The Environmental Protection Agency has seen a future fueled by corn ethanol, and it doesn’t much like it. That’s why in a sweeping revision to the National Renewable Fuel Standard announced today, it proposes a shift over time to the higher-yielding cellulosic form of ethanol — which is produced largely from biomass (switchgrass, woodchips and sugar cane).

By 2022, the rulemaking proposes that the U.S. fuel mix will include 16 billion gallons of cellulosic biofuels, 15 billion gallons of conventional biofuels, four billion gallons of “advanced biofuels” and at least a billion gallons of diesel fuel made from biomass — an increasingly viable concept (gasoline, diesel and jet fuel can all be made from “feedstocks” as varied as sawdust and sugar cane).

The White House envisions that its proposed rule, calling for 36 billion gallons of biofuels, would reduce foreign oil dependence by 297 million barrels of oil annually, and reduce greenhouse gas emissions 160 million tons a year when fully phased in. President Obama is committing $786.5 million for advanced biofuel research, which will be necessary because cellulosic technology is still in its infancy.

The 15 billion gallons of corn ethanol (from existing plants) in the plan is “grandfathered” in, which should damp down any outcry from the Midwestern corn farmers (and their politicians) who had a lockdown on U.S. energy policy in the Bush years.

According to EPA Administrator Lisa Jackson during a conference call this morning, “Corn-based ethanol is a bridge, an extraordinarily important one, to the next generation of ethanol and biofuels.”

The U.S. produced nine billion gallons of corn ethanol in 2008, and the EPA says it could maybe get to 18 billion gallons by 2015-16. But, it added, 15 billion gallons is probably the limit of “sustainable” production.

Cindy Zimmerman, who writes the industry-savvy Domestic Fuel blog with her husband, Chuck, says the Obama administration plan makes sense. “As Lisa Jackson said, corn ethanol is a bridge to the next generation,” Zimmerman said. “We couldn’t have next-generation biofuels without the current ethanol infrastructure.”

Zimmerman said that today’s corn ethanol plants can be re-engineered to produce high-yield cellulosic ethanol, “and in fact that is already happening.” Verenium has a cellulosic ethanol plant in Louisiana up and running, with sugar cane waste (or baugasse) as fuel, and South Dakota-based Poet, which has 26 plants and produces a billion gallons of ethanol annually, is also developing cellulosic technology and hopes to have a plant online by 2011.

The EPA plan takes the prudent step of conducting a very thorough land-use analysis to determine the greenhouse gas impact of its ethanol standards. And it also considers indirect impacts. As Zimmerman puts it, “Will what we do here cause somebody in the Philippines to tear up forests?”

Needless to say, farm-state senators would rather have indirect impact analysis go away. “It defies common sense that EPA would publish a proposed rule-making with harmful conclusions for biofuels based on incomplete science and inaccurate assumptions,” said an incredulous Sen. Charles Grassley (R-Iowa). He was one of a dozen farm-state senators who wrote Jackson in March in the hope that only direct emissions would be considered.

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