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Corn ethanol plant in Iowa.

Richard Sennott, Star Tribune

ABOUT THE AUTHOR

Tammy Klein is assistant vice president of Houston-based Hart Energy, a data and information provider to the global energy industry. She can be reached at www.hartenergy.com/Consulting.

Business forum: Election is finally over; now let's lock in an energy policy

  • Article by: TAMMY KLEIN
  • November 18, 2012 - 9:43 AM

Want to be prepared for the future?

OK, repeat after me: "Zhè shì wode míngpiàn" (Pronounced: "Zhe she woe-a-da ming-piehn.'')

Not bad, but try it again, this time with feeling. This is an important phrase to know, because it melds two fundamental issues facing this country -- jobs and foreign debt. You just said "This is my business card" in Mandarin. Good for you.

What I'm getting at is more basic than how much publicly held U.S. debt lies within China's control. (It's $1.2 trillion or 8 percent of the total, for those keeping score.)

A fundamental issue exists that President Obama in his second term must find a way to address: energy. Economies run on it and the ''all-out, all-of-the-above" approach that was treated like a badminton birdie during this political season is taken seriously in Beijing.

The growth in biofuels has reduced the level of fossil fuels consumed in the United States, and that has reduced this country's dependence on foreign sources of energy. In fact, sometime between 2020 and 2025, North America is on track to achieve oil independence -- no net oil imports -- due to the surge in domestic oil and gas production.

Amazing, isn't it? Suddenly energy independence is a near-term reality instead of hopeful rhetoric. But that leaves us with a question: With all these new domestic crude resources, what happens to biofuels?

Congress set, and the EPA implemented, lofty biofuels mandates that fuel producers and the marketplace are not able to meet. What should happen is a revision of the government's Renewable Fuel Standard program that sets distinct targets to be met by 2022. The new targets could be 15 billion gallons per year for corn ethanol (we're almost there), between 1 billion and 2 billion gallons per year for biodiesel (again, almost there) and 2 billion gallons per year for advanced biofuels, which would be defined as cellulosic, renewable diesel or sugarcane ethanol.

Projections from Hart Energy indicate that our next-generation capacity won't be up to the task of that kind of output. But technological progress has the potential to spur investment. At the very least, setting reality-based targets is a start.

In 2025, U.S. ethanol consumption is projected to rise to a total of about 15 billion gallons, or about 13 percent by volume of all gasoline used. Nearly all of that comes from corn. Sounds like a lot, but the goal, as spelled out in the Renewable Fuel Standard program, is 36 billion gallons by 2022. Three years after the deadline, this country still will be less than halfway there.

Why? There's nowhere for the excess corn ethanol to be blended domestically. There are only so many cars in this country, they burn only so much gasoline and that gasoline is limited, for the most part, to an ethanol content of 10 percent by volume (commonly known as E10).

Meeting the federal mandate would require a much higher ethanol blend. The average blend would need to be E25 or even E30 to satisfy federal requirements. Not likely to happen.

Compounding the issue is the slow progress in commercializing advanced ethanol that can be produced from non-food sources. Not that there would be any place to blend it in the gasoline pool if there were, an issue that continues to bedevil producers in Minnesota, Iowa and elsewhere.

We need a direction and a plan -- and neither political party has put together anything that's credible. The necessity for regulatory certainty for the industries involved -- and for us as consumers -- simply cannot be emphasized enough.

One suggestion: Let's encourage development of advanced biofuels by providing greenhouse gas credits.

The presidential campaigns had a knack for reducing important issues to mindless mnemonic devices. Energy became "drill, baby, drill"; education reform, "skill, baby, skill"; opening new markets for U.S. goods, "shill, baby, shill."

Those on stage at the presidential debates uttered more than 53,000 words -- only three of them were "biofuels."

Meantime, the Chinese government has been pursuing its own "all-out, all-of-the-above" strategy and is focused on developing new crude sources, renewable energies and advanced biofuels.

Our failure to choose a direction in the next four years would mean surrendering to the political gridlock that binds us now. It will only lead to a collective sigh of "W mílù le." (Pronounced: "Wuh me-loo luh'').

That's "I'm lost" in Mandarin.

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