Oil companies won't be able to get as much cellulosic biofuel as they might need next year, according to the U.S. Energy Information Administration.
EIA, a unit of the Energy Department that compiles industry data, expects cellulosic biofuel production in 2011 to be 3.94 million gallons, according to a letter written by an EIA official. That's less than 2 percent of the 250-million-gallon mandate for 2011. The government already slashed the target of 2010 by more than 90 percent to 6.5 million gallons.
The shortfall for renewable fuels blended into gasoline and diesel comes as ethanol is trading at its highest price in more than two years. The disparity between the amount required by law and current capabilities reflects the lack of government backing for cellulosic biofuel projects, said Matt Hartwig, a spokesman Renewable Fuel Association.
Ethanol futures on the Chicago Board of Trade have surged 59 percent June 29, trading at $2.32 a gallon yesterday, the most since August 2008.
Legal Target
The target for using ethanol was set by Congress in 2007 and is due to be revised by the Environmental Protection Agency this month. EPA officials didn't reply to requests for comment. The agency is required to consider EIA's letter and other public comments before issuing its final 2011 cellulosic biofuel requirement.
An EIA spokesman confirmed that Newell sent the letter. He wouldn't comment further.
There are currently 57 cellulosic biofuel projects in various stages of development in the U.S.. No biofuel projects have received loan guarantees from the DOE.
EIA's estimate is based on four plants that convert wood, agricultural waste, and other non-food biomass sources into fuel. The facilities, owned by KL Energy Corp., Fiberight LLC, Dupont Danisco Cellulosic Ethanol LLC and Range Fuels, have a combined production capacity of almost 12 million gallons a year, according to a letter sent by EIA administrator Richard Newell to EPA administrator Lisa Jackson on Oct. 20.
Capacity Lagging
Under the federal Renewable Fuel Standard, gasoline and diesel producers are required to blend 36 billion gallons of biofuel into their products by 2022. The EPA set annual targets for biofuel usage when the law was enacted in 2007.
The agency also must publish by Nov. 30 each year a revised requirement. It can lower the mandate for cellulosic fuel if it expects industry capacity to be insufficient to meet the target.
In November 2009, EPA reduced its initial 2010 cellulosic biofuel requirement, from 100 million gallons to 6.5 million ethanol-equivalent gallons. That is, enough biofuel to produce the same amount of energy as 6.5 million gallons of gasoline. The 2011 target currently is 250 million gallons.
EPA is aware that current capacity cannot meet the earlier target. In July, the agency estimated industry potential for 2011 at 5 million gallons to 17.1 million gallons.
Limits of Analysis
That facility, which is supported by an $80 million loan guarantee from the Department of Agriculture and a $76 million grant from the Energy Department, will produce 1 million gallons of fuel derived from woody biomass and grasses in 2011, the EIA estimates.
Range began building the facility in 2007 and at the time said the site was permitted to produce up to 100 million gallons per year, assuming completion of several planned expansion phases.
EIA also excluded a 20 million-gallon-a-year facility owned by closely-held Cello Energy LLC, which has received funding from Khosla Ventures.
Bankruptcy Court
Cello filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Alabama on Oct. 19, according to court documents compiled by Bloomberg Law. The company said it had assets of less than $50,000, and estimated liabilities between $10 million and $50 million.
