Des Moines Register
09-04-07
Ethanol, wind energy stand to benefit from energy bill
House-Senate panel to discuss energy bill dispute
By PHILIP BRASHER
REGISTER WASHINGTON BUREAU
Washington, D.C. - Congress returns to work this week with unfinished business
important to some growing sectors of Iowa's economy - fuel ethanol and wind
energy.
An energy bill that is a top priority for congressional Democrats could guarantee
a growing market for the ethanol industry and electric utilities to obtain more wind
energy. Iowa ranks No. 1 in ethanol production and No. 3 in wind power.
The House and Senate each passed energy bills this summer but with sharply
differing provisions. A House-Senate conference committee will have to work out
differences between the two bills and write a final version.
The Senate-passed bill would require the nation to use 15 billion gallons of
ethanol a year by 2015 - double the current mandate - and 36 billion gallons by
2022.
"That's going to propel growth," said Monte Shaw, executive director of the Iowa
Renewable Fuels Association.
The provision is intended to guarantee a growing market for corn ethanol as well
to encourage commercialization of second-generation biofuels, made from crop
residue and other sources of plant cellulose. The House-passed legislation omits
the biofuel mandate but does contain a special 50-cent-per-gallon tax credit
targeted to cellulosic ethanol.
For farmers, the ethanol mandate would ensure that prices for corn and other
commodities stay relatively high, said Bruce Babcock, director of Iowa State
University's Center for Agricultural and Rural Development.
"It's hugely important," he said.
Ethanol plants that are now in operation or under construction nationwide will
produce 13.4 billion gallons of ethanol a year. Plants now in operation in Iowa
can produce nearly 2 billion gallons a year, and an additional 1.4 billion gallons of
production capacity is under construction, Shaw said.
The House-passed bill also includes a new renewable electricity standard that
would require utilities to get 15 percent of their energy from sources such as wind
and solar by 2020. Utilities can meet the standard at a lower level by showing
energy efficiencies.
In Iowa, the standard would affect MidAmerican Energy Co. and Alliant Energy
Corp. Rural electric cooperatives and municipal utilities are exempt.
Officials at MidAmerican Energy and Alliant say it is too early to say whether the
standard would mean higher rates for consumers. Both companies oppose the
provision in the form it passed the House.
MidAmerican Energy is unhappy with restrictions on the credits that utilities can
accumulate for renewable energy that they produce ahead of or over the federal
standard. The credits can be sold to other utilities that have trouble meeting the
standard.
The limits on banking credits discourage utilities from adding more wind energy
than is required to meet the standard, said Brent Gale, senior vice president for
legislation and regulation for MidAmerican Energy Holdings Co., MidAmerican
Energy's parent company.
MidAmerican Energy generates 5 percent of its power from wind and expects to
increase that to 11 percent by 2013 by adding more wind turbines. About 4
percent of Alliant's power is renewable, mostly wind energy, but it gets some
energy from biomass, including on-farm generators that operate off manure gas.
"We're sitting in a pretty good region for wind. That's where we expect the vast
majority of our renewables to come from," said Ryan Stensland, an Alliant
spokesman.
Congressional negotiators will have to settle a number of issues to get a final bill
that can pass the House and Senate and get signed by President Bush, who
objects to provisions in both the House and Senate bills.
Republicans say that the legislation does little if anything to increase energy
production.
Democrats, who control both houses of Congress, "have to have something that
they can point to as a success in the energy field," said Frank Maisano, an
energy industry lobbyist. "For Republicans, there really is no incentive for them to
support this because it's a disaster according to them."
Among the thorny issues that Democrats will have to settle is a Senate-passed
boost in automobile fuel economy standards. The Senate bill would require a 40
percent increase in fuel economy by 2020. The House couldn't agree on a similar
provision because of disagreement among leading Democrats.
The livestock industry is alarmed by the higher mandate for biofuels production
because of concerns that it will further increase feed prices.
"We just want the market to drive this. We want to be able to compete for a
bushel of corn on the same level as everyone else," said Colin Woodall,
executive director of legislative affairs for the National Cattlemen's Beef
Association.
Under the Senate bill, as much as 15 billion gallons of ethanol a year could come
from corn and count toward meeting the standard. The rest of the fuel would
have to come from cellulosic sources, such as corn cobs, wood chips or
switchgrass.
Bob Dinneen, the ethanol industry's chief lobbyist, said the increased mandate is
primarily intended to encourage investment in the production of cellulosic
ethanol. The industry will reach the 15-billion-gallon target even without the
legislation, he said.
Dinneen is president of the Washington-based Renewable Fuels Association,
which represents companies such as Poet LLC, which plans to alter an ethanol
plant in Emmetsburg to make the alcohol from corn cobs as well as corn starch.
The Bush administration has pushed for the higher mandate.
"We have proven that agriculture, that our farmers, can be major contributors in
terms of dealing with energy issues in the United States. Let's not take a step
back. Let's keep stepping forward," Agriculture Secretary Mike Johanns said at
the Farm Progress show in Illinois recently.