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Report questions RFS viability

By ANN HINCH
Assistant Editor

HOUSTON, Texas — Last week, the U.S. Environmental Protection Agency (EPA) finalized its renewable fuels standard (RFS2) and the Biofuels Interagency Working Group (IWG) released its first report, including strategy ideas to realistically meet the country’s renewable biofuel targets as laid out in the RFS2.

Whether that strategy can be enough remains to be seen, according to researchers who co-authored a paper, Fundamentals of a Sustainable U.S. Biofuels Policy, released last month. They are concerned the Congress-mandated RFS (in 2007) and the updated RFS2 set unrealistic volumes for renewable vehicle fuels production through 2022.

The report – sponsored by the James A. Baker III Institute for Public Policy and the Rice University Department of Civil and Environmental Engineering – also questions federal subsidies and mandates for biofuel production, particularly the RFS. Co-author James Coan, Baker Energy Forum research associate, said the report focuses on the limitations of producing and shipping biofuel throughout the United States at a reasonable cost.

“There’ll be significant price differentials around the nation,” he explained. “Consumption of ethanol in Iowa is cheaper than consumption of it in Florida,” because Iowa has lots of ethanol plants, whereas the fuel would have to be shipped down South at extra cost.

There are regional price differences with petroleum gasoline, he said, because of Clean Air Act provisions – but those differences are negligible compared to the add-on cost of buying Midwest-produced ethanol in a coastal city.

While the paper goes into few specific dollar figures, it does state much of the corn ethanol now produced – about 6 billion gallons per year, or upwards of two-thirds of the total – is used to replace the gasoline additive MTBE, a suspected carcinogen. What is left over, it explains, replaces only about 2 percent of our annual gasoline demand.

The report puts forth several other points of consideration, especially about corn-based ethanol: Any concentration higher than E10 could be dangerous if it leaks out of underground storage tanks, and may damage engine seals and parts in non-flex fuel vehicles (which make up about 97 percent of vehicles in the U.S.); growing enough corn to continue meeting the RFS will require more fertilizers and chemicals that can run off and create hypoxia in waterways, not to mention needing greater amounts of water; and building pipelines to ship it would be expensive, given the special requirements needed to keep water out of the fuel.

This doesn’t include the researchers’ concern about cellulosic biofuel, which the RFS2 demands in annually-increasing amounts over the next decade, despite the fact such fuel is still only being produced in test facilities.

“It’s difficult to see how a product that isn’t made (yet)” will be able to reach 16 billion gallons per year in 10 years, Coan said, especially given that last year’s mandate wasn’t met and so has been rolled into this year’s. “The possibility of that ramping up to 2022 (standards) … it looks incredibly difficult.”

In fact, the entire RFS2 seems to the authors “a stretch, given where we are now.” Coan admitted the technology could come about within 10 years to make the 2022 goal possible. He also noted cellulosic and other “second-generation biofuels” as they’re called, seem to have less environmental consequence and may have less impact on the food supply, than corn ethanol and soy biodiesel.

Coan did say the Baker report’s authors were glad to see last week’s IWG report addresses biofuel transportation issues and proposes government-university-private partnerships to develop different kinds of facilities in various parts of the country, based on that region’s production capability (i.e., ethanol in the Midwest, advanced biofuel from “energy cane” in the Southeast). “They were very focused,” he said.

One more area the Baker report questions is the tariff on imported sugar cane ethanol. Tariff-free ethanol could help coastal regions use more biofuel to help the U.S. meet its RFS2 standard, it states, at a lower cost to consumers than domestic ethanol shipped in. Further, the report says this could help grow the economies of U.S. allies in the Western Hemisphere.

Yes, the report notes, the tariff keeps U.S. corn ethanol competitive. But taxpayers are paying for blender credit and grower subsidies here at home, despite the fact ethanol itself is less attractive to drivers, with the lower petroleum prices the nation is experiencing now.

Coan said when Congress mandated the RFS three years ago, its primary purpose was to cut down on petroleum imports; boosting the economy of rural America was a secondary goal.
To read the report in its entirety, go to www.bakerinstitute.org/programs/energy-forum/search?Subject%3Alist=Biofuel online and page down to click on this report’s name.
And, to view the IWG report, go to www.whitehouse.gov/sites/default/files/rss_viewer/growing_americas_fuels.PDF

2/10/2010