Millions of Americans will celebrate Independence Day this weekend with friends, family and fireworks. But several days before the 4th of July, the nation's ethanol and biodiesel producers declared their independence from foreign oil, when the Renewable Fuels Standard officially went into effect on July 1st.
Commonly known as RFS2, the Renewable Fuels Standard requires that nearly 13 billion gallons of homegrown fuel be used in domestic motor fuel annually... an amount that increases to 36 billion gallons by the year 2022.
To that end, the Agriculture Department released a 21-page report this week detailing regional strategies to increase production, marketing and distribution of biofuels. According to USDA, the outlook is promising, but the road from production to actual consumption could be bumpy.
Increasing nearly 2 billion gallons every year, the Renewable Fuels Standard requires U.S. motorists to use 36 billion gallons of renewable fuels by 2022. According to USDA, 500 biofuels plants will need to be constructed in order to reach this goal. This would be in addition to the nearly 200 plants already in existence which are capable of producing more than 12 billion gallons annually. Federal officials estimate the cost of the expansion at nearly $170 billion.
While the boost in required consumption would appear to be a positive event, the ethanol industry continues to face significant challenges. Only 10 percent of the predominately corn-based fuel can legally be mixed with gasoline. Producers are still waiting for the Environmental Protection Agency to teardown the, so-called, "blend wall" which prevents more ethanol from reaching U.S. consumers.
Despite federal mandates and "blend walls," ethanol producers also are concerned about the potential loss of incentives that help promote increased production. The federal tax incentive of 45 cents per gallon of ethanol -- known as the "blender's credit" -- will be dropped at the end of the year if no action is taken in Washington. The Renewable Fuels Association, or RFA, an ethanol promotion group representing 90 percent of the nation's ethanol capacity, is calling on Congress to extend the "blender's credit."
Bob Dinneen, President, RFA "The Congress has to take a moment and realize that they work for us and they've got some serious things to accomplish. They've got to get that tax incentive done this year or you're going to see as many as a 112,000 people across the country, many in the Midwest, loose their jobs."
Critics in the past have cited a controversial hypothesis as another reason to attack ethanol as an alternative fuel. Known as the "indirect land use" theory, it presumed farmers would tear-up environmentally sensitive land to cover the nation's food and feed needs as more corn was devoted to biofuels.
The RFA pointed out this week that increased ethanol production has NOT compelled farmers to tear up sensitive ground -- like Conservation Reserve Program acreage -- to plant more corn. Citing recent USDA data, the RFA maintains the theory is full of holes. Despite record corn and ethanol production, the total number of acres planted to all crops in the United States since 2008 has actually declined.