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Oil Price Information Service - Sources See Continued Push for ‘Energy Lite' With Expanded RFS

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Before Congress adjourns for the year, it will likely pass some version of an energy bill that will contain an increased renewable fuels standard (RFS), a handful of Capitol Hill observers and legislative aides predict.

"I am hearing a very serious push from [House Speaker Nancy] Pelosi,
D-Calif., to get a bill done yet this year," said one biofuels source.
Pelosi isconcerned that fellow congressional members will return to their districts empty handed, the source noted, with partisan gridlock holding up the energy and farm bills, as well as the majority of appropriation legislation.

Both the House and Senate have passed their respective versions of the energy bill, but neither chamber can proceed to an energy conference to reconcile the two chambers' versions of the bill because of a hold that has been placed on it by Sen. Kay Bailey Hutchison, R-Texas.

Therefore, there are "efforts underway to jettison controversial items [of the energy bill] and assemble a bill with an expanded RFS of 36 billion gal/yr by 2022 and perhaps higher fuel economy standards," the source said. In other words, passage of an "energy lite" bill.

While there has been talk for some time about Congressional efforts to pass a smaller energy bill that tackles less contentious issues, it was unclear about whether that would include an expanded RFS, especially since the provision was one of the main reasons why Hutchison objected to the Senate energy legislation.

"Members of Congress and staff indicate to us that the RFS is the glue that holds the thing together," the biofuels source said of the energy negotiations. "Just because Texas senators don't like it, doesn't mean the vast majority of members aren't with us," the source added.

"There's absolutely no discussion of dropping the RFS," said one House Democratic aide.

The House is working on an "energy lite" proposal and they "will try to have something for the Senate to consider soon," the biofuels source said.

Within that context, U.S. Democratic Presidential Contender and Sen.
Barack Obama, D-Ill., sent a two-page letter today to Pelosi and Senate Majority Leader Harry Reid, D-Nev., saying he "strongly support[s]" their joint efforts to send an energy bill to President George W. Bush before the end of the year.

Of particular importance to Obama are both the higher fuel economy standards and an increased RFS, he said. The 2005 energy bill included the first RFS, requiring 7.5 billion gal/yr of biofuels by 2012, but ethanol production is expected to reach that level by next year. "[A]s ethanol usage passes the congressionally-mandated, annual RFS targets, the major oil companies lose any incentive to use more renewable fuels in their supplies or to make higher ethanol blends like E85 available at their service stations," he said.

The RFS expansion in the current Senate energy bill "anticipated this problem....Until those updated levels are enacted, we risk stalling further development of the existing biofuels industry and jeopardizing timely investment in next- generation cellulosic fuels from non-food sources," he added.

The Senate RFS language also includes an advanced biofuels carve-out,
requiring 21 billion gal/yr out of the 36 billion gal/yr to be comprised of second generation biofuels such as cellulosic ethanol. It appears ethanol and environmental groups are working on further details of the carve-out, while the House is focusing on a tighter greenhouse gas reduction requirement for advanced biofuels, sources said.

"I share your assessment that time is of the essence in moving a meaningful energy bill that includes a CAFE [corporate average fuel economy] increase and an RFS upgrade through Congress to the president's desk," Obama said. "And now that the Senate Republicans have united to block passage of the farm bill, we should not let a critical investment in our renewable energy future fall victim in the crossfire. I stand ready to do whatever I can to support you in this effort," the senator concluded.

In October, the Illinois senator joined forces with Senate Agriculture Chairman Tom Harkin, D-Iowa, and introduced a standalone bill to increase the RFS to 18 billion gal/yr by 2016, with a 3 billion gal/yr advanced carve-out.

However, the legislation, S. 2202, has languished in the Senate Environment and Public Works Committee since it was referred there last month.

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