Obama to Stay Course on Biofuel Law, Vilsack Says

President Barack Obama’s administration won’t abandon the nation’s ethanol program and will encourage Congress to maintain it, Agriculture Secretary Tom Vilsack said.

The Renewable Fuels Standard, passed in 2007, requires the U.S. to use 13.8 billion gallons of renewable fuels such as ethanol this year and 15 billion gallons by 2015. The Agriculture Department estimated this month that 42 percent of this year’s corn crop will go toward making the fuel.

Last summer, lawmakers from both parties called for a temporary suspension or reduction of the ethanol program as a drought drove up corn prices. The Environmental Protection Agency declined the requests.

“Our position is that we are strong supporters of he RFS,” Vilsack said in an interview with reporters at the National Ethanol Conference in Las Vegas. “It’s working. It’s doing what it’s supposed to do. We would hope Congress will continue to allow it to work.”

The industry allowed a 45-cent tax credit provided to refiners for each gallon of the fuel blended into gasoline to expire in December 2011, saying at the time the ethanol mandate was sufficient to spur demand.

Denatured ethanol for March delivery fell 1.9 cents, or 0.8 percent, to $2.41 a gallon at 1:57 p.m. New York time on the Chicago Board of Trade. Prices have jumped 10 percent this year and 9 percent in the past year.

Corn Costs

Prices haven’t been robust enough to overcome higher corn costs that topped $8.40 a bushel in intraday trading in August. Corn for March delivery slipped 9 cents, or 1.3 percent, to $7.135 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

The corn crush spread, or the profit that can be made from turning a bushel of corn into ethanol, was at minus 19 cents a gallon versus minus 20 cents yesterday, according to data compiled by Bloomberg.

Production fell to 770,000 barrels a day in the week ended Jan. 25, or 11.8 billion gallons on an annualized basis, the EIA report showed. That was the lowest level since weekly records began in June 2010. The total rose to 774,000 last week. Stockpiles are 20.1 million barrels, down from the record 22.7 million in March.

Ethanol-blended gasoline made up 89 percent of the total U.S. gasoline pool in the week ended Feb. 1, up from 87 percent a year earlier, according to the report.

Build Coalitions

Vilsack, a former governor of Iowa, said ethanol industry advocates must align themselves with other coalitions, such as environmental and national security interests, to increase support for the Renewable Fuels Standard and make it easier to beat back attempts to repeal or alter the program.

Vilsack said he plans to meet with European Union officials to help eliminate trade barriers and boost exports of the biofuel to the continent.

Participants at the industry’s conference in Las Vegas wore red-white-and-blue buttons reading “Don’t Mess with the RFS.” Bob Dinneen, president of the Washington-based Renewable Fuels Association, made the phrase the centerpiece of his keynote address yesterday.

At least 19 plants have been idled since June as drought in the Midwest and a glut of the fuel eroded margins, according to the RFA.

Archer-Daniels-Midland Co., in Decatur, Illinois, is the biggest U.S. ethanol producer, followed by Poet LLC, in Sioux Falls, South Dakota.