Washington (Platts)--6May2009

The Environmental Protection Agency's plan to assess the "indirect
effects" of production of biofuels under a proposed rule drew bipartisan
condemnation from House Republicans and Democrats from farm states, who fear
the EPA's standard could end corn-based ethanol production.

At a hearing of the House Agriculture Committee's subcommittee on
Conservation, Credit, Energy and Research, representatives from the EPA and
the Department of Agriculture were peppered with tough questions on the
proposed plan, which includes controversial measurements associated with the
land use, and production and transportation of certain fuels, including
ethanol and biodiesel, known as "significant indirect" emissions.

"You are going to kill off the biofuels industry before it gets started,"
Representative Collin Peterson, a Minnesota Democrat who chairs the full
Agriculture Committee said to Margo Oge, the EPA's director at the Office of
Transportation and Air Quality. "I have had it," he said. "I don't trust
anyone anymore."

Peterson vowed not to vote for any climate-change legislation unless
corn-ethanol producers were protected. "We need an ironclad guarantee that
these agencies won't get involved," with pending legislation, he said.

Staffers for Peterson were not immediately available to respond to
questions on his prior position concerning climate change legislation. But one
staffer on the Agriculture Committee said that Peterson had not previously
taken a public position on climate change, but that was involved in the
negotiations with the White House.

In response to Peterson, Oge said that under the proposed rule, 15 billion
gallons of first generation corn-ethanol production was "grandfathered" in,
and would not be trimmed back under the Renewable Fuels Standard. "We are very
optimistic of the future of the second generation of biofuels," she said, a
telling referral to ethanol produced from cellulose and other farm waste,
rather than corn-based ethanol.

COMMENT PERIOD EXTENSION IS SOUGHT

Several lawmakers called for the extension of the EPA's 60-day comment
period on the proposed rule. "We should extend this period at least to 180
days so we can figure out what is going on here," said Representative Robert
Goodlatte, a Virginia Republican.

The proposed rule, which was unveiled Tuesday in a teleconference with
EPA Administrator Lisa Jackson, Energy Secretary Steven Chu and Agriculture
Secretary Tom Vilsack, will measure the carbon dioxide emissions of biofuels.

Included in its plan a controversial standard that includes "indirect
emissions" relating to land use and production--a standard that ethanol
producers fear will place them at a disadvantage, as critics of ethanol say
that corn-based ethanol actually creates more emissions than it removes from
the environment.

The California Air Resources Board last week approved a low carbon fuel
standard designed to reduce greenhouse gas emissions by 16 million mt by 2020,
which included the controversial "indirect land use" standard.

Oge said that the "indirect land use" standard would continue to be
studied and peer-reviewed, which brought more scorn from Goodlatte, who
accused the EPA of including the standard without a rigorous examination
first.

"Why would you rush to judgment without have a peer review of your fellow
scientists?" Goodlatte demanded.

Representative Jerry Moran, a Kansas Republican, said he planned to
introduce legislation that would prohibit EPA from using such an "indirect
effect" standard until the science is better proven. "This industry is
struggling to survive," Moran said. The indirect land use standard, "is one
more nail" in the coffin of the industry, he said.

Peterson's outburst at the hearing stunned some lawmakers. "That's the
most direct expression of frustration that's come out of his mouth I've seen
in 16 years," said Representative Tim Holden, a Pennsylvania Democrat.

--Daniel Goldstein, daniel_goldstein@platts.com