Last year, the president signed the Energy Independence and Security Act of 2007 into law, implementing an expanded renewable fuels standard along with several other energy provisions. During today's OnPoint, Bob Dinneen, president of the Renewable Fuels Association discusses the new RFS, and comments on current Hill discussions to rework some technical points of the RFS. Dinneen also gives his views on a new study focusing on the negative effects of biofuels production, including deforestation and increased emissions.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Bob Dinneen, president of the Renewable Fuels Association. Bob, thanks for coming back on the show.
Bob Dinneen: Thank you very much for having me.
Monica Trauzzi: Bob, the journal Science recently released a report on the impact of biofuels on the environment is. It got a lot of attention in the mainstream media and the basic headline was that biofuels may be doing more harm than we thought. More harm than good. What's your basic reaction to this study?
Bob Dinneen: My reaction was it was intended to get a lot of attention. It was a polemic and written to generate this kind of controversy. The fact of the matter is though; it was a situational analysis in which all of the assumptions were designed to show the worst-case scenario. Look, the land-use issues are important and they need to be studied very carefully, but you cannot put all of the blame on biofuels. There are a whole host of reasons why land-use issues are coming into play, including a growing world economy, including dietary changes that are happening across the globe that are demanding more meat in diets. Biofuels is a factor, but not the overwhelming factor by any stretch. My problem with the analyses that were done is that they really were pretty simplistic and a much more robust, a much more thorough, a much more balanced analysis needs to be done. They discounted any progress that is being made and will be made in terms of yields, in terms of efficiency at ethanol plants. They completely ignored the most important factor, which is there's a carbon debt that we are creating with our reliance on coal and oil that can never be repaid. Are there ways that you can produce biofuels that isn't terribly sustainable? Sure. Ought we ever be cutting down rain forest in order to make room for more biofuels? Absolutely not! But we believe, in this country, there are very effective conservation measures in place that assure that biofuels are being produced in the most sustainable way. There are measures included in the energy bill that just passed that assure that that is the case. Other countries really need to follow the lead of the United States and look at what they're doing with their natural resources and assure that there isn't deforestation going on, but that is certainly not a reason to move away from biofuels.
Monica Trauzzi: But you agree that deforestation is happening as a result of increased biofuels production?
Bob Dinneen: Deforestation is happening because of demands being placed on agriculture and a lack of control in some parts of the world. I mean it wouldn't happen in this country. We have too many controls on agriculture for that to happen, but it is an issue. It needs attention. It's not really helped by the polemic that was issued last week.
Monica Trauzzi: How much of a PR blow is this for your organization? The amount of mainstream attention that was given to this, it was basically on every nightly newscast. How much do you have to work with the consumers now to get them on board with biofuels?
Bob Dinneen: Well, consumers are on board with biofuels. I think most people understand that there are two choices we can make. One is to continue on this path of coal and oil, which is providing no benefit, which has been destructive, which has had economic and environmental challenges that we need to address. Or we can go about the business of producing biofuels in the right way. So, is it a challenge? Yeah, it's a challenge. Keeps us busy, but at the end of the day I don't think it's going to derail the effort to move forward on what is and will continue to be an extraordinarily important agenda.
Monica Trauzzi: At the end of last year the president signed the Energy Independence and Security Act, which raises the renewable fuel standard. But recently Senators Bingaman and Domenici, the chair and ranking member of the Senate Energy and Natural Resources Committee, they questioned whether the RFS is perhaps too aggressive. Does the RFS need to be reworked and do you think what was laid out in last year's plan is too aggressive?
Bob Dinneen: What the chairman and Senator Domenici were referring to, I think, was some questions about some definitions, whether or not they had captured the definition for woody biomass accurately enough to allow development of cellulosic ethanol from those feedstocks to move forward as rapidly as everybody thinks. Nobody questions whether or not the schedule that was laid out in that bill, the 9 billion gallons of renewable fuels this year will be met. It absolutely will be met. Nobody questions whether or not we can meet those schedules going down the road. You know, we want to make sure that we are allowing development of cellulose in the most efficient way. And that's sort of what I believe that they were wondering about.
Monica Trauzzi: Yeah, one of the things that Senator Bingaman was concerned about was that there wasn't enough room for technological advancement in the RFS. Is that something that you would agree with?
Bob Dinneen: Well, there's one plant, for example, that's under construction in Georgia today that is looking to produce cellulosic ethanol from woody biomass, from wood waste. And there is at least some ambiguity, some confusion as to whether or not under the definition for cellulosic ethanol included in the bill that that ethanol will qualify. And certainly I believe most people believe that it should qualify. There's just some questions and they're going to have to take a look at it.
Monica Trauzzi: But there's this back-and-forth now, some murmurs that there may be some legislative compromise or a fix of some sort that may come down the line.
Bob Dinneen: I think there may be some oil interests that are really kind of promoting that.
Monica Trauzzi: OK, so is this something you would agree to?
Bob Dinneen: But they didn't support this in the first place. Well, no, I think what was passed last December and signed by the president makes a great deal of sense. And I haven't seen any interest on the part of Capitol Hill to go back and revisit the fundamental question of whether or not we should have an expanded and an accelerated RFS. That's done. Some in the oil industry are complaining that, oh, there's not going to be enough ethanol. Wrong. There's not going to be enough infrastructure. Wrong. You're not going to be able to get it there. Wrong. But I mean that's their view of the world, which is we can't possibly do this. They're always saying we can't, we can't, we can't. I think what the Congress said last year, what the American public continues to say, what I firmly believe is that we can and we will.
Monica Trauzzi: The petroleum industry is also a little concerned that refiners may be penalized for not lending the fuel with ethanol at the level that is going to be required because there simply won't be enough ethanol available. Is that a valid concern?
Bob Dinneen: Not at all. Look, they have plenty of time to meet the challenges out there. There are plenty of credits for renewable fuels. But our industry is expanding. Monica, we have 60 plants physically under construction today. We're going to be doubling in size in the next 18 months. We're going to have more than 13 billion gallons in production, only 9 billion gallons is required this year. Getting the volume of ethanol needed to meet these targets is absolutely not a challenge.
Monica Trauzzi: So, Congress didn't jump the gun here bypassing this RFS that some are considering ...
Bob Dinneen: No, they didn't jump the gun and I don't think that's what the members of the Senate Energy Committee were referring to last week. I think they're looking in the weeds. You know, do there need to be some really technical changes on some definitions on some definitions? And maybe there does need to be that, because we do want to make sure that all feedstocks that can be appropriately provided for renewable fuels are allowed to participate in this program. And those are the types of things that they are looking at. But as I testified before the committee last week and as I hear from members of Congress I don't hear anybody saying that we ought not move forward with what we put in place just last December.
Monica Trauzzi: We've discussed the food supply issue here several times when you've come in previously, but it's worth bringing up again. There are many studies out that are saying that the production of biofuels is having a direct negative impact on food prices around the world. And the USDA is expecting corn prices to be at around $3.80 a bushel in the next two years, which is almost double what the price was two years ago. So what can be done to reduce the impact that biofuels production is having on food supply and food prices? Is there anything that can be done?
Bob Dinneen: Monica, since the last time we talked on this a very thoughtful piece was released by Informa Economics that looked at the real impact that ethanol prices or ethanol demand is having on food prices. And what it showed was the growth in ethanol has less than a five percent impact on consumer food prices. That's because the largest driver for food prices, consumer prices, is the marketing bill, the transportation, the marketing of the product itself. And that's really a function of energy and gasoline prices. And what is the renewable fuel standard doing but helping to moderate gasoline prices? So, we're actually helping to reduce consumer food prices by taking energy out of the equation, or trying to.
Monica Trauzzi: Ethanol pumps are still hard to find when you go out across the country. What's the biggest thing that's getting in the way from increasing and expanding the implementation of ethanol pumps? Is there enough consumer support driving that?
Bob Dinneen: Well, there's consumers support and demand is growing. There had been some issues with certification of those pumps, but Underwriters Laboratories, late last year, put out a process by which fuel pumps can be certified. We think that is going to stimulate additional infrastructure development. The fact that General Motors and Ford have committed that at least 50 percent will be flexible fuel vehicles by 2012 creates a tremendous opportunity to build that demand, as ethanol continues to grow and it continues to be very cost competitive with gasoline, indeed, saving consumers significant money today. E85 is going to be a more and more attractive option. And we're very optimistic that you're going to see that infrastructure develop. As the cars come online and as the fuel becomes more readily available the infrastructure will absolutely follow.
Monica Trauzzi: All right, and final question here. I wanted to get your thoughts on the president's budget proposal, which was released last week, specifically on the funding for DOE's biofuels and biomass program. What are your thoughts and do you think enough is being provided for R&D to move forward with technological advancements?
Bob Dinneen: I was disappointed with the budget. I think we need to be maximizing investments in R&D on these important fuels. We are embarking on a tremendous journey right now to build cellulosic ethanol, other biofuels, to reduce our dependency on imported oil. And I think that really takes more of a commitment than was suggested by that budget. I realize that in today's economy it's hard and there are priorities that need to be made, but I think a more secure energy future for our country should be a higher priority than was reflected in that budget.
Monica Trauzzi: All right, we'll end it right there. Thanks for joining me again today.
Bob Dinneen: Thank you, Monica.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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