Fos­sil fu­els rule market

The Washington Times Weekly - - National - BY BEN WOLF­GANG

The fed­eral Re­new­able Fuel Stan­dard will fall far short of the goals laid out by Congress, gov­ern­ment watch­dogs said, deal­ing an­other blow to the em­bat­tled pro­gram and giv­ing more am­mu­ni­tion to crit­ics who say it must be ended im­me­di­ately.

Gov­ern­ment Ac­count­abil­ity Of­fice re­ports say the Re­new­able Fuel Stan­dard, en­acted by law­mak­ers in 2007, has been crip­pled by higher-than-ex­pected costs of pro­duc­ing ethanol and other bio­fu­els and by the boom in U.S. oil and gas pro­duc­tion, which has made fos­sil fu­els far more com­pet­i­tive in the mar­ket­place.

The pro­gram, which re­quires in­creas­ing amounts of ethanol and other bio­fu­els to be blended into the na­tion’s gas sup­ply each year, also will fail to de­liver the kinds of re­duc­tions in green­house gas emis­sions en­vi­sioned a decade ago, the GAO said.

Taken to­gether, the two con­clu­sions raise doubts about the fu­ture of the Re­new­able Fuel Stan­dard and sup­port crit­ics’ con­tention that the pro­gram is forc­ing the use of fu­els that are too ex­pen­sive and in­com­pat­i­ble with many of to­day’s ve­hi­cles and in­fra­struc­ture.

“Given that cur­rent ad­vanced bio­fuel pro­duc­tion is far be­low Re­new­able Fuel Stan­dard (RFS) tar­gets and those tar­gets are in­creas­ing ev­ery year, it does not ap­pear pos­si­ble to meet statu­tory tar­get vol­umes for ad­vanced bio­fu­els in the RFS un­der cur­rent market and reg­u­la­tory con­di­tions,” the GAO re­port reads in part. “Cur­rent pro­duc­tion of cel­lu­losic bio­fu­els is far be­low the statu­tory vol­umes and, ac­cord­ing to experts, there is lim­ited po­ten­tial for ex­panded pro­duc­tion to meet fu­ture higher tar­gets, in part be­cause pro­duc­tion costs are cur­rently too high.”

Last week, the agency set a 2017 tar­get of at least 19.28 bil­lion gal­lons of ethanol and other bio­fu­els to be blended into the na­tion’s gas sup­ply. That is an in­crease over this year’s tar­get of 18.11 bil­lion gal­lons but is far be­low the tar­get of 24 bil­lion gal­lons set out in 2007 leg­is­la­tion that es­tab­lished the pro­gram.

One rea­son for the gap, the GAO re­port said, is a lack of in­cen­tives for more bio­fu­els pro­duc­tion or up­grades in in­fra­struc­ture be­cause of the rel­a­tively low cost of fos­sil fu­els in the market.

Mov­ing for­ward, the GAO says, the Re­new­able Fuel Stan­dard faces a bleak fu­ture. In­vest­ments into ethanol and bio­fu­els, the watch­dog agency said, look to be dry­ing up in the en­ergy mar­ket­place, which has been trans­formed by the boom of do­mes­tic oil and gas drilling over the past decade.

That uptick in fos­sil fuel pro­duc­tion seems to have crushed in­cen­tives to in­vest in bio­fu­els and made once-promis­ing ethanol much less ap­peal­ing.

“The short­fall of ad­vanced bio­fu­els is the re­sult of high pro­duc­tion costs, and the in­vest­ments in fur­ther re­search and de­vel­op­ment re­quired to make these fu­els more cost-com­pet­i­tive with petroleum-based fu­els even in the longer run are un­likely in the cur­rent in­vest­ment cli­mate,” the GAO said.

In re­sponse to the GAO stud­ies, the EPA con­ceded that the orig­i­nal con­gres­sional timetable now is es­sen­tially ir­rel­e­vant. The agency also cited the rel­a­tively low cost of fos­sil fu­els, the cost of new bio­fu­els tech­nol­ogy needed to hit the tar­gets and other fac­tors.

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