The Obama administration announced steps today aimed at improving the coordination of U.S. biofuels policy, increasing investment in next-generation fuels and shrinking the industry's environmental footprint.

At the same time, U.S. EPA is releasing draft rules today showing that corn-based ethanol has lower "lifecycle" greenhouse gas emissions than gasoline but still fails to meet emission targets set by Congress in 2007, EPA Administrator Lisa Jackson said.

The administration is forming a new Biofuels Interagency Working Group that will be led by the secretaries of Energy and Agriculture and the EPA administrator. President Obama is also calling on the Agriculture Department to quicken the pace of programs to support the biofuels industry.

"President Obama's announcement today demonstrates his deep commitment to establishing a permanent biofuels industry in America," said USDA Secretary Tom Vilsack, a former governor of Iowa, a major ethanol-producing state.

The inter-agency group is tasked with developing a "comprehensive" market development program, which would include policies to aid retail marketing and increase production of flex-fuel vehicles.

Another task would be coordinating infrastructure policies that affect supply, transport and distribution of fuels. A recent report [pdf] by the bipartisan National Commission on Energy Policy warned that infrastructure to deliver increasing amounts of fuels is at risk of lagging behind increased production.

The group will also come up with policy ideas for reducing the environmental footprint of growing biofuels crops – considering land use, natural-resource conservation, water efficiency and "lifecycle" greenhouse gas emissions.

The United States produced 9 billion gallons of ethanol last year and is expected to surpass 10 billion gallons in 2009, according to the Renewable Fuels Association, an industry trade group.

A major 2007 energy law expanded the national renewable fuels standard to reach 36 billion gallons annually by 2022. Traditional corn ethanol is limited to 15 billion gallons, and the rest would ultimately come from next-generation sources such as cellulosic ethanol made from crop wastes, grasses and other materials.

USDA to help troubled producers

Obama also issued a directive to USDA to speed up federal investments in the biofuels sector that were authorized in the 2008 farm bill.

Federal aid includes loan guarantees for building and retrofitting biofuels refineries, grants for demonstration-scale projects, funding to help current ethanol plants replace use of fossil fuels by using biomass energy for their processes, and funding for biofuels producers to make next-generation biofuels from nonfood feedstocks.

More than $1.1 billion will be available, Vilsack told reporters in a conference call. He said USDA will also attempt to use its existing credit programs to aid restructuring of ethanol companies facing hard times. The sour economy and lower demand for gasoline have hit the industry hard, forcing some producers into bankruptcy.

Separately, Energy Secretary Steven Chu said the Energy Department will make available more than $786 million from the economic stimulus package for next-wave biofuels initiatives.

From DOE will come funding to demonstrate "integrated" plants that produce biofuels, byproducts, and heat and power in an "integrated" system; additional money for programs to support development of commercial-scale biorefineries for advanced biofuels; additional money for biofuels research centers established under the last administration; and other steps, Chu said.

EPA rule

EPA is posed to release proposed rules today to implement the 2007 expansion of the national biofuels mandate. The law requires biofuels, to varying degrees, to have less "lifecycle emissions" than gasoline.

Lifecycle emissions take into account feedstock production, refining and use in motor vehicles. The agency will include a measurement of emissions from land-use changes that stem from increasing biofuels production, such as clearing land for farming in other countries to make up for increasing diversion of U.S. crops to biofuels.

Biofuels' environmental footprint has come under increasing scrutiny over the past few years, with studies suggesting that "indirect" land-use changes will release stored carbon, a view that is highly controversial.

Under the 2007 law, corn ethanol must have 20 percent less lifecycle emissions than conventional gasoline, while advanced biofuels that eventually account for the rest of the mandate must be 50-60 percent better.

Jackson told reporters that corn ethanol would be 16 percent better. But she emphasized "pathways" for bettering the performance. "There are things that could be done to make corn-based ethanol more sustainable," said Jackson, who also called corn ethanol a "bridge" to new forms of biofuels and lauded its use as a way to displace oil imports.

The emissions requirement for corn ethanol would be largely symbolic, because it only applies to plants that began construction after the 2007 law was enacted, and existing or under-construction plants already account for most of the 15 billion gallon level.

The agency's plans for modeling indirect land-use changes are the most closely watched part of the rule and have been the subject of fierce lobbying of White House officials reviewing EPA's plans.

The biofuels industry says methods for measuring these changes are too crude to be applied at this point, while environmentalists say they must be considered, or else the mandate will spur ventures that worsen climate change. Jackson said that EPA will seek formal peer review of its methods for assessing the emissions from land-use changes.

Reactions

Industry groups – including the Biotechnology Industry Organization, the National Farmers Union, and Growth Energy, an ethanol producers organization – cheered the new inter-agency working group, saying it underscores the administration's support for biofuels.

"With the establishment of this working group by the president, America has taken an important step toward sustainability, energy security and economic vitality," said Tom Buis, CEO of Growth Energy.

Buis also cheered EPA for seeking peer review of agency methods for assessing indirect land-use changes, although he attacked use of the metric at all.

"Indirect land-use change theory uses speculative models and incorrect assumptions in an attempt to blame American farmers for deforestation in Brazil," he said.

Meanwhile, the Natural Resources Defense Council praised EPA for releasing a proposed rule that considers the land-use change emissions.

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