POLITICAL CONTEXT

Introduction

In our political context section we will be performing a stakeholder analysis, where we take into consideration the perspectives of Lafayette College’s Office of Sustainability, the Stone House Group, and ultimately Lafayette’s Board of Trustees. It is crucial to reflect on how the various backgrounds and experiences of stakeholders involved in this project can influence their decision on whether or not to pursue this alternative. There are also other political factors that can impact the attractiveness of an alternative. For natural gas, we consider the politics of fracking on both a local and national level. For the Renewable Fuel Oil and biomass alternatives, there are implications for local suppliers and uncertainty of current policy frameworks that should play an important role in assessing the viability of these potential projects.

Impact of Renewable Fuel Oil on the Forest Industry

As previously mentioned, one of the alternatives we are considering is the Renewable Fuel Oil that is supplied by Ensyn Corp., a Canadian producer of bio-oil from wood residues (Kryzanowski). Without deeply discussing the technical aspect of the process, Ensyn uses its patented and proprietary Rapid Thermal Processing™ (RTP™) technology to convert wood residues or other cellulosic material into a renewable fuel oil (Gosselin, 2018). Ensyn can use practically any type of wood for its processes and has tested over 100 different feedstocks. For this reason, the company believes that they can be a huge benefit to the forest industry. “From a government, industry and local community perspective, we’re providing the wood industry with a new value-added product use for its residues at a time when the market for residues has been somewhat stressed due to the shifting of the pulp business to the tropics and the fibreboard business moving to Asia,” says Ian Barnett, Ensyn’s Executive Vice President (Kryzanowski 2015).

More specifically, Ensyn has found that when its facilities are attached to existing saw mills, the activity of the bioplant can keep the mill going, providing employment and stimulating the local economy. “What we’re seeing in some areas we are working in is that pre-commercial thinning is not being carried out in an optimal way because the market for the residuals is poor,” says Barnett. “So, we believe that a value-added home for the residuals using our technology will allow the forests to be managed in a more efficient way, generating higher yields” (Kryzanowski 2015). Ultimately, Renewable Fuel Oil can have a positive impact on both the environmental and local sawmills.

Renewable Identification Numbers

The Renewable Fuel Standard program, implemented by Congress under the Energy Policy Act of 2005 and expanded in the Energy Independence and Security Act of 2007, was designed to reduce greenhouse gas emissions and expand the country’s renewable fuels sector while reducing reliance on imported oil (Renewable Fuel Standard Program, 2018). As a part of this plan, renewable fuel producers generate RINs, or renewable identification numbers, which are the ‘currency’ of the Renewable Fuel Standard program. The RIN system allows biofuels, particularly ethanol, to be blended within the U.S. fuel supply, making it a more sustainable resource with a lower carbon emission impact. Additionally, these policy actions have expanded the demand for biofuels, lowering the cost of biofuels like Ensyn’s RFO, enabling them to be economically competitive (RINs 101: The Basics of Renewable Identification Numbers).

The sale of Ensyn’s renewable fuel oil generates D7 cellulosic diesel RINs, which is essential for the competitiveness of the product in the energy market. More specifically, when fuel producers do not generate enough of their own renewable identification numbers, they must, as required by the Energy Policy Act of 2007 and Energy Independence and Security Act of 2007,  purchase these identifiers from other third parties, which acts as a subsidy for the biofuel producers like Ensyn. A visual description of how RINs act as a subsidy for biofuel producers is demonstrated in the Figure 1 below. This figure shows how the mandated quantity of biofuels, denoted as RFS creates a new equilibrium price of RINs. When government mandates change the mandated quantity, the core value of the RIN will change. Thus, any government legislation will have a direct impact on the value of RINs, thus also impacting the cost of biofuels for final consumers like Lafayette.

Figure 1. RINs Supply and Demand Graph (Source: Int. Council on Clean Transportation)

Estimating the extent of the role RINs play in subsidizing the cost of RFO requires an estimate of the value of D7 RINs. While other categories of RINs are traded and thus price data is tracked, there is little to no data collection for the price of D7 RINs, as such a low volume of D7 RINs is produced yearly (Kotrba, 2018). However, price data for D3, D4, D5, and D6 RINs is collected by the EPA, as seen below in Figure 2. D3 RINs are likely the most comparable category of RINs because they are cellulosic biofuels. Because D3 RINs (the blue line) have almost reached a value of $3, they play a major role in subsidizing the cost of renewable fuel oil.  Because Renewable Identification Numbers play a large role in subsidizing the cost of RFO, the viability of these policies in our current political environment must also be evaluated.

Figure 2. RIN Trades and Pricing Information

The current political climate has not been extremely conducive of progressive energy policy and climate action legislation. In March of 2017, President Trump issued an Executive Order that reversed many of the clean energy initiatives enacted in the Obama administration, notably the Clean Power Plan, as well as absolving the EPA’s working group that measured the social cost of carbon (Hultman, 2017). Despite these deregulatory efforts, the Renewable Fuel Standards program has survived. However, the program has created growing tensions between two of President Trump’s largest supporters: the oil industry and midwestern agricultural business, especially those growing corn. In the April edition of the University of Nebraska’s “Cornhusker Economics” describes how RINs “buyers’ (of RINs) price must be lowered to convince buyers to buy more,” while “ethanol producers’ price must be raised to convince them to reproduce more,” creating a “bitter pill for plenders caught in the middle, who now have the obligation to buy high and sell  low to achieve the higher volume requirements” (Perrin 2018). However, according to Perrin, blenders will not go bankrupt in this process because they can relay the higher prices, which are thanks to the ethanol blending requirements, onto consumers. If RIN prices were capped, less RINs would be traded, but blenders would still be required to meet the Renewable Volume Obligation set by the Energy Independence and Security Act of 2007, suggesting that there may be a sizable but smaller impact on the cost of biofuels (Perrin, 2018).

A 2017 analysis of US policymakers’ attitudes towards climate change and subsequent policy action suggests that, despite President Trump’s vocal opposition to regulation and refusal to acknowledge global warming as a man-made occurange, climate action legislation is plausible. In their paper “The spatial distribution of Republican and Democratic climate opinions at state and local scales,” by Matto Mildenberger, Jennifer Marlon, Peter Howe, and Anthony Leiserowitz, multilevel regression and post-stratification models are combined to create a spatial distribution of partisan climate and energy opinions. They find that “partisan climate opinions are characterized by a policy-relevant degree of heterogeneity. Both the belief that global warming is happening as well as support for particular climate mitigation policies varies widely across both states and congressional districts”. However, “while subsets of the Republican voting public do not support climate policies and hold views consistent with party elite, Republican climate and energy opinions are more varied than might be presumed from political discourse” (Mildenberger et. al, 2017). This analysis of party beliefs, coupled with a newly elected, Democrat-controlled House of Representatives, makes sustainable energy policy slightly more plausible. However, new climate action legislation, or maintaining old legislation including the Energy Independence and Security Act of 2007, is threatened by White House leadership.

While there is little scholarly research assessing the risk of President Trump modifying or ending the general Renewable Energy Credits program or Renewable Identification Numbers, this uncertainty is a major drawback to implementing Renewable Fuel Oil. As discussed above, the economic viability of RFO is partially reliant on RINs, as the program subsidizes the cost of Ensyn’s final product. Thus, a considerable amount of in depth research about the future of this policy program would be necessary before implementing this alternative.

Sustainability of Supplier- Renewable Fuel Oil

The sustainability of Ensyn’s renewable fuel oil as the primary source of fuel for all of Lafayette’s steam plant needs is problematic because Ensyn is currently the only producer of their patented renewable fuel oil in the world. Additionally, Ensyn’s production facility is located in Ottawa, Canada. While the production capacity of that facility is 300 million gallons per year, relying on one plant worldwide for a primary source of power poses significant risks (Gosselin, 2018). Additionally, the location of this plant in Ontario means that the renewable fuel oil would have to travel great distances. Although there is little research to support this hypothesis, heavy winters could pose a challenge to the transportation of this fuel, and that is when it would be needed most.

However, Ensyn partnered with Arbec and Cote Nord in 2016 to begin designing and eventually building another production facility in Port-Cartier, Quebec. This production facility would support a 10.5 million gallon per year production capacity, greatly increasing the volume of renewable fuel oil Ensyn can produce. Additionally, this facility is designed to serve customers in the Northeastern United States and Eastern Canada for heating purposes. An Ensyn official noted that the approval of this project was notable because “to our knowledge, this is the only commercial-scale cellulosic biofuel project that has gained approval anywhere in the world over the past two years” (Gosselin, 2018). This project would greatly increase the capability of Ensyn to provide renewable fuel oil to Lafayette and hopefully reduce the cost of transportation. Additionally, Ensyn has discussed the possibility of building another plant in New York state. However, the construction of a Northeast Ensyn plant in the U.S. is dependent on the development of a customers base in the area that can pledge their renewable fuel oil demand for the foreseeable future (Gosselin, 2018). Because the creation of a New York plant requires the commitment of consumers in the regional area, but the commitment of these consumers also rests on the long term sustainability of Ensyn’s supply chain, Lafayette could play an important role as a catalyst for regional demand and an eventual New York plant. However, a New York Ensyn plant is by no means a current project or a definite future project.

Local and National Politics of Natural Gas

Natural gas is considered an imperfect solution to reducing carbon emissions. The fuel source is cheaper and more environmentally friendly than standard oil. However hydraulic fracturing can be very harmful to the health of citizens residing in the area which the drilling occurs. When committing to natural gas, the political context of this socio-technical system must also be evaluated, and whether the college should continue to support both the positives and negatives of this use.

Natural gas is one of the most common fuel types in the United States due to its abundance and cheap price. In the past few decades, it has been part of political campaigns, as candidates argue the country must reduce its dependence on foreign oil. This issue is non-partisan, and has been a talking point by presidents in the past 40 years. From President Richard Nixon’s  plan “in 1971 to make the United States self-sufficient in energy by 1980,” to President Jimmy Carter’s promise to “never again use more foreign oil than we did in 1977,” (Wald, 2006) foreign oil dependence has shown to be a non-partisan issue. More recently, natural gas production and reduction on foreign oil was addressed in each of President George W. Bush’s first four State of the Union addresses, desiring to move beyond a petroleum-based economy. In President Barack Obama’s sixth State of the Union, he expressed that he “believed we could reduce our dependence on foreign oil and protect our planet. And today, America is number one in oil and gas,” (Carroll, 2015). Natural gas exports has helped the country in the foreign trade markets, and assisted in the country’s energy independence goal. It is not only an important energy resource, but a key bargaining chip in the United States’ foreign policy plan.

While the resource has been relatively inexpensive, national investors have been concerned about demand not meeting supply, causing futures prices to grow rapidly (Wall Street Journal). Natural gas is traded on a market with fluctuating prices, and even with the source relatively close by, evaluating the cost of natural gas futures relies on how the market reacts to news and future legislation.

While the above may be a great argument from a supporter in New York City, residents located near the Marcellus shale may disagree. Pennsylvania is home to a large amount of natural gas reserves, and while considered a natural resource to be used, the process of extracting it can harm nearby residents. Reports have shown that it may be “possible for natural gas and hydraulic fracturing-associated chemicals to travel through cracks in the rock into an underground drinking water source. Water contamination could also occur if a well is improperly installed,” (NIEHS) which makes it difficult for fracking to receive local support. In some areas along the Marcellus Shale, a study confirmed “evidence for methane contamination of shallow drinking-water systems in at least three areas of the region,” (Osborn, et. al, 2011).  While fracking has been a large boon to the natural gas industry, of which large companies have succeeded in western Pennsylvania, the environmental ramifications draw enough pause to consider whether natural gas is the best solution.

Stakeholders

In order to establish which fuel source will be the best solution, we have spoken to and considered perspectives from several different stakeholders that would be involved in any changes. To start, the Board of Trustees is the governing body of the college and is heavily invested in its success. Any major project will require the board’s approval, but will impact many other community stakeholders. A potential fuel change will impact operations at the plant, run by Tom Pursel, and thus his input is particularly important. Nick DeSalvo, the energy manager, has a firm understanding of alternative resources, and his opinion is highly valued. Likewise, we have consulted with Marie Fechik-Kirk, the head of the office of sustainability and an expert in how the school can best reduce carbon emissions. Our report is intended to supplement the work of Larry Eighmy and The Stone House Group, and we have been in constant contact with him and his team.

The faculty of the college are also heavily invested in the long term sustainability of the school and the planet, and thus very involved in the development of an updated Climate Action Plan. Larry Eighmy has noted that faculty members have expressed concern with switching our fuel source to wood chips due to a concern in creating a monoculture. Wood chip solutions are commonly sourced from willow trees which, in order to create a sustainable system, must be planted to replace wood sources chosen for processing and producing wood chips. Willow trees are frequently chosen by farmers growing trees for consumption by operations like biomass gasification because they grow very quickly, thus increasing the profitability for tree farmers. This creates a ‘monoculture’ in which tree farms boast little biodiversity, which has negative ramifications for the local ecosystem (Eighmy, personal communication, 2018).

Rather than grow the willow trees on campus, DeSalvo has sent our group a list of local suppliers that source wood used for wood chips from various sources. However, we must also consider the concerns of Tom Pursel, the plant manager. A biomass gasification plant poses several new logistical challenges including the location of storage for an on-campus reserve of the resource, the required delivery by trucks, and high number of deliveries per day, as wood chips have less energy content per volume. When considering a switch to wood chips, additional emissions resulting from additional shipping trips will also be part of the evaluation.

Conclusion

The political context surrounding biogenic fuels plays an important role in the assessment of three alternatives for Lafayette’s heating needs; natural gas and fuel oil No. 2, biomass gasification, and Renewable Fuel Oil. While the use of RFO could have a positive impact on struggling saw mills, there is considerable risk associated with the RIN program, which drastically reduces the cost of RFO. Ultimately, the stakeholder analysis highlights the many differing, and sometimes conflicting interests of invested parties, so the projects must be thoroughly assessed from many different perspectives.

To read about our technical analysis, click here: Technical Context (Biogenics)