Is the Renewable Fuel Standard broken beyond repair? It depends who you ask, but it’s certainly problematic.

The RFS enforced by the EPA was originally envisioned as a way to get more biofuel into the US transportation fuel market, but changing technology and consumption patterns have required continual adjustments to the law. The EPA recently released its proposed 2014 biofuel blending volumes, which have now been overcorrected such that cellulosic biofuel producers are adversely impacted.

“EPA’s RVOs [Renewable Volume Obligations] create no economic incentives for alternative fuels and threaten to throw the baby out with bathwater,” Harrison Clay, President of Clean Energy Renewable Fuels recently told Breaking Energy. The company is a subsidiary of Clean Energy, a major natural gas transportation fuel producer.

Clay’s company produces renewable biomethane, primarily sourced from landfill gas, marketed under the brand name “Redeem.” The fuel will be classified under the Cellulosic Biofuel category because a majority of the waste that goes into a landfill and breaks down to produce biomethane is cellulosic based, explained Clay.

“We want to be classified in that category because it’s higher value than the Advanced Biofuel category, which is where we are now,” he said. Ethanol also falls within the Advanced Biofuel category.

When the RFS mandate was originally formulated, it set an ambitious cellulosic biofuel target with the rationale that companies would rise to the occasion and produce the mandated volumes required by law. However, technology did not progress fast enough to meet the requirements and EPA significantly reduced the cellulosic biofuel mandate. The situation has humorously been summed up as such: “It’s like trying to solve a traffic problem by mandating hovercraft. Except we don’t have hovercraft.”

“We were projecting we could produce 67.5 million ethanol-equivalent gallons next year,” said Clay. EPA says their targets have no impact on the marketplace, but that’s simply not the case.”

Clay’s company is in a difficult situation because cellulosic ethanol – produced from non-food-based feedstock – has been slow to materialize for technical reasons. But the Cellulosic Biofuel category is not ethanol-specific and Clean Energy Fuels appears to have the ability to produce its product in substantial volumes, while cellulosic ethanol producers still cannot.

Additionally, Clean Energy Fuels is targeting the natural gas vehicle market, which currently accounts for a fraction of the US liquid transportation fuel market. The natural gas vehicle market faces an infrastructure challenge – with engine and fueling station build out required – not a fuel challenge, as US natural gas production booms. Nevertheless, the EPA’s proposed 2014 RFS mandates disincentivize production of Clean Energy Fuels’ product.

“It’s bizarre because they [EPA] say their targets will not impact how much fuel can be produced. That’s crazy because the goal is to incentivize fuel production and high RIN [Renewable Identification Numbers] prices incentivize and low RIN prices do not,” said Clay. RINs are assigned to each gallon of biofuel to track and ensure RFS compliance. Traditional petroleum refiners purchase RINs in order to comply with the RFS.

“We’re calling for a more nuanced and specific adjustment for next year that does not slash the Advanced Biofuel target to allow non-food based fuel to come into the market,” he said. “The big fight is between Big Corn and Big Oil and what’s getting lost is that RFS was never an ethanol mandate. Just because there are problems with ethanol is no reason to scrap entire program.”

“The blendwall is a problem to be treated with a scalpel and they’re are taking a sledgehammer to it,” Clay said.