By Jon H. Harsch

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, April 27 – The biofuels industry won strong endorsement Tuesday from Big Oil. Addressing the annual EIA Energy Conference hosted by the federal Energy Information Administration (EIA), Shell Oil Company President Marvin Odum called for “a rational, prudent energy policy, one that ensures both current and future demands are met.” He explained that this policy should include more, not less, government support for biofuels, including ethanol and said “today's biofuels are likely the most practical commercial solution for reducing carbon emissions in the transport fuel sector over the next 20 years.”


Shell Oil Company President Marvin Odum at the 2011 EIA Energy Conference Tuesday. Photo: Agri-Pulse.

Odum said that to meet “staggering growth” in worldwide energy demand,the slate of options really is relatively limited and we really do need to pursue them all.” He blamed politicians for pursuing divisive arguments about “bringing new sources of energy into the mix.” He said unfortunately “people pick winners and losers and there are some that are less than honest about the trade-offs. And that sets the stage for conflict and relegates compromise to the back row.”

Odum stressed the importance of developing natural gas and opening up both the Gulf of Mexico and Alaska to more production. But he also insisted that the growing international biofuels market could grow even faster “with the right policies in place.”

Odum said Shell considers the biofuels delivery system “the most similar to our core liquid hydrocarbon business” and therefore “Shell continues to build capacity in biofuels produced from sustainable feedstocks.” He said the logical next step is “to go beyond corn ethanol to a mix that provides the best combination of performance and low CO2 emissions.” He pointed out that as a leading biofuels distributor which sold fuel containing over nine billion liters of biofuels in 2010 alone, today Shell is “working with Brazil's largest ethanol producer to finalize a $12 billion downstream joint venture for the production of ethanol, sugar and power . . . and two billion liters will be just the starting point. We have considerable aspiration for growth.”

Shell is also working on “new technologies and advanced biofuels produced from new feedstocks and new conversion processes,” Odum said. “We are moving new technologies from lab-based demonstration phases toward commercial scale-up.” Predicting this work will pay off starting around 2020, he called on government to “incentivize the development of advanced biofuels” and “help create conditions necessary to build a sustainable biofuels market.”

Odum praised current government support for biofuels and warned that “There is a temptation, I think, to believe that's enough, but that assumption would be wrong. There is much more that can be done.” He called for government policy to include “rewarding sustainable low-carbon fuels and creating a regulatory framework that stimulates market-driven innovation, or providing the kind of regulatory certainty that encourages long-term investment. It also includes removing or even just lowering import tariffs and creating a level playing field for low CO2 biofuels.”

The White House's National Economic Council Director Gene Sperling delivered a somewhat different message at the EIA conference. He was equally enthusiastic about biofuels. Then he said the administration wants to eliminate some $4 billion in annual subsidies to the oil industry and divide that money between deficit reduction and support for renewable energy development.

Sperling said along with being “at the mercy of supply disruptions in other parts of the world” when the U.S. remains so dependent on oil imports, the U.S. economy is also negatively impacted by the success of developing countries around the world – because that success increases global oil demand and therefore oil prices. He said the problem is that “over-dependence on oil gives us less control over our economic destiny.”

Sperling explained that the White House is focused on finding “what makes sense . . . both on the economic and the environmental front.” So the administration is asking “whether our budget priorities make sense right now in terms of what we subsidize and what we invest in . . . whether it makes sense for us to provide subsidies for oil companies that themselves have made clear in the past that high oil prices provide more than enough incentive to invest in domestic exploration and production without special tax breaks . . . whether we can still afford $43 billion over ten years on subsidies that do not seem to be efficient or needed.”

Sperling noted that President Obama sent a letter “to the bipartisan congressional leadership asking them to accelerate efforts at repealing these oil subsidies that are costing us over $40 billion and expressing, as he did in the State of the Union, that to the degree that we can afford these resources, we should be using them not to subsidize the carbon-intensive energy of the past but the investments we need in a clean energy future.” He said the savings from ending the oil industry subsidies “could help us both contribute to deficit reduction and still ensure that we have resources to support the president's ambitious R&D proposals for clean energy.” In contrast, he pointed out, “The House Republican budget resolution cuts the clean energy investments by 70% over the next decades,” putting a range of important programs “on the chopping block for complete elimination.”

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