By MARK DRAJEM
In the arid Imperial Valley of California, Tim Brummels is
trying to turn an agricultural cousin of sugarcane into
Its the kind of climate-friendly project
supporters have pined for
since Congress in 2005 ordered refiners to use more renewable
fuel. Even so, Brummels company -- Canergy -- is being
stymied by an unlikely culprit: the Obama administration.
al Protection Agency is
eight months past the deadline for issuing its mandate of how
much ethanol, biodiesel and other petroleum alternatives must
be blended into motor fuels this year, leaving investors wary
about the governments commitment to the program. At the
same time, cuts EPA proposed last year, and a surprise
regulatory rewrite last month, may undercut demand for
Right now the technology
works. Its the
regulatory barriers that are holding it back, Brummels,
the CEO, said in an interview after a meeting with the
administration to discuss his complaints.
The EPA is preparing to send its mandate to the Office of
Management and Budget for final review as soon as this week.
That will kick off the last-ditch lobbying campaign on the
2014 requirements, which were due by the end of November
Signed by President George W. Bush, the law was designed to
boost gasoline alternatives by forcing refiners to add
specified amounts of biofuel
s each year to motor fuels.
It requires increasing amounts each year and gives the EPA
authority to make adjustments in the event of supply
The agency has missed the deadline for issuing the
requirements in each of the past three years. Refiners such
as Valero Energy and Tesoro have had to guess what will be
required for 2014 -- and may have to make rapid adjustments
in the final months of the year if they guessed wrong.
The EPA shares the goal of getting back on the
statutory timeline, said Ben Hengst, associate director
of the EPAs transportation and air office. But
doing this on an annual basis is a big challenge.
President Barack Obamas administration also faces
conflicting pressures, with oil lobbyists jockeying with
makers of alternative fuels to bend the guidelines in their
favor. Production of cellulosic fuels such as those derived
from cornstalks and switchgrass have also failed to live up
to the promise.
The most recent delay comes as alternative fuel companies
such as Canergy, Royal DSM and a joint venture of BP and
DuPont say they are finally ready for market. Those companies
say the EPAs management of the Renewable Fuels
Standard, or RFS, has created turmoil.
When I talk to investors, one of the first questions I
am asked is, Whats going to happen to the
RFS? said Rebecca Boudreaux, president of Oberon
Fuels, a company making an alternative to diesel from natural
People are wary that if you build it, they may not
come, because they arent obligated to consume that
amount of fuel, said John May, a managing director at
Stern Brothers & Co. who does investment banking for
renewable energy companies.
is booming despite
proposed EPA cuts, in part because corn prices have fallen
due to a record crop last year and good forecasts for 2014.
It really hasnt affected corn-based ethanol much,
if at all, Scott Irwin, a professor of agricultural
economics at the University of Illinois at Urbana-Champaign,
said in an interview. The real losers, despite the
headlines, are advanced biofuels and biodiesel.
Corn ethanol faces its own pressures from critics who say
its bad for the environment
and consumers. The Environment
al Working Group said
EPA isnt taking into account the full climate hit from
producing a gallon of that fuel.
Theres no divide between the corn ethanol industry and
the rest of the renewable fuels producers, as many companies
produce several types of fuel, said Bob Dinneen, president of
the Renewable Fuels Association.
Theres more than just philosophic synergies
here, Dinneen said. Its largely the same
The EPA says its working to help establish the market
for the advanced biofuel
s. We are doing all
we can right now to push forward these fuels, the
EPAs Hengst said.
A draft of the 2014 standards released by the EPA Nov. 15
would require 15.21 billion gallons (57.58 billion liters) of
renewable fuels, including about 13 billion gallons (49
billion liters) of corn ethanol and 1.28 billion gallons of
biodiesel in 2014. Thats a cut from a 18.15 billion
gallon total set in the 2007 law.
After meeting with White House adviser John Podesta July 24,
Democratic Minnesota Senator Al Franken said the EPA would
raise the mandates from what it had proposed.
Some outside lobbyists say the White House is looking to
raise the requirements in part to boost the prospects of
Democratic Representative Bruce Braley, who is in a tight
race for the Senate in Iowa, the nations top corn
This is all politics at this point, Bob Greco,
head of the downstream group at the American Petroleum
Institute in Washington, told reporters last month.
Theres no reason for this thing to go on as long
as it has.
After years of disappointment, not everyone making fuels
beyond corn ethanol is losing.
In Iowa, DSM, a Dutch biotechnology
company, and ethanol
maker Poet joined together to build a plant that makes
from corn waste. The
plant, the first of its kind, is set to have its grand
opening Sept. 3, and the company has invited Obama and some
of his cabinet members to attend.
Anybody at the facility that day will no longer be able
to argue that its a phantom fuel, said Hugh
Welsh, DSMs president for North America. Once
is proved at a
commercial scale, you will see a lot of people interested in
Two other project
s, one by Abengoa and
another by Butamax Advanced Biofuels, the BP and Dupont joint
venture, are also opening so-called next-generation plants.
Lost in the shuffle are companies trying to get established
with fuels made from sources other than corn or soybeans.
They say that the government mandate is crucial to helping
their products get on the market.
The delay in issuing standards is hurting my guys the
most, because my guys are looking for financing to build
plants, Michael McAdams, president of the Advanced Biofuel
s Association, said in an
interview. The guys Congress intended to bring into
this have had the rug pulled out from under them.
Canergy, which is backed in part by the agribusiness company
CHS, and has partnered with local farmers to plant energy
cane in fields near the Mexican border. Energy cane is a
perennial crop similar to sugarcane that was bred to have
lower sugar content and more fiber, making it better for fuel
The outlook for its fuel was put in doubt on July 18 when the
EPA issued details on what kinds of energy cane can qualify
as cellulosic fuel. The guidelines left even researchers
funded by the Department of Agriculture funded scratching
I have no idea what their thinking is, and where they
are getting their numbers, said Donal Day, a professor
at the sugar institute of Louisiana State University, who has
a USDA grant to help develop and spread the use of the crop.
This is a game they are playing, or they just
dont understand it.
The agency said its reacting to conflicting requests
from producers of energy cane, producers of competitive crops
and refiners, who had requested tighter restrictions.
For Brummels, the confusion means he worries the cane
varieties he purchased from LSU may no longer qualify.
Who repays me for this misleading representation?
he said. With uncertainty, who will finance this?