Biofuels industry needs a quick jump-start

These biofuels must be some kind of elixir.

According to legislation introduced this month in Olympia, renewable fuel produced in-state will not only help farmers, clean the air and reduce dependence on foreign oil potentates, it will also be “functioning as a bridge that spans the gulf between the mainstream ideological differences of eastern and western Washington.”

Wow. Do these folks intend to burn this stuff, or drink it?

Witnesses on the six House bills supporting a biofuels industry in the state were so enthusiastic — mostly — that one could be mistaken for taking the testimony as a kind of barroom chorus. Rep. Brian Sullivan, the Lynnwood Democrat characterized as the godfather of biofuels legislation, called a House Energy Technology and Communications Committee hearing on the bills a “kumbaya” moment of unusual harmony. Obviously, there is a great deal of excitement about the industry’s potential in Washington, as well as concern that the state could lose out if legislators do not act quickly.

Several states, most in the Midwest, have already ramped up production of biodiesel and ethanol. The former is squeezed from oilseeds like canola, the second is distilled from crops like corn or barley, even straw and forest waste. Ethanol has been used for years in some fuel mixes to clean up auto emissions. The federal energy bill enacted last year sets a goal of four billion gallons for biofuels production this year, with a jump to 7.5 billion gallons by 2010.

Under the proposed state legislation, by July 2007 2 percent of all diesel sold in Washington must be biodiesel. The share would increase to 10 percent as in-state capacity to produce the fuel increases. The thresholds for ethanol use would be 2.5 percent and 10 percent.

To help reach those modest goals, the legislation offers several incentives; a revolving loan fund to finance construction of the crushers and refineries that would produce the fuels, and relief from the 23-cent-per-gallon excise tax and property taxes, among others. Notes estimating the potential financial impact on state revenues are not yet ready. They might be beside the point, anyway.

These bills — H.B.s 2738, 2663, 2664, 2665, 2666, and 2775 — dazzle because they seem to hold the promise of a new industry that employs hundreds, produces an environmentally friendly product, and throws a lifeline to small farmers facing extinction due to rocketing fuel and pesticide prices. How many times in the last year have we heard that farmers receive less for a bushel of wheat than they paid for a gallon of fuel?

Agriculture employs about 170,000 Washington residents, more than any other industry. But volatile commodity prices have many farmers gasping. Biofuel production could represent a new, stable source of income, and seed crops also rotate well with wheat.

If legislators can grant Boeing Co. and other makers of airplanes and airplane components $2.4 billion worth of tax relief and other incentives, they can help the farmers. Have, in fact, many times in the past. But timing and tailoring legislation that will assure Washington farmers are the beneficiaries of new state initiatives will be tricky, as several witnesses pointed out last week.

Midwest biofuel makers could rush into Washington and soak up the market before farmers can gear up to grow oilseed, or investors can build crushers. Stipulations that Washington-grown feedstocks be used could run afoul of the Interstate Commerce clause in the U.S. Constitution. And a state loan fund or similar aid could violate prohibitions in Washington’s constitution against the lending of state credit or gifting of funds.

A few witnesses, the Association of Washington Business among them, suggested the state ought not to mandate a certain level of consumption of anything, and rely instead on the tax breaks and other incentives. Others noted that, with gasoline at $3 per gallon last summer, biofuels were cost competitive. With the long-term outlook for oil prices anything but optimistic, consumers will eventually embrace farm-grown alternatives. Even if they are a little more expensive, at least the dollars spent in Seattle are exported to Eastern Washington, not the Mideast.

If they will pass a constitutional test, cheap loans to crushers and distillers who will purchase Washington-grown feedstocks seems like the best way to jumpstart a biofuel industry with minimal state action. In a short, 60-day session, minimal is the way to go.

One more thought. How long will it take to overcome our hang-ups relating to the growing of industrial hemp, a crop with a multitude of uses, including fuel production? The stuff is no more intoxicating than the rhetoric regarding biofuels.