Big Oil opts out of biofuel battle

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The oil industry that once fought fiercely against biofuels barely has lifted a finger to oppose the Senate energy bill’s mandate for huge increases in ethanol production, lobbyists and congressional aides say.

“The oil companies are kind of sitting this one out,” said Michael McKenna, an energy industry lobbyist.

Mr. McKenna and other big-oil lobbyists say the industry is convinced the technology will not exist to churn out 36 billion gallons of ethanol a year by the 2022 target date in the legislation. The government eventually will have to relax the standard, they say.

Oil executives also are resigned to Democratic leaders’ desire to push the bill forward to satisfy their environmental base and voters angry over $3-per-gallon gasoline, the lobbyists said.

“They have to pick and choose their battles,” said Bill Wicker, a Democratic spokesman for the Senate Energy and Natural Resources Committee.

The Democrat-led Congress is feeling more pressure from soft-drink manufacturers and food processors who use high fructose corn syrup in their products and have seen prices soar because of the government-engineered demand for ethanol in the last energy bill, lobbyists say.

The insufficient supply of ethanol also contributed to recent spikes in gasoline prices, industry analysts say.

Mr. Wicker noted the oil industry’s low key approach this year compared to the “battle royale” over the Energy Policy Act of 2005 that set biofuel levels for the first time, requiring 8 billion gallons of ethanol use a year.

The five-fold increase called for in the current bill relies upon supplementing traditional corn-based ethanol with newly developed supplies of cellulosic ethanol, which would be distilled from prairie grasses, shrubs and wood chips.

The bill’s supporters foresee an annual production of 21 billion gallons of cellulosic ethanol, but “today there is none,” said Jim Ford, vice president of government affairs for the American Petroleum Institute, which represents the U.S. oil and natural gas industry.

He said they are quietly promoting “face-saving” amendments that will allow the president to revise biofuel standards when the industry can’t meet the quota in 2022.

The oil companies are instead sending their lobbyists to stave off higher taxes and lower subsidies in the energy plan, as well as moves by House Democrats to stop new oil exploration permitted under the 2005 bill, Mr. Ford said.

A lobbyist working for the oil-refining industry said they set their sights on killing some amendments to the Senate bill, including ones by Sen. John Thune, South Dakota Republican, that would extend the tariff on ethanol imports from South America and approve higher levels of ethanol for use in flex-fuel vehicles.

The overall hope is that without a fight the energy bill will “die of its own weight,” the lobbyist said.

The bill, the Clean Energy Act of 2007, also would raise the corporate average fuel economy standards for cars and light trucks to 35 miles per gallon by 2020, set higher energy efficiency standards for home appliances, and make gasoline price gouging a federal crime during “energy emergencies.”

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