Senate hearing examines oil price spikes, role of biofuels

By Holly Jessen | March 30, 2011

During a U.S. Senate committee hearing on March 30, Chairwoman Debbie Stabenow, D-Mich., said that focusing on advanced biofuels for homegrown energy is in the best interest of the United States. “I think that we have heard today, very clearly, that we are making progress and we need to continue to do that,” the Senator said, adding that the message most often heard about biofuels is one of concern, rather than the progress achieved.

The hearing to “evaluate high gas prices and how new rules and innovative farming can help” was held by the Senate Committee on Agriculture, Nutrition and Forestry. Those testifying included Poet LLC CEO Jeff Broin, Bruce Dale, a professor at Michigan State University, Richard Newell, administrator of the Energy Information Administration, a representative from the U.S. Commodity Futures Trading Commission who talked about speculators and the commission’s efforts to enforce market laws, and a Kansas farmer.

Newell kicked off the hearing with some dollars and cents reporting on gas prices. EIA’s most recent projections are that regular-grade motor gasoline in the U.S. will reach an average of $3.56 this year, 77 cents higher than the 2010 average. This summer gas will reach $3.70, he said.

Ethanol helps keep gas prices 17 cents per gallon lower than they would be, adding up to an annual savings of $100 a driver, Broin pointed out. This is according to a report from the National Renewable Energy Laboratory and McKinsey & Company. Other studies peg the savings at as high as 50 cents per gallon. “What ethanol is doing today to lower gas prices is nothing compared to what it will do in the future if given the chance,” he said.

Poet is already producing cellulosic ethanol from corn crop residue and, in the future, it will be produced from Georgian wood chips, Arkansas rice hulls and other sources of biomass around the U.S. But, Broin said, to get there, stable government policy is needed. To illustrate, he explained the difficulties Poet has had getting additional farmers to provide the company with the biomass needed to produce cellulosic ethanol. Although Biomass Crop Assistance Program, known as BCAP, survived a legislative attempt to eliminate it earlier this year, it cast doubt in the mind of farmers that were just receiving their first $45 per ton payments for biomass delivered. In addition, U.S. DOE loan guarantees are badly needed to build up the fledging cellulosic ethanol industry. “We don’t need loan guarantees forever, but the first couple plants do,” he said, adding that Poet’s first commercial cellulosic plant in Emmetsburg, Iowa, is still waiting on loan guarantee approval.

To start off his testimony, Dale warned those listening that his message was a sober one. The days of cheap, domestic oil are long gone and the days of cheap foreign oil are rapidly ending, he said. That’s scary news in an economy that depends very strongly on liquid transportation fuels. “We are increasingly at the mercy of much more expensive oil, much more environmentally damaging oil, and much more insecure oil supplies,” he said. “Not a pretty picture.”

Increased fuel efficiency is good, but it won’t be enough, Dale said. Increasing domestic production of oil can, and should be done, but it’s not enough. Neither is combining carbon sequestration and advanced oil recovery. “We need to increase production of oil alternatives, and that means biofuels,” Dale said. “There simply is no way to a sustainable transportation sector without sustainable biofuels.”

The ethanol industry—with the success of the cellulosic ethanol industry depending on a strong and healthy first generation corn ethanol industry—has a huge potential to replace petroleum in the future. Research at the Great Lakes Bioenergy Research Center showed that double crops could be planted on about one-third of corn and soy cropland, or about 300 million acres of land. “We found that doing this one simple thing would allow us to produce about 100 billion gallons of ethanol, roughly the amount of gasoline we import, provide all the food and animal feed the land currently produces, improve soil quality and biodiversity and reduce total U.S. greenhouse gas emissions by 10 percent,” he said, adding that the estimate is conservative.

Stabenow asked Dale the million dollar question—when will cellulosic ethanol become commercially viable? “We’ll do it when we choose,” he answered simply, adding that it’s important that the U.S. continue down the advanced biofuels path it is traveling. “We can do it with cellulosic and other biofuels, but it’s going to take decades to do it,” he said.