Renewable fuel standard in energy bill

Renewable fuel standard in energy bill

Both the House and Senate versions of the energy bill require that refiners produce billions of gallons of renewable energy annually—a mandate that could spur more biodiesel production

Both the House and Senate versions of the energy bill require that refiners produce billions of gallons of renewable energy annually—a mandate that could spur more biodiesel production.

The Senate version of the bill contains a provision that requires refiners to produce 4-billion gallons of renewable fuel annually in 2006 and double that amount by 2012. By comparison, the more modest House version mandates production of 3.3-billion gallons of renewable fuel in 2006 and 5-billion by 2012.

The language gives refiners the flexibility to determine how much ethanol-blended gasoline or biodiesel to produce to meet the renewable fuel allotment.

The most recent data from the U.S. Energy Information Administration indicates the transportation sector consumed just over 39-billion gallons of diesel in 2003.

“[The renewable energy standard says that there needs to be a certain amount of renewable fuel in all fuel production—most refiners would probably use ethanol with gas to fulfill the requirement,” said Rich Moskowitz, regulatory affairs council for the American Trucking Assns. “As to the extent refiners would produce biodiesel, that will be an economic decision for the refiner to make.”

Separate from the national energy bill, the state of Minnesota is planning to requiring that all diesel fuel contain at least 2% biodiesel. The rule, which is expected to be anacted as early as this fall, would make Minnesota the only state that mandates the retail sale of biodiesel blends.

“These types of mandates generally increase the cost of fuel,” Moskowitz said. “You could imagine you’d be paying a penny or two more per gallon for diesel in Minnesota than any other neighboring state.”

John Kleiboeker, field services director for the Missouri Soybean Assn., said that 2% biodiesel is currently selling for about the same price as conventional diesel in Missouri.

“The price of soybean oil and the price of petroleum diesel are the two biggest factors in the marketability of biodiesel,” said Kleiboeker. “For many, it still comes down to a dollar-for-dollar figure. The renewable fuel standards in Congress and tax credits are helping the biodiesel industry get up and on its feet.

“We’re working to get the price of biodiesel fuel comparable to the conventional because the users will benefit tremendously,” Kleiboeker continued. “They’ll get a premium product because of the added lubricity and decreased emissions. And if it can [be] bought at the same price as traditional fuel, we feel buyers will be happy.”

The National Biodiesel Board said the industry’s top priority remains extending the federal biodiesel tax incentive. The tax break currently remains an essential component to driving biodiesel prices low enough to stay competitive with conventional diesel. The Senate energy bill includes the extension.

Charlie Drevna, director of technical advocacy activities for the National Petrochemical and Refiners Assn., declined to comment on the economic feasibility of biodiesel versus ethanol.

“The marketplace should dictate the use of fuels, but if an industry needs a jumpstart with R&D money, that’s fine,” Drevna said. “But we don’t feel that mandating a certain amount of [ethanol or biodiesel] blend stock is appropriate.”

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