US refiners warn Congress on ethanol mandates

31 July 2007 23:54  [Source: ICIS news]

WASHINGTON (ICIS news)--US refiners warned Congress on Tuesday that excessive legislative mandates for biobased renewable fuels could undermine the US transportation fuels market and supplies.

 

Charles Drevna, executive vice president at the National Petrochemical & Refiners Association (NPRA), told a Senate committee that congressional mandates for ever-increasing biobased fuel production could lead to market instability.

 

Testifying before a panel of the Senate Energy and Natural Resources Committee on the US infrastructure for renewable fuels, Drevna said: “The lack of adequate renewable and alternative transportation fuel infrastructure creates significant production and environmental challenges.”

 

A new mandate for US ethanol production - now wholly based on corn - has raised prices for corn and other commodities, he said. Congressionally imposed mandates for renewable fuels production also raises significant transportation and logistical issues, he said, particularly because ethanol cannot be shipped via existing US pipeline systems.

 

On the production side, Drevna said a new and massive congressional mandate for ethanol production could undermine US gasoline supplies.

 

He cited the Bush administration’s call for 35bn gal/year of biofuels production by 2017 as part of a plan to reduce US gasoline consumption by 20%.

 

The Department of Energy forecasts that US gasoline demand that year will be 161bn gallons, he noted. A 20% reduction would mean only 129bn gallons of demand.  With current US gasoline production at 136bn gal/year, he said US gasoline production is already in excess of the forecast 2017 demand - if the biofuels mandate is met.

 

“It should be clearly understood that requirements to substantially increase the volume of ethanol and other renewables could essentially supplant a significant portion of the need and desire for additional domestic refining capacity,” Drevna said.

 

“The domestic refining industry is likely to look upon rapidly rising ethanol and other biofuels requirements in the coming years as adding significantly more risk to investment in capacity expansions,” he said.  He warned that additional congressional mandates for ethanol output will pressure domestic and foreign refiners to reconsider investments in new capacity.

By: Joe Kamalick
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