# Renewable **Fuels Standard Program**  **and Agriculture**

**Fa rm**  **, R anch, and R** 

**ural Communities Fe**  **deral Advisor y Committee Meeting**  **August 2009**2 

# Agenda

 

# Process update and review of key provisions in EISA and the Notice of Proposed Rulemaking (NPRM)
– The key relations to Agriculture

 

# Lifecycle impacts and GHG thresholds  

# Direction  

# Results  

# Recent Peer Review

 

# Other important interpretations and provisions in NPRM

 

# Overview of proposed program impacts assessments

 

# Concluding thoughts and questions3 

# RFS2 Process Overview / Update

 **On May**

**5 , A**  **dministrator Jackson**  **signed the Renewable Fuel Standard**  **(RFS2) proposal**  Proposal interprets EISA 2007 revisions to the original EPAct RFS program  Lays out these proposed changes, including alternative options, for public comment
 **Some of the rev isions**  **that are interpreted**  **and discussed in the proposal**  **include:**  Significantly increased volumes of renewable fuel  Separation of the volume requirements into four separate categories of renewable fuel:  Changes to the definition of renewable fuels to include minimum lifecycle GHG reduction thresholds  Restrictions on the types of feedstocks that can be used to make renewable fuel, and the types of land that can be used to grow feedstocks  Inclusion of specific types of waivers
 **May**

**2 6**  **th Publication**  **of NPRM in Federal Register**  **opened 60**  **- day**  **p ublic**  **comment period**   Comment Period Originally Set to Close July 27 th  **Extended until September**  **25th**
 **Public hearing on proposal**  **held for June 9 in**  **Washington**
 **Two -**  **day**

**l ifecy**  **cle workshop held June**  **10 -**  **11 in Washington,** 
 **Peer rev iew**  **s conducted**  **/ completed of sev**  **eral key**  **a spects**  **of lifecy cle**  **methodology**  **Avail ability**  **An nounced**  **Au gust**  **7th**
 **Ag ency**  **intends to finalize**  **rule by e**  **nd of 2009 and implement program in 2010**4 

# New Provisions Are Focus of Primary Discussions on NPRM

 

## Lifecycle **assessments require groundbreaking analysis**  **and model dev**  **elopment**  

### Formal independent expert peer reviews were conducted on four areas of the lifecycle assessment that in particular charted new ground: 1. Land use modeling (use of satellite data/land conversion GHG emission factors) 2. Methods to account for variable timing of GHG emissions (time horizon and discounting) 3. GHG emissions from foreign crop production (modeling and data used) 4. How the models EPA relied upon are used together to provide overall lifecycle estimates  

## Renew **able Biomass Definition and implementation approaches**   

### Subject of many individual stakeholder discussions  

### Subject of various legislative proposals  

## Program Structure / Compliance Changes  

### Key interest of obligated parties and others affected by the regulations
 

## Standards come up against the “blend w **all”**  

### Growth Energy Petition - March 6 th 

### , 2009 - requesting waiver for E15 blends  

### Comment period closed July 20  

### EPA decision required by Dec 15 

# Increase Mainly From Cellulosic/Advanced Biofuel

0 5 10 15 20 25 30 35 40

2009 2010 2011 2012 2013 2014 2015 20 16 2017 2018 2019 2020 2021 2022 **Year B** **i l** **l i** **o n** **G a** **l l** **o n** **s** Advanced Biofuel: Unspecified Advanced Biofuel: Biomass-Based Diesel Advanced Biofuel: Cellulosic Biof uel Conventional Biofuel



## RFS17 

# Key Standard: Lifecycle Thresholds **Four Separate Standards**  

### Cellulosic **Biofuel: 16 billion gallons by**  **2 022**  **– Minimum 60%** **G HG Reduction**   Renewable fuel produced from cellulose, hemicellulose, or lignin  E.g., cellulosic ethanol, BTL diesel, green gasoline, etc.  

### Biomass **- Based Diesel: 1 billion**  **gallons by 2**  **012 and bey ond**  **– Minimum 50%**   Biodiesel, “renewable diesel” if fats and oils not co - processed with petroleum  

### Ad **vanced Biofuel: Minimum of 4 billion**  **additional gallons by**  **2 022**  **– Minimum 50%**   Essentially anything but corn starch ethanol  Includes cellulosic biofuels and biomass - based diesel  

### Conv **entional Biofuel** : **Up to 15 billion gallons**  – Minimum 20%

 Ethanol derived from corn starch
– or any other qualifying renewable fuel  Only applies to fuel produced in new facilities* 

### NOT **ES:** ***Existing biofuel facilities**  **not required to meet conv entional biofuel**  **GHG threshold EISA**  **l anguage permits EPA**  **t o adjust the lifecy**  **cle GHG thresholds by a**  **s much as 10%**  (60% to 50%; 50% to 40%; 20% to 10%)

 Based on the market availability of fuels that could count as advanced biofuel, we have proposed that the GHG threshold for advanced biofuel be adjusted to 44% or as low as 40%8



# Lifecycle Methodology and Results9 

# Lifecycle GHG Thresholds

 

### Lifecy **cle GHG**  **analy sis**  **is integral to the new RFS2 Standards**   

### Defined and required by EISA  

### Without a determination of whether a fuel does or does not comply with the thresholds, the program cannot be implemented as intended by Congress
 

### GHG **thresholds are defined**  **as the % r**  **eduction in**  **lifecy cle**  **GHGs for a renew**  **able fuel**  **in comparison to**  **the 2005 baseline gasoline**  **or diesel that it displaces**  

### Lifecycle GHG estimates are only used to categorize renewable fuels into the four standards, not to value them (market determines value)
 

### We hav **e conducted**  **lifecy cle**  **analy sis**  **for a v ariety** **o f**  **renew able fuel**  **pathw ay**  **s**  

### Additional analysis for final rule is expected to expand the list of pathways and revise input assumptions based on new information  

### Also proposing a "default" mechanism that would allow some renewable fuels to temporarily generate RINs even if we did not explicitly analyze their lifecycle GHG impacts
 

### While each renew **able fuel pathw**  **ay h**  **as a unique lifecy**  **cle GHG**  **emissions impact**  **in grams/mmBtu, for**  **RFS2 regulatory p**  **urposes these lifecy**  **cle emissions**  **are used only** 

**t o**  **compare each pathw**  **ay t**  **o the applicable**  **threshold and assign**  **it to**  **one of the four renew able fuel**  **categories**10 

# Key Factors in Land Use Assessment

 

# Analy **sis revealed w hich**  **factors have the most significant**  **impact on the final**  **results including:** 
 

# What **ty pe of land is converted?**   

## Use of historic satellite data to project type of land converted  

## Alternative approach - use economic models to predict type of land converted  

# What **time period to consider and wh**  **ether to apply**  **a discount rate**  **to emissions over time?**
 

# We conducted **additional sensitivity analy**  **ses around these and**  **other factors** 11 

# Presentation of LCA Results in NPRM

 

# Thorough **description of our new m**  **ethodology a**  **nd results**
 

# Acknow **ledges uncertainty**  **, particularly**  **f or land**  **- use change**  **impacts**
 

# Presents the results, along w **ith various sensitivity**  **r uns**   

# Corn ethanol assessments for different volumes, different years  

# Different assumptions for land use impacts  

## Bracketing pasture replacement (zero to 100%)  

## Ty pe of land converted (assume 100% grassland)  

# Impact of foregone sequestration over time
 

# Likew **ise we**  **p resent several options for valuing the impacts**  **over time**12 

# Biofuel Lifecycle GHG Results: **Different Pathways with 2% Discount**  **Rate –**  **100 years (2022**  **Values) -**  **Illustrative**

-128% -115% -47% -47% -39% -16% -39% +1 3%

-44% -2 2%

-80%

-40% -20% 0% 20% 40% 60% 80% 100% 120%

Dry Mi ll

Nat ural Ga s 2022 Bes t

Cas e Dry Mi ll NG Dry Mi ll Coal Dry M ill Biom as s 2022 Dry

Mi ll Biom as s w/ CHP We t M ill Biom as s Switch gras s Corn Stov er Su garcane Soy -Bas ed Wa st e Grea se
GA SOLI NE BA SEL IN E CO RN ET HA NO L CELLULO SI C ET HA NO L AD VAN CED ET HA NO L DI ESEL BA SELINE BI OD IE SELGHGEmissions(%ofPetroleumBaselineLifecycleGHGEmissions) Fu el Pr oduc ti on Ta ilp ip e In te rnat io nal L and Us e Ch ange In te rnat io nal Fa rm I nput s a nd Fert N 2O Ot her (f uel a nd feeds to ck tr

ans port ) Do mes tic So il C arbon In te rnat io nal L iv

es to ck In te rnat io nal R ice Me th ane Do mes tic R ic e Me th ane Do mes tic Fa rm I nput s a nd Fe rt N 2O Do mes tic L iv

es to ck Ce llu lo si c T

hres hold Adv anc ed and Bi odies el Th res hol d Co nv ent ional Th res hold Ne t Emissio ns13 

# Biofuel Lifecycle GHG Results: **Different Pathways with 0% Discount**  **Rate –**  **30 years (2022**  **Values) -**  **Illustrative**

-124% -26% -26% -18% +34%

-18% +5%

-116% -26% +4%

-80%

-40% -20% 0% 20% 40% 60% 80% 100% 120% 140%

Dry M ill Nat ural Ga s 2022 Be st

Cas e Dry Mi ll NG Dry

M ill Coal Dr

y Mi ll Biom as s 2022 Dry

Mi ll Biom as s w/ CHP We t M ill

Biom as s Switch gras s Cor n Stov er Sugarcane So y- Bas ed Wa ste Gre as e
GA SO LINE BA SELI NE CO RN ET HA NO L CELLULO SIC ETH AN OL AD VAN CED ET HA NO L DI ESEL BA SELI NE BIOD IESELGHGEmissions(%ofPetroleumBaselineLifecycleGHGEmissions) Fu el Pro duc tion Ta ilp ip e Int ernat ional Land Us e Change Int ernat ional Farm I nput s a nd Fer t N 2O Ot her (fu el a nd feeds to ck trans port ) Domes ti c So il C arbon Int ernat ional Liv

es to ck Int ernat ional R ice Me th ane Domes ti c R ic e Me th ane Domes ti c Fa rm I nput s a nd Fe rt N 2O Domes ti c L iv

es to ck Cellulos ic T hres hold Adv anc ed and Biod ie se l T hres hold Conv ent ional Thres hold Net Emissio ns14 

# Formal Peer Review
 

### Conducted **a formal peer rev**  **iew of key**  **e lements**  **of our lifecy**  **cle analy** **sis:** 1. 

### Land use modeling (use of satellite data/ land conversion GHG emission factors) 2. 

### Our estimates of GHG emissions from foreign crop production 3. 

### Methods to account for the variable timing of GHG emissions 4. 

### How the models we’ve relied upon are used together to provide overall lifecycle estimates 

#  **Follow ed OMB**  **/ EPA p**  **eer rev iew**  **guidelines**  

### EPA’s guidelines also incorporate OMB’s government - wide peer review bulletin 

#  **In accordance w ith this**  **guidance, we**  **used an independent, third**  **- party**  **contractor to conduct**  **an external peer rev**  **iew**  

### Contractor identifies list of expert reviewers, checking for possible conflict of interest  

### Also conducts meetings, teleconferences, etc, in order to clarify technical components of the product and develops the peer review record 

#  **The peer rev iew**  **record is be av ailable**  **to the public,**  **including:**

 

### Materials provided to the peer reviewers  

### List of names and affiliations of the peer reviewers  

### Summary of comments, as well as comments attributable to individual reviewers15 

# Peer Review Process

 

# The reviews were conducted following OMB and EPA’s peer review guidance  

# In accordance with this guidance, EPA used independent, third - party contractors to conduct an external peer review:  

## Contractor identifies list of expert review ers, checking for possible conflict of interest. EPA provides contractor description of expertise required and examples of experts that fit the expertise needed for each review
.  

## Over 80 experts w ere considered as potential review ers including 8 from Senator Lugar’s office.
 

## EPA developed charge questions for each review ( circulated to OSTP and OMB prior to commencement of peer review ) wh ich guides the review process.  

## Contractor develops the peer review r ecord.
 

## Peer review ers wo rk independently and are not asked to reach a consensus decision.16 

# Topics Reviewed
 

### Peer Rev **iew #1**  **– Satellite**  **Imagery a**  **nd Land Use Change Emissions Factors**   

### Is it scientifically justifiable to use remote sensing data in conjunction with projected land use change from agricultural sector models to estimate indirect land use change emissions associated with biofuel production?  

### Given the goals of this analysis, was the most scientifically justifiable remote sensing data set selected?  

### Were emissions factors estimated using the best available data sources given the geographical scale and scope of the study?
 

### Peer Rev **iew #2**  **– Ac**  **counting for GHG**  **Emissions Ov**  **er Time**   

### What are scientifically justifiable project and impact time frames to consider for this analysis?  

### What is the most scientifically justifiable discount rate (including the possibility of a zero discount rate) for this lifecycle analysis?
 

### Peer Rev **iew #3**  **– International**  **Ag ricultural**  **GHG Emissions**   

### What is the best way for EPA to deal with the limitations of the data, especially those data elements to which the results are most sensitive?  

### What other factors should EPA take into account when projecting future agricultural production?
 

### Peer Rev **iew #4**  **– Model**  **Linkages**  

### Are appropriate models being used to represent the different aspects of the fuels lifecycle?  

### What are the possibilities for inaccurately estimating, prices, land use changes, GHG emissions, and other related impacts under this approach?  

### What models or tools are available to capture petroleum sector indirect impacts (e.g., changes in fuels markets and use based on price changes in petroleum due to biofuel use)?17 

# Recent Release
 

# Availability of Peer Review Record Announced August 7  

# FRN Published August 17 th



###  

# Materials available on EPA website and in EPA docket

 

# Peer review record includes:

 

## Materials provided to the peer review ers  

## The procedure and criteria used to select review ers  

## List of names, affiliations, and professional resumes of the peer review ers  

## Contractor summaries of comments, as w ell as original comments attributable to individual review ers18 

# Selected Peer Reviewers **Name Ti**  **tle, Institution** Dr . Holly Gibbs Research Fellow , The Woods Hole Institute, Stanford University Dr . Rattan Lal Professor of Soil Science, Director Carbon Mgmt. and Sequestration Center , Ohio State Univ
. Dr . Jason Tu llis Asst. Professor, University of Arkansas Dr . Brian Wardlow Asst. Professor, Univ . of Nebraska Dr . R.A. Houghton Senior Scientist, Woods Hole Research Center Dr. Joseph Fargione Regional Science Director for the Central U.S. Region, The Nature Conservancy Mr. Ralph Heimlich Principal, Agricultural Conservation Economics (ACE) Dr. Liz Marshall Senior Economist, Wo rld Resource Institute Dr. Kenneth Richards Indiana University, Assoc. Dir. Lugar Center for Renewable Energy Dr. Jeremy Martin Senior Scientist, Union of Concerned Scientists Dr . Ken Cassman Professor , Agronomy & Horticulture, University of Nebraska
– Lincoln Dr
. Arvin R. Mosier Private Consultant Dr . John R. Freney Honorary Research Fellow , CSIRO, Div . of Plant Industry, Canberra, Australia Dr . Beth Boyer Associate Professor Water Resource, Penn State University, Agricultural Sciences Dr. Martin Banse Senior Agricultural Economist, Agricultural Economics Research Institute, The Hague Mr. Tim Searchinger Visiting Research Scholar and Lecturer in Public and International Affairs, Princeton University Mr. John Sheehan Program Coordinator, Biofuels Sustainability, University of Minnesota Institute on the Environment Dr. Michael W ang Section Leader, Argonne National Laboratory19



# Other Key Provisions20 

# Grandfathering

 

## Al **l biofuel facilities that “commenced construction” prior to EISA**  **a re**  **grandfathered**  

### They are not required to meet the minimum 20% GHG threshold  

### Does not apply to other thresholds  

## We seek comment on a range of options based on input from **stakeholders**  

### Protective of pre - EISA investments  

### Level playing field for future investments  

### Practical implementation (avoid NSR - like issues)  

## Main proposal is to grandfather a baseline v **olume for each facility**   

### Baseline volume would be grandfathered forever  

### Expansions would be tracked like new facilities  

## We expect at least 15 bill gal w **ill be grandfathered**   

### All current corn - ethanol production volume  

### All current biodiesel production volume  

### All current sugarcane ethanol production volume21 

# Renewable Biomass Provision

 

## EISA **r estricts the types of renew**  **able fuel feedstocks and land that feedstocks can come from. For example:**   

## Agricultural land must have been cleared or cultivated prior to Dec 19, 2007 and actively

managed or fallow, and non - forested  

## Woody

biomass from federal land is not allowed, except from wildfire areas  

## EISA **l anguage does not prohibit a “shell game” in w**  **hich food crops are**  **mov ed**  **to new a**  **g land w hile existing ag land is used for fuel feedstocks**   

## Requires new **t racking of feedstocks from point of production**  **to renew able**  **fuel producers**  

## Applies to both domestic and foreign producers  

## We are proposing that renew **able fuel producers w**  **ould be required to**  **maintain records to support their decision to generate or not to generate RINs for a giv**  **en batch of renew**  **able fuel**  

## Renewable fuel producers would be expected to work out a sy stem with their feedstock supplier(s) to ensure they generate RINs only for fuel produced from feedstock that meets the definition of “renewable biomass  

## The practical implication is that producers would establish tracking sy stems up through their supply

c hain  

## Other options include rely ing on third - party verification and use of satellite imagery22 

# Waivers for Cellulosic Biofuel

 

## Irrespectiv **e of the v**  **olumes of cellulosic**  **biofuel required in EISA ,**  **EPA is**  **required to determine the standard for the follow ing**  **year based on**  **projections of production**  

### We " may" reduce the advanced biofuel and total renewable fuel standards accordingly
 

## We are proposing annual Production Outlook Reports for all renew **able fuels**  **through wh**  **ich renew**  **able fuel producers w**  **ill giv e**  **us their expansion and new**  **construction plans**   

### We e xpect to conduct a notice - and - comment rulemaking each year for setting the standards using information from the Production Outlook Reports  

### For 2010 we are proposing that the full 0.1 bill gal requirement from EISA be used as the basis for the standard
 

## If the projected v **olume is less than the EISA**  **v olume, w**  **e must make**  **cellulosic biofuel credits av ailable**  **up to the lev el**  **of the standard set for that year**   

### Price is set by EISA as greater of 25 ¢ or $3 - wholesale price of gasoline, adjusted for inflation  

### We a re proposing that credits ("allowances") only be made available to obligated parties at the time of their compliance demonstration23 

# RFS2 Impacts Summary **(Assumes full implementation**  **in 2022)** 

 

### GHG **Emissions from**  **Transportation**  

### Reductions of 6.8 billion tons of CO2 equivalent (or approximately 160 million tons per year)  

### Reductions equivalent to taking about 24 million vehicles off the road.  

### Impacts **on Ov erall**  **Petroleum Consumption**  **in 2022**  

### 36 billion gallons of renewable fuel will increase renewable fuel usage by approximately 22 billion gallons over 2022 base volume scenario  

### This will displace about 15 billion gallons of petroleum - based gasoline and diesel fuel.  

### This represents about 11% of annual gasoline and diesel consumption with most reductions coming from reduced imports of petroleum.  

### Fuel Cost **Impacts (Nationw**  **ide A verage**  **based on low and high**  **crude costs)**  

### Gasoline costs would increase by about 2.7 and 10.9 cents per gallon by 2022.  

### Diesel fuel costs could experience a small cost reduction of 0.1 cents per gallon, or increase by about 1.2 cent per gallon  

### Increases in gasoline and diesel fuel costs are equivalent to $4 billion to $18 billion in 2022  

### Energy

**S ecurity**   

### Estimate, the total energy security benefits associated with a reduction of U.S. imported oil is $12.38/barrel.  

### Based upon the $12.38/barrel figure, total energy security benefits associated with this proposal were calculated at $3.7 billion24 

# Thoughts and Questions
 

# Legislative Changes?  

# Cap and Trade  

# Definition of Renewable Biomass  

# Application of Lifecycle
– Delay or Change  

# Feedstock considerations (algae, microcrops, other)  

# What counts as what?  

# Intermediate blends (E15 / Flexible Fuel Vehicles)  

# Low Carbon Fuels  

# Etc.