The Coalition of the Unwilling and the Doctrine of Underwhelming Force
by Jim Lane (Biofuels Digest) Terrabon CEO Gary Luce says the biofuels industry must rethink the Renewable Fuel Standard, to create the stability for capital formation and prevail over a coalition of wealthy, entrenched opponents.
…As Terrabon CEO Gary Luce notes, “I watched the amount spent on the RFS2 debate, the obligated parties are spending orders of magnitude more on opposing RFS2 than any exposure they have because of capacity shortages. There is no way this small, start-up industry is going to match them in terms of spending, or other resources.”
The industry, in short, is going to have to consider what to do, when strategy is going to have to be based on a Doctrine of Underwhelming Force.
And a coalition is forming on the other side. Among them are traditional opponents of the Renewable Fuel Standard and biofuels. Others among them are newly recruited since the passage of the Bush-backed Energy Security and Independence Act in 2007.
Who are they? When it comes to renewable fuels, call them the Coalition of the Unwilling. Included amongst their ranks: obligated oil refining parties, Republicans who smell blood in the water, the Grocers Manufacturers Association, anti-tax groups, carbon skeptics, libertarians, chicken farmers and cattlemen, and the left wing of the environmentalist movement.
It’s the capital formation, stupid
“The issue is not the RFS, but capital formation,” asserts Terrabon’s Luce. “it’s about how to get debt and equity on these plants. The purpose of the RFS was to provide the stability that the market needed, that investors needed, in order to come forward with the $400 billion that will be needed to bring this industry forward.
“The RFS2 debate, itself is now becoming a factor in creating instability. …”
… “Equity is not really the issue, asserts Luce. “There is a lot of money on the sidelines available to work. We have got to build debt, it is really about debt formation. …”
…I asked Luce if he thought that the RFS2, as structured, was in large part structured – especially with the fines for not blending fuels that were unavailable – in order to incentivize obligated parties to invest equity into the building of capacity, and he agreed that it was to some extent designed that way. But unsuccessfully designed.
…”What is really important is not the mandate, but the RIN. You build the facility and bring it online, and if you build it, that (sic) you will get the RIN.
“If you can show that you have stable supply, stable off-take, and a stable RIN component. Then you can bring in debt. And if you have the debt, you can bring in the equity. …”
The Digest’s Take
…The public, in the end, is going to have to understand, and support, the RFS – the case has to be represented to them. After all, can there enduringly be taxation without representation, in these United States? READ MORE and MORE