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Senate Energy Committee Hearing Held This Week

posted on June 23, 2006


Hello, I'm Rick Swalwell. Mark Pearson is off this week. The first days of summer were accompanied by troubling economic news. One of the most closely watched gauges of economic activity slipped dramatically in May, suggesting the nation's economy could weaken in coming months. *The New York-based Conference Board, which is an industry-backed research group, says its Index of Leading Indicators declined for a second straight month in May … and had its steepest drop since last fall. *Combined with a softer housing market and *sagging consumer confidence, the release of the index kept *financial markets choppy and unpredictable. Analysts place the blame for the flagging growth rate on rising interest rates and soaring energy costs. Congress understands that consumers account for two-thirds of U.S. economic activity … and that paying three dollars for a gallon of gasoline thwarts consumer spending elsewhere. That's why lawmakers met again this week to ponder a future driven by alternative fuels.

Senate Energy Committee Hearing Held This Week

Sen. Jim Talent, R-Missouri: "For years, agriculture has fed the country. Increasingly, it's in a position to fuel the country as well."

A Senate Energy Committee hearing was held this week to discuss the implementation of the Renewable Fuels Standard, or RFS. A key component of the 2005 Energy Bill, the RFS mandates that refiners use 7.5 billion gallons of renewable fuel a year by 2012, up from about four billion gallons last year.

Sen. Ken Salazar, D-Colorado: "Renewable Fuels Standard has set a solid and attainable goal in our path towards energy independence."

The Committee heard from five witnesses who talked about the rapid growth and future potential of the renewable fuels industry --including biodiesel, as well as, corn-based and cellulosic ethanol.

Nearly all cars made after 1970 can run on E10, or fuel that is 10 percent ethanol and 90 percent gasoline. But, only about 2.5 percent of America's cars are capable of running on E85. These so-called "flex fuel" vehicles can burn as much as 85 percent ethanol. Currently, only about one percent of fuel-ethanol consumption in the U.S. is E85, but experts at the Senate Energy hearing said this is changing.

Chris Standlee, Abengoa Bioenergy Corporation: "Even though it's relatively a small part of the gasoline supply today, steadily increasing numbers from automobile manufacturers such as GM and Ford and others, we believe will bring that market to a much larger position in the energy industry."

However, increased demand for ethanol has caused the price to rise to more than $4 a gallon, which in turn is adding about 20 cents to each gallon of reformulated gasoline. According to the Energy Information Administration, the average cost of unleaded gasoline in the U.S. is around $2.90 a gallon.

But, analysts do expect ethanol prices to go down in the coming months, after the summer driving season ends and new production capacity comes on-line. The production costs for ethanol are lower than those for gasoline. And, every gallon of pure ethanol produced in the U.S. receives a 51-cent tax break when it is blended with gasoline.

To date, the ethanol industry has developed almost exclusively from fermentation of grain starch, but experts say that in the near future, ethanol will need to be produced from other feedstocks like fast growing trees and switchgrass.

Michael Pacheco, National Bioenergy Center, National Renewable Energy Laboratory: "Given this full range of resources and today's best available technology...estimates that we can replace up to 70 percent of gasoline that we use in the United States."

Soybean-based biodiesel is another alternative fuel enjoying rapid growth. According to the National Biodiesel Board, biodiesel sales have risen from 25 million gallons in 2004 to an estimated 150 million gallons in 2006. And, investment in biodiesel production has grown from 22 plants in 2004 to more than 65 currently. Industry representatives at this week's hearing were optimistic about biodiesel's potential.

Joe Jobe, National Biodiesel Board: "Biodiesel will add more than $24 billion dollars to the U.S. economy; add more than $24 billion to the GDP, by 2015. It is pretty exciting what is going on right now and the fact that the measures that are in place are actually working."

 


Tags: biofuels Congress energy policy ethanol government news renewable fuels