Finalized energy bill gives needed boost for 2008

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Although the Senate squabbled over farm bill negotiations in December, the real Christmas present came with a finalized energy bill for farmers. President Bush signed the Energy Independence and Security Act of 2007 (H.R. 6) into law Dec. 19 and provided the underlying support the biofuels industry needs to transition to cellulosic fuels.

The legislation mandates that 36 billion gallons of renewable fuels be produced by 2022; 15 billion gallons of fuel are to come from grain-based sources such as corn.

Other provisions in the bill include:

• Requirement of 9 billion gallons of renewable fuels in 2008, progressively increasing to the 36 billion-gallon requirement by 2022, including a 1 billion-gallon mandate for biodiesel;
• Increases in the Corporate Average Fuel Economy (CAFE) standards to 35 miles per gallon by 2020, the first congressional increase in 32 years;
• Studies on the feasibility of ethanol pipelines, higher blend levels and the optimization of flex fuel vehicles.

Feed users object to higher RFS

Livestock producers were disappointed in the expanded RFS. Jay Truitt, National Cattlemen's Beef Association (NCBA) vice president of government affairs, said cattlemen want the marketplace to become a factor in the growth of the ethanol industry.

"We have seen the impacts of drought and other natural disasters on prices and supplies in the past," said Truitt. "What happens to the needs of traditional users of corn if we simply don't have enough corn to meet this mandate? With corn prices trading above $4.00 for the foreseeable future, the livestock industry is facing some significant adjustments now that the government has stepped into the marketplace."

Already poised to expand

As of Dec. 18, total ethanol production annually in the United States was 7.3 billion gallons, according to the Renewable Fuels Association (RFA). An additional 6 billion gallons of capacity from plants under construction are expected to come online in 2008 and be added to the 7.3 billion gallons.

Chris Hurt, Purdue Extension agricultural economist, said the most rapid period of new plant openings will occur in the first half of 2008. He estimates the nation's annual capacity will surge to 11.8 billion gallons. Although new plant openings will slow in the later half of 2008, another additional 1.7 billion gallons of capacity will come online bringing annual capacity to 13.5 billion gallons by the end of 2008.

The expanded RFS calls for 15 billion gallons by 2012, but by the end of 2008 the industry will be just shy of that number.