GreenBiz.com, 6 May 2009 - The Obama Administration established a Biofuels Interagency Working Group this week in a move that carries implications for the industry on several fronts, including regulatory and research and development.

The Biofuels Interagency Working Group, comprised of the U.S. Environmental Protection Agency, Department of Energy (DOE)  and Department of Agriculture, will develop a biofuels market development program, coordinate biofuel infrastructure policies, study biofuel lifecycle and help existing biofuel producers secure credit and refinancing.

Meanwhile, the DOE will spend $786.5 million in stimulus funds on demonstration projects and research to accelerate the adoption of next-generation biofuels.

For example, the agency will dole out $480 million on 10 to 20 pilot-scale and demonstration-scale projects, with a ceiling of $25 million and $50 million, respectively. Another $176.5 million shall be used to increase funding for two or more commercial-scale biorefinery projects that previously received government assistance.

The DOE biomass program also will dedicate $130 million toward research into ethanol, algal biofuels and biofuel sustainability research.

On the policy side, the EPA issued a Notice of Proposed Rulemaking on the Renewable Fuel Standard. Under the Energy Independence and Security Act, the EPA must outline its strategy for increasing the amount of renewable fuels to 36 billion gallons by 2022.

The proposal breaks down renewable fuels into four categories: cellulosic biofuels, biomass-derived diesel, advanced biofuels, and total renewable fuel. The fuels must produce fewer greenhouse gas emissions than conventional fuels, but there is great debate within the biofuel industry about how these lifecycle assessments should be calculated.

Environmental groups claim first-generation corn-based ethanol has negative environmental impacts that result in more greenhouse gas emissions compared to conventional oil, including emissions produced by indirect land use changes as land is cleared to plant biofuel crops.  The debate has raged in California, which recently enacted the country's first low-carbon fuel standard. The new rule includes indirect land use change factors when calculating the carbon intensity of ethanol used in the state.