CRS Compares Biofuel Provisions in House and Senate Energy Bills

This report provides a side-by-side comparison of biofuels-related provisions in the House- and Senate-passed energy bills, H.R. 3221 and H.R. 6, respectively. H.R. 3221 (the New Direction for Energy Independence, National Security, and Consumer Protection Act and the Renewable Energy and Energy Conservation Tax Act of 2007) was approved by the House on August 4, 2007. The Senate approved its version of H.R. 6 (the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007) on June 21, 2007. Both bills cover a wide range of energy topics with extensive attention to biofuels, including ethanol and biodiesel.

Key biofuels-related provisions of the two bills include:

• a major expansion of the renewable fuel standard (RFS) established in the Energy Policy Act of 2005 (P.L. 109-58) [Senate bill];

• expansion and/or modification of tax credits for alternative fuel refueling infrastructure and for ethanol, and renewable diesel fuels [House bill];

• grants and loan guarantees for biofuels research, development, deployment, and production [both bills];

• studies of the potential for ethanol pipeline transportation, expanded biofuel use, market and environmental impacts of increased biofuel use, and the effects of biodiesel on engines [both bills]; and

• reauthorization of biofuels R&D at the U.S. Departments of Energy and Agriculture [both bills].

The Energy Policy Act of 2005 (P.L. 109-58) established a renewable fuel standard (RFS). The RFS requires the increasing use of renewable fuel in gasoline, starting at 4.0 billion gallons in 2006, increasing to 7.5 billion gallons in 2012. Although not an explicit ethanol mandate, it is expected that the majority of this requirement will be met using corn-based ethanol.² About 4.0 billion gallons of corn ethanol were consumed in 2005, so the RFS represents roughly a doubling of U.S. ethanol consumption over seven years. However, the U.S. ethanol industry is expanding rapidly, outpacing the required growth in the RFS. As of August 1, 2007, existing U.S. production capacity was roughly 6.5 billion gallons per year, with another 6.4 billion gallons of capacity under construction or in the planning stages. Because this capacity will likely outpace the current RFS, some proponents of cornbased ethanol support an increase in the mandated levels of the RFS.

Because of the rapid expansion of U.S. corn ethanol capacity, there are concerns that the United States will soon reach the limit of ethanol that can be produced from corn. Critics of corn-based ethanol argue that the industry does not need continued government support, and that current corn demand for ethanol is putting a strain on corn and other grain markets, leading to increases in other commodity prices, such as livestock feed, which then leads to higher dairy and meat prices.³ Critics also argue that the environmental costs of corn-based ethanol may outweigh the benefits.

Because of concerns over corn-based ethanol, as well as interest in diversifying energy supply, there is growing interest in developing biofuels that rely on other sources of biomass, including agricultural wastes, municipal solid waste, and dedicated energy crops such as perennial grasses, fast-growing trees, and algae. This interest has led to proposals to support and/or mandate biofuels produced from feedstocks other than corn starch through explicit requirements, R&D funding, and/or tax incentives.⁴ Non-corn biofuels could include fuels produced from cellulosic material (such as perennial grasses), ethanol produced from sugarcane or beets, and biodiesel or renewable diesel produced from vegetable or animal oils.⁵

On July 27, 2007, the House passed H.R. 2419, the 2007 "Farm Bill" (the Farm, Nutrition, and Bioenergy Act of 2007). Like the 2002 Farm Bill, Title IX of the 2007 Farm Bill is dedicated to farm-related energy issues, including biofuels. Title V of H.R. 3221 contains provisions similar or identical to provisions passed in Title IX of H.R. 2419. For more information on these Farm Bill provisions, see CRS Report RL34130, Renewable Energy Policy in the 2007 Farm Bill.

Table 1 contains a section-by-section comparison of the biofuels provisions in H.R. 3221 and H.R. 6 with current law. The table is organized in the same order as the House bill, with non-comparable Senate bill sections shown at the end. Key provisions of the bills include:

• a major expansion of the RFS established in the Energy Policy Act of 2005 [Senate bill];

• expansion and/or modification of tax credits for alternative fuel refueling infrastructure and for ethanol, and renewable diesel fuels [House bill];

• grants and loan guarantees for biofuels research, development, deployment, and production [both bills];

• studies of the potential for ethanol pipeline transportation, expanded biofuel use, market and environmental impacts of increased biofuel use, and the effects of biodiesel on engines [both bills]; and

• reauthorization of biofuels R&D at the U.S. Departments of Energy and Agriculture [both bills].

² For more information on ethanol, see CRS Report RL33290, Fuel Ethanol: Background and Public Policy Issues, by Brent D. Yacobucci.

³ For more information on the issues surrounding rapid ethanol expansion, see CRS Report RL33928, Ethanol and Biofuels: Agriculture, Infrastructure, and Market Constraints Related to Expanded Production, by Brent D. Yacobucci and Randy Schnepf.

⁴ This would include using other parts of the corn plant, including the husks and the stalks, which are high in cellulose.

⁵ For more information on biodiesel, see CRS Report RL32712, Agriculture-Based Renewable Energy Production, by Randy Schnepf.

⁶ The House approved its version of H.R. 6 on January 18, 2007. However, this bill is a less comprehensive bill than H.R. 3221 or the Senate version of H.R. 6. Presumably, H.R. 3221 has superseded the House version of H.R. 6.