The U.S. should maintain its current biofuels policy because it's a bridge to second-generation fuels that won't rely on food crops, according to cellulosic ethanol producers.
The Energy Independence and Security Act of 2007, signed into law five months ago by President George W. Bush, mandates the U.S. use 15 billion gallons a year of ethanol and 1 billion gallons of biodiesel by 2015, 16 billion gallons of cellulosic ethanol by 2022. The plan is known as the renewable-fuels standard, or RFS.
Democratic presidential candidate Barack Obama said May 4 on NBC's Meet the Press that changes in the ethanol policy may be needed to improve global food supply. Demand for gains, primarily corn, used to make ethanol have been blamed for surging food costs and shortages.
Presidential candidate John McCain was among 23 fellow Republican Senators who May 2 wrote Environmental Protection Agency Administrator Stephen Johnson seeking a waiver from the mandate. Oklahoma Republican Senator James Inhofe said April 29 that Congress must take “dramatic'' action to address the U.S. “biofuel policy blunder,'' because of rising food costs.
“Now isn't the time to waffle,'' Verenium Corp. Chief Executive Officer Carlos Riva said in a telephone interview. “We're right on the doorstep of deployment. We've taken a space- race approach to it.''
Riva urged House Speaker Nancy Pelosi to maintain the RFS, in a May 5 letter obtained by Bloomberg. Cambridge, Massachusetts-based Verenium is developing a demonstration-scale cellulosic ethanol plant in Jennings, Louisiana, that will convert sugar cane waste into fuel.
Scrutiny
U.S. ethanol policy is under scrutiny by others. On May 1, Connecticut Governor Jodi Rell, a Republican, wrote President Bush and Congress asking for temporary suspension of the mandate to reduce food and energy prices. That followed a April 25 request from Texas Governor Rick Perry, also a Republican, to waive the mandate.
Corn, the primary feedstock for ethanol in the U.S., reached a record $6.2425 a bushel May 2 on the Chicago Board of Trade and has climbed about 63 percent in the past year on record demand for feed and biofuels.
Denatured ethanol for June delivery rose 1.1 cents, or 0.4 percent, to settle at $2.559 a gallon on the Chicago Board of Trade. Prices have climbed 22 percent in the past year.
U.S. ethanol production climbed to a high of 518,000 barrels a day in February, the Energy Department said in an April 28 report.
Cellulosic ethanol may prove more attractive than the grain- based fuel produced in the U.S. because it uses non-food crops, such as wood chips or switch grass, rather than corn.
Intervention
“For this to get out there, we have to move rapidly,'' Coskata Inc. Chief Executive Officer Bill Roe said in an interview last week. “It's going to take government intervention, like the RFS.''
Coskata, a cellulosic ethanol company counting General Motors Corp. and Sun Microsystems Inc. co-founder Vinod Khosla as investors, plans to build a demonstration plant in Madison, Pennsylvania, next year and a larger distillery by 2011.
There are 147 ethanol distilleries in the U.S., with the capacity to produce about 8.5 billion gallons of the fuel annually, according to the Renewable Fuels Association in Washington.
“This is paving the way for cellulosic fuel,'' said Steen Riisgaard, chief executive officer of Novozymes A/S, the world's biggest maker of enzymes to make biofuel. Development of grain- based ethanol “infrastructure is necessary for cellulosic ethanol to take off.''
Verenium rose 23 cents, or 8.7 percent, to $2.89 in New York time in Nasdaq Stock Market composite trading. The shares have fallen 42 percent this year.
