Last month, the Advanced Biofuels Association deviated from other biofuels groups when it released a set of recommendations for legislative reforms of the cellulosic biofuel provisions of the renewable fuel standard (RFS). How much support exists in Congress and among stakeholders for a legislative fix to the RFS? During today's OnPoint, Michael McAdams, president of the Advanced Biofuels Association, discusses the group's motivations for pushing congressional reform and talks about the current environment for near-term action by U.S. EPA and Congress on the RFS.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Michael McAdams, president of the Advanced Biofuels Association. Mike, thanks for coming on the show.
Michael McAdams: Monica, always nice to be with you.
Monica Trauzzi: So you caused quite a stir last month within the biofuels community when your organization released recommendations for legislative reforms of cellulosic biofuels provisions of the RFS, the renewable fuel standard. The biofuels industry has largely opposed congressional involvement, so why a legislative fix?
Michael McAdams: Well, we represent the next generation. Our association's been around about 10 years now. We have 30 members from all over the world, and most of them make advanced and cellulosic fuels. And what we said in our speech last week was that the RFS has worked really well for some folks, but it hasn't worked as well for the advanced and cellulosic sector. And so we called on three basic provisions that needed to be legislatively reformed because we believe that that'll help jump-start the actual ability to deliver these plants, and up to this point, we've had very limited ability to get the financing for these plants, and that's why we made these three recommendations.
Monica Trauzzi: EPA is moving to make changes. Have you lost confidence in the agency?
Michael McAdams: Oh, I wouldn't say that we've lost confidence. What we have said from the beginning is that we'll work with anyone. We'll work with any of the stakeholder groups. We'll work with the administration, the White House, EPA, DOE. We were very engaged with the Department of Defense program on the DPA program in the past. We will work with Capitol Hill, but what we are -- what we have done in terms of shifting is we've made it very clear that we are at a very crucial time in our sector of the industry's development, and we need resolution. What we don't need is more hearings and comment periods. What we need is actions and solutions. And so turning to the Congress and asking for them to seriously consider making some of these revisions, which after eight years of implementing the EPA's RFS rules, we think are clearly needed. It seems like one of the things that we need to be doing at this time.
Monica Trauzzi: So why did you and your member organizations decide to distance yourselves from what the broader biofuels community is seeking?
Michael McAdams: Well, we have a different set of members. We are principally smaller companies, not larger agribusinesses. Most of my members can't write their own checks. We're the little guys. We're David, if you will, right, and so for us it's time for us to try to move off what has been two to three years of suspended animation and actually try to get the policymakers to step up, be they and the administration or on Capitol Hill, and preserve what they had as a vision to deliver the advanced and cellulosic industry.
Monica Trauzzi: So since making your speech, what's the response been like, and is there a push to form some kind of coalition around this idea?
Michael McAdams: Well, the great thing -- I would say the speech was very well-received. I was delighted that the Wall Street Journal covered it in detail. I've had a lot of members from both sides of the aisle reach out to us and want to explore -- for instance, like the cellulosic waiver credit. Why did I say that this is loophole for the oil industry? Why do we need to legislatively fix the credit? Well, because at the end of the compliance periods, these guys can just simply choose a waiver credit instead of actually buying the fuels. If I was fixing the statute, the statute would make it very clear that if my members made the gallons, then the oil industry would have to buy those gallons first and not have the opportunity to, in lieu of buying the actual gallons that were made, which would no longer be phantom fuels, but actually buy the waiver credit -- I mean, buy the fuel instead of the waiver credit.
Monica Trauzzi: How has your organization connected with the oil and gas industry on your proposal? Because it sounds like some of the things you're asking for are similar.
Michael McAdams: Well, I would say we have similarities with the oil industry in terms of our frustration over not having the RVO put out. What we have said at ABFA for now, for a year and a half, is simply take the numbers off the EMTS system and use those as the mechanism for setting the RVO. That way you wouldn't have three years of this political mishmash back and forth, quandering about what the numbers are going to actually be because the EMTS system, in February, puts out the actual completed numbers for the year every year. So just move the date from November, which they've missed every year now, for whatever reason, and just make the date the end of February and take the actual numbers and start from those numbers and move forward.
Monica Trauzzi: So you're pushing for this legislative fix, but RFS reform does not seem to be a top-tier energy issue for this Congress, and the politics of reform heading into 2016 are pretty sticky. What do you think the overall chances are for some type of legislative reform of the RFS?
Michael McAdams: Well, I'm not naive, and I agree with you that the politics and track record of the last four years of performance of the legislative branch of government has, you know, not been at an all-time high. But nevertheless, for the people that I represent, I have to get out there and try to do everything I can to see that the vision of a cellulosic and advanced industry is -- has an opportunity. And so we -- that's why we've taken this step. That's why we will push the Congress very hard. That is why we intend to meet with any stakeholder group that's willing to work with us to see if there's a combination of objectives that we can align on, and ironically I would suggest, given what we see in terms of the rulemaking timing this year, it may actually be the market that convinces the politicians that they really need to step up and deal with this. I mean, I'm certainly no competition to the big corn industry and the big oil industry in terms of having revenue and lobbyists and hiring people. We're just a small trade association that punches above our weight, but the markets are huge and the markets might be able to turn that trick far better than one might think.
Monica Trauzzi: On cellulosic specifically, EPA recently asked for more data to aid in determining annual volume standards. What does that indicate to you? And does that mean that we could see more delays coming from the agency?
Michael McAdams: Well, Monica, as always, you've put your finger right on the concern. You know, the '14 rule was supposed to be out November 30, 2013. It's now April 1, 2015. That is a tradition -- they've traditionally looked to try to collect data prior to putting out the numbers. That makes me anxious about are they going to be able to hit the deadlines. I hope they are. I would have actually hoped we could have had the deadline -- the RVO proposal out much earlier in the year since they weren't able to do it in November, but every day that goes by puts my members at risk because there's only so much financial appetite for inconsistency and uncertainty, and so what we're trying to do with this whole legislative strategy is help try to bring some certainty to this sector of the marketplace.
Monica Trauzzi: So if we see delays from EPA, no action legislatively because, as we've talked about, it's a tough hill to climb, where's this all go?
Michael McAdams: Well, unfortunately it's got to go in one of three places, right? So when you look at government, it's one of three places. They're either going to complete the rulemaking or the lawsuits that are pending, the courts are going to force them to do something in response to missing the deadlines, and -- or they're going to put an RVO out, which I would suggest when the RVO comes out we'll have a much better idea whether the RVO is likely to receive less consternation than the last one that was proposed. I'm fearful that it will come out with something similar to the last one and then we'll see all these allegations about I'm going to take you to court, which leads us to the third option, the court. And so we don't want to go to court because that doesn't solve our problems. We need to make some fixes to the statute itself so that we have more certainty for our sector, so that the banks will loan the money to build these new innovative plants.
Monica Trauzzi: All right. We're going to end it right there. Thank you for coming on the show. I appreciate your time.
Michael McAdams: Thank you. Always a pleasure.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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