More meddling in the market

I post this article, despite its breathless credulity about the imminence of a world beyond petroleum, because it reveals how Washington works. Bush and the corn lobby will ask Congress for a biofuels mandate that drives up the cost of gasoline. Congress and the Big Three will ask Bush for tax credits to sell more cars that use the more costly fuel.
Gas substitutes boost the flex-fuel car

Soon, alternative fuels might be made from corn, soybeans, and plant fiber – and new cars would be able to run on them.

By Mark Clayton, Christian Science Monitor, January 26, 2007

Prospects are brightening for a big change at your local service station.

Instead of just regular, plus, and premium, gas stations in a few years may well be offering fuel made from corn, soybeans, and plant fiber. And new cars would be engineered to run on them.

Following President Bush’s call Tuesday for a 20 percent cut in gasoline consumption, Democrats and Republicans in Congress have unveiled legislation that would require automakers to build “flex-fuel” cars that could burn the various alternative fuels.

The new legislation, which still must work its way through Congress, has some powerful backers. Energy-security advocates like its emphasis on reducing reliance on foreign oil. Farm-state Democrats and Republicans like its boost of corn-based ethanol. Even the Big Three automakers like the move to flex-fuel technology because it might give them an advantage over foreign automakers building hybrid cars.

“This plan now waiting in Congress dovetails nicely with the president’s statements, helping achieve his goals and doing even more,” says Anne Korin, chairwoman of Set America Free, an energy-security coalition based in Washington, D.C. “The amazing thing is that I believe there’s actually a pretty good chance it will pass both houses and get to the president’s desk.”

The push for alternative fuels is coming from several forces. Last November, the chief executives of the Big Three automakers met with Mr. Bush in a White House chat to talk about the challenges facing their industry. One idea that surfaced: by 2012, half of all their new vehicles could be flex-fuel models.

These cars and trucks could burn a range of alternatives to gasoline — from ethanol made from corn to methanol made from coal. That kind of push could help meet Bush’s goal of reducing US gasoline consumption by 20 percent over the next 10 years.

After the president announced that goal at Tuesday’s State of the Union address, Ford announced its support for the effort in a statement, pointing out it had already produced 2 million flex-fuel vehicles.

The Alliance of Automobile Manufacturers, which represents foreign as well as domestic automakers, is taking a more nuanced stand.

“Energy security is important to the alliance, and we’ve already put more than 9 million alternative-fuel automobiles on the road, including hybrid, diesel, and ethanol-capable vehicles,” says spokesman Wade Newton.

The bipartisan legislation in Congress has some of the same aims as the president. It aims to slash US dependence on oil by 2.5 million barrels a day by 2017 — a 10 percent reduction on expected consumption. That cut is roughly equivalent to the White House goal of 20 percent in gasoline consumption (which represents about half of US oil use).

But the bill provides an explicit road map for achieving a reduction of 7 million barrels a day by 2026. It, for example:

– Provides big tax incentives for motorists to purchase plug-in hybrid vehicles. Because these hybrids rely far more on electric power (and less on gasoline) than today’s hybrids, they would qualify for bigger tax breaks than today’s models do.

– Ramps up oil displacement with biofuels by, among other things, offering tax breaks to gas stations that offer ethanol and other fuels.

– Establishes a detailed oil-conservation program, which would include “oil savings” audits of federal agencies.

– Boosts research on ethanol made from plant fiber and other noncorn materials by $1 billion over five years.

– Offers tax credits, loan guarantees, and grants to automakers and suppliers that retool factories to build more efficient vehicles.

Congress, of course, is awash in energy bills that go nowhere. In fact, earlier versions of the current legislation enjoyed good bipartisan support in the last Congress. But they stumbled because they became ensnared in issues such as opening the Arctic National Wildlife Refuge to drilling — and drilling off the Florida coast. With Democrats now in charge of Congress, both issues seem off the table, giving the bill room to get going, observers say.

The biggest question marks are in the House of Representatives where the bill’s success may depend on garnering support from House Speaker Nancy Pelosi — as well as the level of opposition from Rep. John Dingell (D) of Michigan, whose committee is known for blocking bills Detroit automakers don’t like.

But especially if some modest White House support for the bill can be generated, the bill will make it through that committee, supporters say. There are already 60 cosponsors from both parties with the prospects for another 100 or so, observers say.

“I’ve talked with the president about this bill before, and I know he supports its goals,” says Rep. Jack Kingston (R) of Georgia, the bill’s cosponsor along with Rep. Eliot Engel (D) of New York. “If the president is looking for a legacy, shifting the nation away from oil to alternative fuels, it’s sitting there waiting for him.”

In the Senate, prospects appear even stronger. The bill got critical support in the Senate Energy and Natural Resources committee where committee chairman Sen. Jeff Bingaman (D) of New Mexico is a cosponsor. Other key Democratic cosponsors include Sens. Richard Durbin, Charles Schumer, Hillary Rodham Clinton, and Barack Obama.

One key stumbling block from the old version of the House bill has been excised: a provision to get rid of the current tariff that makes it more expensive to import ethanol. Even though energy hawks wanted it badly, the provision was a deal breaker because ethanol manufacturers — especially those in the critical state of Iowa where presidential aspirants must campaign first — don’t want it.

That move has generated some criticism. “This legislation recognizes the dire geopolitical threat to us from imported oil,” says Ariel Cohen, an energy expert at the Heritage Foundation, a conservative Washington think tank. “What I find amiss is that it does not address the need to bring into the US the most competitive ethanol, sugar-cane ethanol [from Brazil and Caribbean nations], which is now penalized with punitive tariffs.”