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U.S. to Keep Subsidizing|Biofuels, Vilsack Says

WASHINGTON (CN) - U.S. Secretary of Agriculture Tom Vilsack said biofuel incentives "need to continue" to reach President Obama's goal of producing 36 billion gallons of biofuel per year by 2022. He called on Congress Thursday to reinstate or extend biofuel tax credits to boost production.

This year the country will produce nearly 13 billion gallons of ethanol-blended and biodiesel fuel.

"For the time being, incentives will need to continue," Vilsack said at the National Press Club. "We need to send a message to the industry that we are committed to 36 billion gallons."

Vilsack said the 36 billion gallon goal, part of the renewable fuels standard, or RFS2, will enable the United States to import 350 million fewer barrels of oil per year by 2022.

He urged Congress to reinstate the Biodiesel Production Tax Credit and to provide a "fiscally responsible short-term extension" of the Volumetric Ethanol Excise Tax Credit to boost biofuel production.

Vilsack warned that the last lapse of biodiesel tax credits caused the industry to shed 12,000 jobs.

"It would be premature to end this support for the industry," he said.

Vilsack said the injection of federal funds into the biofuel industry will revitalize rural economies, which have disproportionately high unemployment and account for 90 percent of the nation's poorest counties.

Federal support for the construction of biorefineries to "dot our rural landscapes" will create 1 million jobs, Vilsack said.

Within the next two months, Vilsack said, USDA officials will announce federal funding allowing biorefineries to begin construction next year.

The government will also help build five regional biomass research centers to research nonfood biomass feedstocks for biofuel production.

Additionally, the USDA will make payments to refiners facing higher costs for processing nonfood materials from the biorefineries out of a $281.5 million fund remaining under the 2008 Farm Act.

The government will also provide matching funds for 10,000 pumps and storage systems for blended fuels at convenience stores and filling stations across the country.

"This administration is committed," Vilsack said.

He said the Environmental Protection Agency's announcement last week that it is increasing the maximum amount of ethanol allowed in fuels to 15 percent, allowing for an E15 blend, will increase demand and help the industry gain momentum.

When asked about studies showing that it takes more energy to produce a gallon of ethanol than the energy gained from a gallon of ethanol, Vilsack responded, "The studies are dated. The studies that I've seen recently indicate that we are becoming much more efficient in terms of our production of ethanol and much less reliant on natural resources. And that is only going to continue as research continues at these centers."

Agency officials pointed to a recent USDA study showing that the net energy gain of converting corn to ethanol is improving.

Vilsack said the rewards of biofuel production -- less dependence on foreign oil, improved air quality and jobs -- made government subsidies worth the cost.

"The reward for our investments outweigh the risks associated with our investment," Vilsack said. "If you compare what we do to assist this industry with what we do to assist other industries, it's a fair deal."

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