Finally EPA makes RFS law, so what! Biofuels lovefest continues

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In typical D.C. fashion, the government signed something into law. But it's really too little, too late. The latest is Environmental Protection Agency Administrator Stephen Johnson's signature on the final implementation rules of the Renewable Fuels Standard (RFS), making it official law inally. I bet you didn't even realize RFS wasn't law. The ethanol investors didn't need it to be the law of the land to go to the bank and show a guaranteed market for ethanol.

The RFS was passed as part of the 2005 energy bill and requirse gasoline refiners to use increasing volumes of renewable fuel each year. The current RFS calls for 7.5 billion gallons of renewable fuel use per year by 2012.

The RFS was first enacted in January 2006 under a default rule. It called for the use of 4 billion gallons of renewable fuel use in 2006 and increasing incrementally to 7.5 billion gallons of annual renewable fuel use in 2012.

The final rule will implement the full RFS as passed into law, including the critical credit trading provisions that allow gasoline refiners the flexibility to blend ethanol where it makes the most economic sense for them.

But ethanol makers are already well on their way to surpass the 7.5 billion gallon mandate within the next two years. For 2007, 4.02% of all the fuel sold or dispensed to U.S. motorists will have to come from renewable sources, roughly 4.7 billion gallons. Total annual capacity is forecast at 5.7 billion gallons in 2007, up from 4.89 billion gallons in 2006, according to the American Ethanol Coalition.

Legislators want more

At the end of March, Senate Energy Committee leaders unveiled a bill to require 36 billion gallons of renewable fuels by 2022, increasing use in the U.S. more than fivefold. President George W. Bush has proposed increasing biofuels production by five times by 2017.

The legislation will require America's fuel supply to contain higher amounts of renewable fuels, from 8.5 billion gallons in 2008 to 36 billion gallons in 2022. From 2016 to 2022, the bill requires an increasing portion of the renewable fuels consumed to be advanced biofuels, such as cellulosic ethanol, biobutanol and other fuels derived from unconventional biomass feedstocks.

The bill supports the development of advanced biofuels by increasing Department of Energy funding for bioenergy research and development by 50% over fiscal years 2007 to 2009.

Next month Jeff Bingaman and Pete Domenici, who lead the Senate Energy and Natural Resources Committee, expect to hold a hearing on their legislation -- the Biofuels for Energy Security and Transportation Act of 2007.

Biodiesel legislation gaining speed

At least 11 states are considering some form of requirement legislation that would require a certain percentage of diesel sold in a state to be biodiesel. These states include Florida, Connecticut, Missouri, California, Oregon, Mississippi, Arkansas, Nebraska, Montana and New Mexico.

Many states are adding language that would increase a B2 blend (two percent biodiesel) to a B5 level after a designated period.

Other states have legislation to establish a Task Force, or study committee, to research mandates; label pumps that dispense biodiesel; exempt the state's diesel tax for the portion of biodiesel in the blend (Connecticut and Tennessee); encourage biodiesel use and production through a variety of tax incentives and grants and loans. For example, Florida Governor Charlie Crist asked the state legislature for $68 million in funding incentives for Florida-based biodiesel and ethanol projects.