Why Going to Congress for RFS Reform Is a Really Bad Idea

March 18, 2015 |

By Brent Erickson and Brooke Coleman

erickson

Brent Erickson, BIO

Coleman, AEC

Brooke Coleman, AEC

Last week, ABFA made headlines by calling the federal Renewable Fuel Standard (RFS) an “obstacle” to the commercial deployment of advanced biofuels and publicly supporting opening up the program in Congress. While the Biotechnology Industry Organization and the Advanced Ethanol Council certainly agree that the RFS is off track, we have a sharp difference of opinion with ABFA when it comes to how to get it back on track.

First and foremost, BIO and the AEC understand full well the imperfections in the RFS. BIO and the AEC together represent a broad diversity of companies, large and small, in the advanced biofuel space. What the divide between ABFA and the rest of the biofuels community comes down to is a difference of opinion about what the quickest and most effective RFS remedy really is.

Along these lines, it would be hard to find a single advanced biofuel company substantively opposed to new ideas and policies that would help our companies secure financing and build plants. But the issue we have with ABFA’s proposal is not substantive, it’s tactical.

In Washington it is a challenge to get new policy proposals passed into law. And once passed, your opponents never give up trying to chip away at your gains. Any calculation about trying to get new policy options adopted has two main components. First, there is an evaluation of the efficacy of the new policy itself. The second critical piece is an assessment of the political landscape and the risks of renegotiating existing law.

Our industry also has to be careful of things that sound good, but end up being a tremendous waste of time and resources. Washington insiders generally understand that Congress is where good ideas go to die, but it can be lucrative and exhilarating pretending there is a chance for success.

RFS2 was an exception to the political norm. For a moment in time, renewable fuels were very popular in the House, the Senate and the White House. Policymakers were clamoring over one another to be more supportive of the emerging biofuels industry, and President Bush ultimately signed into law a program that reserved nearly a fifth of the motor fuel marketplace for low carbon renewable fuels.

Passage of RFS2 relied upon a very rare – and by today’s standards extraordinary – political alliance between America’s Heartland and its coastal states. What we got out of that perfect political storm was not perfect, but it’s a standard with teeth that includes strong environmental constraints and makes a massive commitment to advanced biofuels. If properly administered, it is quite simply the envy of the rest of the world for advanced biofuel policy.

ABFA seems to believe that the rulemaking process is irretrievably lost and has accused other groups of just hoping for resolution. But let’s look at reality.

The AEC and BIO, together with our partners at Fuels America, spearheaded the effort to stop the Obama Administration’s 2014 proposal to allow oil company distribution intransigence to be a rationale for waiving the RFS. The ABFA told us that issue was not their fight when we asked them to join us. EPA pulled the proposal in November 2014 and shortly thereafter announced a plan to do a multiyear rule to address uncertainty.

Since then, we have been working tirelessly to help Administration and EPA officials work through the issues that paralyzed the program a year and a half ago. We worked with the corn ethanol industry to give the Administration options that would prevent unreasonably high RIN prices and are working with EPA now to address illiquidity in D3 RIN markets with administrative fixes that are well within EPA’s broad authorities under the law.

Of course, it is true that EPA could miss its commitment to release a multiyear proposal by June, perhaps by many months. But let’s look at the alternative.

It would take a miracle for anything to happen legislatively on the RFS by year end. But if something happened, keep in mind that it took EPA almost three years to get the RFS2 rule completed. EPA is working very hard on the 111d carbon rule and will no doubt face legal action on any new final rule, so we would have to wait.

But if there is one thing missing from ABFA’s “new” calculus of RFS reform, it is political reality. The oil industry made things like RIN price floors a political impossibility in the best of times when up against our perfect political storm of 2007. The question today isn’t what we can get from the current political marketplace; it’s how bad the RFS slaughter will be when advanced biofuels goes up against the oil industry after throwing first generation biofuels under the bus. This tactic makes no sense from a business perspective, as many first generation biofuel companies are leaders in the effort to deploy cellulosic biofuels, but it’s even more irresponsible at the political level.

When discussing ABFA’s position with companies behind the scenes, there seems to be some feeling that going to Congress could shake the tree and have indirect benefits. Actually, the opposite is true.

We have counted the votes and it is inconceivable that any legislative process on the RFS would be a clean one. Either way, legislating is like making sausage and the final outcome would not be pretty. And that’s before taking into account that the RFS is part of the Clean Air Act.

In addition to incredible political risk, taking our issues to Congress only relieves the pressure on EPA to actually enforce the law and distracts Congress from their current focus of applying political pressure on the Administration to fix the program administratively. Perhaps ABFA’s heart is in the right place, but we cannot help but notice that the reality is a shift of focus to legislative reform — lauded by the American Petroleum Institute — would undercut work already done right when it’s starting to work.

Whether we admit it or not, the politics of the RFS is a full contact sport. We are doing battle with oil giants who have spent hundreds of millions of dollars on advertising and lobbyists to poison our brand politically. But remember, the primary reason we are not today facing a legally dubious 2014 final rule with an escape clause for oil companies is that BIO, the AEC and the rest of the Fuels America coalition didn’t blink.

If the common goal is to fix the RFS – and it should be – our advice is to resist the temptation to blink and instead double down on administrative pressure. It’s not going to be easy, but it’s better than paving the road to further administrative inaction and risking the future of our industry with a time-consuming and ill-fated legislative process that has no chance of strengthening the RFS.

Brent Erickson is the Executive Vice-President of BIO and head of its Industrial & Environmental section; Brooke Coleman is the executive director of the Advanced Ethanol Council.

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