Des Moines Register
12-07-07
House-approved bill boosts biofuels use
By PHILIP BRASHER • Register Washington Bureau
Washington, D.C. - Iowa's biofuels industry is likely to get a boost from a Housepassed energy bill that would guarantee a growing market for ethanol and
biodiesel by requiring refiners to buy more of both products.
Economists say the biofuels mandate also would ensure that the price of Iowa's
corn and soybeans remains relatively high for years to come.
But the bill's future is uncertain because of a likely Senate filibuster and a veto
threat from the Bush administration.
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The bill, which passed the Democrat-controlled House 235-181 on Thursday,
encourages investment in projects that would make the new generation of
biofuels from crop residue and other sources of plant cellulose rather than grain.
The bill also would require automakers to increase the average fuel economy of
new cars and trucks to 35 miles per gallon by 2020.
The biofuels mandate would require refiners to buy 9 billion gallons of ethanol in
2008, about 2.5 billion gallons more than the industry is expected to produce this
year. The target would rise annually to reach 36 billion gallons by 2022.
"We will send our energy dollars to the Midwest, not the Middle East," said
House Speaker Nancy Pelosi, D-Calif.
Under current law, refiners would be required to buy only 5.4 billion gallons of
ethanol in 2008. The industry distilled about 6.5 billion gallons this year, and
production next year could reach 9 billion gallons, the level required by the
energy bill, as new plants come on line, according to the Renewable Fuels
Association.
The expanding capacity has led to a glut of ethanol that has pushed down prices
for the fuel additive. Raising the mandate would increase ethanol prices, industry
officials say.
Bruce Rastetter, chief executive of Ames-based Hawkeye Renewables, said the
higher mandate "will ensure an open marketplace for the distribution of ethanol
throughout the country." Hawkeye has two ethanol plants in operation and two
under construction.
The bill includes a new requirement for biodiesel use that starts at 500 million
gallons in 2009 and grows to 1 billion gallons in 2012.
The bill's fate is clouded because of a $21 billion tax package and a provision
that would require electric utilities to increase production of wind and solar power.
The bill would take back tax breaks for oil companies and use the money for
renewable-energy incentives, including tax credits for biodiesel and cellulosic
ethanol. Senate Republicans have pledged to filibuster the bill, and the Bush
administration has threatened to veto it.
Iowa's House delegation split along party lines. Republican Rep. Tom Latham
said the bill could increase gasoline and heating costs. Democratic Rep. Leonard
Boswell said it would be a "tremendous boost to Iowa's economy by promoting
increased production of renewable fuels."
What isn't in doubt is what the biofuels mandate would mean for corn and
soybean farmers. Iowa State University economist Bruce Babcock said he
sees "five years, eight years, of high corn prices, high soybean prices."
The mandate also guarantees a market for cellulosic ethanol, a boost to projects
such as one by Poet LLC to distill ethanol from cobs as well as corn kernels in
Emmetsburg. The bill would require 21 billion gallons of cellulosic ethanol to be
produced by 2022.
That's a "tall order," given there is no commercial cellulosic ethanol plant now in
commercial operation, said Robert Brown, who directs Iowa State
University's Office of Biorenewables Programs.
Environmentalists won a provision in the bill that would make it difficult to build
conventional corn ethanol plants that burn coal rather than natural gas. Grain
ethanol would be required to have 20 percent lower greenhouse gas emissions
than gasoline.