June 15, 2007

On Capitol Hill, a Warmer Climate for Biofuels

by Steven Mufson
Washington Post Staff Writer
Friday, June 15, 2007; Page D01

Robert Dinneen, president of the Renewable Fuels Association, had every reason to feel good when he delivered a speech in Tucson this year on the state of the ethanol industry.

He could boast of soaring production, support from such former foes as Sens. Hillary Rodham Clinton (D-N.Y.) and John McCain (R-Ariz.), and growing support from average Americans and President Bush. He brushed aside remaining critics, declaring that "even the mightiest eagle cannot soar without resistance from the wind." He quoted the poet Maya Angelou, and then the fictional pirate of the Caribbean, Jack Sparrow, who said in one movie: "Bring me that horizon."

The energy bill now under consideration in the Senate would bring that horizon a lot closer for the ethanol industry. The proposal includes requirements that the use of biofuels -- part corn-based ethanol and part fuels made from other feedstocks -- climb to 36 billion gallons by 2022, more than six times the capacity of the nation's 115 ethanol refineries.

While many other provisions of the energy package remain controversial, opposition to the biofuels mandate has all but evaporated in Congress, a situation that would have been almost unthinkable just a few years ago. And though environmental, industry and farming groups can point to numerous unresolved concerns about biofuels' effects and feasibility, the ethanol lobby has never been stronger.

Supporters of ethanol have capitalized largely on congressional concern that U.S. dependence on imported oil has compromised national security. Moreover, as ethanol plants have spread beyond a small portion of the Midwest, the industry has spread its influence among lawmakers. The early presidential season has helped, as Clinton, McCain and other candidates seek to bolster their positions in such ethanol strongholds as Iowa.

"There's almost a gold rush in this sector at the moment," said Philip R. Sharp, who served in the House for 20 years and who is now president of Resources for the Future. The 7.5 billion-gallon ethanol mandate adopted in the 2005 Energy Policy Act, he said, was "the most surprising intervention in the marketplace almost since the days of the Carter energy bill." Yet this year's legislation "is trying to take that to significantly greater levels."

Democratic leaders in Congress now see the biofuels part of this year's energy legislation as a sweetener that could help persuade some lawmakers to sign on to other, less-palatable energy measures. For example, while about 60 House Democrats opposed tougher motor fuel efficiency standards a few years ago, aides to senior House Democrats say that they hope that boosting biofuels can cut that number to 30 this year, while luring more than enough Republicans to pass an energy package.

"I see some opposition, but it's not getting a great deal of traction," Dinneen said yesterday.

"The 2005 bill has been such a success in terms of sending signals to the marketplace. People are beginning to recognize that there is a lot more potential here and they're going to try to tap it."

The political dynamics were different in November 2001, when Dinneen was pushing for legislation that would boost production of ethanol to 5 percent of the U.S. market by 2016. That seemed ambitious at the time. But the mandate in the current Senate proposal would double that 2016 target and push it to four times that level by 2022.

The climate in Congress has changed despite the fact that there are many reasons for opposition to boosting biofuels production.

Corn-based ethanol gobbles up federal tax subsidies at the rate of 51 cents a gallon, drawing criticism from economists and business leaders who favor market solutions for economic problems.

Ethanol, which is highly corrosive, cannot be used in the country's existing gasoline pipeline infrastructure, and that has helped spur opposition from the American Petroleum Institute. Bob Greco, an API official, said the oil industry supports "realistic or workable" targets with periodic technical reviews "so that the consumer does not lose out."

The renewable fuel also drives up the price of the corn used to make it, and that has earned it the enmity of beef producers, the poultry industry and grocers' associations -- giving some lawmakers from agricultural areas pause. Dinneen argues that those groups have been used to "cheap corn" and will adjust. And he says new biofuel makers will turn to other feedstocks.

For now, however, farmers are expanding plantings to an extent that many environmentalists fear will encroach on areas set aside for conservation, worsen soil erosion and boost the use of harmful fertilizers and pesticides. Dinneen boasts that this year, American farmers are on pace to plant more grain than any year since 1945, including 90 million acres of corn, a 15 percent increase from last year. A World Resources Institute report warns that "an expanding market for ethanol from corn grain will exacerbate water and soil quality problems in the United States."

Such controversies have scarcely hindered the ethanol lobby.

The national security angle has been bolstered by the war in Iraq, tensions with Iran and production limits by the Organization of the Petroleum Exporting Countries that have kept the price of crude oil at more than $60 a barrel.

Ethanol producers have also been tapping into climate-change concerns by arguing that ethanol emits less greenhouse gases than regular gasoline. Several academic studies have confirmed some greenhouse-gas savings, but they vary or disappear depending on the project; for corn-based ethanol, savings usually amount to 10 to 20 percent.

Venture capitalists, many of them veterans of technology companies, have polished the industry's image by talking up refineries that use feedstocks other than corn, such as switchgrass, wood chips or corn stalks. At the moment, there are not any cellulosic ethanol plants in commercial operation, but they would be big winners in the Senate bill, which would first require a scaling up of corn-based ethanol production, then in 2016 require a phasing in of 21 billion gallons of advanced biofuels such as cellulosic ethanol or other innovations.

Environmental groups, resigned to the prospect of a bigger biofuels mandate, are looking at controlling the "collateral damage," said Elizabeth Marshall, an economist with the World Resources Institute. If Congress is going to use agriculture "to enhance energy security, then it needs to take into account some side effects and make agriculture more sustainable."

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