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 U.S. Senate will consider a bill that would require the production of 15 billion gallons of renewable fuel from feedgrain-based ethanol by 2015.

An estimated 5.4 billion bushels of corn, whcih is roughly equal to 43% of the entire U.S. corn crop, would be needed to produce the 15 billion gallons proposed in the bill.
 

NCBA is providing information to Congress about the negative consequences S. 987 could have on beef producers; the impact of a 15 billion gallon renewable fuel standard for feedgrain-based ethanol could dramatically increase costs of gain and pressure feeder cattle and calf prices.
 

Policy approved by NCBA members earlier this year opposes additional mandates for grain-based ethanol.  Beef producers support a sunset on current ethanol subsidies and greater emphasis on renewable fuels derived from sources other than feedgrains.

Nebraska Senator Ben Nelson has introduced what he calls “groundbreaking legislation that offers tax breaks and guaranteed loans for small business for the development of bio-gas derived from animal waste.”
 

Biogas, a natural gas substitute that is created by the anaerobic digestion (AD) of animal wastes, is composed of at least 60%  methane, the principal ingredient in natural gas.  Biogas can be used as is on the farm, co-located with an ethanol plant, and cleaned up to be used as a renewable substitute for natural gas, propane, or other fossil fuels.  Nelson acknowledges that the technology to break down animal wastes to create bio-gas already exists and that it needs encouragement from the federal government to become a commercially-viable alternative to natural gas.
 

The bill, the Biogas Production Incentives Act of 2007, would encourage greater production of biogas for energy purposes by doing a number of things and would provide bio-gas producers with a tax credit of $4.27 for every mmBtu of biogas produced.
 

Biogas production also offers environmental benefits such as a reduction in the greenhouse gas emissions of both carbon dioxide and methane, as well as improved water quality through better manure management.
 

Sen. Nelson says the bill “would provide loans, loan guarantees and/or grants for the multi-farm collection and transportation of qualified energy feedstock from smaller livestock operations to a qualified facility, or for the purchase or construction of equipment or facilities for collection and transportation,” as well as creating a counter-cyclical safety net for biogas producers by providing payment from Commodity Credit Corporation funds to qualified biogas producers only when the annual average daily prices of natural gas falls below a certain level.
 

“We’ve made great strides in developing an ethanol industry in Nebraska and we should do more to diversify and expand our production of bio-fuels and renewable energy. My legislation will put into place tax incentives and financial support for large scale and small scale producers to get involved in biogas production and help America win the battle for energy independence.”

Last Thursday, Missouri’s Senate, seeking to boost alternative fuels production and consumption, endorsed a biofuel mandate and new tax breaks for motorists who pump ethanol or biodiesel fuels into their gas tanks.

The bill endorsed last week would apply a 5% biodiesel mandate to diesel fuel sold in Missouri beginning in April, 2009 - unless the price of ethanol exceeds the price of traditional diesel.  Sen. Bill Stouffer is sponsoring the legislation, which received first-round Senate approval.

Also receiving preliminary approval was a bill by Sen. Luann Ridgeway granting a variety of tax breaks, including income tax credits up to $20,000 or 20% of the cost - whichever is less - for gas stations that install tanks and pumps for alternative fuels.  In addition, beginning in 2008, Missouri residents who buy a hybrid vehicle could claim an income tax credit of up to $1,500 or 10% of the purchase price - whichever is less - and in 2008 only, Missouri would waive the sales tax for purchases of E-85-equipped vehicles. 

Already in place in Missouri is a law mandating that most Missouri-sold gasoline contain a 10% ethanol blend beginning next January - as long as its price is cheaper than regular gasoline.

The bill, according to the Associated Press, is generally supported by Missouri’s agriculture community, which is supplying more corn and soybeans to new ethanol and biodiesel production plants proliferating throughout the state.
 

U.S. Senator John Thune (R-S) has urged federal officials to give quick consideration to a proposal for using a 20% blend of ethanol in vehicles.

 
About half the gasoline sold in the nation is now a blend of 10% ethanol and 90% gasoline (or E10), but Thune urged the EPA to prepare for quick certification of a blend of 20% ethanol and 80% gasoline.

 
Minnesota will be requesting a waiver to allow the use of 20% ethanol in fuel, Thune said. When the EPA considers the Minnesota request, it should look at approving a broader standard that would allow the fuel in other states if those states and the fuel industry decide to use a 20% blend, called E-20, he said.

 
“We’ve got to continue to grow the demand for and usage of and develop the ethanol market for all the reasons everybody agrees are important, energy independence, clean air and obviously a good economy in the Midwest,” Thune said.  Thune said the EPA will have 180 days to respond to the Minnesota request, but he hopes the agency will conduct its review quickly.

 
Roughly half the corn grown in the nation is expected to be used to produce ethanol this year.  Lisa Richardson, executive director of the South Dakota Corn Growers Association, said the ethanol industry needs the proposed change to increase demand for ethanol.

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.

Increased ethanol production and President Bush’s push for a greater emphasis on renewable energy sources seems to be the cause of some controversy in the poultry industry.  Speaking at the National Turkey Federation’s annual convention in Tucson yesterday, Samantha Slater, director of congressional and regulatory affairs with the RFA, discussed the pros of ethanol before an audience confronted with ever-rising corn prices.

Though the poultry industry faces corn prices of about $4 per bushel, Slater said the grain-based ethanol industry is paying far less for product. “about $2.20 to $3 a bushel, though the spot price is much higher.”

More than 100 grain-based ethanol plants are “on the line” today, Slater said, with 77 more under construction to meet growing U.S. demand for the fuel source.  In all, some 4.9 billion gallons of ethanol were produced in the United States last year against demand of about 6 billion gallons, Slater said. The remainder was imported from Brazil.

Economist Tom Elam, president of FarmEcon.com, said it will be difficult to seamlessly integrate ethanol into the U.S. economy. “An 8-million to 10-million acre increase in corn will drop prices, but cause soybean meal prices to rise” owing to corresponding declines in soy acreage, and at a time when McDonalds Corp. is looking to substitute soybean oil for Canola in their cooking oils.

Some argued that grain-based ethanol demand and resulting corn prices will add to the price of U.S. poultry exports, making them less competitive than exports from Brazil, which relies on sugar cane to manufacture ethanol.  Elam said that as long as oil prices to remain high, so too will the price of corn, owing to greater demand for renewable fuels. “As long as crude oil prices are north of $50 [per barrel],” he said, “we’ll see corn above $3 [per bushel].

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).