Industry leaders said they were pleased overall with a package of biofuels policies announced by the Obama administration on Feb. 3, but still expressed concern over the indirect land use changes included in the Renewable Fuels Standard 2 (RFS) final rulemaking.

The announcement included: a final rulemaking for the Renewable Fuels Standard 2 by the U.S. Environmental Protection Agency; a proposed rule on the Biomass Crop Assistance Program (BCAP); a first-ever report from the President’s Biofuels Interagency Working Group; and creation of an Interagency Task Force on Carbon Capture and Storage.

The Renewable Fuels Association (RFA) said it was disappointed that EPA "continues to rely on oft-challenged and unproven theories such as international indirect land use change to penalize U.S. biofuels to the advantage of imported ethanol and petroleum."

"EPA was right to recognize that ethanol from all sources provides significant carbon benefits compared to gasoline," said Renewable Fuels Association (RFA) President Bob Dinneen. "As structured, the RFS is a workable program that will achieve the stated policy goals of reduced oil dependence, economic opportunity, and environmental stewardship."

The RFS2 rulemaking includes for the first time set blending volumes for specific categories of renewable fuels, including cellulose and biodiesel.

The cellulose level of 6.5 million gallons was significantly lower than the 100 million proposed in May 2009. Biodiesel blending was increased from a proposed 650 million gallons to 1.15 billion gallons. Total 2010 RFS volume was maintained at 12.95 billion gallons, increasing to 36 billion gallons by 2022.

While reaction was positive overall, the issue of international indirect land use change (ILUC) was still a cause for concern among industry groups and producers.

EPA set mandatory greenhouse gas emission reduction thresholds for the various categories of fuel. It set the levels at 20% for renewable fuel; 50% for advanced biofuel; 50% for biomass-based diesel and 60% for cellulose biofuel. The thresholds were set using an analysis of the full lifecycle of various fuels including emissions from international landuse changes resulting from increased biofuel demand.

Major ethanol producer POET said EPA lessened the ILUC penalty, but didn’t go far enough.

"…EPA still relied on the disproven theory when all of the data shows that ethanol production continues to improve and isn’t requiring new land," said Jeff Broin, POET chief executive officer (CEO).

Novozymes commended EPA for its work on the challenging issue, but also noted that ILUC modeling is in its infancy and lacks consensus in the scientific community.

"Moving forward, the U.S. government should act thoughtfully and deliberately and continue to study this issue," said Steen Riisgaard, CEO of Novozymes.

For biodiesel producers, the RFS2 ensures a national market for the renewable fuel. The American Soybean Association (ASA) said a favorable rulemaking was "vitally important as demand for domestically produced soybean oil and the future of the biodiesel industry in the U.S. hinged on the outcome."

The initial rule would have done harm to the competitiveness of the U.S. industry, ASA said. The group said it was pleased that agricultural feedstocks produced in the U.S. will be in compliance and not require additional certification unless the baseline level of approved land is exceeded. Foreign feedstocks will require certification.

The President’s Biofuels Interagency Working Group also released its first report, "Growing America’s Fuel." The group was established in May 2009 to develop a comprehensive approach to accelerating the investment in and production of biofuels.

U.S. Agriculture Secretary Tom Vilsack said the report provides a clear roadmap and pathway to greater energy security. It encourages interagency cooperation, and recognizes that one size does not fit all so that a regional approach to biofuels development is needed, he said.

It notes that the nation is not on track to produce 36 billion gallons of renewable fuel by 2022. Hundreds of projects have been funded, it said, but more robust supply chains would emerge if there was more integration among government agencies.

Support must continue for first and second-generation fuels, but additional focus must be placed on "third-generation" drop in fuels, it said. Additionally, support must be given to feedstock research and demonstration.

Jim Greenwood, BIO president and CEO, thanked the Obama administration for its leadership in integrating the complete biofuel supply chain, from crop production to fuel production and marketing.

"Directing federal resources and funding in a coordinated framework to the development of new feedstocks, transportation and distribution networks, and vehicles can help create a robust value chain for the bioeconomy," he said.

USDA’s BCAP proposed rule is designed to spur expansion of dedicated non-food crops for renewable energy and biofuel production. It provides matching payments to agriculture and forest landowners and operators who sell eligible biomass materials to qualified biomass conversion facilities for the production of heat, power, bio-based products or advanced biofuels.

It also provides funding for producers of eligible renewable crops within a select geographical area of up to 75% of the cost of establishing the crop, and annual payments for up to 15 years for crop production.

A public comment period will continue for 60 days after the rule is published in the Federal Register.

"The establishment of BCAP, the EPA announcement and the release of the report from the working group is a very positive, very specific, very direct message that the Obama administration is highly supportive of the biofuels industry, sees the potential for growth and is committed to making that happen," said Agriculture Secretary Tom Vilsack in a teleconference with reporters on Feb. 3.