NEW YORK — Royal DSM NV, the world’s largest vitamin manufacturer, expects to begin producing cellulosic ethanol in the U.S. by July as the government considers reducing the amount of renewable fuel that oil companies will be required to buy.
The $250 million plant in Emmetsburg, Iowa, is a joint venture with ethanol maker Poet LLC and will produce about 12 million gallons (45 million liters) this year, DSM Chief Executive Officer Feike Sijbesma said today. It will be able to make about 20 million to 25 million gallons annually and will reach full production by the end of the year.
Demand for the fuel is driven in part by U.S. Environmental Protection Agency requirements that gasoline companies blend biofuels into their products. Those mandates increase annually while U.S. gasoline consumption is declining. As a result, the biofuel percentage in each gallon of fuel is rising, and is approaching the 10 percent level that refiners and automakers say may damage engines. The EPA in November proposed lowering the rate, a change DSM said is unnecessary.
“We think that principle is fundamentally flawed,” Hugh Welsh, the Heerlen, Netherlands-based company’s president for North America, said today in an interview at Bloomberg’s headquarters in New York. “The blend rate should not be tied to 10 percent.”
There’s no reason a 10 percent ethanol blend can’t be used in U.S. vehicles, and fuels with as much as 15 percent ethanol have been extensively tested, Welsh said.
The Emmetsburg plant will turn corn waste into cellulosic ethanol. That’s considered a second-generation biofuel, an evolutionary step beyond fuel produced from food crops such as ethanol from corn and sugar cane. DSM makes a broad range of chemicals, including enzymes used in food production and biofuels.
Under the U.S. Renewable Fuel Standard, gasoline and diesel producers are required to blend 36 billion gallons of biofuel a year into their products by 2022, including 16 billion gallons of cellulosic fuel.
Oil companies have urged lawmakers to revise or repeal the policy as more efficient vehicles and consumers’ shifting driving habits eat into gasoline consumption.
Those rates were set in 2007, and in November the EPA proposed lowering the 2014 mandate to 15.21 billion gallons, from 18.15 billion gallons under the original schedule. The new rate includes 17 million gallons of cellulosic biofuel.
“The Renewable Fuel Standard will play an important role in the market,” Sijbesma said. Shifting mandates make it difficult to forecast demand, and DSM is seeking “a consistent RFS policy.”
The EPA expects to make a decision on the 2014 blend requirements by June, its administrator Gina McCarthy said today.
Copyright 2014 Bloomberg
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