NACEPT
                              Shaping the Nation's Environmental Policy
           National Advisory Council for Environmental Policy and Technology


November 19,2007

Administrator Stephen L. Johnson
U.S. Environmental Protection Agency
1200 Pennsylvania Avenue, NW
Washington, DC 20460

       Re:  Expanding EPA's Stewardship Role in Biofuel Development

Dear Administrator Johnson:

NACEPT members are appreciative for the serious consideration that you and the Agency are
giving to the two advice letters we have already provided on the development of renewable fuels.
We want to express our appreciation for the rapid evolution of the biofuels program within EPA,
particularly the excellent work EPA is doing in providing leadership on environmental issues in
the interagency  Biomass R&D Board, in developing the Renewable Fuel Standard, in adopting
and  promoting  the biofuels supply chain as a framework for  analysis  and planning, and in
working  to develop a coordinated, participatory way for the entire Agency to engage in this
burgeoning national effort. Your letter of September 26 to us is a strong and positive one, and
we wish you much success in all these efforts.

In today's letter, we wish to place particular emphasis on the large scale and almost breakneck
pace of the national effort to develop a biofuels industry able to meet the expectations of both the
executive and legislative  branches and respond to the recent decision of the Supreme Court
regarding greenhouse gases.  An effort of this magnitude is bound to generate a polarization
between  what John Gartner characterized as "uncritical lovers"  and "unloving critics." A key
challenge for EPA in this  national effort is to rise above this polarization and help all parties
understand  that the impacts of this unprecedented initiative will depend on the quality of the
effort to ensure that the biofuels industry is developed in a sustainable manner.

NACEPT members believe that the nation has the capacity to create a biofuel system that can
help meet energy  needs over the generations ahead without degrading the natural resources of
soil  and  water required for continuing productivity and without unacceptable impacts on the
environment, human health, and the well-being of any parts of our population. But this outcome
will not be automatic, or easy, or inexpensive.  It will require a dedicated, long-term  effort in
which "doing it sustainably" achieves equal priority to meeting production goals.  The Agency's

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shorter-term rulemaking efforts will take a first step towards sustainability by characterizing the
life cycle impacts of the industry, but achieving a fuller understanding of the requirements for
building a truly sustainable biofuels industry will be a longer-term effort.  EPA will need to be
prepared to take further actions over time in the light of continued learning.

The stakes are high because  the costs of "doing  it  unsustainably" could  be  very large.  A
generation from now, the rapid expansion of biomass and biofuel production may look unwise,
or worse, unethical, if it is done in a way that leads to depleted aquifers and polluted water
supplies, reduced soil quality and land productivity, high food prices and more  undernourished
people, and a boom-and-bust cycle of unsustainable growth that discourages further investment.

The current effort to transition our energy economy from hydrocarbons to  carbohydrates will
deliver its full promise only if we remain mindful of the essential truth that  renewability is not
synonymous  with sustainability.   How we answer the questions of what, where, and how
biomass  is grown, processed, and delivered will determine whether the effort meets its potential
of becoming an environmentally and economically sustainable solution.

NACEPT members believe that providing  the leadership  needed to steer biomass and biofuel
development on a sustainable path will require EPA to go well beyond its strictly mandated
regulatory roles and develop a wide range of stewardship initiatives that encourage all parties
involved with the biofuels industry to take active  responsibility for improving environmental
quality and achieving sustainable results.  Under your  leadership,  the Agency is  increasingly
incorporating  stewardship  strategies into its programs and activities.   The effort you have
initiated  to  create  an  integrated,  collaborative, multimedia Biofuels  Strategy provides  an
opportunity for EPA to utilize virtually the entire set of stewardship  strategies at its disposal,
including partnerships, research, technology development assistance, information provision, and
collaborative problem-solving.

Below are several examples of the kinds of stewardship activities that EPA  could undertake or
do on a larger scale. They are presented in logical categories (e.g., research, commercialization
assistance, public information) rather than in any priority order. Please share these examples and
recommendations with the work  group  you have created to develop an Agency-wide Biofuels
Strategy.
Accelerate Research on Impacts of Expanding Biomass and Biofuels Production and the
Sustainability of the Industry

As you know, EPA already has identified several important areas for research on the impacts of
expanded biomass and biofuel production on natural resources and human health. To accurately
assess these impacts, it will be necessary to establish baseline data in key areas such as water
availability, water quality, soil quality, land use changes, and the implications of changing land

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uses for the provision of ecological services.  Building upon the baseline data, EPA and other
agencies will then be able to develop a set of sustainability indicators to identify the extent that
the conditions being monitored are changing. The regular data collection needed to produce
useful  indicators will be  a major step forward in assessing environmental conditions.  The
challenge  of developing sustainability  indicators for biomass and biofuel production can be a
spur to making  improvements  in the nation's system for gathering environmental data.  The
resulting information will be useful for a variety of other purposes.

Recommended EPA Actions

    •   Further elevate research on the impacts of biomass  and biofuels production and the
       sustainability of the industry as a major priority within the Office of Research and
       Development, and encourage greater coordination between ORD and relevant research
       efforts across the Agency.

    •   Develop  an even more robust in-house capacity for carrying out sophisticated life cycle
       analyses  (LCA) and building national and  regional decision support tools, such as the
       Office of Research and  Development's and Region 7's Future  Mid-western Landscape
       Study on the impact of biofuels on ecosystem services.

    •   Help catalyze intergovernmental research efforts to improve baseline data needed for
       assessing impacts of biofuels and other energy technologies.   For example, a September
       2007 report from the President's Office of Science and Technology Policy (OSTP) on A
       Strategy for U.S.  Science and Technology Policy to Support Water Availability and
       Quality in the United States  concludes that "simply  stated, quantitative knowledge of
       U.S. water supply is currently inadequate." The report  proposes a comprehensive science
       and technology research strategy  to  address the water challenges  facing the nation.
       Participation in an effort of this nature would give EPA a basis for assessing many other
       environmental impacts and for gauging progress toward meeting several goals in the
       Agency's strategic plan.

    •   Building  from a better understanding of the  baseline state of the environment, work with
       other agencies to develop a comprehensive set of sustainability indicators.

    •   Accelerate efforts  within the Office of Prevention, Pesticides, and Toxic Substances to
       evaluate  and register bio-pesticides and bio-based  fertilizers  to augment  or replace
       traditional chemical pesticides and petrochemical-based fertilizers.  Work to identify the
       best application approaches for mitigating the serious impacts that the rapid expansion of
       biofuel production could have on water quality.

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       Collaborate on research to clarify best methods for maintaining and building soil and
       mitigating nutrient runoff in areas where intensive biomass production is taking place.
       Use  existing alliances  between  Regional  programs, the  Office  of  Research and
       Development, Office of Water, and USDA, such as the National Water Program, Gulf
       Hypoxia  Task Force, Chesapeake Bay Program Memorandum of Understanding, and
       EPA/USDA Animal  Feeding Operations Environmental Research and  Technology
       Transfer Committee.
Provide More Public Information on Biomass and Biofuel Impacts and Sustainability

EPA can  play  an essential role by providing the public,  public  officials,  and the business
community with objective analysis and accurate, understandable information.  To be effective in
this role, the Agency needs to maintain and strengthen its reputation for scientific rigor, honesty,
and transparency.

Recommended EPA Actions

    •   Clearly present the  facts if there  are aspects  of the federal government's initiative to
       accelerate the  production  of renewable  fuels  that  research  shows  are producing
       unsustainable impacts.

    •   Work collaboratively with the investment community.  Financial markets can function
       well only when investors have the information they need to assess risks and  make
       judgments about who will most productively use their capital.  No organization is  better
       qualified than EPA to provide information that investors would find highly useful on the
       practices and processes that appear most problematic or beneficial from the perspective
       of impacts on natural resources, environmental quality, and human health.

    •   Work with other groups, like the 25 x  25 Initiative, that are forming  sustainability and
       stewardship working groups or task forces to promote the environmental integrity of the
       biomass industry. (The "25 x 25" effort is a partnership initiated in the agricultural and
       forestry sectors to forge consensus on providing 25 percent of the total energy consumed
       in the U.S. from renewable sources by 2025.) The efforts of different groups are likely to
       overlap considerably, such as work to define the basic principles of sustainability and the
       metrics to measure it. By developing a relationship with these groups and their activities,
       EPA can learn from them as well as help them to influence the industry's development.

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Help Facilitate the Commercialization of Biofuel-Related Technologies

NACEPT's Subcommittee on Environmental Technology has recently produced two reports that
review the wide range of programs and other means available to EPA for facilitating promising
technologies through a development continuum toward commercialization and use.  These tools
need to be used to accelerate the development of promising biofuel-related technologies.

Recommended EPA Actions

   •   Utilize the full range  of tools at EPA's disposal for facilitating promising biofuel
       technologies, including:

       S  State grants in all  EPA programs (e.g., Air, Water, Waste, and Pesticides), for
          projects related to all the Agency's renewable fuel goals;
       S  Tribal  grant programs,  including  Performance  Partnership  Grants  and  Direct
          Implementation Tribal Cooperative Agreements;
       S  Office of Research and Development Small Business Innovation  Research  (SBIR)
          grants to small businesses for bench and pilot-scale investigations;
       •S  Research grants to "on the edge"  investigations that are risky but  would have very
          large payoffs  if successful, through the Office of Research  and Development's
          Science to Achieve Results  (STAR) program and  the  National Environmental
          Technology Competition (NETC)',
       ^  Funding of larger demonstrations, jointly with other agencies, through such things as
          State  program   grants,   the  Environmental  Technology  Council's  Regional
          Environmental Technology Council (RETAN), and the  Collaborative  Science and
          Technology Network for Sustainability, (CNS);
       ^  Using the Regional Environmental Technology Advocacy Network (RETAN)  under
          EPA's  Environmental Technology  Council  to  identify,  share,  and implement
          opportunities to  use technologies that will ensure sustainable biofuels feedstock,
          production, distribution, and use;
       •S  Using  the Office  of Research  and Development's Environmental  Technology
          Verification Program (ETV) to verify  the environmental performance of commercial-
          ready technologies  to assess  their efficacy  and cost  so  they will  be  seriously
          considered in the marketplace, and help facilitate permitting  of new environmentally
          beneficial innovative technologies;
       v'  Replicating models  such as EPA New England's Center for  Environmental Industry
          and  Technology (CEIT) nationally or within other regions to  encourage collaborative
          technology development and use;
       S  Program,  Regional and  multi-state  permit  and  compliance  assistance  for new
          environmentally beneficial technologies; and

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       S  Readily available, reliable information on new, cost-effective technologies through
          programs such  as EPA's  Environmental Technologies  Opportunity  Portal,  the
          Environmental Technology Council's Regional Environmental Technology Advocacy
          Network (RETAN), EPA New England's Center for Environmental Industry and
          Technology, and Regions 6 and 7's Blue Skies Collaborative.

   •   Focus  many of  these  stewardship activities  on  the development  of crop-to-fuel
       conversion technologies, waste-to-energy technologies, and the comparatively neglected
       area  of  developing  new  types  of biofuels  with  superior  cost-performance and
       environmental characteristics.

   •   Consult with the oil industry to insure that EPA's biofuel-related efforts are done with an
       understanding of their potential impacts on the existing industry.  Rapid expansion of the
       biofuels market depends on  cooperation between  the oil and biofuel industries  to
       minimize conflicts and uncertainties.

   •   Consolidate  NEPA  reviews  and other  government  information  on  experience  in
       constructing cellulosic ethanol plants and other biorefmeries and make it available to help
       industry avoid problems and speed the replication of successes.  While this information
       will all be site-specific, generic  aspects may apply that could  reduce the administrative
       burden.  EPA's regions could use this information to support both DOE and USD A in
       their efforts to assist industry.

   •   Explore the  technical and environmental feasibility of allowing use of higher ethanol
       blends, such as E-30 and E-50,  working collaboratively with  the oil, auto, and ethanol
       industries. EPA, along with industry and other federal agencies, will need to assure the
       technical and environmental feasibility of using higher  blends.  If it proves possible to
       permit  drivers of non-flexible fuel vehicles to use higher blends with low-cost, EPA-
       approved modifications  to  engines, and  with appropriate modifications to assure the
       safety of distribution infrastructures and dispensing technologies, the market for ethanol
       could expand rapidly.
Provide Economic and  Scenario Analyses to Inform Public and Private Sector Decision
Making

Assuring that biofuel development follows a sustainable path requires attention to economic
sustainability as well as environmental sustainability.  Therefore, EPA needs to help engage the
federal family in looking at economic aspects of sustainability.  Whether or not it may sometimes
be appropriate for EPA to weigh in on subsidies and other policy issues, NACEPT members

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believe  it is clearly appropriate for the Agency's economics modelers (such as the National
Center for Environmental Economics, the Office of Research and Development's Regional
MARKAL modelers, and economic analyses within the Office of Air and Radiation, Office of
Water, and the Office of Solid Waste) to do cost-benefit analyses to inform decision-making.

Recommended EPA Actions

   •  Hold internal discussions among the Agency's leadership in the near future about  the
      kind of cost-benefit, economic-environmental analyses that would be appropriate and
      useful for EPA to undertake in this area, optimizing the use of expertise within program
      offices,  the Office  of Research  and Development,  and the  National Center  for
      Environmental Economics.

   •  We recommend using decision support  tools, such  as  the Office of  Research and
      Development's Regional MARKAL model, to forecast the economic and  environmental
      impacts of alternative biofuel development paths using specific regional inputs.  For
      example, as part of its responsibility for water quality in the Midwest, EPA could help
      develop estimates of the potential consequences of different levels of increased corn
      planting for biofuels. Areas for analysis and forecasting could include water availability
      and quality, soil quality and  erosion, greenhouse gas emissions and air  impacts, food
      prices, potential environmental justice issues, land use changes, and the impacts of these
      changes on the provision of ecosystem services.

   •  We recommended conducting cost-benefit analyses of alternative cellulosic  conversion
      plant configurations  (e.g., centralized  vs. distributed processing).  Conversion plant
      location, distribution of these plants in rural America,  and size will significantly affect a
      wide  range   of  logistic  and   environmental  factors,   including   transportation
      volumes/distances,  volumes of spatial water extraction/use,  economics, energy and
      carbon balance, and types of feedstock that may be produced.
Provide the Workforce, Resources, and Planning to Do the Job Right

The accelerating pace of biomass and biofuel development is forcing EPA to take on added
responsibilities  (such as  promulgating the Renewable  Fuel Standard  and developing  the
Alternative Fuel Standard rulemaking), use every tool at its disposal, and do all this quickly.

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Recommended EPA Actions

   •   Initiate discussions  with the Office of the Chief Financial Officer (OCFO) about the
       implications of the Agency's biofuels initiative for EPA strategic planning. At the least,
       biofuels issues are sufficiently important to rise to the  level of strategic targets  to be
       included  in the  next revision  of the Strategic  Plan.   Beyond that,  the  integrated,
       collaborative, multi-media Biofuels Strategy being developed within the Agency under
       your leadership may serve as a model for how EPA can plan and organize for dealing
       with other environmental issues and  areas of energy development, as recommended in
       our first advice letter.

   •   Carefully consider  the  workload being  placed on  key EPA  staff for developing a
       proposed rule on Alternative Fuel Standards, and supply additional staff where it is most
       essential to provide comprehensive analyses and data to support this rulemaking.

   •   Distribute the workload more widely, relying on air, water, waste, and pesticides experts,
       and gaining access to baseline environmental data and models throughout EPA to help
       analyze the impact of biofuels production.

   •   Encourage voluntary programs throughout EPA to  identify ways in which they can assist
       the development  of an  environmentally  sound biofuels  industry while protecting the
       health and well-being of all citizens of our nation.

   •   Keep encouraging the kind of internal dialogue that is beginning as a result of your recent
       request to develop  an EPA-wide Biofuels  Strategy.  This  cross-agency, multi-media
       dialogue is  needed for developing an effective strategy that integrates across programs
       and utilizes the full range of tools and expertise  available to the Agency.   Integrated,
       participatory,  sustainability-focused,  Agency-wide  planning  is  the   key  to  both
       maximizing the Agency's resources and reducing risks to the environment.
Administrator Johnson,  your  National Advisory  Council on Environmental  Policy  and
Technology believes that assisting the biofuels industry to develop in a sustainable manner will
be a stringent test  of EPA's leadership within the  federal family,  within the environmental
community, and within the energy industry.  Shepherding the initiatives that you already have
begun in this area will be daunting;  facilitating and focusing the efforts of the several federal
departments and  agencies will  be difficult; maintaining EPA's reputation for integrity while
managing expectations will need to be artful and open; and helping the rapidly growing biofuels
industry  and the mature petroleum  industry  to  understand  and appreciate  their necessary
interdependence will be  extremely important in making the entire undertaking feasible.   As
always, we stand ready to do whatever we can to help.

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                                       Sincerely,
                                       /Signed/

                                       John L. Howard, Jr.
                                       Chair
cc:     Frank Stewart, Working Group Co-Chair
       Bob Olson, Working Group Co-Chair
       Marcus Peacock, Deputy Administrator
       Charles Ingebretson, Chief of Staff
       Ray Spears, Deputy Chief of Staff
       George Gray, Assistant Administrator, Office of Research and Development
       Robert Meyers, Acting Assistant Administrator, Office of Air and Radiation
       John Askew, Region 7 Administrator
       Jon Scholl, Agricultural Advisor
       Rafael DeLeon, Director, Office of Cooperative Environmental Management
       Sonia Altieri, NACEPT Designated Federal Officer

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