Examining the New Energy Bill

By Jesse McCurry | March 10, 2008
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In late December President George W. Bush signed the Energy Independence and Security Act of 2007 into law. Many know the act includes an expanded renewable fuels standard to 36 billion gallons by 2022. It also raises Corporate Average Fuel Economy standards to 35 miles per gallon by 2020. However, a closer analysis is needed, especially of Title II, to see what other biofuels provisions exist for ethanol producers.

"Congress is incentivizing alternative feedstocks, production and distribution," according to Donna Funk, manager of the biofuels group at Kennedy and Coe. "This provides opportunities for producers especially when we know more about implementation. Our firm is examining the impacts on our clients and how we can be of most value to them as we move toward cellulose."

The new law includes goodies ranging from grants, infrastructure improvements, studies, added authority for the secretaries of energy and transportation, and expanded EPA authority. While the RFS program begins expansion this year, the other provisions won't take effect until Jan. 1, 2009.

Notably, there are no biofuels tax provisions included in the new law. The RFS requires 21 billion gallons of advanced or cellulosic fuel.

RFS definitions
› Conventional biofuel—ethanol derived from corn starch that achieves a 20 percent greenhouse gas emissions reduction

› Advanced biofuel—renewable fuel other than ethanol derived from corn starch and achieves a 50 percent greenhouse gas emissions reduction

› Cellulosic biofuel—renewable fuel derived from any cellulose and achieves a 60 percent greenhouse gas emission reduction

› Authorizes $500 million annually for fiscal years 2008 through 2015 for the production of advanced biofuels that have at least an 80 percent reduction in lifecycle greenhouse gas emissions relative to current fuels

› Authorizes $25 million annually for fiscal years 2008 through 2010 for research and development and commercial application of biofuels production in states with low rates of ethanol and cellulosic ethanol production

› Authorizes a $200 million grant program for fiscal years 2008 through 2014 for the installation of refueling infrastructure of E85.

› Directs the secretary of energy, in consultation with the secretary of transportation, to report on the feasibility of constructing dedicated ethanol pipelines

› Directs the secretary of energy to study whether optimizing flexible fuel vehicles to run on E85 would increase their fuel efficiency

› Requires a report on the adequacy of railroad transportation of domestically produced renewable fuel

› Directs the National Academy of Sciences to study the impact of the RFS program on each industry relating to the production of feed grains, livestock, food, forest products and energy.

The regulations will now be promulgated by the relevant agencies. Greg Krissek, director of government affairs for ICM Inc., expects a rule-making process to occur, primarily with EPA for implementation of the RFS and the provisions concerning carbon reduction requirements of the various categories of biofuels: conventional, advanced and cellulosic.

"I expect that U.S. EPA will begin describing the process they will use sometime late winter or early spring of this year," Krissek says. "The legislation also creates a number of additional research programs primarily through the U.S. Department of Energy. The federal appropriations process will ultimately determine the amount of resources available and timing for implementing these programs."

Producers should tune in through their trade associations, professional service providers, and Ethanol Producer Magazine to stay up to speed on qualification, especially with the hidden costs of regulations in the RFS, as noted by Clayton McMartin in the February issue of EPM.

Jesse McCurry is a business development specialist at Kennedy and Coe LLC. Reach him at jmccurry@kcoe.com or (316) 691-3758.