Bill would add natural gas-based ethanol to federal biofuels mandate

To the federal government, ethanol only counts as a conventional biofuel if it is produced from switchgrass, corn starch or some other easily replenished materials.

But Texas Rep. Pete Olson wants to change that.

On Tuesday, the Houston-area Republican is introducing legislation that would allow ethanol and other transportation fuels produced from natural gas to compete with corn-based ethanol under the federal renewable fuels standard, an eight-year-old mandate that forces refiners to blend an increasing amount of alternatives into petroleum-based fuels. Technically, the measure would create a new “domestic alternative fuel” category under the RFS, under which the natural-gas based product would qualify.

Olson sponsored similar legislation last Congress, but it did not advance on Capitol Hill.

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Olson’s bill responds to commercial interest in producing ethanol from natural gas, amid questions about the ability to efficiently and cost effectively transform plant material into ethanol that can be blended into fuel.

A number of companies have honed techniques to convert natural gas into ethanol or drop-in fuels, including Dallas-based chemical company Celanese Corp., Warrenville, Ill.-based Coskata Inc., and Hillsborough, N.J.-based Primus Green.

Olson said his idea makes sense, since one of the major aims of the renewable fuel standard was to reduce the United States’ need for imported oil. The ethanol made from natural gas is chemically identical to corn-based ethanol, has the same low emissions when it is burned in automobiles and would be produced from domestically harvested supplies.

“The RFS’ singular focus on corn ethanol has translated into higher feed costs for livestock producers and higher food costs for working families,” Olson said.

Olson supports a full repeal of the federal renewable fuel standard, but said that in the meantime, the government should “provide greater participation and competition under the program.” Inclusion in the RFS would guarantee a market for alternative, natural-gas-based ethanols, spurring investment.

“Expanding the sources for ethanol will only benefit all Americans,” Olson said in a statement.

But critics say that giving natural gas-based ethanol an advantage short circuits the original intent of the renewable fuel standard: to support renewable, non-fossil fuel alternatives. Natural gas is, of course, a fossil fuel of finite supply.

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The Renewable Fuels Association has insisted that any bid to add fossil fuels to the standard is misguided. Fossil fuels, the trade group insists, have no place in a renewable mandate.

And some critics charge that making natural gas into ethanol could actually produce similar greenhouse gas emissions as fuels refined from crude oil.

Celanese says it can create drop-in fuel at a cost of about $1.50 per gallon, by putting hydrocarbons through a thermochemical process that results in ethanol.

Coskata, meanwhile has decided to focus on natural-gas based ethanol instead of its original plan to focus on cellulosic ethanol made from wood chips, plant materials and other sources. And Primus is just completing a demonstration plant in New Jersey.

For Celanese, Coskata and Primus, a big advantage is the current relatively low cost of natural gas.

Olson’s bill is cosponsored by Rep. Jim Costa, D-Calif., and the pair have lined up more than a dozen cosponsors, including Texas Republican Ted Poe, Ralph Hall, Blake Farenthold, Bill Flores and Joe Barton, as well as Texas Democrats Henry Cuellar, Gene Green and Filemon Vela.