Renewable Fuel Makers Say EPA Waivers Siphon Away Their Buyers

by Mark Drajem (Bloomberg Business) Companies that make fuel from corn stalks or landfill gas say a federal program designed to help them has a loophole that is discouraging buyers.

In addition, producers have been pushing the Environmental Protection Agency to close a loophole in the program when it sets the new levels. The provision, which has set off a new skirmish over the controversial program, lets refiners buy waivers instead of the low-carbon fuel.

“What we’re finding is that the obligated parties aren’t interested in buying our cellulosic ethanol,” said Delayne Johnson, chief executive of of Quad County Corn Processors, a farmer-owned corn-ethanol plant in Galva, Iowa, that added a cellulosic plant last year. “They can substitute with the waiver credit.”

In Iowa, Quad County is holding more than $800,000 of cellulosic credits tied to the more than 1 million gallons it has made, in the hope refiners will eventually need them and buy them. They won’t get a buyer unless the EPA clears up the issue, he said.

“It’s not like it’s pocket change, or anything,” said Johnson, who along with industry lobbyists met with EPA officials to discuss the issue last week.

Refiners obligated to use renewable fuels, or buy credits equal to their targets, say the shortfall in production underscores the need for waivers.

The waivers were added in 2007 to cap the price producers could charge. They now are threatening sales of the fuel and scaring off investors, advocates say.

Separate lobbying groups for those producers have opposite approaches on a solution. The Advanced Ethanol Council, which represents Quad County, said the EPA has the authority to limit the use of the waivers and opposes any efforts by Congress to rejigger the program.

“You don’t go after a administrative problem with a legislative solution, especially with a hostile Congress,” said Brooke Coleman, that group’s executive director.

The Advanced Biofuels Association argues that Congress needs to rewrite the entire program, and this is one of the flaws that needs fixing.

“They only way this program will work is if they have to buy these gallons,” said Michael McAdams, president of the group. “I want to make absolutely certain these guys are absolutely required to buy these gallons.” READ MORE