House holds RFS2 hearing – digest of key comments

In Washington, the House Committee on Oversight and Government Reform, Subcommittee on Energy Policy, Health Care and Entitlements, held a hearing on the Renewable Fuel Standard (RFS) and the blend wall. Witnesses were called from the Energy Policy Research Foundation, the Turkey Federation, the American Petroleum Institute, the EPA, and the Union of Concerned Scientists. Written testimony was submitted by others, including BIO.

Among the comments:

Lou Pugliaresi, President, Energy Policy Research Foundation: “EIA forecasts show that production of large volumes of cellulosic are not expected until after 2030. In this scenario, refiners and importers (so-called obligated parties) cannot obtain the volumetric requirements under EISA and therefore face rising costs from lack of supply and payments for credits issued by EPA. These rising costs lead to falling demand and lower production of transportation fuels. Reduced production brings about rising prices which resulted in NERA concluding that by 2015, diesel prices would rise by 300% and gasoline prices would rise by one-third if the program were not substantially reformed. Even if we create an unrealistic and highly unlikely case in which large scale marketing channels are available for E85 (and one of the few legal means available to generate RINs after crossing the blend wall), and we further assume no major decline in demand for transportation fuels, EPRINC’s research shows that near term increases in volumetric blending above the blend wall (10% ethanol in gasoline) would only be possible by financially encouraging consumers to buy E85 and then shifting that cost onto the price of E10. Such a cost shift would cause a spike in the price of E10 with prices escalating as the volumetric mandate grows. Under this best case scenario, the marginal cost to supply E10 gasoline will rise by about $0.18/g in 2014 and $0.36/g by 2022 through E85 sales, a cost to American consumers of $20-$40 billion per year.

Growth Energy CEO Tom Buis: “Today’s hearing is nothing more than a forum for those with a vested interested in not wanting to see our nation adopt an alternative to a fossil-based fuel. Instead of finding solutions to gas prices, all it accomplishes is giving a microphone for special interests to deny consumers a cost-saving choice at the pump. And, while some will testify today claiming that the production of ethanol results in the rise of worldwide food prices, according to a recent World Bank study, the biggest driver by far of world food prices has been crude oil—responsible for almost fifty percent  of the change in food prices since 2004.”

Renewable Fuels Association CEO Bob Dinneen: “Big oil created the blend wall barrier by refusing to allow access to the market for E85 and resisting with fear and misinformation the use of E15 for those consumers that want to use it. They have had years to prepare and comply with the RFS. Instead, they’ve hired PR firms and lawyers to maintain their monopoly over the fuel market. They created the blend wall and are now complaining about its existence. That is the very essence of hypocrisy.”

Dr. Jeremy Martin, senior scientist for Union of Concerned Scientists: “We are not moving forward as fast as we hoped to be in 2007, but the RFS is still pointing us in the right direction. To keep moving forward we need to provide the regulatory stability that will protect the early investments in the cellulosic biofuels industry, and support further investment to bring the technology to larger scale. The RFS is a more flexible policy than many people appreciate, and Congress was smart to give the EPA the authority to adapt the second phase of the policy to circumstances, and move us forward in a pragmatic way. Now the EPA must use that flexibility and provide more clarity on the path ahead. The smart approach is to limit the mandates for all food-based biofuels to 20 billion gallons in 2022, as laid out in the RFS implementation schedule. This represents a slower rate of growth than the country has seen over the last few years and will reduce pressure on food markets while slowing agricultural expansion. The growth beyond this limit should come from non-food based cellulosic biofuels. Using wastes, agricultural residues like corn stalks, and environmentally friendly perennial grasses to make fuel can provide economic opportunities, rural development and good jobs not just in the corn belt, but all over country. The biomass resources are available, but to realize their potential, we also need a large scale industry to make them into useful fuel.”

Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section: “The Renewable Fuel Standard is working as intended. Advanced and cellulosic biofuel companies have invested billions of dollars in furthering research and development of new energy crops and in commercializing innovative new fuel technologies. They are ready to invest more if they are assured that federal policy will remain stable and continue to clear a path and promote competition in the U.S. fuel market. It is regrettable that the House Oversight Subcommittee did not invite the advanced biofuel industry to testify about the measurable results we’ve achieved under the RFS. The first commercial cellulosic biofuel refineries are starting up, and more are scheduled to come online over the next few years. The industry is creating jobs and investment opportunities in nearly every state. Moving the goalposts on the industry by undermining the RFS will unnecessarily halt their progress and postpone achieving the nation’s goals of energy security and a healthier economy and environment.”