The Energy Bill's Details, Impact: TBD

By Tom Bryan | January 17, 2008
If there's one thing we all know about the new energy bill, it's that we don't know much. Most of the details are TBD-to be determined-and it will be months before the legislation is wholly defined.

A few months ago, I used this column to laud the introduction of a House bill that would have required U.S. petroleum companies to use 450 million gallons of "biobased diesel" in 2008, gradually increasing to 1.25 billion gallons in 2012. The Biodiesel Promotion and Quality Assurance Act of 2007 was the nearest thing to a biodiesel-specific renewable fuels standard the industry had ever seen, and for many of us, it was a first glimpse at the legislative absorption of biodiesel into a new category of advanced biofuels.

That particular bill didn't endure on its own. Many of its essential components did, however, settling out in the RFS of the Energy Independence and Security Act of 2007. The idea of a "biomass-based diesel" mandate survived, while the timelines and volumes changed. The energy bill's carve-out for biomass-based diesel begins at 500 million gallons in 2009, rather than 450 million gallons this year, and it tops out at 1 billion gallons in 2012, rather than 1.25 billion gallons. Several months of U.S. EPA interpretation and rule-
making lie ahead; only broad certainties about the RFS can be assumed at the moment. One thing we can count on, according to our page 44 cover story, "A Billion-Gallon Boost," is that post-2012, the minimum annual usage requirement for biomass-based diesel use in the United States will be 1 billion gallons.

A usage mandate doesn't remedy high feedstock prices, though. In fact, the legislation includes a partial waiver from the requirement when feedstock costs soar. Commodity experts say the mandate, coupled with high feedstock prices, might "ration users out of the equation," benefiting the lowest-cost producers and exposing others. On the whole, it's simply not clear how significant a national minimum floor for biomass-based diesel will be to an average biodiesel plant's bottom line if feedstock costs don't settle.

That's not the only thing about the bill that's open-ended. The legislation credits renewable fuels based on their lifecycle greenhouse gas (GHG) emissions. Biomass-based diesel is defined as biodiesel with lifecycle GHG emissions that are at least 50 percent less than baseline 2005 GHG emissions. How this will be determined, and precisely how the EPA will use renewable identification numbers, or RINs, to track these new values, is up in the air. From the sound of things, changes are imminent.

What wasn't in the energy bill? For starters, an extension of the penny-per-gallon blender's tax credit-the most potent legislative push for biodiesel in U.S. history, which expires at the end of this year-was excluded. The new RFS kicks in after the current tax credit sunsets, but producers could struggle during the buildup if the law isn't renewed. Finding a way to bridge that gap is crucial, and the passage of a new, fully funded Commodity Credit Corp. Bioenergy Program might be the answer. A new, broader CCC program might provide additional incentives for existing producers facing incredibly high feedstock prices. The pending farm bill might answer those questions, but that too is TBD.

Tom Bryan
Editorial Director
[email protected]

Correction from our December 2007 issue:
On page 21 of the Industry News section, Matt Johnston of the University of Wisconsin in Madison was incorrectly identified.

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