The Environmental Protection Agency (EPA) proposes to reduce renewable fuel standard (RFS) by almost 3 billion gallons in 2014. In their press release, the EPA explained that this was a response to a drop in gasoline consumption which meant that there was also a glut of ethanol (the “E10 blend wall”), but less than half of the proposed reduction would be ethanol. A third of the amount is advanced biofuels,  such as the algal biofuels being produced by San Diego based companies. EPA Administrator Gina McCarthy maintains that Biofuels are still “a key part of the Obama Administration’s ‘all of the above’ energy strategy,” but the Renewable Fuels Association suggests “EPA is proposing to place the nation’s renewable energy policy in the hands of the oil companies.”

It was a move applauded by American Petroleum Institute (API), whose President/CEO Jack Gerard said the blend wall “is a dangerous reality that must be addressed to avoid serious impacts on America’s fuel supply.” He added that more must be done to bring these mandates closer to reality for cellulosic biofuels “which do not exist in commercial quantities.”

During the past five years, the RFS made room in the transportation fuel market for advanced biofuels that reduce greenhouse gas emissions by 50% percent or more compared to petroleum fuels. Numerous San Diego biotechnology companies – like Cellana, Sapphire Energy and Verenium (recently acquired by BASF)  – have invested time and money into developing new technologies. The first question investors usually ask is, “What is the size of the market for your product?” The RFS’ assurance of market space helps technology companies attract the investment and capital necessary to develop new biofuel technology and bring it to market.

Green Crude oil still - Courtesy Sapphire Energy

Green Crude oil still – Courtesy Sapphire Energy

Though Cellana and Sapphire Energy have emerged as leaders in the algal fuel industry, they are both still in the pre-profit stage and on the verge of commercialization.

“Advanced biofuels like drop-in gasoline, diesel, and jet fuel refined from Sapphire Energy’s Green Crude oil have none of the undesirable tradeoffs of first generation ethanol,” said Tim Zenk, Vice President of Corporate Affairs at Sapphire Energy. “These fuels are not dependent on food crops or valuable farmland; do not use potable water; do not result in biodiesel or ethanol and are completely compatible with current oil & gas infrastructure. Additionally, our company recently contributed real-world data from our facilities in New Mexico to a peer-reviewed study that determined the pathway and methods utilized by Sapphire Energy has an estimated 68% reduction in overall GHG emissions on a lifecycle basis, and is approaching the EROI of marginal sources of crude oil at commercial scale production.”

By shrinking the advanced Biofuel market, from 2.75 billion to  2.2 billion gallons, the EPA could make it difficult for companies like these to continue to attract the necessary investment. And it allows petroleum companies to use less advanced biofuel and emit more greenhouse gases.

The production of biodiesel is expected to reach 1.7 gallons gallons this year. This is a kind of biofuel and production will be cut back to 1.28 gallons if the proposed reduction goes through. A recent study by the National Biodiesel Board showed that 8,000 biodiesel-supported jobs would be lost. Many of these would be in San Diego.

Cellana Research Scientist - Courtesy Cellana, Inc

Cellana Research Scientist – Courtesy Cellana, Inc

According to Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section, “The current (EPA) proposal would have the effect of closing the market to renewable fuels and undermining the investment community’s confidence in the program, starving advanced biofuel and biotech companies of the capital they need to successfully commercialize new and innovative technologies.”

“This decision by the EPA has created unnecessary risk for advanced biofuel producers, and threatens the billions of dollars invested in advanced biofuel technology throughout the country,” said Zenk. “President Obama and his administration should not turn their backs on sustainable, renewable, domestic sources of advanced biofuel that are technologically ready to make the United States a world leader in fuel production.”

EPA’s proposal is open for public comment for the next 60 days, and everyone who wishes to express their concerns should email EPA at a-and-r-docket@epa.gov.

(Image at top of page: POET-DSM Project Liberty cellulosic biorefinery, under construction and set to open in 2014, located in Emmetsburg, Iowa. – courtesy  POET-DSM)