Domestic Fuel

The National Biodiesel Board (NBB) testified this week to the Senate Finance Committee about the importance of reinstating the industry’s tax incentive. The $1-per-gallon biodiesel tax incentive expired on Dec. 31 for the second time in three years.

Anne Steckel, NBB vice president of federal affairs, said in her testimony, that when the incentive was reinstated last year after a lapse in 2010, it helped boost biodiesel production to a record volume of nearly 1.1 billion gallons in 2011. That volume – triple the production of 2010 – supported more than 39,027 jobs and $3.8 billion in GDP, according to a recent study conducted by Cardno ENTRIX, an international economics consulting firm.

“The biodiesel industry is poised to continue that momentum so long as Congress and the Administration continue supporting strong policies such as the biodiesel tax incentive,” Steckel said. “The recent expiration of the $1 per gallon biodiesel tax incentive poses a significant threat to the industry’s continued growth.”

Under projected expansion, with the tax incentive in place, the industry is expected to support more than 74,000 jobs by 2015 and some $7.3 billion in GDP.

Bipartisan legislation has been introduced in the House and Senate to extend the tax incentive for three years.

In the State of the Union Address and other appearances this week, President Obama is endorsing a proposal that would extend the advanced energy manufacturing tax credit.

The Security in Energy and Manufacturing (SEAM) Act, authored by U.S. Sen. Sherrod Brown (D-OH), is a job-creating clean energy tax cut, which has delivered nearly $125 million to seven Ohio manufacturers to help create clean energy jobs, provides investment tax credits of 30 percent for facilities that manufacture energy equipment. Currently, 70 percent of clean energy components are manufactured outside of the United States.

“We can’t trade a dependence on foreign oil for a dependence on foreign-made sources of energy,” Brown said. “It’s unacceptable that 70 percent of clean energy components are made outside of the U.S. Extending the Advanced Energy Manufacturing Tax Credit will help more American manufacturers create jobs through the production of cutting-edge energy technologies.”

The initial tax credit, which was included in the Recovery Act, supported seven Ohio projects and dozens more eligible projects applied for funding but were denied due to a lack of funds. The Department of Energy (DOE) states that the program was more than three times oversubscribed. Nationwide, DOE deemed 418 projects eligible, which amounts to $5.8 billion in unfunded eligible applications. These manufacturers are waiting in the pipeline, and would be ready to break ground soon after they receive funding.

To be eligible for the tax credit, manufacturers must produce solar, wind, and geothermal energy equipment; fuel cells, microturbines, and batteries; electric cars; electric grids; energy conservation technologies; and equipment that captures and sequesters carbon dioxide or reduces greenhouse gas emissions. The SEAM Act is also cosponsored by Senators Debbie Stabenow (D-MI), Maria Cantwell (D-WA), and Bob Casey (D-PA).

Advanced Biofuels USA has released low cost and cost-efficient policies the group feels should be included in the Farm Bill which will be under consideration in 2012.

“We have identified two specific problem areas,” said executive director, Joanne Ivancic. “First, the challenges of bringing small, non-contiguous marginal acreage to productivity via an energy crop market; and, second, funding promising conversion and production technologies wallowing the in the financing valley of death.”

Read the Advanced Biofuels USA proposed policies in their entirety.

As Congress resumes work for 2012, the American Coalition for Ethanol (ACE) is urging its grassroots members and all ethanol supporters to attend the “Biofuels Beltway March” in Washington, DC. ACE’s fly-in for Capitol Hill visits will be held Tues., March 27 and Wed., March 28, headquartered at the Washington Court Hotel.

“Historic opponents to ethanol are again ramping up their misinformation game in an attempt to discredit the significant benefits seen as a result of the Renewable Fuels Standard (RFS) and it is imperative for our industry to proactively convey to Members of Congress that the RFS is successfully displacing foreign oil imports, creating American jobs, and reducing toxic pollution from gasoline,” said Brian Jennings, Executive Vice President of ACE.

Participants will break into teams for visits to Capitol Hill offices, meeting with Members of Congress or their staff about the RFS, ethanol infrastructure such as blender pumps and flex-fuel vehicles (FFVs), and educating Congress and federal agencies about the clean-octane benefits of ethanol. Sixty ethanol advocates met with more than 160 congressional offices during last year’s fly-in, and ACE is hoping for even greater attendance this year.

“Face-to-face meetings between constituents and lawmakers are the best way to make sure our consumer fuel choice message is heard,” said Jennings. “We encourage grassroots ethanol supporters to sign up for this fly-in and help explain that the RFS is accomplishing its purpose and will be the driver to help commercialize the next-generation of biofuels.”

Register with ACE for the event or get more information.

Representatives of the U.S. biodiesel industry are urging Congress to pass a seamless extension of the biodiesel tax incentive. The $1-per-gallon biodiesel tax credit is slated to expire on Dec. 31. Bipartisan legislation has been introduced in the U.S. House and Senate to extend it for three years. Proponents of the bill testified this week in a hearing on alternative energy tax incentives, held by the Senate Finance Committee’s Subcommittee on energy, natural resources and infrastructure.

“This tax incentive is a job creator and Congress will be putting jobs in jeopardy if it adjourns without passing an extension,” said Anne Steckel, vice president of federal affairs at the National Biodiesel Board (NBB).

The tax incentive was allowed to expire in 2010 but was reinstated this year. Since the reinstatement, the biodiesel industry has set a new production record of more than 802 million gallons through October. That is more than double last year’s volume of about 315 million gallons. Increased production supports more than 31,000 jobs this year while generating at least $3 billion in gross domestic product and $628 million in federal, state and local tax revenues, according to a recent economic study conducted by CardnoENTRIX, an international economics consulting firm.

“Stable, long-term federal incentives are necessary for this industry to continue to grow,” Paul Soanes, president and CEO of Texas-based Renewable Biofuels, Inc (RBF) said at the hearing.

Soanes said RBF has increased production at its plant in Port Neches, Texas from 9 million gallons in 2010 to more than 62 million gallons this year, hiring new employees and investing in capital improvements. Similar stories are taking place within the biodiesel industry across the United States.

The Illinois state legislature has approved an extension of the state’s biodiesel blending program. The bill extends the sunset date for the biodiesel state sales tax incentives to Dec. 31, 2018. Any biodiesel blend of more than 10 percent continues to be eligible for fuel tax exemption.

Since the inception of the B11 blending credits in 2004, more biodiesel has been blended in Illinois annually than any other state, says the Renewable Energy Group.

Illinois has more than 1,500 “green collar” jobs in the state, according to data from a recent Illinois biodiesel economic impact study. The biodiesel industry generated $1.5 billion of household income and was responsible for more than $2.6 billion of Illinois gross domestic product between 2004 and 2010.

“REG applauds the Illinois legislature for promoting green collar jobs, Illinois agriculture, rural economic development and sound environmental policy,” said Daniel J. Oh, president of REG.

REG markets biodiesel from its REG Danville (45 mmgy capacity) and REG Seneca (60 mmg capacity) facilities as well as several Chicago-area terminal locations.

A number of ethanol supporting organizations recently sent a letter to the chairman and ranking members of the U.S. Senate and House Appropriations Committees urguing them to oppose a proposal by Reps. John Sullivan (R-Okla.) and Gary Peters (D-Mich.) that would delay commercialization of next generation ethanol.

The groups, which includ Growth Energy, the Renewable Fuels Association, the American Coalition for Ethanol and the National Corn Growers Association, oppose a proposal by Sullivan and Peters to include language in the FY12 omnibus appropriations package that would prohibit the U.S. Environmental Protection Agency (EPA) from using any appropriated funds to implement the E15 waiver.

The Sullivan-Peters proposed language — which did not receive a vote during this year’s appropriations process or a hearing in the Energy and Commerce Committee — is aimed at derailing and altering the long-standing process by which new fuel blends are brought into the marketplace. The EPA approved E15 after a more exhaustive study and data collection than any other of the 11 previously-approved fuel waiver petitions.

The letter from the organizations noted that “preventing the EPA from implementing the use of E15 for cars, pickups and SUVs made in model year 2001 and newer, further contributes to our nation’s reliance on foreign oil. Extensive testing has been done on E15 and it has been found to be a safe and effective fuel for use in the vehicles approved in the waiver. There has been no evidence to the contrary that would indicate problems in any vehicle regardless of vintage.”

Further, the EPA’s decision does not make E15 mandatory. Consumers are not required to use E15. Gas stations will not be required to sell E15. And the EPA will require a fuel label that clearly delineates that using E15 in model year 2000 vehicles, small engines and marine engines is illegal.

Lastly, the Sullivan-Peters language would inhibit new and innovative alternatives to fossil fuels. We are looking toward cutting-edge innovation to move to new ethanol feedstocks, like plant wastes, wood chips and switchgrass. The Sullivan-Peters language would solidify the status quo-a 90 percent mandate of our fuel supply from oil and would prevent American-made ethanol from being made available to consumers.

Senator Tom Udall (D-NM) announced this week his intent to introduce bipartisan legislation in the U.S. Senate that would help level the playing field for advanced biofuels such as algae. He wants to accomplish this by reforming the Renewable Fuels Standard (RFS) to make it technology agnostic. Of the 36 billion gallons required by the RFS, up to 15 billion gallons can come from corn-based ethanol while the remaining gallons are a mix of biodiesel and advanced biofuels but cellulosic fuels (ethanol) are heavily favored.

Udall’s decision came after he toured New Mexico State University’s (NMSU) Energy Research Laboratory where he spent time discussing the state’s growth in the biofuels sector with NMSU President Barbara Couture. He also met with researchers in the Algal Bioenergy Program. It should come as no surprise that Udall found the algae research interesting because NMSU is one of 16 other research institutions that are part of a consortium with Los Alamos National Laboratory that received a $49 million DOE grant to study the commercialization of algae-based fuels.

The bill will be supported by Senator Mike Crapo (R-ID) and the the two intend on introducing it after the Senate returns from its August break. One goal of the proposed bill is to remove the cellulosic biofuel carve-out and replace it with a feedstock neutral category that includes all advanced biofuels including algae, cellulosic and other next-gen fuels. Similar legislation has been introduced in the U.S. House by Reps. Brian Bilbray (R-CA) and Jay Inslee (D-WA).

“Congress shouldn’t be in the business of picking winners and losers when it comes to the use of emerging technologies,” said Udall. “This bill simply puts all advanced biofuels on a level playing field and lets the market determine which emerging technologies prove most useful.”

Udall is a long-time supporter of the “Do It All” energy approach and is a strong advocate of a national energy policy that includes all forms of energy such as wind, solar, biofuels, natural gas, enhanced oil recovery, clean coal technology and nuclear power.

“The West and my home state of New Mexico are rich in renewable energy opportunities like wind and solar and advanced biofuels. This legislation is an important step in making sure we’re taking full advantage of all the energy technologies our country has to offer,” added Udall.

The renewable energy and agricultural industry today sent a letter to all Members of the House of Representatives urging them to vote no against amendments that would harm the growth of the ethanol industry. The coalition says moves such as prohibiting the Environmental Protection Agency from implementing the E15 waiver would “weaken efforts to reduce our nation’s dependence on foreign oil and cost U.S. jobs.”

The letter was signed by the American Coalition for Ethanol, Advanced Ethanol Council, Growth Energy, National Corn Growers Association, National Farmers Union, National Sorghum Producers, and the Renewable Fuels Association. The letter addresses a number of “anti-ethanol” amendments including one proposed by Reps. John Sullivan (R-OK), Gary Peters (D-MI), and Michael Burgess (R-TX) that would block the legal implementation of E15. The fuel blend of 15 percent ethanol and 75 percent gasoline (E15) is the most tested fuel ever.

Ironically, calls to cut biofuel support come at a time of high debt crisis for the country. Needless to say, the same legislators who oppose biofuels are those who continue to support status quo tax credits and subsidies given to industries like oil, natural gas and coal. And one way to bring revenue to the federal government, an idea Republicans vehemently oppose, would be to close tax loop holes, some of which are helping the these same industries. Yet the biofuels industry is in a position to not only help save consumers money at the pump, but also to infuse money back into local, regional, state, and federal budgets.

As our elected officials continue to bicker on the Hill over the budget, now is a good time to urge them to make some sound policy decisions such as keeping continued support for biofuels a federal priority.

The full text of the letter is below:
Read the rest of this post…

Earlier this week, the Environmental Protection Agency held a hearing to discuss the latest renewable fuels proposal. One goal of the hearing was to determine if current 2011 mandates will be met by the obligated parties and to ensure the industry can produce enough fuel. Also under debate is whether the 2012 mandates are too high. Joe Jobe, the CEO of the National Biodiesel Board, was one of several industry leaders who testified during the hearing.

Jobe testified the EPA’s proposal represents a modest and sustainable level of growth in the biomass-based diesel program that is consistent with the availability of the diverse feedstocks used to produce biodiesel including used cooking oil, used waste grease and vegetable oil. Jobe also noted that biodiesel is the only EPA-designated advanced biofuel being produced on a commercial scale across the country.

“While we believe these are conservative targets for the U.S. biodiesel industry, we applaud the EPA for proposing a reasonable increase,” Jobe said in a statement after the hearing. “As America’s only EPA-designated advanced biofuel to reach commercial-scale production nationwide, we are ready to meet the challenge.”

The biodiesel industry currently has more than 1 billion gallons approved with the EPA and is on track to achieve the EPA’s 2011 standard of 800 million gallons. This year, average production is nearly 75 million gallons per month with a high of 82 million gallons during May.

The proposed biomass-based diesel requirements for next year are set at 1 billion gallons and nearly 1.3 billion gallons for 2013. It should be noted that biodiesel not only qualifies, and makes up almost the entirety of the biomass-based diesel category, but it is also approved as an advanced biofuel. In fact, biodiesel made from corn oil has the lowest carbon intensity score of all commercial scale biofuels.

“We’re confident that we can meet these production goals. In doing so, we’ll help cure America’s oil addiction with a clean-burning renewable fuel while creating good-paying American jobs,” said Jobe. “This program was developed to wean the country off foreign oil with cleaner homegrown fuels, and we believe it’s working as intended.”

Policymakers in California are once again attacking its ethanol industry. Led by California Senator Dianne Feinstein (D-CA), she has plans in the works to limit incentives for production and use of biofuels that would cause taxes to be raised, an increase in use of foreign oil, reduce jobs, and increase pollution. According to the California Ethanol Vehicle Coalition (CEVC), Sen. Feinstein has “long harbored what many observers feel is an irrational vendetta against ethanol.” This despite the fact that the state consumers 20 percent of the nation’s gasoline and more than 60 percent of the gas comes from imported oil.

Feinstein’s goal is to reduce, if not end, California’s as well as the country’s use of corn-based ethanol. On a national level she co-authored legislation that ended support for current ethanol programs. Less than two weeks ago, the Senate came to a compromise to end ethanol incentives via the Ethanol Reform and Deficit Reduction Act, sponsored by Feinstein, John Thune (R-SD) and Amy Klobuchar (D-MN). The compromise included an end to the ethanol tariff as well as to the Volumetric Ethanol Excise Tax Credit (VEETC) that gave the ethanol blender of record a 45 cent incentive to blend the fuel. Should the house pass the same measure, it would take effect on July 31, 2011.

The California Senator’s ire is not limited to corn-based ethanol, although the California Ethanol Producer Incentive Program is under fire and she is lobbying to increase gas taxes and ethanol blended fuel taxes in the state. In addition, she is gunning to limit funds dedicated to building biofuel infrastructure including the installation of E85 or blender pumps. If this isn’t enough, she is also attacking incentives for cellulosic and algal biofuels.

One industry that would suffer a dramatic setback should the federal legislation be signed into law, are those retailers who sell E85 (eighty five percent ethanol, 15 percent gasoline). In California, the 50 plus retailers who sell E85 are looking at shutting off the pumps because they won’t be able to sell the fuel at competitive prices.

“If you were trying to stifle biofuel technology, increase reliance on imported oil, eliminate jobs, and increase pollution, you could not have done a better job than this,” said Joe Irvin, executive director of CEVC. “Senator Feinstein continues to talk about saving taxpayers money when she just pushed through this $1.1 billion increase in the federal fuel tax to California consumers by raising tax on ethanol blends from $13.6 cents to 18.1 cents.”
Read the rest of this post…

Earlier this week, the Senate compromised on some ethanol legislation that would eliminate the ethanol blenders tax credit (VEETC) at the end of this month. The agreement also eliminates the ethanol tariff on July 31, 2011, five months ahead of the original expiration date of December 31, 2011. The bipartisan Ethanol Reform and Deficit Reduction Act was submitted by U.S. Senators John Thune (R-SD) and Amy Kobuchar (D-MN) and sought to transition to a more sustainable model of renewable fuel incentives.

The Brazilian Sugarcane Industry Association (UNICA) was pleased with the news and has been lobbying for several years to eliminate the ethanol tariff. Brazil eliminated its ethanol tariff early last year. Leticia Phillips, UNICA’s representative in North America said, “As the world’s top producers of ethanol, the U.S. and Brazil should lead by example in creating a free market for clean, renewable energy.”

Phillips noted that last month, the U.S. Senate voted to end ethanol subsidies and UNICA looks forward to continue to work with Congressional leaders to accomplish that goal.

“We thank Senator Feinstein for her leadership on this important issue and urge Congress to pass it as soon as possible,” continued Phillips. “Ending the 30-year-old tariff on imported ethanol will help lower fuel prices and provide Americans with greater access to clean and affordable renewable fuels like sugarcane ethanol.”

She concluded, “Consumers win when businesses have to compete in an open market, because competition produces higher quality products at lower costs. The same principle holds true for renewable fuels. Allowing other alternative fuels like sugarcane ethanol to compete fairly in the U.S. will save Americans money, cut dependence on Middle East oil and improve the environment.”

Ironically, earlier this week Bloomberg reported that the Brazilian government is considering lowering the country’s ethanol requirement from 25 percent to 18 percent due to several back-to-back reduced sugarcane harvests.

Today U.S. Senators Jeff Merkley (D-OR), Tom Carper (D-DE), Tom Udall (D-NM) and Michael Bennet (D-CO) introduced the Oil Independence for a Stronger America Act today in an effort to eliminate dependence on foreign oil by 2030 and create a National Council on Energy Security that would be charged with providing recommendations to the President and Congress to ensure America’s energy goals are met. More specifically the act calls for more production and use of electric vehicles, increase in travel options (more public transportation including high-speed trains), infrastructure improvements, development of alternative transportation fuels and reduce the use of oil to heat buildings.

“America’s dependence on oil from the Middle East, Nigeria, and Venezuela makes us increasingly vulnerable to economic and national security risks,” said Merkley. “American entrepreneurs and workers have the ingenuity and grit necessary to break this addiction to foreign oil – the challenge is whether politicians in Washington are willing to choose American strength over vulnerability.”

With all of the proposed pieces of alternative energy legislation that have been introduced and voted on over the past few weeks, as an aside, I thought I would provide a bit of education on how a bill becomes a law. Remember, School House Rock?

Now that you know how the process works, let’s see what the industry is saying.

Michael McAdams, President of the Advanced Biofuels Association said, “This legislation authored by Senators Carper, Merkley and Bennet is precisely the way our nation must rethink, and how Washington must confront, our energy challenges. By resisting the past temptations of picking a winner, the bill instead offers a comprehensive approach that focuses on the future of all biofuels, including advanced drop-in, algae, and cellulosic fuels to deliver as many gallons to back out foreign oil as quickly as possible.”

He concluded, “Developing renewable energy alternatives is an inevitable part of our shared global future and America should help lead the way. This bill puts us on the road to doing just that by encouraging the development of a robust and thriving domestic advanced biofuels market.”

The Oil Independence for a Stronger America Act would reduce oil consumption in the U.S. by over 8 million barrels per day by 2030, enough to end the need for oil imports from beyond North America.

The ethanol industry is anxious to continue talks about the future of the Volumetric Ethanol Excise Tax Credit (VEETC) and how best to balance the budget while still ensuring the ethanol industry can move forward. Yet while many believe the Senate’s defeat of Sen. Coburn’s ethanol amendment opens the door for dialogue, others believe today’s action does little to move the debate forward.

“Today’s debate did little to move the ball forward in encouraging the development of an advanced and cellulosic biofuels industry,” said Michael McAdams, president of the Advanced Biofuels Association. “Our nation needs a comprehensive approach that focuses on the future of all biofuels, including advanced drop-in, algae, and cellulosic fuels to deliver as many gallons to back out foreign oil as quickly as possible. In order to best achieve this goal, Congress must consider policies that are technology, feedstock, and product neutral, and provide long term certainty for the markets. We remain committed to working with Congressional leaders and stakeholder groups to find a common sense approach the benefits all biofuels.”

While all groups remain committed to working with federal policymakers on a compromise, Bart Schott, a grower from Kulm, North Dakota and the current president of the National Corn Growers Association noted that should Coburn’s policy have been passed, the ethanol industry could have seen production reduced by 38 percent. “This would have significantly impacted an industry that provides and supports more than 400,000 U.S. jobs, many in rural America, during a time of economic uncertainty. The loss in ethanol production could have resulted in the shedding of approximately 112,000 of these jobs, in all sectors of the economy,” said Schott.

Schott pointed out that while the ethanol industry remains open to change the oil and gas industry has refused to proactively engage in debates about subsidy reform. He continued by reiterating his organization’s support of the Ethanol Reform and Deficit Reduction Act that was introduced yesterday by Sens. John Thune and Amy Klobuchar.

Jeff Broin, chairman and CEO, of POET, the country’s largest ethanol producer added that the country must transition away from the tax credit and make a short-term investment that will reap long-term rewards. This should be done through the expansion of flex fuel pumps and flex fuel vehicles.

“Over the years as the tax credit has declined, we have been able to improve our efficiency and stay competitive with gasoline. Now it is time for the ethanol industry to take the next step in competing with oil. That can only happen if ethanol is allowed greater access to the fuel market,” concluded Broin.

In a vote of 40-59, Sen. Tom Coburn’s (R-OK) Amendment No. 436 to immediately eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) and the tariff on imported ethanol was quashed. Coburn’s proposal needed 60 votes to move forward but fell short by 20 votes. Shortly after the news hit, the ethanol industry began calling for “real reform.”

“The fight is not over until we achieve real reform for the ethanol industry, but this vote sends a signal that there is a right way and a wrong way to go about it,” said Growth Energy CEO Tom Buis. “For more than a year, Growth Energy has advocated for our Fueling Freedom plan, which would phase out the VEETC in a fiscally responsible way, while redirecting the funds toward ethanol infrastructure build out. Opening the fuels market to ethanol, through Flex Fuel pumps and Flex Fuel vehicles, would give consumers a choice at the pump and allow us to ultimately eliminate all government assistance.”

The industry applauded the Senators who voted to stop the amendment from moving forward. Renewable Fuels Association President and CEO Bob Dinneen said, “This vote demonstrates the lack of appetite for this kind of destructive policy and political gamesmanship. The Senate and the country need to focus on a comprehensive energy strategy that seeks to expand America’s ability to renewably meet its fuel needs.”

Yesterday the ethanol industry joined together in support of another proposal introduced by Senators Thune and Klobuchar. This proposal also eliminates VEETC in its current form but replaces it with a variable tax incentive tied to the price of oil, which hit more than $120 a barrel today, a five week high. This proposal would also allocate funds to improve ethanol infrastructure and supports tax policies for emerging ethanol technologies.

“This vote is a major victory for the biofuels industry and American consumers and a setback for those clinging to our status-quo dependence on oil,” added Brian Jennings, executive vice president of the American Coalition for Ethanol. “It proves political stunts aimed at ethanol won’t be tolerated in the U.S. Senate. Now we can focus on continuing our work with the White House and both chambers of Congress to support meaningful and responsible legislation to reform ethanol policy.”