Farm bill could set fivefold boost in biofuels

By Charles Abbott

WASHINGTON (Reuters) - The new U.S. farm law would require use of 36 billion gallons of biofuels by 2022, five times more than this year's output, under an amendment offered on Monday as a fallback in case an energy bill falters.

Senate leaders hope to pass the five-year, $286 billion farm bill by the end of this week. Senators also are expected to vote this week on an energy bill, which also would set a 36 billion-gallon (137 billion-liter) "renewable fuels standard."

New Mexico Republican Pete Domenici said the new RFS would "reinvigorate" the ethanol industry, encourage development of cellulose as a feedstock for ethanol and expand the volume of home-grown U.S. fuels.

Ethanol production has skyrocketed since enactment of the 2005 energy law, which mandated the use of 7.5 billion gallons (28.5 billion liters) a year of ethanol by 2012. Production is forecast at 6.5 billion gallons this year and more than 9 billion gallons (34 billion liters) in 2008.

The boom in fuel ethanol has been a bonanza for rural America. This year's corn (maize), wheat and soybeans crops are forecast to fetch record prices at the farm gate. Corn currently is the dominant feedstock for fuel ethanol.

Under the language proposed by Domenici, production of corn-based ethanol would be encouraged to grow to 15 billion gallons. A mandate to use "advanced biofuels," such as biodiesel and cellulose-derived ethanol made from switchgrass, wood chips and other farm waste, would begin at 3 billion gallons in 2016 and reach 21 billion gallons in 2022.

Colorado Democrat Ken Salazar and Republicans John Thune of South Dakota and Larry Craig of Idaho joined Domenici in calling for larger use of biofuels. Thune called the Domenici amendment "this marker in the farm bill" and a safeguard for enactment of the 36 billion-gallon target.

"It is clear the energy bill has slowed down," said Domenici, noting White House objections to a House-passed bill.