I called Jim Caldwell at the EPA today to talk about the
classification of biodiesel within the EPA registration process (ie
whether it's classified as non-baseline or atypical), and to ask
about the possible small business producer exemptions for Tier
I/Tier II testing for EPA registration if it is classified as
nonbaseline. He was very helpful and said that he gets a
number of these calls and also that he had discussed the small
producer issue with Joe Jobe of the NBB the previous week.
The issue is this: onroad fuels are classified as "baseline",
"non-baseline", or "atypical" by the EPA, and the EPA requires
commercial producers to carry out various testing to prove health
effects and emissions safety prior to being registered as a
manufacturer of a fuel or fuel additive. Depending on the
classification, there might be small business exemptions to
some of the testing requirements. The cost of this testing or the
alternative- joining the National Biodiesel Board for access to
their EPA testing data, effectively bars smaller producers from
being able to go into business making biodiesel for on-road
use.
This testing is very expensive- Tier I (literature review, and
emissions testing) can cost up to $300,000 and Tier II (animal
tests) can cost several million dollars. The National Biodiesel
Board is the only entity that has carried out both of these rounds
of testing as per the EPA requirements. Today, legally producing
biodiesel for onroad use requires either spending several
million dollars and several years to conduct a round of these
tests, or joining the NBB for access to their data, (paying a
$5,000 per year fee to the NBB, plus a production tax to the NBB
for every gallon sold (or giving the NBB $100,000 as a
non-member and hoping that they'll give it back to you by 2015
which they might not. In this way the NBB hopes to get back the
money it spent on the Tier I and Tier II testing and the EPA
supports them in this).
There is a small business exemption from both Tier I/Tier II
testing for just one of the categories, "non-baseline". There is a
different exemption for Tier II for smaller producers of the
"atypical" category as well, although the slightly cheaper Tier I is
still required. There are different definitions of `small producer'
for the non-baseline exemption and the atypical exemption.
IN the case of biodiesel, there has been some question over
whether this fuel fits into the non-baseline category, or the
atypical category (baseline category is essentially
petroleum-specific). If it fits into the non-baseline category, small
producers could be exempt from the burdensome cost of Tier
I/Tier II testing or from the costs of joining the National Biodiesel
Board, the only current alternative to conducting their own testing.
It appears that biodiesel was originally intended to fall under the
non-baseline category (from prior language in EPA documents).
(Non-baseline describes a diesel fuel made containing more
than 1% oxygen, which can be made from non-petroleum
sources, contains nothing other than carbon, hydrogen, oxygen,
sulfur, nitrogen, and contains less than .05% sulfur by weight.
Biodiesel fits all of these criteria.)
Unfortunately for biodiesel, the non-baseline classification also
requires the fuel to conform to the PETROLEUM diesel standard,
D-975-93. The properties of biodiesel fall outside of the D-975
standard in a few areas: the 90% distillation temperature
(basically a spec to describe different grades of petrodiesel,
irrelevant to biodiesel's operability in an engine or the emissions
resulting), and viscosity.
Anything not meeting baseline or non-baseline specifications,
including the not meeting the D-975 standard for petrodiesel
which biodiesel can not do, falls under another category,
atypical.
Jim Caldwell told me today that the reason why the EPA is now
sticking to atypical categorisation of biodiesel, is due to the
viscosity issue. Basically (my interpretation) they want testing to
`prove' that the viscosity or other non-D-975 properties of
biodiesel will not cause performance which leads to harmful
emissions- they know all about how petrodiesel combusts when
it has the D-975 properties, but they don't have the data to `prove'
that biodiesel will behave the same way with a lower viscosity
(and the fact that the NBB proved it to them is considered a sort
of intellectual property of the NBB, so we can's just point to the
NBB data without paying the NBB for use of the data).
He said that in the early days of the writing of the regulations
they (he?) were unaware of the viscosity distinctions between
D-975 petrodiesel and biodiesel, and were willing to locate
biodiesel in the non-baseline category, but more recently, since
they have become aware of the viscosity differences, they believe
it belongs in the atypical category because they have to take the
most conservative approach in evaluating fuels.
Jim Caldwell also said that there is an arbitration provision in the
regulations. It is in EPA documents at 40 CFR 79.56( c) . This
states that if two parties do not agree on compensation (such as
me and the NBB not agreeing that a fee of $5,000 a year for use
of their data is fair to me as a small producer), a solution is to be
decided via arbitration overseen by the independent national
organization of arbitrators or something like that. He stated to me
that he thinks that an arbitrator is unlikely to side with the NBB in
this situation, and that the outcome could be something more
amenable to small producers- such as lower fees for joining the
NBB and accessing data. When I asked him what other
channels exist to change the classification of biodiesel from
non-baseline or atypical- ie what channels exist by which the
EPA rules can be changed- he said that it is unlikely that any
legal challenge could stand unless arbitration has been tried
first, since they so clearly set up an arbitration process for just
this situation.
We also discussed the fact that a group of small producers
could band together and go through the arbitration process to
spread out the costs of arbitration.
He also suggested that since only Tier I is required for
registration of 'atypical' fuels, that a group of small producers
should band together and conduct their own Tier I testing. At that
point if we wished to make the data `public domain' it would be
within our rights to do so, and if we wished to be a NBB-style
membership organization for the purposes of members gaining
data access it would also be within our rights to do so.
I know that the DOE's Northwest Regional Biomass Energy
Program tried to submit Tier I data but it was rejected due to
them using the wrong engine in the test, so there has in the past
been at least one attempt by non-NBB organizations to conduct
Tier I. I wonder how much of their data is salvagable (like the
literature review portion) for reuse by a second attempt.
Costs of Tier I are anywhere from $100,000 to $250,000. The
NBB spent some $600,000 I believe. Jim Caldwell suggested it
would cost approximately $300,000 and that getting 100
producers together to spend $3,000 would make this affordable.
In my opinion, it would be a massive undertaking to make this
happen, but this is an option to explore if nothing else works.
Lastly, I reiterated that I was talking about commercial producers
of onroad fuel for sale, and not about homebrewers making fuel
for themselves. I said that my idea of small producer is
someone under 500,000 gallons a year or something along
those lines (which seems to be `pilot plant' scale for the
industry). He then told me that there is no registration process
for people who wish to make fuel for their own use- that we are
essentially exempt from all of the registration requirements. I
also mentioned research and university projects (I'm thinking of
student-run projects here rather than something like Iowa
State's mechanical engineering program which operates a
whole plant for research). He then said that the EPA has a
research exemption but it is temporary- he gave some
theoretical examples of university projects which typically
produce their own fleet onroad fuel for about 5 busses, figuring
out the logistics for a couple of years as exempt producer- and
that the EPA would require registration and testing once such a
theoretical project upscaled to something like 50 busses past
the first couple of years of research. He said such research of
course needs to be actual research- keeping records,
conducting experiments.
SO I am now very much wondering about strategy on where to go
with all this. I think we're finally reaching the point (at least in
California biodiesel) where there could be significant public
support for legal challenges and the like. I do agree with Jim's
point that legal challenges wouldn't get far if the first option,
arbitration with the NBB, didn't get tried. The other route besides
arbitration with the NBB would be challenging the EPA itself to
change it's rules (which sounds difficult, plus these rules apply
across the board to all manufacturers of new fuels and fuel
additives and it seems to me like a generally good thing that they
are conservative!). The other route besides arbitration and
challenging the EPA would be to form a producers' coop to run
Tier I testing and making this info public domain (yeah right).
Knowing what I know of small business owners, it'd be quite
difficult to organize 100 would-be businesses or otherwise take
on a project of this scope. Plus there's a catch-22 situation- it's
hard to include such a plan as a cornerstone of your business
plan while looking for investors to put money into your biodiesel
business.
Thoughts?
mark
Biofuel at Journey to Forever:
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