UpdateObama biofuels path sparks mixed feelings

05 May 2009 21:54  [Source: ICIS news]

(Recasts throughout; adds DOE announcement in paragraph 2; adds Prime Ag quote in paragraph 4; adds National Biodiesel Board comment in paragraph 12).

HOUSTON (ICIS news)--US renewable fuel makers had mixed reactions to the flurry of news coming out of Washington on Tuesday, with some expressing concerns about new rules and others lauding government funds pledged for the flagging industry.

The Department of Energy (DOE) announced on Tuesday nearly $800m (€600m) in funding for biofuels commercialisation and research projects, while in a press conference earlier on Tuesday, President Barack Obama announced the formation of a biofuels interagency working group comprised of the DOE, the US Environmental Protection Agency (EPA) and the US Department of Agriculture (USDA).

But at the same time, the EPA unveiled new rules for its renewable fuel standards (RFS) that could favour the next generation of biofuels makers while making it harder for those dependent on corn and soy as feedstocks to sell their product.

“Biofuels is finding a little bit of that Obama money,” said Chad Henderson, analyst at Prime Ag. “But if corn-based ethanol is a bridge to the next generation of biofuels, are they [policymakers] going to blow up that bridge?” 

The US Renewable Fuels Association (RFA), a trade association representing ethanol makers, commended policymakers for supporting the US biofuels industry.

“I think the president has sent an incredibly important signal that biofuels are going to be a key component in his strategy to address energy challenges,” said RFA President and CEO Bob Dinneen. “Investments in biofuels like ethanol are creating green jobs here at home, reducing America’s foreign oil dependence, and helping to meet out environmental goals.”

The federal interagency group Obama unveiled will provide funds to refinance existing investments in renewable fuels refineries “to preserve jobs in ethanol and biodiesel plants”.

But when it comes to the new RFS, ethanol and biodiesel producers said they will challenge the EPA’s plans to broaden lifecycle analysis of biofuels environmental benefits.

The new standard calls for the blending of 36bn gal/year (136bn litres/year) of biofuels into gasoline by 2022, with 15bn gal/year of that total from conventional corn ethanol. Biodiesel blending would begin at 500m gal/year by 2012.

But the EPA will now include changes in land use stemming from increased crop production in measuring a fuel’s greenhouse gas emissions, even if the crops were produced outside the US. The consideration could reduce the environmental balance for grain-based biofuels, making them unusable for meeting the new requirements. US renewable fuel production is based almost wholly on corn and soy.

The agency mirrored California’s decision to do the same when the state created its own fuel standards last month. 

“The EPA, in determining the greenhouse gas profile for biodiesel, is penalizing the US biodiesel industry for land use decisions made outside the US,” said National Biodiesel Board (NBB) spokesman Manning Feraci.

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

Biofuels 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.

(Additional reporting by Joe Kamalick and Ben Lefebvre)

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By: Ben DuBose
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