US may reduce cellulosic target in biofuel mandate

Tue Jun 21, 2011 6:04pm BST

* Industry expects another cut in cellulosic target

* EPA slashed cellulosic target in 2011 fuels mandate

By Ayesha Rascoe and Timothy Gardner

WASHINGTON, June 21 (Reuters) - The U.S. Environmental Protection Agency is set to unveil next year's mandate for renewable fuels as soon as Tuesday, likely cutting back the target for making the fuel from cellulosic sources for a second year, industry and agency sources said.

While the 2012 target to produce 13.2 billion gallons (60 billion litres) of corn-based ethanol are unlikely to be much altered since the industry is already exceeding the volume, the second-generation biofuel producers have failed to thrive due expensive enzymes needed to make the advanced fuel.

As a result, biofuel industry officials expect the agency's proposal to again cut the mandate for advanced biofuels, such as cellulosic ethanol, versus the government's original target.

"Production of these fuels is not yet sufficient to meet the statutorily prescribed volumes in the (Renewable Fuel Standard)," said Matt Hartwig, of the Renewable Fuels Association.

The agency's proposal for the 2012 Renewable Fuel Standard is "very close" to being ready, an agency source told Reuters.

The ethanol industry hopes to make commercial quantities of cellulosic fuel from non-food feedstocks including grasses, wood chips and agricultural waste.

But expensive enzymes needed for that process and other hurdles have made that a challenge, leaving the industry dependent on the corn crop, which critics say is driving up fuel prices.

Cellulosic fuel was supposed to make up 500 million gallons of the renewable fuel mandate next year based on the government's original target.

The EPA already slashed the target for cellulosic fuel use in 2011, cutting it to 6.6 million gallons, far less than the 250 million gallons originally required.

The cellulosic target was a key part of the decision making and if that target changed, it could also change the target slightly for traditional biofuels made from grain, the agency source said.

The 2012 target for traditional biofuels, which is mostly made from corn in the United States, is supposed to be 13.2 billion gallons. The RFA expected that this target would remain largely unchanged.

U.S. lawmakers in the Senates overwhelmingly voted for an amendment to slash the support payments and the tariff wall that protects the sector, just as criticism mounts globally that using food to produce to fuel is driving up prices. (Reporting by Ayesha Rascoe; Editing by Marguerita Choy)