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The Hidden Hook in the Renewable Fuel Standard
by Jim Lane (Biofuels Digest) ...“Investors constantly ask us the simple question,” says AE Biofuels CEO Eric McAfee, “ If the EPA is not enforcing the cellulosic ethanol mandate and only providing a few months of forward visibility each year, how are investors expected to fund cellulosic ethanol capacity that will require five years or more to repay the funding?”
...The EPA, while waiving down the cellulosic ethanol mandate for 2011 from 250 million gallons to a range of 6.5-25 million gallons, did not waive down the advanced biofuels mandate as a whole, which remains at 1.35 billion gallons of ethanol equivalent renewable fuel for 2011. You see, while EPA is required to waive down cellulosic ethanol mandates, they “may” waive down advanced biofuels mandates – or they may not. So far, EPA is taking the view that Congress’ intent was to get renewable fuels into the market, and have chosen not to waive down advanced biofuels. ...Biomass-based diesel, Brazilian sugarcane ethanol and cellulosic ethanol would all qualify.
...Even without changes in the RFS, if the EPA chooses to enforce the advanced biofuels mandate, there may be good news for cellulosic ethanol investors – and opportunities in CE for obligated parties – even if the cellulosic ethanol mandates are waived down. SInce it takes years to get capacity built, the operable figures are not the impact in 2011 or 2012, but the arbitrage in 2016 or 2017. There, the numbers start to get pretty darn compelling. READ MORE