Renewable fuels industry assesses impact of EISA 2007

By Timothy Charles Holmseth | April 08, 2008
Web exclusive posted May 2, 2008 at 5:21 p.m. CST

DTN hosted a webcast April 29 featuring experts who shared insights into the impact that the Energy Independence & Security Act of 2007 has had on the renewable fuels industry.

Brian Milne, refined fuels news editor for DTN, assured attendees that mandates in the recent energy bill will find a market for supply. "We heard at length at how the ethanol market would collapse under too much supply-don't bet on it," he said, noting that production capacity is expected to be12.9 billion gallons by the end of 2008.

Milne said ethanol is trading at a wider discount to gasoline. "Physical ethanol prices are higher, but still at a discount to gasoline that, along with a 51 cent per gallon blenders credit, has prompted a rapid increase of discretionary blending," he said, adding that by the end of 2008 ethanol should reach a penetration point of 70 percent. Milne said total production this year is expected to be roughly 8.5 billion gallons.

Sherri Cabrera, director of legislative affairs for Petroleum Marketers Association of America, said the 2008 ethanol mandate will be 9 billion gallons and the 2009 biodiesel mandate will be 500 million gallons.

Signed into law on Dec. 19, 2007, Cabrera said some of the opposition brought to bear by the PMAA paid off. She said, for example, off-road use of farm tractors, stationery motors, locomotives, and marine are included in the renewable fuel standard (RFS). "PMAA leaders determined a blending mandate on heating oil would increase cost and undermine an efficient oil heat marketplace," she said.

Issues with the U.S. Internal Revenue Service regarding B99 and the federal excise tax were worked out, she said. "[The] IRS has determined that B99 is not a taxable liquid because it lacks the paraffin content of other motor fuels," she said. As a result, the IRS tells producers they must file for the biodiesel credit on B99 but they don't have to pay the 24.4 cent federal excise tax.

In a prepared presentation, the PMAA provided some of the following facts during the webcast:

Mandates
Because the assumption that additional supply will be available from sources which are not currently available, there is language to waive the RFS increase if needed. Recently, Texas Governor Rick Perry has sought a 50 percent waiver of the RFS mandate for the production of ethanol derived from grain.

Infrastructure Restrictions
Conversion of a tank is permitted under any circumstances as long as the infrastructure is warranted or certified by a recognized standards setting organization to be suitable for use with renewable fuel.

The bill will prohibit franchise agreement restrictions on installation of renewable fuel pumps.

Pump Labeling Requirements
By June 2008, the U.S. Federal Trade Commission will promulgate biodiesel pump labeling requirements. There are no new labeling requirements for pumps with less than 5 percent biomass-based diesel blends or biodiesel blends which also meet ASTM D975 diesel specifications.

Blends with 5 percent to 20 percent will be labeled "contains biomass-based diesel or biodiesel in quantities between 5% and 20%."

Blends with more than 20 percent will be labeled "contains more than 20% biomass-based diesel or biodiesel."

Other
PMAA said high prices are having an impact - vehicle miles driven are down, a change in "vehicle type" will be significant, and passenger vehicles will consume less fuel.

To listen to the entire webcast presentation, visit DTN's Web page, https://dtn.webex.com/dtn/lsr.php?AT=pb&SP=EC&rID=4569242&rKey=AAA82D056408F0E8.