Fate of the Union: 3-point plan for biofuels

Note to readers: Tonight, President Obama gives the annual State of the Union address, and, following high-profile meetings with Chinese president Hu Jintao, is expected to propose a long-term strategy for federal investment in education, research and infrastructure to match Chinese investment and advances in these areas.

Today, we are delighted to welcome Renewable Fuels Association CEO Bob Dinneen as a monthly Digest columnist, with his debut column discussing elements that could and should become a feature of the new Obama policies in cleantech and the advancement of biofuels.  Specifically, Dinneen proposes a three-step program relating to infrastructure, financing and tax policy for first-generation and advanced biofuels.

Our new line-up of columnists for 2011 includes Algal Biomass Organization executive director Mary Rosenthal, Advanced Biofuels Association president Mike McAdams, BIO’s Exec VP heading the Industrial and Environment section, Brent Erickson, and long-time Digest columnist Will Thurmond, in addition to Dinneen.

By Bob Dinneen, CEO, Renewable Fuels Association

The State of the Union address each year is as much sport as it is course-setting inside the Beltway.  Competition among industries to get even a throwaway mention is fierce.  So, too, are the drinking games developed by Hill staffers with excess time on their hands.

Nevertheless, the State of the Union can serve to set a tone and provide insight into the real priorities of the president for the coming year.  With that hope in mind, I would humbly submit that President Obama has an opportunity to set a course for American renewable fuel that achieves the goals of the Renewable Fuels Standard and the American people.

Ethanol: high efficiency, high yields from first generation fuels

American ethanol production is a success story whose tale is not yet finished.  American ethanol producers provided the nation more than 13 billion gallons of cleaner burning, renewable fuels last year.  While an impressive start, it is just the tip of the iceberg when it comes to this industry’s potential.

While some would choose to ignore reality, the nation can produce more ethanol sustainably using grains like corn, wheat and barley.  Ethanol producers are becoming more efficient just as American farmers are proving they can produce much more per acre.

Opportunities in advanced biofuels

The nation can also produce significant volumes of renewable fuel from non-grain feedstocks.  Feedstocks like corn cobs, grasses, wood waste, algae, and even garbage can all serve as viable and productive sources of renewable ethanol.

America must continue to build on the progress achieved by the current ethanol industry.  Ethanol producers today have torn down walls and paved the way for public adoption of renewable fuels of all types.  Such success must be recognized and policies must be adopted that allow for the industry’s continued evolution.

In his address, President Obama is likely to emphasize key themes of job creation, international competitiveness and fiscal discipline.  A robust and thoughtful domestic ethanol policy can help address concerns across all those areas.

Here are three suggestions how:

1. Tax policy

First, efforts to reform tax policy with respect to domestic ethanol production and use must include all sources of ethanol production.  Current tax policies have been instrumental in developing an industry that today supplies 10% of the nation’s gasoline demand.  They should not be scrapped for the sake of change alone.  Rather, they should be thoughtfully reformed to allow for the continued growth of current ethanol technologies and help accelerate the commercialization of emerging feedstocks and process technologies.  This would include policies like an investment tax credit to bring promising technologies out of the lab and into the market.

2. Loan guarantees.

Second, the Obama Administration needs to build upon the announcement last week of significant loan guarantees for advanced and cellulosic ethanol producers.  Accessing the capital needed to build the nation’s first advanced and cellulosic ethanol biorefineries has been difficult.  Loan guarantees from the federal government will be critical to commercializing new technologies.  Encouraging the Department of Agriculture to continue its efforts as well as reforms of the loan guarantee program at the Department of Energy so they are more accessible to biofuel producers must be part of any renewable fuel agenda.

3. Ethanol infrastructure.

Third, the Obama Administration must follow through on pledges to partner with the industry to expand ethanol fueling infrastructure.  Last fall, Agriculture Secretary Tom Vilsack announced a robust program to help install 10,000 blender pumps across the country in the next five years.  The USDA has yet to provide guidance on how funds dedicated to this initiative will be made available, but the RFA stands ready to help the government identify the most impactful targets.  Additionally, any discussion of reforms to current ethanol tax policy must also work to provide the incentives small businesses need to install ethanol infrastructure, such as blender pumps, and for automakers to deliver more flex fuel vehicles to the market.

A full and fair assessment of energy policy across the board

To be honest, the biggest initiative the President can and should undertake is a full and fair evaluation of energy policy across the board.  Fossil fuels like petroleum and coal, along with nuclear power, have benefited from the largesse of the federal government for generations.  The oil industry alone makes itself available of up to $280 billion in taxpayer funds every year.  To truly change the energy path of this nation, we must be honest about all of our energy choices and the policies that promote them.

I firmly believe that in an environment of fair and faithful consideration, ethanol from any feedstock is far superior and a more progressive choice for American energy.  We have the know-how and the ability to declare ourselves rid of our dependence on imported oil through the ambitious yet realistic production and use of ethanol and other biofuels.  What we have yet to muster is the political fortitude to take on the power wielded by entrenched energy interests.

Mr. President, now would be a good time to demonstrate that fortitude.

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