US ethanol industry sees havoc in land-use formula

WASHINGTON, May 21 (Reuters) - The U.S. biofuels industry would be hamstrung if government regulators choose to use unfair and untested formulas that hold it responsible for greenhouse gases from crops overseas, ethanol groups said on Thursday.

U.S. and California environmental regulators included indirect land use change overseas in formulas that measure greenhouse gases from biofuels in comparison to emissions from petroleum. The formulas would determine what qualifies as a low-carbon fuel in California or an advanced biofuel in the U.S. market.

"It should be obvious to everyone but a few misguided advocates that ILUC (indirect land use change) is not ready for prime time," Tom Buis of Growth Energy, a pro-ethanol trade group, told a House Agriculture Committee hearing.

The industry's objections dovetailed with legislation to change the formula proposed by the Environmental Protection Agency for advanced biofuels. A 2007 law requires use of 21 billion gallons a year of advanced biofuels in 2022. They are expected to include fuel from cellulose.

Growth Energy and two other ethanol trade groups said it was a mistake to try to measure international indirect land use change -- the ripple effect on cropland overseas -- from the U.S. ethanol boom.

There are widely varying estimates of the impact on plantings and conversion from pasture or forest overseas as well as the importance of other factors, like local population growth or tax breaks.

"The (U.S. Environmental Protection Agency) has failed to recognize all of the practices influencing international land use changes," said Bob Dinneen of the Renewable Fuels Association.

Buis said indirect land use change formulas "will cap domestic ethanol production."

Brian Jennings of the American Coalition for Ethanol said the ILUC factor would prevent next-generation feedstocks, like cellulose, from reaching the motor fuel market because they would not be deemed advanced biofuels.