Biofuel bill passes second reading

A landmark proposal in Congress mandating the blending of gasoline with biofuels has finally hurdled the deciding plenary session after it was approved on second reading last week.

Under the bill, which was earlier certified as as urgent measure by Malacañang, the minimum biofuel (on bioethanol fuel) blend will be set at five percent within the first two years upon effectivity. The bill was earlier approved by the House energy committee and endorsed for second reading, the stage which decides the fate of any proposed measure.

Earlier, Lanao del Norte Rep. Alipio V. Badelles, the committee chairman, said the proposed Bioethanol Fuel Act will go a long way in weaning the country away from overdependence on fossil fuels.

Biofuels, as defined in the bill, consist of liquid fuels produced from biomass and primarily used to fuel vehicles. It is produced from bioethanol or ethanol. Ethanol, in turn, uses as feestock biomass or organic matter such as trees, crops, plant fibers, poultry litter and other animal wastes, industrial waste and the biodegradable component of municipal solid waste.

Under the bill, the Department of Energy (DOE) will adopt the National Biofuels Program under which the blending of bioethanol fuel with gasoline will be implemented.

The DOE is also directed to gradually phase out "harmful gasoline additives and oxygenates" within six months of the law’s effectivity. Gasoline that will still contain these additives or oxygenates and gasohol (the gasoline-bioethanol blend) that do not follow the mandated mixture will be confiscated by the DOE.

The bill also provides fiscal incentives to encourage private enterprises to engage in bioethanol fuel production. These include exemption from paying tariff and duties on imports of inputs, machinery and equipment for 10 years, and a tax rating of bioethanol fuel equivalent to unleaded gasoline that shall remain for 10 years.

Producers of biomass sources such as sugarcane, cassava, sweet sorghum and corn will also be accorded priority when they access financing from government financial institutions such as the Land Bank of the Philippines, Development Bank of the Philippines and the Quedan and Rural Credit Guarantee Corp.

Badelles said the use of bioethanol fuel will not only be beneficial for the environment but will generate economic activity and employment in the rural areas. He noted, however, that these benefits will not be realized overnight considering the resistance among certain sectors against bioethanol fuel use.

House Bill 4629, sponsored by Rep. Juan Miguel Zubiri, as revised, now provides for policy support for the development of other biofuels, other than bioethanol. Since policy support will now be accorded to bioethanol and other biofuels, the national program, originally called National Bioethanol Program will now be called National Biofuels Program.

Instead of having the percentage blend directly increased from five percent to 10 percent by the end of the fourth year after the approval of the law, an independent board composed of private and government offices, the National Biofuels Board, will recommend an increase in the mandated minimum blend by up to five percent every two years after the second year of the approval of the law. The Board will also have the power to determine and recommend a higher limit in terms of percentage of the fuel ethanol blended into gasoline.

The duty of one percent will also now be applicable to imported planting and breeding materials. It is also clear that such duty rate shall not apply to imported biofuels and feedstock.

The bill provides for the National Biofuels Board to propose a national program for biofuels other than bioethanol. High-level representatives of Department of Labor and Employment and the Philippine Coconut Authority are now added in the composition of the National Biofuels Board.

At least 25 ethanol-producing plants are needed if the Philippines intends to meet demand for a gasoline additive in the next three to four years, according to Zubiri.

He emphasized that unless these plants are constructed, the country may have to resort to importing ethanol from Brazil or Thailand, which will defeat government efforts to achieve energy independence.

"With the ethanol production, the Philippines might be a major exporter of ethanol to Vietnam, Indonesia, Malaysia," he said, adding that each plant will require P1.5 billion in investments.

Currently, San Carlos Bioenergy Inc. (SBCI), a joint venture between Bronzeoak Philippines and the National Development Co., is involved in an ethanol facility in San Carlos, Negros Occidental, which is expected to commence operations by 2007.

The SCBI integrated facility will have a cane milling plant with a through-put capacity of 1,500 metric tons of cane daily, a cogeneration nine megawatt power plant, and a distillery plant that will also produce 100,000 liters of bio-ethanol a day.

Top oil refiner Petron Corp. recently entered into a memorandum of understanding (MOU) with SCBI, for the use bio-ethanol for blending with its gasoline products.

The production of ethanol as a gasoline additive is expected to spur capital investment, job creation and economic development in the country, especially in rural areas.

Zubiri assured that the price of bioethanol will not be more than P25 a liter, warning local producers that the country could source cheap ethanol from Brazil if they fail to come up with a cheap price.

To lure local and foreign investors, Zubiri said Congress has inserted a set of incentives for investors interested in biofuels, adding that this will jumpstart production.

"We have prepared some attractive fiscal incentives to give investors more bang out of their buck, where biofuel producers will be exempted from paying tariff and import duties of all types of inputs and machinery they will use," Zubiri said.