U.S. cellulosic fuel makers say expansion finally at hand

Reuters

By Ayesha Rascoe

WASHINGTON, April 29 (Reuters) - U.S. producers of cellulosic ethanol on Tuesday said the industry is poised for rapid growth in 2014 after years of false starts, and that the U.S. Environmental Protection Agency's proposed usage target is too low.

Lawmakers set ambitious goals for use of cellulosic biofuels in the 2007 law establishing the Renewable Fuel Standard, which requires increasing amounts of various types of biofuels to be blended into the U.S. fuel supply.

Production of cellulosic fuels, made from sources such as grasses, trees and crop waste, has so far not been anywhere near the targets set by Congress, forcing EPA to repeatedly slash its annual mandates.

But producers say the industry is finally on the verge of success, with a handful of plants soon to open.

The EPA's draft proposal for 2014 would require the use of 17 million gallons of the innovative fuel, about 1 percent of the 1.75 billion gallons originally stipulated by Congress.

"They are being conservative at this point," Doug Berven, vice president of corporate affairs for biofuel producer POET LLC, said at a press event.

"They should be a little bit higher. We've got a number of production facilities coming on line and I do think they are going to be successful," Berven said, although he declined to specify an alternative target.

A $250 million cellulosic ethanol plant backed by POET and Dutch food and chemicals group DSM is set to come on line by June. The plant could eventually produce 25 million gallons of fuel a year.

Biofuel officials warned that the EPA's proposed cut to the overall 2014 biofuel mandate, including conventional corn-based ethanol, would hurt the entire renewable fuel industry.

"When that policy becomes more uncertain, then the first thing that happens is investors become weary and begin to look somewhere else," said Chris Standlee, executive vice president for global affairs for Abengoa Bioenergy, a Spanish ethanol company active in the United States.

The draft EPA rule cut the 18.15 billion gallons (68.7 billion liters) of biofuels mandated for use in 2014 down to 15.21 billion gallons. The rule is set to be finalized by June.

Abengoa's cellulosic ethanol plant in Hugoton, Kansas will begin producing fuel within weeks and at full capacity could produce 25 million gallons a year.

Other projects discussed at Tuesday's event included Dupont's Nevada, Iowa plant, expected to start operations in the fourth quarter, and Quad County Corn Processors' Galva, Iowa plant, scheduled to come online in June.

(Reporting by Ayesha Rascoe; Editing by Ros Krasny and Grant McCool)

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