US energy leaders decry new biofuels mandate

14 December 2007 21:00  [Source: ICIS news]

US energy chiefs charge biofuels will raise costsWASHINGTON (ICIS news)--The new US mandate for 36bn gallons of biofuels production by 2022 is unrealistic and unachievable and will add complexity and higher costs to the US transportation fuel supply, energy officials warned on Friday.


US petroleum and refining industry leaders raised caution flags in the wake of Thursday’s approval in the US Senate of a new energy bill that includes a four-fold increase in the federal mandate for biofuels production.


The Senate passed the bill late on Thursday, and it is expected to be approved by the House of Representatives next week. The White House has already indicated that President George Bush will sign the bill into law.


The American Petroleum Institute (API) said it was pleased that the bill’s earlier provision for a $21bn (€14.3bn) tax increase on oil and gas producers had been stripped out of the final bill.


“However, we remain concerned by the unrealistic biofuels mandate” in the legislation, the institute said.


Biofuels producers said the new mandate was necessary to help advance the domestic renewable fuels industry, especially cellulosic ethanol, which uses non-food feedstock such as corn stover, grasses and wood chips.


“By relying more heavily on domestically produced renewable fuels, including next generation technologies such as cellulosic ethanol, we can begin the hard work necessary to mitigate the impact of global climate changes, reduce our dependence on foreign oil, and leave a more stable and sustainable future for generations that follow,” said Renewable Fuels Association President Bob Dinneen.


Al Mannato, fuels issues manager for API, said the trade group is concerned because in addition to being “probably unachievable,” the biofuels mandate in HR-6, the “Energy Independence and Security Act of 2007,” is very complicated. 


He noted that the bill sets out use requirements for four different biofuels, including the existing corn-based ethanol along with advanced but as yet unproven biofuels, such as cellulosic ethanol and biobased diesel and an unknown but hoped-for low-emissions biofuel.


“We’re not looking forward to the regulatory process that will be necessary to make those four parts relate to each other in the refining process, credit trading, accounting and so on,” he said.  “Do those four fuels have to be segregated?  We don’t know.”


In addition, Mannato noted that the Senate declined to adopt a provision sought by API for federal pre-emption of state biofuels mandates.  “With such a large biofuels programme as this on the federal level, they should have pre-empted states from enacting their own boutique fuels requirements,” he said.


Eight states have or are about to implement renewable fuels mandates to require certain blends of biofuels in motor fuels sold within their boundaries. “We don’t think this is an efficient way to deal with renewables,” Mannato said.


He also noted that the Senate bill, which seems certain to become law, requires that refiners make production adjustments if the greater volumes of biofuels blended into gasolines should cause increased emissions.  That could result in additional costs on refiners, Mannato said, adding: “I might characterise the increased volatility from ethanol as being the fault of ethanol, not a refining problem - but others might see it as a refining issue.”


The National Petrochemical & Refiners Association (NPRA) also was sharply critical of the new biofuels mandate, charging that Congress “is tying the nation’s energy future to nonexistent technologies such as cellulosic ethanol.”


Association spokesman Bill Holbrook said that “From the refining perspective, it ultimately means billions of dollars in new costs to make the blendstocks required for the new biofuels requirements.”


“You also have to factor in what’s needed for new infrastructure relevant to transportation and distribution of a product that is corrosive and cannot move through normal, existing pipelines,” Holbrook added.


NPRA noted that the energy bill does nothing to encourage increased domestic oil and gas production and refining.


“The US already imports roughly 12% of its finished gasoline product,” said association president Charles Drevna. “With demand increasing significantly year after year, we should be encouraging investment in domestic oil and gas production and refining.”


($1.00 = €0.68)

By: Joe Kamalick
+1 713 525 2653

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