Moving Stepwise toward State Clean Fuel Standards

by Susanne Retka Schill (Ethanol Producer Magazine) From Minnesota to Nebraska, discussions around performance-based fuel standards are bringing a broad range of stakeholders together. Progress requires coalition building and compromise.

Movement towards state clean fuel standards in the Midwest inspired by a broader regional vision continues, albeit slowly. Brian Kletscher, CEO of Highwater Ethanol and board president of the Minnesota Biofuels Association, is content with the pace. “This is one bill I’m okay with it taking its time to get done. We need to make sure it gets done right.”

The Minnesota state legislature has held hearings on the Future Fuels Act in two sessions now. “It’s not uncommon that we see bills like this take some time to work through because there’s lots of policy to be developed,” Kletscher says. Many groups are cautious about giving full support, having questions about policy language, concerns about which state agency would administer the program and uncertainty about the policy itself.

The educational effort is substantial—not only with legislators themselves who hear conflicting viewpoints, but with farm groups leery of new regulations, environmental groups suspicious of anything promoting corn ethanol and other stakeholders seeking favorable incentives.

The bill was successfully amended in the Democrat-controlled house to satisfy critics, but lacked momentum in the Republican-controlled senate. “We need to reevaluate what the senators are concerned about, what they need and want. We may have to make some changes to accommodate that,” Jennings (Brian Jennings, CEO of the American Coalition for Ethanol) says. “But despite the slow progress in Minnesota, I’m still very encouraged by the overall trajectory of our work in the Midwest.”

“The coalition continues to grow,” says Brendan Jordan, vice president transportation and fuels at the Great Plains Institute. “We’ve had strong support from a lot of different organizations ranging from forest products industry stakeholders interested in utilizing wood residuals for biofuels production to the auto industry, the electric vehicle sector, and strong support from the ethanol industry. We have very broad support, but it’s a big policy and it takes a few years.” There are groups, he adds, that are skeptical of anything involving ethanol, “but they also understand this is a policy that can help commercialize new biofuel crops, such as cover crops that would have substantial water quality and soil building benefits. That’s a positive, and a coalition building opportunity.”

The white paper, “A Clean Fuels Policy for the Midwest,” proposes Midwestern states set carbon reduction goals, requiring all transportation fuels be evaluated with lifecycle carbon accounting.

One unique feature of the Midwestern proposal is the recommendation to include farm-level CI reduction efforts in lifecycle analyses.

With biofuel feedstocks like corn and soybeans comprising a sizable portion of biofuel emissions, incorporating farm-level emissions would provide economic incentives to growers to implement best practices.

A USDA-funded research effort is getting underway in South Dakota to inform the protocol development for farm-level carbon accounting. While quantifying fertilizer and fuel use, cover crops and tillage methods are fairly straightforward, determining the amount of carbon being sequestered in the soil on an annual basis is not yet solidified in scientific circles.

There are many skeptics among commodity groups on whether clean fuel policies would be a net economic benefit or cost, Jennings says. Many also mistakenly assume California’s high gasoline prices are a result of its Low Carbon Fuel Standard. On top of that, current high fuel prices add to concerns about policies that may boost fuel cost. This summer, Jennings says, ACE will be sharing an analysis with commodity organizations and others on how clean fuels policy can result in economic benefits for farmers and others.

The shape of Nebraska’s proposal and how closely it follows the Minnesota Future Fuels Act example is yet to be determined, Caldwell (Dawn Caldwell, executive director of Renewable Fuels Nebraska) says. The group stepped back from an initial attempt to draft a bill, with the realization more discussion is needed. “Whatever we do,” she says, “there are a few agreements in the room. One, is we are not California and whatever we come up with will not be like what California has done. And we will put farmers first. How do we monetize carbon credits appropriately through the entire value chain to make this work for the farmer, the ethanol plant, the fuel retailer and the consumer? We want every segment of this to win.”

Ohio is another state in a pretty early stage of considering a clean fuels policy, Jordan says.

The governors in Michigan and Illinois have included clean fuels standards as part of their recommendations for their transportation sectors, he adds, although neither state has seen a stakeholder coalition emerge as yet.

Besides the Midwestern states, Koehler (Neil Koehler, Renewable Fuels Association policy advisor) points out that New Mexico came very close to passing legislation this past year and efforts in New York show promise, while the idea is percolating in other northeastern states. He believes the state efforts will be critical underpinnings for a national clean fuels standard sometime in the future. READ MORE