updated 4:41 p.m. ET Dec. 18, 2007

WASHINGTON - By mandating a boom in ethanol output from sources other than corn, the energy bill President Bush is expected to sign presents a huge opportunity for the fledgling biofuels market — and considerable uncertainty.

The commercial viability of making ethanol from grasses and agricultural waste is unproven, and if industry can’t meet the challenge, consumers could end up paying the price.

The U.S. currently produces nearly 7 billion gallons of ethanol, all of it made from corn, thanks in large part to government mandates and subsidies included in the 2005 energy bill. The 2007 bill, which passed the House Tuesday and the Senate last week, mandates 36 billion gallons by 2022, with 21 billion gallons coming from so-called cellulosic ethanol.

There are significant obstacles to meeting this goal, however, not least of which is devising a profitable method of producing cellulosic ethanol.

Other challenges include: growing enough feedstock without harming the environment and efficiently transporting it to ethanol refineries; delivering the finished fuel to pumps nationwide; and bolstering consumer demand. The lack of an adequate transportation system for biofuels and limited demand already have squeezed ethanol producers’ profits this year.

It is unclear how government or industry will respond if the country’s ambitious cellulosic ethanol goals cannot be met, though one potential unintended consequence is higher pump prices if fuel supplies fail to match rising demand.

“In this industry, they always say cellulosic is five or six years away, but they’ve been saying that for the last 15 years,” said David Swenson, an associate scientist in economics at Iowa State University.

Renewable Fuels Association President Bob Dinneen heard similar concerns two years ago when critics questioned how the industry would produce a previously mandated 7.5 billion gallons by 2012 “and we will do that by next month.”

It’s not a technological issue, Dinneen said, but “it’s really a question of the marketplace and the economics ... and the bill is clearly empowering the marketplace to resolve those issues.”

Farmers in Iowa, a top ethanol producer, say the goals are achievable.

“It will take a lot of research money, a lot of coordination and cooperation but I honestly believe we can do it just like we were the first to put a man on the moon,” said Craig Lang, president of the Iowa Farm Bureau Federation.

The bill doesn’t specify who would be punished if ethanol-production mandates aren’t met, but one potential loser in that scenario is motorists.

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