U.S. Ethanol Industry Needs ‘Simple Stability,’ POET CEO Says

U.S. lawmakers need to make up their minds about support for ethanol so the industry can grow and expand motor-fuel supplies, said Jeff Broin, the chief executive officer of the largest U.S. biofuels producer.

Congress should allow more of the fuel to be put into gasoline and to increase support for industry infrastructure, Bruin, who runs Poet LLC, said in testimony prepared for delivery today before the Senate Agriculture Committee. Efforts to scale back ethanol subsidies are making it difficult for potential investors to evaluate risk, he said.

“What the ethanol industry really needs is simple stability,” he said. “Government incentives and blending targets are far less effective when their future is in doubt.”

House Republicans last month passed legislation that would roll back an Environmental Protection Agency decision to raise the amount of ethanol allowed in motor fuels for newer vehicles to 15 percent from the current 10 percent. Other proposals have called for the immediate end of a 45-cent-a-gallon credit to blenders of the fuel, which cost about $6 billion last year, as a way to reduce the federal-budget deficit.

Growth Energy, an industry lobbying group, has proposed a “Fueling Freedom” plan that would scale back the credit in return for more investment in ethanol infrastructure, including more blending pumps at gas stations.

Biofuel Sources

Poet, based in Sioux Falls, South Dakota, and companies including Verenium Corp. (VRNM) and BP Plc are investing in developing commercially viable cellulosic fuel, which can be made from grasses and farm waste. Still, the bulk of the alternative- energy source continues to be corn.

Ethanol has been criticized by groups ranging from the American Meat Institute to the UN Food and Agriculture Organization for driving up the cost of corn, making livestock more expensive to feed and food less affordable for the world’s hungriest people. Industry advocates say biofuels will be necessary to meet the world’s energy needs.

The U.S. had 204 ethanol plants operating or under construction with total annual capacity of more than 13.7 billion gallons as of March 28, according to the Renewable Fuels Association, a Washington-based trade group.

Today’s hearing was called to examine the recent increase in gasoline prices. Before today, futures traded in New York jumped 24 percent this year as violence in the Middle East and northern Africa jeopardized crude-oil supplies.

Other witnesses include Richard Newell, the head of the U.S. Energy Administration, and Dan Berkovitz, general counsel for the Commodity Futures Trading Commission.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net.

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