Senate Energy Legislation Offers Mandated Market for Biofuels

Dec. 14 -- The U.S. Senate approved energy legislation that will more than quadruple the use of biofuels such as ethanol during the next 15 years in a bid to reduce gasoline consumption. President George W. Bush will sign the measure into law if it reaches his desk, a spokeswoman said.

The congressional mandate would require that biofuels be blended with gasoline to reduce the amount of petroleum needed for U.S. transportation. The measure approved by the Senate would boost biofuels production from 7.5 billion gallons this year to 36 billion in 2022.

The legislation is ``going to be significant because it demonstrates there's clearly a marketplace that Congress is mandating for alternative fuels,'' said Arnold Klann, chief executive officer of Irving, California-based BlueFire Ethanol Fuels Inc.

Denatured ethanol for January delivery had its biggest one- day gain yesterday in eight months, rising 7.9 cents, or 4 percent, to settle at $2.049 a gallon on the Chicago Board of Trade. The contract is at the highest since June 15, when it settled at $2.05.

The legislation ``should go far to bringing ethanol demand into close balance with output in the near term, and thereby help to restore a measure of pricing power to ethanol producers,'' Mark McMinimy, a Washington-based analyst for Stanford Group Co., wrote in a note issued yesterday.

In the near term, it will help ethanol producers such as Archer Daniels Midland Co., VeraSun Energy Corp. and Abengoa SA, McMinimy wrote.

Fuel Economy Standards

The legislation approved yesterday also increases vehicle fuel economy standards for the first time in 32 years.

The vote came after two failed attempts to pass the legislation with provisions that would increase taxes on oil and natural gas companies and require that investor-owned utilities purchase a portion of their power from renewable sources. Those portions were stripped from the legislation because of Republican opposition.

The House will take up the legislation on Dec. 18, House Majority Leader Steny Hoyer of Maryland said. House Speaker Nancy Pelosi told reporters she will back the legislation, calling it ``a substantial policy advance.''

Bush will sign the legislation, according to a statement last night from the White House.