Obama moves to shore-up US biofuels industry

05 May 2009 17:49  [Source: ICIS news]

WASHINGTON (ICIS news)--President Barack Obama’s administration took steps on Tuesday to provide emergency funding to the floundering US ethanol industry and to stimulate broader distribution of biofuels and production of flexible-fuel automobiles.

The president established a biofuels interagency working group to focus on reviving and expanding US biofuels production and use. The working group includes the Department of Energy (DOE), the Environmental Protection Agency (EPA) and the US Department of Agriculture (USDA).

Among other things, the Agriculture Department will make available an unspecified amount of federal funds to refinance existing investments in renewable fuels refineries “to preserve jobs in ethanol and biodiesel plants”.

There have been several bankruptcies among US ethanol producers, and industry leaders have warned that the sector could collapse without urgent and broad federal support.

Biofuel manufacturers have petitioned the EPA to raise the national blend cap on ethanol in gasoline from its current 10% to 15%. The agency's action on that request is pending and a decision is expected by year end.

An increase in the ethanol blend cap is opposed by US chemical firms, refiners, environmental groups and other industries.

Agriculture Department Secretary Tom Vilsack said that emergency funding will be made available within 30 days for refinancing, new financing of renewable energy projects and loan guarantees for the development, construction and retrofitting of commercial-scale biorefineries.

Federal money or loan guarantees will be made available to current biorefineries that use fossil fuels for energy so they can convert their on-site power generation and energy consumption to biomass-fuelled systems.

Funding also will be made available to biofuel producers to encourage development of next-generation fuels from biomass feedstocks other than corn.

Current US ethanol production is almost entirely corn-based.

The multi-agency working group will initiate “the nation’s first comprehensive biofuels market-development programme”, according to Vilsack. 

That programme will “accelerate the production of and access to sustainable home-grown energy options by coordinating policies that impact the supply, secure transport and distribution of biofuels”, he said.

The group will seek to encourage more US retail gasoline stations to install biofuel pumps.

In addition, the federal working group will develop policies to increase production of flexible-fuel vehicles. Support in this area apparently will include federal funding to “assist in retail marketing efforts” for biofuels and flex-fuel vehicles.

Environmentalists and others recently called for an end to existing federal subsidies and market support for ethanol production, including a 45 cent/gal (€0.9/litre) credit to gasoline refiners who are required to use ethanol as an oxygenate and a 54 cent/gal tariff on imported ethanol.

However, Tuesday's multi-agency support effort indicates that far from eliminating subsidies for ethanol, the Obama administration is expanding such support.

($1 = €0.75)

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By: Joe Kamalick
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