Sheila McNulty White House support for biofuels comes at a crucial time, but ethanol faces new emissions standards

The White House underlined its support for biofuels today, forming a Biofuels Interagency Working Group that will include the Secretaries of Agriculture and Energy, as well as administrator of the Environmental Protection Agency.

The group is to develop the country’s first comprehensive biofuels market development program, while also providing financial assistance, such as helping to refinance troubled biofuel factories and guaranteeing loans for new bio-refineries. It also will help build a market for biofuels products by developing policies to increase flexible fuel vehicle production and assist in retail marketing efforts.

The timing could not be better. The National Biodiesel Board noted yesterday that a review of the March biodiesel production numbers show commercial biodiesel production fell to 30m gallons. That trend, if it continues, could well reduce industry production to half of the 700m gallons produced last year, the board said. The White House wants the biofuels industry, like all alternative energy industries, to grow, not contract.

“There is over $1.1bn of opportunity here,” said Tom Vilsack, Secretary of Agriculture. He was referring to stimulus and other funding being provided by the US government to support the growth of alternative energy in everything from researching new products to helping to convert existing refineries from fossil fuels to biofuels.

At last count, the Biodiesel Board said, 176 plants in the US were able to produce almost 2bn gallons of homegrown, renewable fuel per year. But, it said, many plants now sit idle, and at least 20 have gone out of business, costing the country jobs and increasing its dependnce on foreign oil.

The board said the biodiesel industry stands ready and waiting to answer the Obama Administration’s call for economic investment in American renewable energy. Yet they will be asked to do more than that.

The EPA is proposing revisions to the National Renewable Fuel Standard program to establish new specific volume standards for cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuel that must be used in transportation fuel each year.

The carrots are supported by a stick, however. The revised statutory requirements also include new definitions and criteria for both renewable fuels and the feedstocks used to produce them, including new greenhouse gas emission thresholds for renewable fuels. The regulatory requirements will apply to domestic and foreign producers and importers of ethanol and other renewable fuels.

This will put pressure on the ethanol industry, which has come under criticism for its greenhouse gas emissions. Yet, as the EPA noted today, ethanol was always meant to be a “bridge” fuel to the next generation fuels, such as cellulosic ethanol.