Invest in renewable options

In 2007, Congress created a new, cleaner direction for the future of America's transportation fuel, and the millions of drivers who use it. The Renewable Fuels Standard spurred research and new technology that makes it possible today to create renewable biofuel from crop waste and other biomass - not just corn.

An entirely new industry has been born - as the very first commercial-scale cellulosic ethanol plant began production in July of 2013. Another three plants will come online this year, and dozens more are planned after that.

Oil companies are desperate to kill this new industry while it is still in its infancy. While corn ethanol has already built nearly all of the capacity called for under the RFS, advanced biofuels and cellulosic ethanol have much more room to grow - crowding out the need for additional oil imports. They also have a much larger available supply of potential feedstock, since they can be derived from wood chips, agricultural wastes, or grasses that can grow where traditional crops can't.

In fact, the U.S. is home to more than 1 billion tons of available biomass that can be converted to 80 billion-100 billion gallons of cellulosic ethanol.

Big Oil's campaign to gut the bipartisan RFS would be very damaging to corn ethanol producers, but make no mistake: the most severe impact will be on next-generation biofuel.

If Congress or the U.S. EPA now reduces the overall market for biofuels - an idea under consideration - America's biofuel producers will go from a period of steady expansion to sudden contraction. Investments in new production capacity for advanced biofuels will become difficult or impossible to finance, even if modest targets for advanced biofuel are retained.

Here's why:

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Biofuel companies that are looking to expand into cellulosic ethanol production may lack the capital to do so because their core business will start shrinking.

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Banks and investors planning to finance new facilities - which can cost $100 million or more - may abandon their support for these projects if Washington injects uncertainty into the equation and forces a reduction in the overall size of the market. Investing in expansion plans within a declining market flies in the face of conventional investment strategy.

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In many cases, the most economical business case is for 'bolt on” cellulosic or advanced ethanol plants that can simply be added to existing corn ethanol plants, making use of the existing infrastructure and transportation network that is already operating and paid for. POET-DSM, for example, is now building a commercial-scale cellulosic ethanol plant alongside its existing corn ethanol plant in Emmetsburg, and plans to replicate this model at dozens of other plants it already owns.

Consider this analogy. Let's say you had a steady job as an office worker but were planning on buying a rental property to generate some extra income on the side. If you or your spouse suddenly lost your job, or had to take a big pay cut, would you still move forward with the plan to buy the rental property? Probably not. Would the bank still be willing to give you the loan? Again, no.

The oil companies, who just announced $100 billion in annual profits, claim that the RFS raises gasoline prices. The argument makes no sense, since ethanol sells on the wholesale market for 40-80 cents less than gasoline. Is using more American-made biofuel bad for Big Oil, Iran and Venezuela? Yes. But it is good for your pocketbook.

Oil companies who can't (or won't) blend ethanol into their gasoline have the flexibility to comply with the RFS by buying credits, called 'RINS,” from other oil companies who blend more ethanol. The money is simply paid from one oil company to another and is likely a wash for prices at the pump. Even under the most pessimistic scenario, it doesn't add enough net cost to offset the fact that ethanol is so much cheaper than gasoline.

Furthermore, due to the competitive nature of the retail gasoline market, there is no evidence that RINS have had a negative impact on consumer prices.

The EPA should not risk undermining one of President Obama's important achievements by falling victim to Big Oil's cynical, misleading scare tactics. Innovative new technology isn't useful if it cannot be financed or deployed. When it comes to our transportation future, we should look to renewable options grown in America's own fields.

' Jeff Brouin is executive chairman and former CEO of POET, a biofuels company, http://poet.com. Comments: info@poet.com