RFS, biodiesel and energy security

By | June 01, 2005
With rising crude oil prices hurting consumers and record petroleum imports crippling America's economic growth, our focus must be on maximizing the use of domestic, renewable fuels like biodiesel. The time is now for Congress to enact a national renewable fuels standard (RFS). Enacting an 8 billion gallon RFS by 2012 demonstrates a firm commitment to reducing our nation's dependence on foreign oil, while significantly boosting the rural economy.

Coupled with the federal tax incentive, the biodiesel industry will experience rapid growth over the next few years. An RFS would not only benefit consumers with increased availability-and the biodiesel industry with more volume-it would also give refiners the flexibility they need to blend renewable fuels in a national fuel marketplace. This will enable refiners to meet consumers' demand for biodiesel.
For renewable fuels-biodiesel and ethanol-the RFS underscores America's obligation to energy security. Holistically, to illustrate, the United States currently has the capacity to produce more than 3.7 billion gallons of biodiesel and ethanol, and plants under construction will add an additional 700 million gallons of capacity by the end of 2005. Most of this growth comes from farmer-owned plants, which taken as a whole, represent the single largest producer in the country. Clearly, the renewable fuels industry is poised to make a significant contribution to this nation's energy supply. Specifically (in 2005 dollars):

-The production and use of 8 billion gallons of biodiesel, ethanol and other renewable fuels by 2012 will displace more than 2 billion barrels of crude oil and reduce the outflow of dollars largely to foreign oil producers by $64.1 billion between 2005 and 2012. This will reduce America's dependence on imported oil from an estimated 68 percent to 62 percent.

-The renewable fuels sector will spend an estimated $6 billion to build 4.3 billion gallons of new ethanol and biodiesel capacity between 2005 and 2012.

-The renewable fuels sector will spend nearly $70 billion on goods and services required to produce 8 billion gallons of ethanol and biodiesel by 2012. Purchases of soybeans, corn, grain sorghum, corn stover and wheat straw alone will total $43 billion between 2005 and 2012.

-The combination of this direct spending and the indirect impacts of those dollars circulating throughout the economy will:

- Add nearly $200 billion to GDP between 2005 and 2012

-Generate an additional $43 billion of household income for all Americans between 2005 and 2012

-Create as many as 234,840 new jobs in all sectors of the economy by 2012

Currently, RFS legislation is pending before the Congress. The "Fuels Security Act of 2005" was introduced in the U.S. Senate (S. 650) March 17 by Sens. Richard Lugar, R-Ind., and Tom Harkin, D-Iowa, establishing an RFS of 4 billion gallons of renewable fuels in 2006, increasing to 8 billion gallons by 2012. In addition to Lugar and Harkin, other cosponsors include Senate Majority Leader Bill Frist, R-Tenn.; and Sens. Chuck Hagel, R-Neb.; Chuck Grassley, R-Iowa; Dick Durbin, D-Ill.; Kit Bond, R-Mo.; Tim Johnson, D-S.D.; Byron Dorgan, D-N.D.; Jim Talent, R-Mo.; John Thune, R-S.D.; Barack Obama, D-Ill.; Evan Bayh, D-Ind.; and Jim Bunning, R-Ky.

Companion legislation (H.R. 1608) was introduced in the U.S. House of Representatives by Stephanie Herseth, D-S.D.; Tom Osborne, R-Neb.; Collin Peterson, D-Minn.; and Steve King, R-Iowa.

The biodiesel industry will continue advocating the inclusion of S. 650/H.R. 1608 in a comprehensive energy bill currently moving through Congress. With the extension of the biodiesel tax incentive, and an 8 billion gallon RFS, our potential is limitless. The bottom line is, coupled with the extension of the biodiesel tax incentive, the RFS will not only continue boosting the industry and farmer income, but equally important, it reduces our nation's dependence on foreign sources of petroleum.
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