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Cellulosic Production Idled

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- In another response to EPA's actions regarding the Renewable Fuel Standard, POET-DSM Advanced Biofuels LLC announced Tuesday the company will "pause" production of cellulosic ethanol at its Project Liberty plant in Emmetsburg, Iowa.

POET-DSM Advanced Biofuels is a 50-50 joint venture between Royal DSM and POET LLC, created in response to the RFS. The plant has produced cellulosic ethanol from corn cobs and other corn fiber such as husks.

The ethanol plant will instead by shifted to focus on research and development and improving operational efficiency, company officials said. POET executives made it clear the decision to stop cellulosic ethanol production at the plant "is a result of EPA's challenges with the implementation" of the RFS.

"Over the past three years, EPA management of the RFS has held back advancement of cellulosic biofuels," said Kyle Gilley, POET's senior vice president of external affairs and communications.

The joint venture will focus on R&D with the goal of improving mechanical reliability, creating additional technological efficiencies and licensing technology in countries, which favorably support the use of low-carbon fuels from crop residue and other biomass, the company stated.

Gilley said the POET-DSM plant had been producing and selling cellulosic ethanol into the market, but declined to provide a volume level. The cellulosic project is also co-located with a more traditional corn-ethanol plant owned by POET that is not affected by Tuesday's announcement.

Gilley said the POET-DSM plant was hurt by EPA blocking pathways for cellulosic approval, such as failing to make decisions on corn fiber as a cellulosic material. Another major impact was EPA's decisions brought cellulosic Renewable Identification Numbers (RINs) down from $3 per gallon in 2017 to roughly 59 cents a gallon today. That has effectively killed incentives for investors to build out cellulosic production, Gilley said.

"That has been one of the major handicaps EPA has created with their mismanagement of the program," he said.

Hugh Welsh, president of DSM North America, said the joint venture will look at export markets that may be more focused on low-carbon fuels such as South America, Europe and possibly China as well.

"Because of these policy changes, the economic landscape for cellulosic ethanol in the U.S. makes private and global investments in this technology more challenging. As a result, our joint venture is responding by temporarily pivoting and focusing on R&D efforts to improve technological efficiencies and explore additional international licensing opportunities in countries that are not choosing oil over agriculture," Welsh said.

As part of the R&D work, the plant will continue using biomass stored on site or under contract, but will not buy further biomass at this time, the company stated. The facility also will move ahead with a smaller number of employees, but company executives did not detail those numbers.

EPA has come under withering criticism from the ethanol and biodiesel industries for reducing obligated volumes of ethanol under the RFS, largely through small-refinery exemptions. In August, EPA granted 31 small-refinery exemptions affecting roughly 1.3 billion gallons. But POET's announcement highlights EPA also has been working to erode support for advanced and cellulosic biofuels as well.

"We are grateful to President (Donald) Trump for his support of biofuels policies, including year-round E15 and recent efforts to maintain the integrity of the RFS," Gilley said. "But while the White House is pursuing policy proposals to help biofuels, tremendous harm has been done. Over the last three years, EPA management of the RFS has held back cellulosic ethanol advancement, hindered future agricultural markets for U.S. farmers, and undermined what the president has promised."

EPA over the past month has released a supplemental plan for RFS volume levels in 2020 that would account for about 770 million gallons of lost biofuels demand over the past three years, though EPA, on average, has granted small-refinery exemptions averaging closer to 1.35 billion gallons a year, according to the Department of Energy. Biofuel groups and Midwest lawmakers have been calling on EPA to uphold a position laid out by President Trump in September that would assure at least 15 billion gallons of obligated volumes under the RFS.

During the past 18 months, more than 20 ethanol plants have stopped production while many others have scaled back production, in response to struggling profit margins.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(TN/AG)