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Thursday, February 25, 2010

Waiver Authority Under the Renewable Fuel Standard (RFS)

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Transportation fuels are required by federal law to contain a minimum amount of renewable fuel each year. This renewable fuel standard (RFS), established by the Energy Policy Act of 2005 (EPAct, P.L. 109-58) and amended by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140), requires that 12.95 billion gallons of renewable fuels be blended into gasoline and other transportation fuels in 2010. Most of this mandate will be met using corn-based ethanol. However, within the overall RFS there are secondary mandates for the use of cellulosic biofuels, biomass-based diesel fuels, and other advanced biofuels. Questions have been raised over whether there is enough feedstock supply and production capacity to meet these carveouts. 

The Environmental Protection Agency (EPA) has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in the law are present. In 2008 the governor of Texas requested a waiver of the RFS because of high grain prices, although that waiver request was denied because EPA determined that the RFS requirements alone did not "severely harm the economy of a State, a region, or the United States," a standard required by the statute. In February 2010, as part of a final rulemaking implementing the RFS as expanded by EISA, EPA waived most of the 2010 cellulosic biofuel carveout—EISA set the mandate at 100 million gallons but EPA is only requiring 6.5 million gallons, more than 90% less than scheduled by EISA. EPA cited a lack of current and expected production capacity, driven largely by a lack of investment in commercial-scale refineries. 

This report provides a brief overview of the RFS program and discusses the process and criteria for EPA to approve a waiver petition. 
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Date of Report: February 18, 2010
Number of Pages: 8
Order Number: RS22870
Price: $29.95

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Cellulosic Biofuels: Analysis of Policy Issues for Congress

Kelsi Bracmort
Analyst in Agricultural Conservation and Natural Resources Policy

Randy Schnepf
Specialist in Agricultural Policy

Megan Stubbs
Analyst in Agricultural Conservation and Natural Resources Policy

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Cellulosic biofuels are produced from cellulose (fibrous material) derived from renewable biomass. They are thought by many to hold the key to increased benefits from renewable biofuels because they are made from potentially low-cost, diverse, non-food feedstocks. Cellulosic biofuels could also potentially decrease the fossil energy required to produce ethanol, resulting in lower greenhouse gas emissions. 

Cellulosic biofuels are produced on a very small scale at this time—significant hurdles must be overcome before commercial-scale production can occur. The renewable fuels standard (RFS), a major federal incentive, mandates the use of 100 million gallons per year (mgpy) of cellulosic biofuels in 2010. After 2015, most of the increase in the RFS is intended to come from cellulosic biofuels, and by 2022, the mandate for cellulosic biofuels will be 16 billion gallons. Whether these targets can be met is uncertain. Research is ongoing, and the cellulosic biofuels industry may be on the verge of rapid expansion and technical breakthroughs. However, at this time, only a few small refineries are scheduled to begin production in 2010, with an additional nine expected to commence production by 2013 for a total output of 389 mgpy, compared with an RFS requirement of 500 mgpy in 2012 (a year earlier). 

The federal government, recognizing the risk inherent in commercializing this new technology, has provided loan guarantees, grants, and tax credits in an effort to make the industry competitive by 2012. In particular, the Food, Conservation, and Energy Act of 2008 (the 2008 farm bill, P.L. 110-246) supports the nascent cellulosic industry through authorized research programs, grants, and loans exceeding $1 billion. The enacted farm bill also contains a production tax credit of $1.01 per gallon for ethanol produced from cellulosic feedstocks. Private investment, in many cases by oil companies, also plays a major role in cellulosic biofuels research and development. 

Three challenges must be overcome if the RFS is to be met. First, cellulosic feedstocks must be available in large volumes when needed by refineries. Second, the cost of converting cellulose to ethanol or other biofuels must be reduced to a level to make it competitive with gasoline and corn-starch ethanol. Third, the marketing, distribution, and vehicle infrastructure must absorb the increasing volumes of renewable fuel, including cellulosic fuel mandated by the RFS. 

Congress will continue to face questions about the appropriate level of intervention in the cellulosic industry as it debates both the risks in trying to pick the winning technology and the benefits of providing start-up incentives. The current tax credit for cellulosic biofuels is set to expire in 2012, but its extension may be considered during the 111th Congress. Congress may continue to debate the role of biofuels in food price inflation and whether cellulosic biofuels can alleviate its impacts. Recent congressional action on cellulosic biofuels has focused on the definition of renewable biomass eligible for the RFS, which is considered by some to be overly restrictive. To this end, legislation has been introduced to expand the definition of renewable biomass eligible under the RFS. 
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Date of Report: February 1, 2010
Number of Pages: 26
Order Number: RL34738
Price: $29.95

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Tuesday, February 23, 2010

CRS Issue Statement on Energy and Water Development Appropriations

Carl E. Behrens, Coordinator
Specialist in Energy Policy

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior's Bureau of Reclamation (BOR), the Department of Energy (DOE), and a number of independent agencies. 

Funding for the Corps attracts wide interest among Members of Congress. Most appropriations for the Corps' civil works activities are directed to specific projects. Many of these projects are identified in the budget request and others are added during congressional deliberations of the agency's appropriations. As a result, the agency's funding is often part of the debate over earmarks. 

In addition to regular appropriations, the Corps in recent years has received considerable funding in supplemental appropriations, particularly for hurricane protection work in Louisiana following Hurricane Katrina. In addition, the Corps received extra funding in the American Recovery and Reinvestment Act (ARRA, P.L. 111-5). 

The Bureau of Reclamation built or assisted building most of the large dams and water diversion structures in the West. BOR's mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West. Today, BOR manages hundreds of dams and diversion projects. BOR facilities also provide substantial flood control, recreation, and fish and wildlife benefits. At the same time, operations of BOR facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users 

The largest share of Energy and Water Development funding goes to DOE, an agency with an extremely diverse combination of missions. In addition to energy supply and conservation programs, DOE maintains the Strategic Petroleum Reserve and funds several Power Marketing Administrations that distribute power generated at federal hydropower facilities. It is the third largest federal funder of basic research, conducting basic science research in six program areas. The National Nuclear Security Administration, a semiautonomous agency within DOE, maintains the nation's nuclear weapons stockpile. DOE also has a large program to decontaminate and clean up sites where nuclear weapons were produced in the past. 

The Congress and the Obama Administration have shifted the emphasis of DOE's energy programs with massive increases in funding for energy efficiency and renewable energy programs, both in the regular appropriations bills and in the ARRA. DOE's weapons site cleanup program also received a large appropriation in ARRA, as did science programs.


Date of Report: January 12, 2010
Number of Pages: 3
Order Number: IS40651
Price: $0.00 (This is the whole Report less Issue Team Members)

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Monday, February 22, 2010

Automobile and Light Truck Fuel Economy: The CAFE Standards

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Robert Bamberger
Specialist in Energy Policy

On May 19, 2009, President Obama announced a plan to integrate CAFE standards administered by the National Highway Traffic Safety Administration (NHTSA) with automotive greenhouse gas emissions standards to be issued by the Environmental Protection Agency (EPA). On September 15, 2009, EPA and NHTSA issued proposed rules. The Administration has stated that the proposal would require an increase in fuel economy standards to as much as 35.5 miles per gallon (mpg) by model year (MY) 2016, four years ahead of the deadline set in the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140). The Administration estimates that the total cost of complying with EISA and the new proposal will add $1,100 to the cost of an average MY2016 vehicle (compared to MY2011), although this additional purchase cost is expected to be paid back through lifetime fuel savings. The objective of the new greenhouse gas standards would be to reach reduction levels similar to those adopted by the state of California, although some specifics of the requirement would be different. However, while the rulemaking process will be combined, in their joint proposal, EPA and NHTSA recognize that some parts of the GHG program will not translate to the CAFE program, and vice versa. Therefore, EPA and NHTSA expect that the achieved fuel economy will be somewhat lower than 35.5 mpg as automakers will use credits from changes in air conditioner refrigerants and other greenhouse gas reductions to comply with the program, but which have no bearing on fuel economy. 

On March 27, 2009, NHTSA released a final rule establishing fuel economy standards for MY2011 passenger cars and light trucks. EISA restructured the automotive fuel economy program to establish a corporate average fuel economy (CAFE) standard of 35 mpg by MY2020 for the combined passenger automobile and light truck fleet. However, to meet the combined standard, automakers will continue the practice of calculating the CAFE of their car and light truck fleets separately. A Notice of Proposed Rulemaking (NPRM), issued in March 2008, covered MY2011-2015. To provide opportunity to conduct additional analysis to support the setting of standards for the later model years, the Obama Administration, on January 26, 2009, directed NHTSA to finalize a rule solely for MY2011. NHTSA expects that MY2011 rule will result in fuel economy for MY2011 passenger cars and light trucks at 30.2 mpg and 24.1 mpg, respectively. The combined fuel economy for both fleets is expected to be 27.3 mpg, somewhat lower than the 27.8 mpg originally proposed. The standards are "attribute" based; every new vehicle will have its own target, based on its size. 
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Date of Report: January 29, 2010
Number of Pages: 13
Order Number: R40166
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Wednesday, February 10, 2010

Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Alternative fuels and advanced technology vehicles are seen by proponents as integral to improving urban air quality, decreasing dependence on foreign oil, and reducing emissions of greenhouse gases. However, major barriers—especially economics—currently prevent the widespread use of these fuels and technologies. Because of these barriers, and the potential benefits, there is continued congressional interest in providing incentives and other support for their development and commercialization. 

Alternative fuels and advanced technology vehicles have were addressed early in the 111th Congress, as both the House and Senate versions of the American Recovery and Reinvestment Act of 2009 (H.R. 1) contained provisions supporting their development and deployment. While some of these provisions were removed in conference, the final version contains provisions for tax incentives, federal grants and loans, and other federal support for alternative fuels and advanced vehicles. 

On February 3, 2010, the Environmental Protection Agency (EPA) finalized new rules for the renewable fuel standard (RFS) that was expanded by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140). In 2010, the RFS will require the use of 12.95 billion gallons of ethanol and other biofuels in transportation fuel. Within that mandate, the RFS will require the use of 0.95 billion gallons of advanced biofuels, including 6.5 million gallons of cellulosic biofuels. EISA also requires that advanced biofuels (as well as conventional biofuels from newly built refineries) meet certain lifecycle greenhouse gas reduction requirements. EPA's methodology and conclusions on various biofuels' lifecycle emissions have been controversial. 

The 111th Congress is likely to further discuss alternative fuels and advanced technology vehicles as it addresses other key topics. These include their role in any federal policy to address climate change, and their role in federal energy policy. The 111th Congress may also play an oversight role in the development of major regulations: the Environmental Protection Agency's implementation of the RFS; the Department of Transportation's implementation of new fuel economy standards enacted in 2007; and the Department of Agriculture's implementation of a new Farm Bill enacted in 2008. Further, some key tax incentives for biofuels expired at the end of 2009, and may be extended in the second session of the 111th Congress.


Date of Report: February 4, 2010
Number of Pages: 21
Order Number: R40168
Price: $29.95

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Tuesday, February 9, 2010

Biofuels Incentives: A Summary of Federal Programs

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

With recent high energy prices, the passage of major energy legislation in 2005 (P.L. 109-58) and 2007 (P.L. 110-140), and the passage of a new Farm Bill in 2008 (P.L. 110-246) there is ongoing congressional interest in promoting alternatives to petroleum fuels. Biofuels—transportation fuels produced from plants and other organic materials—are of particular interest. 

Ethanol and biodiesel, the two most widely used biofuels, receive significant government support under federal law in the form of mandated fuel use, tax incentives, loan and grant programs, and certain regulatory requirements. The 22 programs and provisions listed in this report have been established over the past three decades, and are administered by five separate agencies and departments: Environmental Protection Agency, U.S. Department of Agriculture, Department of Energy, Internal Revenue Service, and Customs and Border Protection. These programs target a variety of beneficiaries, including farmers and rural small businesses, biofuel producers, petroleum suppliers, and fuel marketers. Arguably, the most significant federal programs for biofuels have been tax credits for the production or sale of ethanol and biodiesel. However, with the establishment of the renewable fuel standard (RFS) under P.L. 109-58, Congress has mandated biofuels use; P.L. 110-140 significantly expanded that mandate. In the long term, the mandate may prove even more significant than tax incentives in promoting the use of these fuels. 

The 2008 Farm Bill—The Food, Conservation, and Energy Act of 2008—amended or established various biofuels incentives, including lowering the value of the ethanol excise tax credit, establishing a tax credit for cellulosic biofuel production, extending import duties on fuel ethanol, and establishing several new grant and loan programs. 

Some key biofuels incentives have expired or are set to expire (e.g., tax credits for biodiesel and renewable diesel), and there is congressional interest in extending these credits. 

This report outlines federal programs that provide direct or indirect incentives for biofuels. For each program described, the report provides details including administering agency, authorizing statute(s), annual funding, and expiration date. The Appendix provides summary information in a table format.


Date of Report: January 27, 2010
Number of Pages: 18
Order Number: R40110
Price: $29.95

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Sunday, February 7, 2010

Selected Issues Related to an Expansion of the Renewable Fuel Standard (RFS)

Randy Schnepf 
Specialist in Agricultural Policy 

Brent D. Yacobucci
 
Specialist in Energy and Environmental Policy

Biofuels have grown significantly in the past few years as a component of U.S. motor fuel supply. Current U.S. biofuels supply relies primarily on ethanol produced from Midwest corn. Today, ethanol is blended in more than half of all U.S. gasoline (at the 10% level or lower in most cases). Federal policy has played a key role in the emergence of the U.S. biofuels industry in general, and the corn ethanol industry in particular. U.S. biofuels production is supported by federal and state policies that include minimum usage requirements, blending and production tax credits, an import tariff to limit importation of foreign-produced ethanol, loans and loan guarantees to facilitate the development of biofuels production and distribution infrastructure, and research grants. 

Congress first established a Renewable Fuel Standard (RFS)—a mandatory minimum volume of biofuels to be used in the national transportation fuel supply—with the enactment of the Energy Policy Act of 2005 (EPAct, P.L. 109-58). This initial RFS mandated that a minimum of 4 billion gallons be used in 2006, and that this minimum usage volume rise to 7.5 billion gallons by 2012. Two years later, the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140) superseded and greatly expanded the biofuels blending mandate. EISA required the annual use of 9 billion gallons of biofuels in 2008 and expanded the mandate to 36 billion gallons annually in 2022, of which only 15 billion gallons can be ethanol from corn starch. The remaining 21 billion gallons are to be so-called "advanced biofuels"—that is, biofuels produced from feedstocks other than corn starch, including sugarcane, oil crops, and cellulose. 

In the long term, the expanded RFS is likely to play a dominant role in the development of the U.S. biofuels sector, but with considerable uncertainty regarding potential spillover effects in other markets and on other important policy goals. Emerging resource constraints related to the rapid expansion of U.S. corn ethanol production have provoked questions about the sustainability of continued growth in biofuels production and about possible unintended consequences, including potential market and environmental effects of a major shift in U.S. agricultural land use patterns, increased energy demand to grow feedstocks and process them into liquid fuel, and nearterm barriers to developing the infrastructure needed to deliver increasing volumes of biofuels to the market. 

Questions also exist about the ability of the U.S. biofuels industry to meet the expanding mandate for biofuels from non-corn sources such as cellulosic biomass materials (e.g., grasses, trees, and agricultural and municipal wastes). Although cellulosic feedstock sources appear promising, technological barriers make them very expensive to produce relative to conventional ethanol and keep their future uncertain. Another important biofuel, biodiesel, is produced from soybeans and other oil crops, but also remains expensive to produce owing to the relatively high prices of its feedstocks. 

Key policy questions are whether a renewable fuel mandate is the most effective policy to promote the above goals, if government intervention in the industry is appropriate, and, if so, what level is appropriate. 

This report describes the nature of the RFS mandate, its implementation, and some emerging issues regarding the long-term growth of the U.S. biofuels sector. 


Date of Report: January 28, 2010
Number of Pages: 25
Order Number: R40155
Price: $29.95

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Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol “Blend Wall”

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

On March 6, 2009, Growth Energy (on behalf of 52 U.S. ethanol producers) applied to the Environmental Protection Agency (EPA) for a waiver from the current Clean Air Act limitation on ethanol content in gasoline. Currently, ethanol content in gasoline is capped at 10% (E10); the application requests an increase in the maximum concentration to 15% (E15). If granted, the waiver would allow the use of significantly more ethanol in gasoline than is currently permitted. The existing limitation leads to an upper bound of roughly 15 billion gallons of ethanol in all U.S. gasoline. This "blend wall" could limit the fuel industry's ability to meet an Energy Independence and Security Act (EISA, P.L. 110-140) requirement to blend increasing amounts of renewable fuels (including ethanol) into motor fuels—thus the interest among ethanol producers in the waiver. 

On November, 30, 2009, EPA sent a letter to Growth Energy neither granting nor denying the waiver, stating that studies necessary for the agency to make a decision have not been completed, and that some of that data may be available in May or June of 2010. To meet the high volumes of renewable fuels mandated by EISA, EPA recognized that "it is clear that ethanol will need to be blended into gasoline at levels greater than the current limit of 10 percent." 

Under EISA, the EPA Administrator must grant or deny the waiver request within 270 days of receipt (December 1, 2009). The Clean Air Act is silent on the consequences if EPA does not grant or deny the waiver within the 270-day window, as is the case in the Growth Energy petition. 

To grant the waiver, the petitioner must establish to EPA that the increased ethanol content will not "cause or contribute to a failure of any emission control device or system" to meet emissions standards. EPA is to consider short- and long-term (full useful life) effects on evaporative and exhaust emissions from various vehicles and engines, including cars, light trucks, and non-road engines (e.g., lawnmowers). In its November 30 letter, EPA noted that long-term testing on newer vehicles has not been completed, but that the agency expects that model year 2001 and newer vehicles "will likely be able to accommodate higher ethanol blends, such as E15." In the letter the agency made no statements about older vehicles or non-road engines, but stated that EPA could "be in a position to approve E15 for 2001 and newer vehicles in the mid-year timeframe." 

In addition to the emissions control concerns, other factors affecting consideration of the blend wall include vehicle and engine warranties and the effects on infrastructure. Currently, no automaker warranties its vehicles to use gasoline with higher than 10% ethanol. Small engine manufacturers similarly limit the allowable level of ethanol. In addition, most gasoline distribution systems (e.g., gas pumps) are designed to dispense up to E10. While some of these vehicle and fuel distribution systems may be able to operate effectively on E15 or higher, their warranties/certifications would likely need to be updated. 

If EPA were to grant a waiver only for newer vehicles, a key question is how fuel pumps might be labeled to keep owners from using E15 in older vehicles and other equipment. A related question is whether fuel suppliers would even be willing to sell E15 if some of their customers may not use it. Further, it is unclear whether existing fuel distribution systems which were designed to dispense E10 can handle the higher-level ethanol blends. 



Date of Report: January 28, 2010
Number of Pages: 13
Order Number: R40445
Price: $29.95

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Friday, February 5, 2010

Calculation of Lifecycle Greenhouse Gas Emissions for the Renewable Fuel Standard (RFS)

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Kelsi Bracmort
Analyst in Agricultural Conservation and Natural Resources Policy

The Energy Independence and Security Act of 2007 (EISA; P.L. 110-140), significantly expanded the renewable fuel standard (RFS) established in the Energy Policy Act of 2005 (EPAct 2005; P.L. 109-58). The RFS requires the use of 9.0 billion gallons of renewable fuel in 2008, increasing to 36 billion gallons in 2022. Further, EISA requires an increasing amount of the mandate be met with "advanced biofuels"—biofuels produced from feedstocks other than corn starch and with 50% lower lifecycle greenhouse gas emissions than petroleum fuels. Within the advanced biofuel mandate, there are specific carve-outs for cellulosic biofuels and biomass-based diesel substitutes (e.g., biodiesel). 

To classify biofuels under the RFS, the Environmental Protection Agency (EPA) must calculate the lifecycle emissions of each fuel relative to gasoline or diesel fuel. Lifecycle emissions include emissions from all stages of fuel production and use ("well-to-wheels"), as well as both direct and indirect changes in land use from farming crops to produce biofuels. Debate is ongoing on how each factor in the biofuels lifecycle should be addressed, and the issues surrounding direct and indirect land use are particularly controversial. How EPA resolves those issues will affect the role each fuel plays in the RFS. 

EPA issued a Notice of Proposed Rulemaking on May 26, 2009, for the RFS with suggested methodology for the lifecycle emissions analysis. EPA is expected to promulgate regulations on biofuels lifecycle emissions in the next few months, although this rulemaking is already overdue under EISA. As EPA's decisions will affect the marketability of each combination of fuel type, feedstock, and production process, there is growing congressional interest in the topic. Congressional action could take the form of oversight of EPA's rulemaking process, or could result in legislation to amend the EISA RFS provisions. Further, related legislative and regulatory efforts on climate change policy and/or a low-carbon fuel standard would likely lead to interactions between those policies and the lifecycle determinations under the RFS. 

On January 12, 2009, the state of California finalized regulations for a state low carbon fuel standard (LCFS). The LCFS requires increasing reductions in the average lifecycle emissions of most transportation fuels. The rule does not require total emissions to decrease, but the emissions intensity (emissions per unit of energy delivered) must be 10% below that of gasoline and diesel fuel by 2020. California concluded that some biofuels lead to higher emissions (i.e., lower emission reductions) than what EPA has proposed. In other cases, the California estimates are more favorable to biofuels. This difference highlights the ongoing debate over lifecycle analysis methods.


Date of Report: January 29, 2010
Number of Pages: 17
Order Number: R40460
Price: $29.95

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