Environmental and Energy Study Institute

May 2009

EESI Announcements

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  New BCO Format

Policy Updates

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  USDA Begins NEPA Process for Biomass Crop Assistance Program

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  USDA Budget Request Includes Increased Funding for Renewable Energy

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  EPA Releases Proposed Rule for Renewable Fuel Standard

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  President Obama Announces New Biofuels Interagency Working Group, Dedicates $786.5 Million to Biofuels Research

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  Senator Thune Introduces Bill to Change Greenhouse Gas Accounting Methodologies for Renewable Fuels

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  EPA Seeks Comments on Ethanol Blend Rate Request

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  Capturing Biogas: Good for the Climate, Environment, Heat and Power

Research and Technology Updates

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  Is the Future of Biofuels in Algae?

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  The Potential of Wood Energy in the United States

EESI is proud to unveil the new BCO format, redesigned to take full advantage of the new EESI content-driven website. In addition to the new style and appearance, we have begun to post advanced articles, feature stories, summaries of new legislation, and commentary directly to the EESI Sustainable Biomass and Energy web page. Throughout the month, please check there for the latest news, analysis, and perspectives. Advanced posting allows us to bring you more timely information and analysis on sustainable biomass and energy issues as they play out in Washington, throughout the United States, and across the world. We will also continue to periodically bundle these articles and deliver them to you under the Bioenergy, Climate Protection, and Oil Reduction (BCO) banner. We hope you will appreciate and value the more timely postings and original content. Please let us know what you think.

On May 13, the Commodity Credit Corporation, an arm of the U.S. Department of Agriculture, published a notice of intent to prepare an environmental impact statement for the Biomass Crop Assistance Program (BCAP). BCAP was authorized in the 2008 Farm Bill (P.L. 110-246, Section 9011) to provide financial assistance for the establishment, harvest, storage, and transport of biomass feedstocks for energy production. As part of compliance with the National Environmental Policy Act (NEPA) of 1969, the federal government is seeking public input to help understand the potential environmental impacts of implementing BCAP.

USDA and the CCC have scheduled a series of scoping meetings around the country, to be held between May 28 and June 11, 2009. The purpose of these meetings is to obtain public participation in developing two alternatives for BCAP implementation – a broad national implementation of the program as well as a targeted implementation to specific areas or regions of the United States.

Details about the meetings, including times and locations, are available in the federal register notice.

On May 7, 2009, President Obama released his FY 2010 Federal Budget Request. The FY 2010 budget includes $513 million dollars for USDA Farm Bill Energy Programs ($391 million in mandatory funds and $122 in additional discretionary funds). This represents an increase of $242 million over FY 2009 appropriation levels, an increase of 89.3%.

• The Biorefinery Assistance Program (Sec. 9003), which provides grants and loan guarantees for facilities producing advanced biofuels, received $262 million in the President’s budget, including $245 million in mandatory funds and $17 million in additional discretionary funds. Representing more than half of the entire budget for farm bill energy programs in FY 2010, this budget request reflects ongoing commitment in Congress and the Administration to accelerating deployment of advanced biofuels technologies.
• The Rural Energy for America Program (Sec. 9007), a popular and successful program providing funds for renewable energy deployment in rural areas, received $128 million – an increase of 113% over FY 2009 funding levels. In addition to $60 million in mandatory funds, the President requested an additional $68 million in discretionary funds for this program in FY 2010.
• The Value-Added Agricultural Market Development Program (Sec. 6401) was not authorized for mandatory funds in FY 2010, but the President’s budget maintains funding levels for this program, requesting $22 million in discretionary funds.
• The Repowering Assistance Program (Sec. 9004) received $35 million in mandatory funds in FY 2009, but was zeroed out in the FY 2010 budget.
• The Rural Energy Self-Sufficiency Initiative (Sec. 9009), Forest Biomass for Energy Program (Sec. 9012), and Community Wood Energy Program (Sec. 9013) were not included in the President’s FY 2010 budget. The 2008 Farm Bill authorized $5 million, $15 million, and $5 million in discretionary funds, respectively, for these three programs in FY 2010
• The Feedstock Flexibility Program for Bioenergy Producers (Sec. 9010) is mentioned in the budget text, but it is not included as a numerical budget item. This reflects the intended revenue-neutrality of the program.

For more information, see full EESI release.

On May 5, EPA Released an advanced copy of a proposed rule for the Renewable Fuel Standard (RFS), as amended by the Energy Independence and Security Act (EISA) of 2007 (P.L. 110-140). The proposed rule outlines the methods by which EPA intends to ensure that refiners, importers, and fuel blenders blend the mandated volume of renewable fuels into the nation’s fuel supply. The proposed rule addresses the registration process, methods for generating and managing Renewable Identification Numbers (RINs), eligibility requirements, determination of Renewable Volume Obligations (RVOs), compliance procedures, recordkeeping and reporting requirements, and other provisions.

Two especially difficult challenges facing EPA in implementing the RFS are determining feedstock eligibility and developing methods for determining the lifecycle carbon footprint of renewable fuels. EISA 2007 included a complex definition of renewable biomass, with a number of site-level and landscape-level criteria determining whether a particular feedstock is eligible. As a result of this definition, EPA must develop a system for verifying and keeping track of when, where, and how feedstocks are produced as they change hands and move from field to fuel. In the proposal, EPA is requesting public input on how to go about designing such a system.

EPA is also tasked with developing a methodology for determining the lifecycle carbon footprint of renewable fuels, as a result of the greenhouse gas emissions performance standards (“emissions screens”) written into EISA. The law explicitly directs EPA to take into account the direct emissions associated with biofuel production as well as indirect market-driven emissions, such as indirect emissions from land use change (ILUC). ILUC is a relatively new concept and there is a great deal of uncertainty around many of the parameters and assumptions necessary to integrate it into a lifecycle analysis framework. EPA’s preliminary attempts to estimate the carbon footprint of renewable fuels suggest that many biofuels, including soy-based biodiesel and some forms of corn-based ethanol, do not meet the greenhouse gas performance standards included in EISA. EPA intends to conduct additional peer-review of its lifecycle analysis methodology in tandem with the public comment process.

These two issues are not only technically challenging for EPA, they have been extremely controversial in Congress and among stakeholders. A number of bills have been introduced to alter both the greenhouse gas performance standards (see the article “Senator Thune Introduces Bill to Change Greenhouse Gas Accounting Methodologies for Renewable Fuels”, also in this issue) and the definition of renewable biomass (including, most recently, Rep. DeFazio’s (D-OR) introduction of H.R. 2364. On May 6, the House Committee on Agriculture, Subcommittee on Conservation, Credit, Energy, and Research held a public hearing to review the impacts of ILUC provisions and the renewable biomass definition on the RFS. At the hearing, expert witnesses, as well as Members of Congress, identified a number of problems associated with the ILUC provisions and the narrow definition of renewable biomass included in EISA.

EPA’s proposed RFS rule has not yet been published in the Federal Register. Public comments are due within 60 days of publication.

On May 5, President Obama announced the creation of a new Biofuels Interagency Working Group, to be headed by the Administrator of the Environmental Protection Agency and the Secretaries of Agriculture and Energy. The group will coordinate policies to assist the development of new biofuels, aid construction of essential infrastructure, and promote the sustainability of biofuels feedstock production. Obama also announced the release of $786.5 million in new funds for biofuels research and commercialization, broken down into the following areas:

• $480 million for integrated pilot and demonstration-scale biorefineries, which will integrate the production of advanced biofuels, bioproducts, and heat and power.
• $176.5 million for commercial scale biorefineries to expedite the start-up of the first-of their-kind projects.
• $110 million for research in key program areas, including algal biofuels, infrastructure development, and sustainability research.
• $20 million for ethanol research, particularly for flex fuel vehicles operating on high octane E85 fuel.

“Developing the next generation of biofuels is key to our effort to end our dependence on foreign oil and address the climate crisis -- while creating millions of new jobs that can't be outsourced,” said Energy Secretary Steven Chu. “With American investment and ingenuity -- and resources grown right here at home -- we can lead the way toward a new green energy economy.”

On April 30, Senator John Thune (R-SD) introduced a bill (S. 943) providing new direction to EPA in determining the carbon footprint of renewable fuels. Currently, the national Renewable Fuel Standard (RFS) requires that renewable fuels meet specific emissions reduction thresholds (greenhouse gas emissions "screens") in order to be eligible for the program. As the law is currently written, EPA is required to determine the carbon footprint of each fuel based on both direct emissions and significant indirect emissions. Direct emissions are the measurable, quantifiable emissions incurred while growing and harvesting biomass, as well as producing and using the fuel. Indirect emissions, on the other hand, are market-mediated emissions that are assumed to occur as a result of demand-driven expansion of global agriculture. The inclusion of indirect emissions in greenhouse gas accounting has been a controversial issue, with many arguing that current estimates are insufficiently supported to justify inclusion in public policy at this time.

S. 943 would require the EPA to count only the direct emissions in making this assessment. Furthermore, the bill would prohibit states from including indirect emissions in state-level policies. Both EPA and the California Air Resources Board (CARB) have recently released greenhouse gas accounting methodologies that include indirect emissions. Consequently, both methodologies come up with carbon footprints for several common renewable fuels (such as corn ethanol and soy-based biodiesel) that are higher than their petroleum counterparts.

In addition to the indirect emissions provisions, Senator Thune's bill would grant the EPA authority to waive the emissions screens altogether if they prove unachievable, if they are resulting in economic harm to the renewable fuels industry, or if they are contributing to increased petroleum dependence. On May 5, Representative Jerry Moran (R-KS) introduced similar legislation (H.R. 2283) in the House of Representatives.

On April 16, the Environmental Protection Agency (EPA) announced it is seeking public comment regarding a request from ethanol producers for a waiver under section 211(f)(4) of the Clean Air Act to permit ethanol blends with gasoline of up to 15 percent (E15) by volume. The current blend rate is set at about 10 percent. On May 15, EPA extended the public comment period to July 20. 2009. By law, the EPA must make a decision by December 1, 2009.

Growth Energy and 54 ethanol producers submitted the application to increase the blend rate on March 6, 2009. Ethanol proponents argue that increasing the blend rate is needed to keep pace with the renewable fuel mandates under the 2007 Energy Independence and Security Act and to assure continued investment in bringing next generation biofuels to market. The law requires 11.1 billion gallons of renewable fuel (mainly ethanol) to be blended in 2009, 12.95 billion in 2010, 13.95 billion in 2011, rising steadily to 36 billion gallons by 2022.

With reduced liquid fuel demand due to the recession, ethanol producers are concerned that the market will soon reach a blend wall at the 10 percent blend rate, a point at which the liquid fuel market is saturated below the mandated ethanol production level. Many environmental and consumer groups and small engine and car manufacturers are concerned that the increased blend rate might damage pollution control equipment, reduce air quality, and undermine vehicle and equipment performance and warrantees. The EPA and Department of Energy are currently testing the effects of higher blend rates on engine performance and emissions.

For more information, go to http://www.epa.gov/otaq/additive.htm

Bipartisan legislation has been introduced in both the House and Senate to encourage livestock producers and processers and landfill operators to capture and use the climate-warming methane gas that is emitted from livestock, landfill, and sewage plant operations. Capturing biogas, which is composed mostly of methane and which, with processing, can be used interchangeably with natural gas, is an important way that the U.S. could quickly reduce a potent source of greenhouse gas emissions and replace fossil fuel sources with a clean, renewable source of heat and power.

Senators Ben Nelson (D-NE), Mike Crapo (R-ID), Mike Johanns (R-NE), Sherrod Brown (D-OH), John Thune (R-SD), Ron Wyden (D-OR), and Debbie Stabenow (D-MI) introduced the Biogas Production Incentive Act of 2009 (S. 306). The bill would provide farmers and landfill operators a tax credit of $4.27 per therm (1 million BTU) for biogas produced from qualified feedstocks and used for energy over a period of 10 years.

“This new energy source would benefit rural communities and the environment while lessening our dependence on fossil fuels and ensuring energy security. We shouldn’t waste the waste; we should promote biogas development,” said Sen. Nelson in a press release introducing the bill.

A similar bill (H.R. 1158) has been introduced in the House by Representative Brian Higgins (D-NY) and a bipartisan group of cosponsors.

According to the U.S. EPA, methane remains in the atmosphere for approximately 9-15 years, and is over 20 times more effective in trapping heat in the atmosphere than carbon dioxide. Landfills are the leading source of U.S. methane emissions, followed in rank order by leaking natural gas systems, enteric fermentation, coal mining, manure management, and waste water treatment.

Globally, landfills are the third largest source of methane emissions from human activities and accounted for 12 percent of global methane emissions in 2005 (almost 750 million metric tons of CO2 equivalent). U.S. landfills accounted for about 17 percent of those emissions. Livestock manure management contributed to roughly four percent of global methane emissions (230 million metric tons of CO2 equivalent), of which U.S. emissions accounted for 17 percent.

Simply burning (flaring) the gas can drastically reduce greenhouse gas emissions and could provide carbon offset opportunities. However, using biogas instead of fossil fuels to generate electricity, heat, or liquid fuel not only further reduces emissions, but can also replace the use of other fossil fuels as a clean, cost-effective, renewable energy source. Biogas is particularly appealing to farmers because, in addition to the energy benefits, the anaerobic digestion process that is used controls manure odor, reduces harmful water run-off, and produces a liquid manure.

According to the EPA’s AgStar website, 125 farms in the U.S. are using anaerobic digesters to capture the gas, producing more than 290,000 MWh in 2008. EPA estimates that there are about 7000 livestock operations in the U.S. that could cost-effectively use such a system, potentially producing more than six million megawatt hours of power per year.

For example, Patterson Farms, Inc. of Auburn NY, an 1,800 head dairy farm, installed an aerobic digester to control odor and improve manure management. The farm mixes the manure with food waste from a nearby cheese plant run by Kraft Foods, which pays a tipping fee. The farm uses the gas to heat the digester and to produce electricity.
In another example of a successful and innovative biogas project, ethanol producer Poet recently announced the completion of a 10-mile landfill gas (LFG) pipeline from the Sioux Falls Regional Sanitary Landfill to its 105 million gallon per year ethanol plant. The pipeline, which has been supplying the plant’s boilers with LFG since late February, provides additional revenue to Sioux Falls and lowers the ethanol plant’s energy costs.

Rural small businesses and agricultural producers are already eligible to apply for grants and loan guarantees for renewable energy and energy efficiency projects, including anaerobic digesters, authorized under Section 2007 of the 2008 Farm Bill (P.L. 110-246), the Rural Energy for America Program (REAP).

As America tries to wean itself off of fossil fuels, it is turning to renewable sources of energy such as wind, solar, hydroelectric, and biomass. The transportation industry relies almost entirely on petroleum, and it accounted for almost 30 percent of all U.S. greenhouse gas (GHG) emissions in 2006. Transportation is the fastest growing source of GHG emissions, according to the U.S. EPA.

Alarmed by high fuel prices, a costly dependence on imported oil, and rising GHG emissions, Congress passed the Renewable Fuel Standard (RFS) in 2005 and strengthened it in 2007, under the Energy Security and Independence Act of 2007 (P.L 110-140). The law requires biofuel production to climb from 9 billion gallons in 2008 to 36 billion gallons in 2022. Of the 36 billion gallons, no more than 15 billion gallons can be corn-based ethanol, the remainder being advanced biofuels that meet at least a 50 percent GHG reduction requirement.

Algae has emerged as a promising feedstock for future biofuels due to its high energy content, energy yield per acre, fast growth, and ability to grow in water of varying quality. Algae’s potential, at least in theory, is remarkable. According to the U.S. Department of Energy (DOE), algae may be able to produce 100 times more oil per acre than soybeans—currently the leading source of U.S. biodiesel—or any other terrestrial oil-producing crop. Because of its high energy content, oil from algae can be refined into biodiesel, green gasoline, jet fuel, or ethanol. Lastly, algae needs only water, sunlight, and CO2 to grow. And, it grows rapidly.

That said, cultivating algae on a commercial scale is no easy task. The industry is still testing a wide variety of methods for growing algae - open ponds, closed bioreactors, or other processes. Bioreactors have proven to be most effective in producing high quality algae at the fastest pace, but they are expensive, and experts such as John Benemann, who has over 30 years of experience in microalgae biofuels, question whether they are economically feasible for commercial scale production. Open ponds, which Benemann says account for 98 percent of commercial algae biomass production as of 2008 (including algae grown for nutritional products), are significantly cheaper, but are susceptible to contamination by native algae species, evaporation, and usually produce lower energy density algal oil.

Sapphire Energy, a leading California-based Algal biofuel company which has raised over $100 million in capital, is investing in developing open pond methods. The company plans to produce a “green crude” oil that can be refined into fuels that are chemically indistinguishable from petroleum-based jet fuel, gasoline, and diesel, and therefore, will require no special distribution infrastructure or engine modifications. The company reports that it will be producing 1 million gallons per year of diesel and jet fuel by 2011, and 1 billion gallons per year by 2025—equal to 3 percent of the RFS mandate.

As reported in the last edition of BCO, Solazyme, another one of the top three best-financed algae biofuel companies, reports that it is on track to become economically competitive in 24 to 36 months. They have a unique closed pond technology where sugar is used as algae feed. A recent study, using Argonne National Lab’s GREET model, concluded that the "full lifecycle greenhouse gas (GHG) emissions from field-to-wheels for Solazyme's algal biofuel, Soladiesel^TM, are 85 to 93 percent lower than standard petroleum based ultra-low sulfur diesel.”

More recently, Origin Oil announced it has developed a new process to extract oil from algae in a single step process. A time lapse video, available on the company website (http://www.originoil.com/), shows the oil rising to the water’s surface as the algae falls. “Origin Oil plans to rapidly commercialize the patent-pending process for use by others in the fast-growing algae industry” according to a press release.

Despite industry optimism, many challenges remain. It is unclear if current lab experiments and pilot programs can be scaled up. Other technical challenges exist including: identifying oil-rich algae varieties; identifying processes for the economic extraction of oils from algae, and identifying commercially viable “co-products.” The cost of producing algae-based fuels remains exorbitant. Beyond the technical challenges, issues such as land- and water-use will need to be addressed going forward if algae is going to make a sizable contribution to the liquid fuels market.

Many in the industry admit algae cultivation simply for biofuels may not be profitable and the industry needs to take advantage of the market for high-value co-products such as nutraceuticals, fertilizers, and the biomass waste product as a cellulosic ethanol feedstock.

Overcoming today’s obstacles means investing in research and development. The federal government is also looking into algae as a potential source of fuel—again. The National Renewable Energy Laboratories has restarted its algae program that was abandoned in 1996 after nearly thirty years in existence. NREL has partnered with Chevron to develop algae strains that can be economically harvested and processed into transportation fuels. The Defense Advanced Research Projects Agency (DARPA), a division of the Department of Defense, is also looking into the use of algae as an alternative source for jet fuel.

The military and airlines are increasingly interested in algae because it can produce “drop-in” jet fuel that meets the specific requirements of aviation which ethanol cannot. Both are searching for a reliable, non-petroleum-based, climate-friendly fuel. In fact, algae has already been used in test flights conducted by a number of international airlines including Continental. Their research and development efforts could be instrumental in overcoming the challenges to commercial production. Testifying before the House Committee on Science and Technology, Billy Glover of The Boeing Company predicted renewable jet fuels would be commercialized around 2015 with Jatropha, Camelina, and halophytes as the primary feedstocks in the near term and algae in the long term.

The DOE is offering awards of up to $15 million and $40 million for integrated biorefinery pilot and demonstration projects, respectively, that aim to produce advanced biofuels from various feedstocks including algae. Applications are due by May 29, 2009.

An article in the March 13 edition of Science ("Wood Energy in America") finds that wood energy can provide economic, social, and environmental benefits for many areas of the United States while lowering greenhouse gas emissions, reducing dependence on foreign oil, and stimulating local economies. Duke University professor Daniel deB. Richter led the team of ecologists, foresters, and energy professionals from a consortium of institutions who participated in the study. The authors argue advanced wood combustion (AWC), which can provide clean heat, cooling, and electricity, can be rapidly implemented in U.S. communities with sustainable wood supplies.

To expand the wood energy economy, the authors recommend three initiatives. First, make AWC the preferred system of power for new construction and renovations in counties with sustainable wood feedstocks. Second, utilize diseased trees and wood from construction sites and other sources of urban wood as a source of fuel. Lastly, take advantage of district-energy systems tied to AWC by supplying heat from a centralized location to a greater number of sites.

The U.S. lags far behind Europe in terms of adopting wood energy, but the use of wood energy is increasing in the domestic energy market. While AWC may not be sustainable or cost-effective for all areas of the U.S., the authors contend adequate wood supplies exist to fuel AWC facilities serving towns, industrial complexes, schools, and other institutions in many regions, particularly in the Southeast, Northeast, and West. Downtown St. Paul, Minnesota, for example, relies almost exclusively on wood energy for its heat and power. In the south, Southern Company was just granted permission to convert a Georgia coal-fired power plant to a renewable wood biomass-fired plant. The 96 megawatt plant will draw on biomass from a 100 mile radius and power 600,000 homes, making it one of the largest biomass plants in the country. On a smaller scale, wood pellet stoves have become popular in the Northeast and Northwest, especially as home heating oil prices spiked recently.

All indications suggest wood energy use will continue to grow in the U.S., especially if federal policies are enacted that drive the energy market toward low-carbon, renewable sources - such as a national renewable energy standard (RES) or legislation to cap and trade emissions of greenhouse gases. According to a recent study by the Southern Alliance for Clean Energy, biomass represents two thirds of the southeast's near-team potential for expanding renewable energy. In one of the most comprehensive national feedstock studies (the "billion ton" study) to date, DOE and USDA determined American forests can sustainably produce 368 million dry tons of wood for energy per year.

These findings are encouraging for the biomass industry, but more, in-depth study is certainly needed to determine how these resources can be developed sustainably and economically. Biopower facilities and wood pellet manufacturers currently rely primarily on sawdust and residues left over from wood products manufacturing, logging, and other 'waste' sources, but these sources are limited and highly dependent on fluctuating markets for traditional wood products. There is concern that a rapidly expanding bioenergy industry will eventually compete for pulpwood and other primary forest resources. Competition between the different wood products industries could result in over-harvesting and higher prices for bioenergy feedstock. As cellulosic ethanol becomes commercially viable, there will be even greater competition among bioenergy facilities and other wood-users for limited feedstocks. Eventually, some bioenergy applications could be priced out of the market altogether, especially if the price of solar, wind, and other renewable sources of energy continue to fall. Basic market forces will sort out some of this demand, but an F & W Special Report (Thomas, M. 2009. "New Industries Compete for Small Trees; Is Field Level?" F &W Forestry Services, Inc. Special Report: Winter 2009: 4-6.) warns that overlapping government incentives and mandates may artificially grow the industry beyond a level that is ecologically and economically sustainable.

It is unclear how big a role wood will play in addressing the nation's energy and climate challenges in the coming decades, but it shows significant promise for the short- to mid-term for reducing greenhouse gas emissions and meet renewable energy goals quickly, cleanly, efficiently, and affordably. Finding a sustainable balance and establishing a sufficient policy framework to encourage its development will be paramount to the future of wood energy in the United States.