With the start of the summer driving season just a couple of weeks away, President George W. Bush will seek to gain momentum for his plan to cut U.S. gasoline consumption by 20% over the next 10 years.

Bush will make an announcement on energy issues from the Rose Garden at 1:25 p.m. (EDT) on Monday to “announce his latest effort to ensure that the nation is taking aggressive steps to reduce gasoline consumption and to reduce dependence on foreign energy sources,” White House spokesman Tony Snow said Monday. “He will ask the administration to start implementing the 20-in-10 plan through regulatory action. At the same time he will continue to urge Congress to pass legislation to advance the goal.”

The national average for regular gasoline is now above $3 per gallon, so lawmakers are renewing their vows to crack down on price gouging. Last week, lawmakers said they want to look into whether OPEC, oil-industry mergers, and a lack of refining capacity are behind the rising prices.

In March, President Bush called on Congress to pass energy legislation by Memorial Day.  The White House sent lawmakers a draft bill to change the current renewable fuel standard to an alternative fuel standard and reform Corporate Average Fuel Economy, or CAFE, standards for cars. Both are key parts of the administration’s strategy to boost the supply of renewable and alternative fuels to 35 billion gallons by 2017 and lower gasoline consumption.

Secretary of Transportation Mary Peters, Secretary of Agriculture Mike Johanns, EPA Administrator Stephen Johnson and Deputy Secretary of Energy Clay Sell will brief reporters after Bush’s announcement Monday.

The American Coalition for Ethanol (ACE) offered  testimony for yesterday’s field hearing of the U.S. Senate Agriculture Committee’s Subcommittee on Energy, Science, and Technology.

 
The event was held on the campus of South Dakota State University in Brookings and was hosted by Senator John Thune (R-SD), the subcommittee’s ranking member.  The event, “The Next Generation of Biofuels: Cellulosic Ethanol and the 2007 Farm Bill,” was a forum for discussing how the 2007 Farm Bill can play a role in directing the development of the biofuels industry, especially the commercialization of cellulosic ethanol.

“Given the likelihood that the next Farm Bill will contain a meaningful energy title designed to promote biofuels and renewable energy, ACE is grateful for the opportunity to submit testimony at this field hearing on behalf of the U.S. ethanol industry,” said Brian Jennings, ACE executive VP.  “We are also pleased that the hearing featured the expertise of two ACE member ethanol companies helping develop the technology breakthroughs necessary to commercialize cellulosic ethanol - Poet Energy and VeraSun Energy.”

In its testimony, ACE outlined cellulosic ethanol’s greta potential, as well as the four overriding challenges to making cellulosic ethanol a commercial-scale reality: 1)the cost and complexity of converting biomass feedstocks into ethanol, 2) the capital costs of financing and constructing cellulosic biorefineries, 3) feedstock challenges (how and where to grow the feedstocks; how to harvest, collect, transport, and store biomass), and 4) sustainability challenges (respecting soil quality, wildlife habitat, land conservation practices).

ACE pointed to the limitations of the “blend market” and the limitations of how much corn can be used for ethanol as reinforcements of the need for cellulosic ethanol to become a reality in the near future. “There is an intersection between what we refer to as the ‘blend market,’ where E10 comprises virtually every gallon of motor fuel in the U.S., and the upward limitations of how much corn we can distill into fuel ethanol, reinforcing the need to make cellulosic ethanol a reality if we are to achieve a more meaningful reduction in fossil fuel use,” Jennings testified.

In the testimony, ACE encouraged Congress to consider a public policy framework to help create certainty for cellulosic and corn-based ethanol.  The framework contains the following:
- expanding the RFS to reach 10 billion gallons of biofuels per year by 2010, 30 billion gallons by 2020, 60 billion gallons by 2030
- promoting the use of higher blends of ethanol is the existing fleet of automobiles
- increasing funding for and consolidating federal cellulosic biofuels loan guarantee programs into a single program at USDA
- establishing a pilot cellulosic biofuels feedstock program
- requiring automakers to ensure that all vehicles in the U.S. are FFV and require installation of E85 and/or blender pump at all gas stations affiliated with major oil companies
- establishing a cost-share program under Title IX of the Farm Bill to provide assistance to ethanol plants for the installation of low-carbon processing and conversion technologies
- extending the Blender’s Credit for ethanol beyond 2010 and retain the existing secondary import tariff offset on imported ethanol

Despite the ongoing drama of the war in Iraq and the firings of U.S. attorneys, the president is focusing in energy, converting switchgrass and wood chips into ethanol.

 
The president is scheduled to visit a U.S. Postal Service plant today, where he was to stand near vehicles that run on alternative fuels and hail them as a way to reduce reliance on oil.  He also touted his energy plan on a Midwestern tour of auto plants last Tuesday.

 
“We want people to know that we’re doing a lot on energy, and we think energy is an issue where there’s an interest in getting it done on the Hill,” said Kevin Sullivan, the White House communications director. “The only way to break through and build some momentum is to do two or three events in a short period of time.”

 
Karlyn Bowman, a public opinion analyst from the American Enterprise Institute, a conservative think tank in Washington, says it is not surprising that Bush is spending so much time on energy.  Energy, especially the shift to alternative sources of fuel, is a hot topic in America today.

 
Bush wants to reduce U.S. gasoline consumption 20% over 10 years, so he promotes cars that run on batteries or on alternative fuels such cellulosic ethanol, which can be produced from cornstalks, woodchips and switchgrass.

 
After announcing his plan, he first went to a high-tech ethanol lab in Delaware to focus on the science.  Next, he toured Ford and GM plants in the Kansas City area to show people that hybrid vehicles are becoming sleeker and more common.  Last Tuesday, he was showcasing how big delivery companies use alternative fuel technology.

 
But is Bush coming off as oblivious or tone-deaf, especially since Americans (and Congress) are paying attention to other issues?  Sullivan says Bush won’t let that happen.  On the day Bush toured the auto plants last week, for example, he returned to the White House earlier than expected to give a statement on the Gonzales matter and take questions from reporters.

The Dairy and Poultry subcommittee of the House Agriculture Committee warned yesterday that consumer food prices will rise if the burden of expensive corn is not ameliorated.

 
J. Patrick Boyle, president and CEO of the American Meat Institute, said that Congress should take practical actions to moderate the impact that the nation’s renewable energy policy is having on animal feed costs and the cost of food sold to consumers, and Tyson Foods’ Matthew Herman spoke on behalf of the National Chicken Council, telling the subcommittee that the United States could see a corn shortage as ethanol demand outstrips supply.

In an effort to alleviate price pressure on corn producers, the two groups groups suggested that Congress 1) increase federal investment in dried distiller grain research that could help producers adjust feeding regimens to include distiller grains, 2) allow the U.S. ethanol tariff to expire as scheduled on Dec. 31, 2008 so that Americans have greater access to imported ethanol, and finally, 3) promote alternative energy sourced from cellulosic materials, methane, or renewable diesel.

 
Herman and the National Chicken Council also asked Congress to 1) permit non-environmentally sensitive cropland to be released from USDA’s Conservation Reserve Program without penalty or loss of program benefits, and 2) allow new cropland into the program if it is designated for bio-energy production. AMI’s Boyle suggested a working lands conservation program to encourage production of environmentally friendly feedstuffs.

USDA Secretary Mike Johanns said yesterday tha there are “scientific issues that present a challenge” to storing ethanol for long periods of time.

 
Ethanol has a corrosive effect on pipelines so it must be shipped by rail, truck or ship to fuel terminals where it is blended with gasoline before going to service stations.  In theory, it seems far more feasible for the government to store the corn that ethanol is made from, said Johanns, who also stressed that is not something even under consideration.

 
Also yesterday, USDA Chief Economist Keith Collins said the cost would be much higher for the government to store ethanol than it pays to store oil in strategic petroleum reserve.

 
Johanns’ comments on the concept of an ethanol reserve come after the idea was mentioned in early February by fellow cabinet member Energy Secretary Samuel Bodman: “Perhaps we should be thinking about having an ethanol reserve.” 

The Renewable Fuels Association, however, said at the time of Bodman’s comments that an ethanol reserve didn’t make sense because every drop was being used. 

Yesterday, Senator Pat Roberts applauded the U.S. Department of Energy’s selection of Abengoa Bioenergy Biomass of Kansas to receive a $76 million federal investment to locate a cellulosic ethanol plant in Kansas.

The plant will use 700 tons per day of corn stover, wheat straw, milo stubble, switchgrass, and other feedstocks, and will produce 11.4 million gallons of ethanol annually and enough energy to power the facility; any excess energy will be used to power the adjacent corn dry grind mill.  Kansas was one of six locations chosen to help bring cellulosic ethanol to the market.

Roberts delivered the following statement: “I am very pleased the Department of Energy has chosen to make this significant investment in both renewable fuels and ultimately, the Kansas economy. This technology is cutting edge and represents the next wave in renewable energy. This is an opportunity to grow our rural economy while reducing our nation’s dependence on foreign oil.”

President George Bush said yesterday that the key to keeping U.S. cattle and hog farmers from feeling the pinch from rising feed-corn prices is a breakthrough in cellulosic ethanol production technology.

Critics of the President’s energy policy say that Bush’s strategu of offsetting 35 billion gallons of gasoline use a year by 2017 with alternative fuels such as ethanol is unrealistic and could make feed-corn prices significantly more expensive.

Nonetheless, President Bush said he was confident in his goal, but it would require continued government funding. Cellulosic ethanol “is coming to fruition, and the role of the government is to stimulate thought and investment.” 

The Bush administration has asked Congress for up to $4 billion in loans guarantees for biofuel projects, which would include plans to build biorefineries and cellulosic ethanol plants, which produce motor fuel from biomass such as wood chips, switchgrass, and corn stover.

The President says his 35 billion gallon goal is supposed to help cut U.S. dependence on foreign crude supplies and address climate change through cleaner-fuel. The Administration is aiming that 20 billion gallons will come from cellulosic ethanol, with only around 15 billion gallons likely to be supplied through corn-based ethanol due to market constraints.

Presently, however, it’s technically unfeasible to produce cellulosic ethanol commercially because of the high cost of enzymes that break down the corn starch into sugar for fermentation, and some energy analysts wonder if a breakthrough is possible within the timeline set by Bush.

“I know it sounds like a pipe dream to some…(but) we’re on the verge of some breakthroughs that will enable a pile of woodchips to become the raw materials for fuels that will be able to run your car” he added.  If cellulosic ethanol doesn’t become commercially viable in time, the Buch administration is hoping to use coal-to-liquid production, another alternative fuel, to help meet the 35 billion gallon goal.

The National Cattlemen’s Beef Association has approved a policy urging the Bush administration to phase out government subsidies for ethanol production, to scrap the 54-cent-per-gallon tariff on imported ethanol, and to transition from corn-based to cellulosic ethanol.

At Saturday’s Cattle Industry Convention in Nashville, Agriculture Secretary Mike Johanns told U.S. cattle producers that the government would encourage alternative methods of making ethanol to protect them from rising corn prices.  “That is why we propose to accelerate our research into cost-effective ways of producing cellulosic ethanol from biomass,“ he said, noting that ethanol can be made using grasses, woody plants, wood waste, and sugar beets.

The proposed 2007 Farm Bill recommends spending $1.6 billion over the next 10 years on the development of cellulosic ethanol and proposes $2.1 billion in guaranteed loans for cellulosic projects as well as construction of production plants in rural areas.

Last week, energy experts told U.S. senators they should restructure renewable energy subsidies to focus less on corn-based ethanol and more on new, advanced technologies that could be used to produce biofuels from agricultural waste.

 
Speaking at a biofuels conference held by the Senate Energy and Natural Resources Committee, David Conover, director of the U.S. Climate Change Technology Program, said subsidies should be reserved for efficient biofuel technologies that need help entering the commercial market.

 
“We certainly don’t want to demonize corn ethanol, because it’s certainly better than gasoline,” Conover told the senators, referring to ethanol’s air quality and energy independence benefits. “But federal subsidies really ought to be targeted to…the valley of death.”

 
Cellulosic ethanol — a motor fuel that can be produced from biomass like wood chips, switchgrass and corn stover — is one of those ”valley of death” technologies, Conover said. Conover pointed out that cellulosic ethanol plants are expensive and can’t compete with corn ethanol. Thus, subsidies would help boost the technology, he said.

 
“You ought to consider directing the subsidies where they are needed the most,” Conover added, later noting that the corn ethanol industry is “very mature.”

 
Although the corn ethanol market is growing quickly, most experts say that there’s a limit to how much corn can be used for motor fuels before there’s a serious conflict between using corn for fuel and using it for food. Cellulosic ethanol, which uses inedible parts of crops, is seen as a the next step needed to further reduce the country’s dependence on foreign oil.

 
Conover argued that subsidies for corn ethanol should be pulled and instead put toward cutting edge technologies like cellulosic ethanol.

 
Reid Detchon, director of the Energy Future Coalition also suggested a need to rework ethanol subsidies.

 
“You have to assess what additional tax incentives are needed to help cellulosic ethanol in the near-term,” he told Dow Jones after speaking at the conference.

 
Subsidies for both fossil fuels and renewable fuels should be related to market prices, he said. “If oil is $70 (a barrel), probably neither industry needs support of any kind.”

 
Two critical ethanol subsidies expire in 2008 and 2010 and Detchon suggested that instead of simply renewing them, Congress should restructure them. Because market problems for corn ethanol could occur if oil prices drop, the new structure should include a sliding scale that ties subsidies to economic conditions, he said.

Federal EPA scientists want to tighten smog standards, allowing tens of millions of Americans to breathe easier, but clashing with President Bush’s plan to reduce projected gasoline consumption by 20% over 10 years by substituting alternative fuels, mainly smog-causing ethanol, in its place.
 
Despite Bush’s goal, the EPA scientists will recommend allowing less smog-causing ethanol. The smog is produced mainly when tailpipe and smokestack pollutants react with summer heat, the official said.  More than half the nation, or nearly 160 million people, breathe illegal levels of smog.
 
EPA scientists are due to recommend day a range of options for healthier air. Last year, EPA identified hundreds of the nation’s most populated counties that were polluting the air with too much smog, and ordered them to clean it up.
 
What the scientists will recommend has stirred up a fair amount of controversy within EPA and could complicate Bush’s push for more ethanol use, said a senior government official speaking on condition of anonymity (because the announcement had not yet been made).