Graham Noyes Stoel Rives LLP

Transcription

1 Presented by: Graham Noyes Stoel Rives LLP Advanced Biofuel Leadership Conference October 11, 2013

2 Energy Pricing Dynamics Renewable Fuel Standard (RFS) Low Carbon Fuel Standard (LCFS) Tax Credits 2

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4 Lead Stoel s Advanced Biofuel Practice Team Regulatory: FFARs, RFS, LCFS, SB 1122, AB 32 Transactional: Feedstock, Offtakes, Gas Upgrading, JV s Project Development: Incentives, Financing, EPC s 4

5 $20.00 $ $18.00 $16.00 $ Price ($USD per million BTUs) $14.00 $12.00 $10.00 $8.00 $6.00 $80.00 $60.00 $40.00 Price ($USD per barrel) $4.00 $20.00 $2.00 $0.00 $0.00 Natural Gas Crude Oil Source: BP Statistical Review of World Energy, June

6 2011: Waste Management, Inc. states 80% of trucks purchased in next 5 years will be NG-fueled 2012: AT&T orders 1,200 CNGfueled cargo vans GM s largest-ever CNG vehicle order 2013: UPS announces plan to expand LNG-fueled fleet from 112 to 800. Source: Trucking Industry Is Set to Expand Its Use of Natural Gas, New York Times Will Truckers Ditch Diesel? Wall Street Journal

7 16.55 BG in 2013; 36 BG in 2022 Corn starch ethanol now at 13.8 BG capped at 15 BGY beginning in 2015 Advanced Biofuel increases to 21 BGY by 2022 Beyond 2022, EPA has discretion with boundaries EPA Indicates 2014 Ethanol Blend Wall Final 2013 Volume Standards a Cellulosic biofuel 6 mill gal Biomass-based diesel 1.28 bill gal = 1.92 EEG Advanced biofuel 2.75 bill gal Renewable fuel bill gal statistical-review-of-world-energy-2013.html 7

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9 - On February 22, 2013 EPA issued a Final Rule adding several new fuel production pathways to the list of approved pathways under the RFS. - The rule establishes Camelina (Camelina sativa) oil as a feedstock for production of biomass-based diesel and naphtha and liquefied petroleum gas, and energy cane (certain hybrids derived from Saccharum spontaneum) as a feedstock for ethanol, qualified to generate RINs as cellulosic biofuels. - The rule also certified that renewable gasoline and renewable gasoline blendstock made from certain feedstocks such as crop residues and other waste products qualify as cellulosic biofuels, and clarified that renewable diesel explicitly includes jet fuel. 9

10 Hot Political Topic in DC Development of Quality Assurance Program ( QAP ) Increased Reliability, Liquidity, Future Value RINs listed on ICE, CME Group Increased Monitoring and Enforcement Small Business Compliance Policy QAP Audit provides factual basis Policy eliminates gravity portion of penalty EPA construes narrowly Opportunity to cure defects 10

11 Company Fuel Feedstock Process 11 Good Energy, Inc. New (G2 Diesel) Soy bean oil, Oil from annual cover crops, Algal oil, Biogenic waste oils/fats/greases, and Canola oil Diamond Green Diesel, LLC New (renewable naphtha) Biogenic waste oils/fats/greases, non-food grade corn oil, soybean oil, canola oil Esterification Hydrotreating DriveGreen, LLC New (renewable electricity) Landfill biogas New (proprietary) Element Markets, LLC CNG Biogas from anaerobic digesters Any Emerald Biofuels LLC, Global Clean Energy Holdings, and UOP LLC Renewable diesel, jet fuel, and naphtha New (jatropha) Hydrotreating Gevo Isobutanol Corn New (proprietary) Golden Renewable Energy, LLC Renewable diesel New (municipal sewage sludge), Biogenic waste oils/fats/greases New (proprietary) N/A Cellulosic biofuel New (pulp wood) Any POP Diesel, Inc. New (un-transesterified plant oil) New (jatropha oil) WM GTL, Inc. Cellulosic Diesel New (landfill biogas) Any New (proprietary) 11

12 Company Fuel Feedstock Process Conestoga Energy Partners, LLC, and Bonanza Bioenergy, LLC Ethanol New (grain sorghum) New (proprietary) EdeniQ, Inc. Ethanol New (corn kernel fiber) Any Green Vision Group Ethanol New (energy beets) Fermentation Growing Power Hairy Hill Ethanol New (wheat starch) New (proprietary) Guardian Energy, LLC Ethanol Corn starch New (proprietary) ICM Ethanol Corn New (proprietary) Iogen Ethanol New (grain sorghum) New (proprietary) Marquis Energy-Wisconsin, LCC Ethanol Corn Starch New (proprietary) Montana Advanced Biofuels, LLC Ethanol New (barley, wheat starch residue) Fermentation National Sorghum Producers Ethanol New (biomass sorghum) Any Osage Bio Energy, LLC Ethanol New (barley) Fermentation Permeate Refining, LLC Ethanol Non-cellulosic separated food waste Any Poet Biorefining-Chancellor Ethanol Grain Sorghum New (proprietary) Valero Renewable Fuels Company, LLC: Fort Dodge Plant Ethanol Corn Starch New (proprietary) 12

13 Company Fuel Feedstock Process Agrisoma Biosciences Inc. Biodiesel, renewable diesel, jet fuel, heating oil, naphtha, LPG New (Brassica carinata oil) Transesterification, Hydrotreating Arvens Technology, Inc. Biodiesel New (pennycress) Transesterification Emerald Biofuels LLC and Global Clean Energy Holdings National Cottonseed Products Association Biodiesel New (jatropha) Transesterification Biodiesel, renewable diesel New (cottonseed oil) Transesterification N/A Biodiesel, renewable diesel New (palm oil) Trans-Esterification; Hydrotreating Rothsay Biodiesel New (biodiesel) Biogenic waste oils/fats/ greases Transesterification Solazyme Biodiesel, renewable diesel, jet fuel Carbohydrate, Algae Transesterification Hydrotreating 13

14 If all criteria are met, EPA will waive 100% of the gravity components of the civil penalty. Criteria includes: 1) discovery is voluntary; 2) disclosure period is met; 3) violation is corrected. Revised policy expands the options allowed for discovering violations and establishes a time period for disclosure. Can obtain penalty relief if violations are discovered by any voluntary means in addition to discovery as a result of government sponsored on-site compliance assistance activities or environmental audits. Clarifies and lengthens disclosure period from 10 to 21 days. Late disclosure may be accepted in exceptional cases where there are complex circumstances. index.html 14

15 Foundation is AB 32, Global Warming Solutions Act of 2006 Goal of AB 32 is to reduce greenhouse gas emissions ( GHGs ) to 1990 levels by 2020 California Air Resources Board ( CARB ) tasked to develop and implement regulations 15

16 Can stack credits with RINs LCFS requires 10% drop in Carbon Intensity ( CI ) of transportation fuels Establishes CI Baseline for Program Use Imposes Declining CI requirements Sets CI levels for various fuels Regulated party must meet CI standards Complicated system for assigning responsibility as Regulated Party Includes gasoline, diesel fuel, alternative fuels, CNG, LNG, electricity, hydrogen 16

17 Year Average Carbon Intensity (gco2e/mj) 2010 Reporting Only % % Reduction Δ % Reduction % 0.25% % 0.50% % 0.50% % 1.00% % 1.00% % 1.50% % 1.50% % 1.50% 2020 and subsequent years % 2.00% 17

18 Diesel Biodiesel Fuel Virgin Soy Biodiesel Pathway Descrip2on ULSD based on the average crude oil delivered to California refineries and average California refinery efficiencies Conversion of waste oils (Used Cooking Oil) to biodiesel (fahy acid methyl esters FAME) where cooking is required Conversion of Midwest soybeans to biodiesel (fahy acid methyl esters - FAME) Carbon Intensity Values (gco2e/mj) Direct Emissions Land Use or Other Indirect Effect Total Compressed Natural Gas Dairy Digester Biogas to CNG Renewable Diesel Liquefied Natural Gas Conversion of tallow to renewable diesel using higher energy use for rendering Overseas- sourced LNG delivered as LNG to Baja; re- gasified then re- liquefied in CA using liquefac^on with 80% efficiency

19 Each 10g of reduction is worth.0125 per gallon when the carbon market price is $10 per ton. Thus, dairy digester CNG would provide about a 10 cent credit per gallon in a $10/ton market Recent market range = $30 to $40 per ton Dairy CNG in $35 market =.35 /Diesel Gallon Equivalent 19

20 Legal Challenges to LCFS decided in 2013 Poet, LLC v. California Air Resources Board (Cal. Ct. of Appeal, July 15, 2013) Rocky Mountain Farmers Union v. Corey (Ninth Circuit, Sept. 18, 2013) LCFS upheld in both cases. But remand to District Court in Rocky Mountain to apply balancing test. 20

21 New LCFS Pathways 16 new applications for Method 2 Fuel Pathways submitted in Includes pathways for biodiesel, biomethane, ethanol, renewable diesel, and LNG. 50 total applications pending for Method 2 Fuel Pathways. 1 Fuel Pathway proposed by ARB in 2013 for North American landfill gas. 21

22 LCFS Amendments Expect draft amendments to be released for public comment in fall Potential amendments include: Cost containment Indirect land use change values Credits for electric rail and forklifts Flexible compliance mechanisms LCFS reporting tool Enforcement Sustainability 22

23 LCFS Expansion Oregon Washington 23

24 Biofuels Credits Income tax credit Biodiesel or renewable diesel ($1.00/gallon) Small agri-biodiesel producer ($0.10/gallon) Second generation biofuel producer credit ($1.01/gallon) Income tax and excise tax Biodiesel mixture or renewable diesel mixture ($1.00/gallon) All of these expire 12/31/13 Liquefied Hydrogen Income tax and excise tax Liquefied hydrogen or liquefied hydrogen mixture ($0.50/gallon) Expires 9/30/14 24

25 On your flash drive! This guide draws on our experience in first-generation biofuels while focusing on the particular challenges and legal issues facing next-generation biofuels and biochemicals 25

26 Questions and Discussion Graham Noyes