial and technical assistance as well as annual payments to establish these
crops.
36 Matching payments are provided for the collection, harvest, storage and transport of eligible biomass materials to
qualified biomass conversion facilities.
37 Email from Ashley Martin, USDA, March 1, 2013.
38 For more information, see CRS Report R42566, Alternative Fuel and Advanced Vehicle Technology Incentives: A
Summary of Federal Programs, by Lynn J. Cunningham et al.
39 The energy content of renewable fuels differ. There are times when an ethanol-equivalence value for a renewable
fuel with a higher energy content than ethanol may allow for that fuel to count more towards a mandate than other
biofuels.
40 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel
Standard Program; Final Rule,” 75 Federal Register, March 26, 2010.
41 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards;
Final Rule,” Federal Register, December 9, 2010.
42 Environmental Protection Agency, Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards, Final
Rule, December 22, 2011.
43 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
(continued...)
Congressional Research Service
8
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
EPA monitors RFS compliance by fuel blenders according to their reported accumulation of
renewable identification numbers (RINs) for each biofuel’s yearly volumetric standard. A RIN is
a unique 38-character number that is issued (in accordance with EPA guidelines) by the biofuel
producer or importer at the point of biofuel production or the port of importation. Each qualifying
gallon of renewable fuel has its own unique RIN. The EPA uses its Moderated Transaction
System (EMTS) to manage RIN transactions.44 Using data generated from EMTS, EPA provides
aggregated monthly data on RIN generation and renewable fuel volume production for specific
fuel categories, such as cellulosic biofuel.45 In general, compliance is achieved by a fuel blender
when the number of RINS generated and assigned each year for cellulosic biofuels equate to the
volume requirement for that year.
As noted above, EPA has the authority to waive the cellulosic biofuel mandate on a yearly basis.
In any year that EPA grants a waiver, the agency must also make waiver credits available at a set
price, the formula for which is set in statute.46 Waiver credits may be used by obligated parties to
comply with the cellulosic biofuel volume obligation in lieu of RINs generated with the
production of the cellulosic biofuel.47 The 2010, 2011, and 2012 prices and the proposed 2013
price for a cellulosic biofuel waiver credit are $1.56, $1.13, $0.78, and $0.42, respectively. If
waiver credits48 are issued (when the mandate is reduced), compliance is met when the
combination of waiver credits and RINs equate to the volume requirement for that year. Previous-
year RINs may be used to meet current-year compliance, although there are some stipulations.
Even before enactment of EISA, which expanded the RFS, reported production data indicated
that overcoming any or all of the hurdles to increasing cellulosic biofuel production to meet the
original 2010 RFS mandate of 100 million gallons set by Congress was unlikely. 2010 was a
transition year for the RFS, going from the RFS established under EPAct05 (RFS1) to the RFS
established under EISA (RFS2). RFS1 had different production requirements than RFS2 for
cellulosic biofuels,49 including an ethanol-equivalency ratio of 2.5-to-1, where each gallon of
cellulosic ethanol counted as 2.5 gallons toward the EPAct05 mandate.50 EPA reports that zero
cellulosic biofuel RINs were produced in 2010 under the RFS2 rules.51 EPA reports that the
(...continued)
Proposed Rule,” 78 Federal Register, February 7, 2013.
44 For more information on EMTS, see http://www.epa.gov/otaq/fuels/rfsdata/2010emts.htm.
45 Concerns have been raised about fraudulent RINs, especially due to recent biodiesel fraudulent RIN activity. While
RIN fraud is possible as discussed in CRS Report R42824, Analysis of Renewable Identification Numbers (RINs) in the
Renewable Fuel Standard (RFS), by Brent D. Yacobucci, there has been no reported fraudulent cellulosic biofuel RIN
activity. EPA issued a proposed rule to establish a voluntary quality assurance program for verifying the validity of
RINs. For more information, see U.S. Environmental Protection agency, RFS Renewable Identification Number (RIN)
Quality Assurance Program, January 31, 2013, http://www.epa.gov/otaq/fuels/renewablefuels/documents/qap-nprm-
pepub.pdf.
46 42 USC 7545 (o)(7)(D)(ii)
47 U.S. Environmental Protection Agency, Questions and Answers on Changes to the Renewable Fuel Standard
Program (RFS2), February 2013.
48 Waiver credits are not allowed to be traded or banked for future use, and are only allowed to be used to meet the
cellulosic biofuel standard for the year that they are offered.
49 The original RFS (RFS1) did not require a cellulosic biofuel production volume until 2013, when 250 million gallons
were mandated. Further, the definition of cellulosic biofuel was amended by EISA.
50 EISA did not stipulate a 2.5-1 ratio for cellulosic biofuel for the RFS2. Instead, the ethanol equivalence value
depends on the type of biofuel being produced.
51 EMTS reports zero RINs available for 2011 cellulosic biofuel and cellulosic diesel.
Congressional Research Service
9
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
majority of compliance for 2010 was met with RINs generated (i.e., production) under RFS1.52
EMTS records show that 12,186 cellulosic biofuel waiver credits were purchased in 2010, which
likely made up for the remainder of 2010 compliance.53
More compliance data are available for the 2011 and 2012 RFS cellulosic biofuels mandates.
However, evaluation of the available data is difficult. Compliance for both years could have been
met with cellulosic biofuel RINs and waiver credits. EPA reports that zero cellulosic biofuel
RINS were produced in 2011.54 Compliance for 2011 was met with excess cellulosic biofuel RINs
generated in 2010 under RFS1 and cellulosic biofuel waiver credits.55 EMTS records report that
4,248,388 RFS2 cellulosic biofuel waiver credits were purchased in 2011.56 EPA reports that there
is no “need to address compliance with the 2012 cellulosic biofuel standard” since there was a
federal court decision that vacated the 2012 standard.57 EMTS reports that 20,069 RINS were
assigned for cellulosic biofuel and 1,741 RINS were assigned for cellulosic diesel in 2012.58
In its 2013 proposed rule, EPA proposes a 2013 cellulosic biofuel actual volume standard of 11
million gallons (actual volume) that is based on the Energy Information Administration’s
(EIA’s) estimate of available supply,59 production volumes developed in consultation with the
companies expected to produce cellulosic biofuel from commercial-scale facilities in 2013,
and EPA’s judgment.60 EPA projects that the 2013 cellulosic biofuels mandate will be met by
production from two companies: INEOS Bio and KiOR. The projected production start date for
both companies is the first quarter of 2013.61
52 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013. The design of the RFS2 transition program allowed for RFS1
cellulosic RINs to be used towards compliance under the RFS2 program. EPA reports the 2010 cellulosic biofuel
standard could have been met with cellulosic biofuel RINs generated under RFS2 regulations after July 1, 2010,
cellulosic biomass ethanol RINs generated under RFS1 regulations between January 1, 2010 and July 1, 2010, and
cellulosic biomass ethanol RINs generated under RFS1 regulations in 2009. U.S. Environmental Protection Agency,
Questions and Answers on Changes to the Renewable Fuel Standard Program (RFS2), http://www.epa.gov/otaq/fuels/
renewablefuels/compliancehelp/rfs2-aq.htm.
53 See http://www.epa.gov/otaq/fuels/rfsdata/rfs2cellulosicwaivercredits.htm.
54 EMTS reports zero RINs available for 2011 cellulosic biofuel and cellulosic diesel. For more information, see
http://www.epa.gov/otaq/fuels/rfsdata/2011emts.htm.
55 The statute allows companies to purchase cellulosic biofuel waiver credits in lieu of submitting RINs in years when
EPA lowers the mandate. U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013
Renewable Fuel Standards; Proposed Rule,” 78 Federal Register, February 7, 2013.
56 See http://www.epa.gov/otaq/fuels/rfsdata/rfs2cellulosicwaivercredits.htm.
57 U.S. Environmental Protection Agency, Enviroflash, Update - 2012 Cellulosic Biofuel Standard Mandate Issued,
February 27, 2013.
58 Blue Sugar Corporation is the first company to be issued cellulosic biofuel RINs. For more information, see
http://www.epa.gov/otaq/fuels/rfsdata/2012emts.htm.
59 EIA estimated that 9.6 million actual gallons of cellulosic biofuel would be available in 2013.
60 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013.
61 They are not online as of publication date of this report.
Congressional Research Service
10
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
What Impact Will Significantly Lowering the 2010,
2011, 2012, and 2013 RFS Mandates Have on
Investment in Cellulosic Biofuel Production?
EPA’s waiver authority creates uncertainty for investors in cellulosic biofuel ventures. Investors
may fear that the full cellulosic biofuels mandate will continually be waived to lower amounts by
EPA, thus depriving them of the government-mandated market on which they had originally
based their investment.
Those in favor of continuing an RFS with a cellulosic biofuels component argue that adequate
production and consumption of cellulosic biofuels can be achieved in a cost-effective manner if
there is consistent federal policy, possibly allaying the concerns of some investors.62 However,
minimal actual production for three years has led some to question the viability of cellulosic
biofuels over the long term.63 Furthermore, a cellulosic biofuels industry that has regularly missed
the reduced mandates has drawn criticism from groups—especially the petroleum industry—that
contend they are being unfairly targeted to purchase credits for a fuel that is unlikely to be
produced at the required levels.64
Another form of uncertainty for all involved parties is the delayed announcement of the proposed
annual renewable fuel standards. Each year’s standards are supposed to be announced by
November 30 of the previous year. EPA was two months late in issuing the 2013 standard. The
delay may lead to uncertainty in investments and planning for the biofuel and petroleum
industries, among others.
Investors and the cellulosic biofuels community alike may be more apprehensive about the
federal policy for advanced biofuels as 2016 draws nearer. There is a provision in the RFS statute
that requires the EPA Administrator, starting in 2016, to modify the applicable volumes of the
RFS in its entirety for subsequent years if the Administrator waives the renewable fuel mandate,
the advanced biofuel mandate, the cellulosic biofuels mandate, or the biomass-based diesel
mandate by at least 20% for two consecutive years or by at least 50% for a single year.65 As a
result, in 2016, some biofuel industries (e.g., corn ethanol) that are satisfying their mandates may
find that they are being penalized because of another biofuel industry (e.g., cellulosic biofuel) that
is not meeting its specified mandate.
62 John M. Biers, “Non-Food Ethanol Projects Coming to Life,” Dow Jones Newswires, November 20, 2012.
63 Russel Gold and Siobhan Hughes, “Biofuel Production Fall Far Short of Targets,” Wall Street Journal, February 4,
2010.
64 “Oil Industry Sues EPA A Second Time Over RFS Mandate,” The Energy Daily, July 26, 2012.
65 42 U.S.C. 7545 (o)(7)(F).
Congressional Research Service
11
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
How Many Commercial Cellulosic Biofuel
Plants Exist?
EPA reports that cellulosic biofuel production in the United States remains limited.66 In its 2013
proposed rule, EPA provides information on eight companies with the potential to produce
cellulosic biofuels, including their biofuel production estimates, technology process, and
anticipated start dates.67 Six of the facilities identified in the 2013 proposed rule were also
identified in the 2012 final rule. EPA reports that five of these six facilities are structurally
complete. In addition, at least six companies have registered with the EPA fuels program, which
may indicate they have already started or are close to actual cellulosic biofuel production.68
As observed over the last few years, due to unforeseen financial and technical issues, it can be
difficult to gauge when or if cellulosic biofuel companies will actually come online and how
much cellulosic biofuel will be produced. Approximately two dozen demonstration- or pilot-scale
cellulosic ethanol plants are reported to exist currently in the United States.69 The Advanced
Ethanol Council reports that there are nine cellulosic biofuel pilot/demonstration facilities, eight
commercial facilities under construction or commissioning, and seven commercial facilities at the
engineering stage.70 Environmental Entrepreneurs—a national community of business leaders—
reports that 16 commercial cellulosic ethanol facilities will come online by 2015.71
What’s Next for the RFS Cellulosic Biofuels
Mandate?
The shift toward large-scale, economically feasible production of cellulosic biofuels has thus far
proven to be illusive. Advancements have been made, but not in step with the pace set by
Congress for the RFS. Multiple factors have contributed to the cellulosic biofuels market being at
the stage it is today, with the two major factors being technological issues and a recession that
slowed the economy, including energy demand. Due to production shortfalls, EPA has
significantly reduced the cellulosic biofuels mandate. It appears that Congress overestimated how
66 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013.
67 Ibid.
68 American Process Inc., INEOS Bio, Poet, Western Biomass Energy, Range Fuels, and KiOR have registered
cellulosic biofuel production facilities under the RFS program and are eligible to generate cellulosic biofuel D3 RINS
or cellulosic diesel D7 RINs.
69 Wallace E. Tyner and Sarah Brechbill, “Cellulosic Biofuels: Feedstocks, Conversion Technologies, Economics, and
Policy Issues,” CRS Workshop on the Development of the U.S. Cellulosic Biofuels Industry, Washington, DC, October
6, 2009; and conversation with Wallace Tyner from Purdue University, February 2, 2010; CRS Report R41460,
Cellulosic Ethanol: Feedstocks, Conversion Technologies, Economics, and Policy Options, by Randy Schnepf; EPA,
Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis, EPA-420-R-10-006, Washington, DC,
February 2010, pp. 171 and 186, http://www.epa.gov/oms/renewablefuels/420r10006.pdf.
70 Advanced Ethanol Council (AEC), Cellulosic Biofuels Industry Progress Report 2012-2013, December 2012,
http://ethanolrfa.org/page/-/PDFs/AEC%20Cellulosic%20Biofuels%20Industry%20Progress%20Report%202012-
2013.pdf?nocdn=1.’ AEC acknowledges the report does not profile all cellulosic biofuel projects under development in
the United States.
71 Environmental Entrepreneurs, Advanced Biofuel Market Report 2012: Meeting U.S. Fuel Standards, 2012.
Congressional Research Service
12
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
much cellulosic biofuel production would occur on an annual basis. It also appears that projecting
the production amount continues to be a challenge for both EPA and EIA.72 Thus, it is difficult to
state with certainty how much cellulosic biofuel may be produced in the future and in what time
frame.
If mandate reductions and continual production shortfalls signify that the cellulosic biofuels
mandate is not working as intended, Congress could decide modifications are necessary.
Advocates of cellulosic biofuels may find it beneficial for Congress to make the mandate more
attainable in the near term (e.g., two to five years), primarily so that the industry has more time to
show whether large-scale commercial production is economically feasible. Opponents may view
any additional congressional action to assist the cellulosic biofuels community as harmful to the
entire renewable energy market in the long run, as some believe that it could be extending the life
of dead-end technologies.
The Role of Congress
Congress will continue to be the final arbiter over the future of the RFS. Should the RFS be
continued in its present form, abridged, or eliminated completely? What additional public costs
would each of these options engender? The discussion about whether the cellulosic biofuels
industry requires additional federal support to meet the RFS mandate has occurred since the
inception of the RFS; however, the discussion became more pronounced when the RFS was
expanded in 2007 to call for a much larger volume of cellulosic biofuel to be produced in a
shorter timeframe. In response, Members of the 111th and 112th Congresses proposed a variety of
bills that could have impacted the cellulosic biofuels industry (see Table 2). The 112th Congress
passed legislation that may aid the industry. In particular, the American Taxpayer Relief Act of
2012 (ATRA, P.L.112-240) extended the cellulosic biofuel production tax credit and the cellulosic
biofuel plant special depreciation allowance to 2013, and included algae as a qualified feedstock
for both tax incentives. ATRA also renamed the tax credit and depreciation allowance to “second
generation” biofuel, removing the term “cellulosic.”
One option for Congress could be modification of the cellulosic biofuels mandate, and thus the
RFS. This option could require an analysis of the cellulosic biofuels market and, perhaps more
importantly, consideration of circumstances that were not as prevalent when the RFS was
expanded in 2007. Some of these circumstances include budget concerns, the blend wall,73
military interest in renewable fuels,74 and the slow development of the cellulosic biofuels
production sector. Such an analysis might quantify the amount of federal support already granted
to the cellulosic biofuels industry. EPA reports that six of the eight production facilities
considered to be front-runners for the industry have received or were offered significant federal
financial support (approximately $637 million) in the form of grants and loan guarantees from
72 EIA reports that “its forecasts and projections to date have proven to be too optimistic, as volumes have been below
expectations.” U.S. Energy Information Administration, Cellulosic biofuels begin to flow but in lower volumes than
foreseen by statutory targets, February 26, 2013.
73 The blend wall is the upper limit to the total amount of ethanol that can be blended into U.S. gasoline. For more
information, see CRS Report R40445, Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol “Blend
Wall”, by Brent D. Yacobucci.
74 Keith Johnson, “Navy’s Biofuel Plan Gets Senate Support,” The Wall Street Journal, November 28, 2012; P.L. 112-
81; H.Rept. 112-329.
Congressional Research Service
13
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
USDA and DOE between 2009 and 2012.75 One analysis of federal and public funding data for
advanced biofuel projects provided by Environmental Entrepreneurs suggest that, since 2009,
USDA and DOE have provided or offered some $1.28 billion in grants and loan guarantees to a
dozen companies that Environmental Entrepreneurs expects to have cellulosic ethanol facilities
come online by 2015.76
Table 2. Selected Proposed Legislation from the 111th and 112th Congresses
Pertaining to Cellulosic Biofuels
Congress Legislation
111th
•
S. 943 and H.R. 2283 would have waived the lifecycle greenhouse
gas emission reduction requirements for renewable fuel
production.
•
Section 129 of the American Clean Energy and Security Act of
2009 (H.R. 2454, also known as Waxman-Markey) would have
amended the Loan Guarantee Program to incorporate renewable
fuel pipeline construction.1
•
Title I of the American Clean Energy Leadership Act of 2009
(ACELA, S. 1462) would have amended the Loan Guarantee
Program and created a Clean Energy Deployment Administration,
under DOE, to advance lending and implementation of commercial
clean energy technologies.
112th
•
H.R. 230 would have modified the DOE Loan Guarantee Program,
appropriating funds for EPAct05 Section 1512 Conversion
Assistance for Cellulosic Biomass Waste-Derived Ethanol
Approved Renewable Fuels, establishing a loan guarantee program
for cel ulosic ethanol production technology development.
•
H.R. 424 would have amended the RFS to revert back to RFS1
targets and eliminated all advanced biofuel mandates
•
H.R. 851, H.R. 2231, S. 884, S. 1294 would have implemented new
financial support mechanisms, extending relevant tax provisions.
•
H.R. 6047 would have modified the way EPA projects yearly
cellulosic biofuel volume mandates.
Source: CRS.
Notes: Legislation is presented in order of House introduction.
When expanding the RFS in EISA, Congress in effect made a technology choice by selecting a
preferred technology (i.e., cellulosic biofuel) among many unknown technologies. Undoing that
commitment could involve substantial costs to both public and private investors. Another issue to
be analyzed may be a technology assessment to determine if selecting one unproven technology
for financial and policy incentives fits into a larger energy policy context.
75 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013.
76 Environmental Entrepreneurs, Advanced Biofuel Market Report 2012: Meeting U.S. Fuel Standards, 2012. CRS
tallied federal funding from Appendix D of the report for those companies with facilities coming online in the United
States before 2015 that were identified as producing the fuel type cellulosic ethanol in Appendix B of the report.
Congressional Research Service
14
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
Alternatively, Congress could take a wait-and-see approach to addressing concerns with the
cellulosic biofuels mandate. Given EPA’s consecutive lowering of the mandate by approximately
95% to 98% for each of the last four years, some question whether the cellulosic biofuels industry
can ramp up production over the next two years to meet the scheduled RFS mandates. There may
be an upcoming shift where some corn ethanol facilities plan to transition to cellulosic biofuel
production, and it is not known what effect this might have on cellulosic biofuel production
estimates.77 Further, some anticipate that additional feedstocks and production pathways may
qualify in the near future for the RFS cellulosic biofuel mandate. For instance, in February 2013,
EPA released a final rule that identifies additional qualified fuel pathways to generate cellulosic
biofuels, and allows renewable gasoline and renewable gasoline blendstock made from certain
feedstocks to qualify as cellulosic biofuels.78
Congress may find that a substantial portion of the cellulosic biofuels volume mandate is
unattainable for years to come. EIA reports that while “cellulosic biofuels volumes are expected
to grow significantly relative to current levels, they will likely remain well below the targets
envisioned in the Energy Independence and Security Act of 2007.”79 Congress has multiple
options to address the lack of cellulosic biofuels production. Congress could make a statutory
change to the definition of cellulosic biofuels for the RFS to open it up to additional feedstocks
that can assist with meeting the annual production targets. Or Congress may continue to require
EPA to set the cellulosic biofuels mandate based on the best available evidence. In the 113th
Congress, some Members have proposed legislation (e.g., H.R. 550, S. 251) that would require
EPA to base the cellulosic mandate on actual production from the previous year. Congress could
also eliminate the cellulosic biofuels portion of the mandate, or the RFS entirely. Alternatively,
Congress could maintain the status quo.
The Role of EPA
Congress directed EPA to implement the RFS. After assessing the cellulosic biofuels market,
consulting with EIA, and taking other measures, EPA has lowered—and in 2013 proposes to
lower again—the cellulosic biofuel mandate if the scheduled mandate cannot be met. Some
contend that EPA has not carried out its responsibilities regarding the RFS cellulosic biofuels
standard as expeditiously or accurately as desired. Some are not satisfied with the success rate of
meeting the cellulosic biofuels standard. Some could argue that EPA has a difficult job trying to
follow through on Congress’s directions, given the challenges in the cellulosic biofuels industry.
Further, it could be argued that any federal agency would likely find it difficult to accurately
project when a new technology selected by Congress, not yet proven at commercial scale, would
come online and at what pace. EPA can modify its projection procedure for cellulosic biofuels,
but any major changes to its procedure would likely require additional instruction from Congress.
With regard to the 2012 standard, a federal court responded to the question of whether EPA is
using an appropriate methodology to estimate the amount of cellulosic biofuels that can be
produced. The court ruling contains principles that EPA will have to apply in future standards as
77 POET LLC, “POET and Agrivida sign technology collaboration joint development agreement,” press release, August
21, 2012.
78 U.S. Environmental Protection Agency, Regulation of Fuels and Fuel Additives: Identification of Additional
Qualifying Renewable Fuel Pathways under the Renewable Fuel Standard Program, February 22, 2013.
79 U.S. Energy Information Administration, Cellulosic biofuels begin to flow but in lower volumes than foreseen by
statutory targets, February 26, 2013.
Congressional Research Service
15
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
well. EPA accepted the federal court’s decision to vacate the 2012 cellulosic biofuel standard.80
EPA’s proposed 2013 cellulosic biofuel standard of 11 million gallons (actual volume) is 2.35
million gallons more than the 2012 cellulosic biofuel standard of 8.65 million gallons. One could
interpret EPA’s 2013 cellulosic biofuels projection as being based on the same methodology the
court faulted for the 2012 standard. EPA stated, when issuing its proposed 2013 RFS cellulosic
biofuel standard, that the projection was consistent with the January 2013 ruling by the U.S.
Court of Appeals directing that EPA base its projection on the EIA estimate of available feedstock
supply.81 But the ruling does not require EPA to issue a carbon-copy projection based on EIA’s
analysis. However, the court discusses, at length, one significant factor that EPA does not appear
to address in the 2013 proposed standard—that is, EPA’s responsibility to accurately project how
much cellulosic biofuel will be produced, not to “individually advance a technology-forcing
[cellulosic biofuels] agenda.”82
There are at least two significant distinctions in the 2013 proposed rule compared to previous
rules: the discussions regarding feedstock supply, and the facility start dates and corresponding
ramp-up periods. In its proposed rule, EPA discusses feedstock supply more thoroughly than in
previous rules. EPA notes that feedstock agreements or contracts have been reached for
structurally complete facilities and for facilities expected to be complete by the end of the year.83
Additionally, EPA notes the possibility for cellulosic biofuel to be produced from other sources,
such as from corn fiber or landfill biogas, depending on if and when these pathways are approved
by EPA. Also, the proposed rule describes production start dates and ramp-up periods to reach full
production. However, there is minimal consideration of what happens if the production start dates
and ramp-up periods do not occur in the time frame projected by EPA, or if glitches occur with
feedstock arrangements during the first year of a commercial facility’s operation. Based on the
information provided in the proposed rule, there appears to be little margin for the cellulosic
biofuels industry to meet the proposed mandate. Given the success rate of meeting previous
cellulosic biofuels mandates, the approach outlined in the 2013 proposed rule seems optimistic
about what can happen without altogether accounting for what may occur (e.g., significant delays
in construction and start-up).
EPA has not been given much guidance by the court, or Congress, on how to calculate a cellulosic
biofuels projection, although the methodology the agency is currently using is under scrutiny
from the oil industry, among others, as evidenced by the recent court case concerning the 2012
cellulosic biofuels production projection and a pending court case addressing the 2011 projection.
If a projection is repeatedly not met and sources enlisted for assistance provide projections that
turn out to be wrong (e.g., EIA, cellulosic biofuel industry), should EPA at some point have set
the cellulosic biofuels standard at close to zero (e.g., 100,000 gallons) until actual commercial
production of a certain threshold was reached? Arguably, setting a standard too low could impact
federal support (e.g., grants, tax incentives) and private investment for the technology. This could
have hindered the overall goals of the RFS, economic development in rural areas, and more.
Prospects for the cellulosic biofuels industry could be affected if EPA continues to incorrectly
project annual amounts of cellulosic biofuel production.
80 U.S. Environmental Protection Agency, Enviroflash, Update - 2012 Cellulosic Biofuel Standard Mandate Issued,
February 27, 2013.
81 U.S. Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards;
Proposed Rule,” 78 Federal Register, February 7, 2013.
82 American Petroleum Institute v. Environmental Protection Agency, USCA Case #12-1139, January 25, 2013.
83 EPA reports that the INEOS Bio, KiOR, Poet, and Abengoa facilities all have feedstock agreements or contracts in
place.
Congressional Research Service
16
Meeting the RFS Mandate for Cellulosic Biofuels: Questions and Answers
Author Contact Information
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural
Resources Policy
kbracmort@crs.loc.gov, 7-7283
Congressional Research Service
17