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House hearing sends RFS through the policy wringer

By Kris Bevill | July 10, 2012

A House Subcommittee on Energy and Power hearing held July 10 to discuss the challenges and opportunities of alternative fuels provided the latest platform for the ongoing and increasingly heated battle between biofuels and petroleum industry representatives over the future of the renewable fuel standard (RFS).

Subcommittee Vice Chairman John Sullivan, R-Okla., said in his opening statement that while he strongly supports measures to increase domestic fossil fuel production, he believes Congress should continue exploring other options as it has already done through the implementation of the RFS. He gave credit to the RFS for increasing ethanol production, but said also that the policy has “some shortcomings” that need to be addressed.

Sullivan’s introduction to the debate immediately placed witnesses Bob Dinneen, president and CEO of the Renewable Fuels Association, and Michael McAdams, president of the Advanced Biofuels Association, in the position of defending of the RFS. In his testimony, Dinneen pointed out that the RFS is largely responsible for the reduction in oil imports since 2005 and said ethanol blending has reduced the cost of gas for consumers. He suggested that the policy needs no modification at this time.

McAdams delivered a passionate testimonial for the continued implementation of the policy, noting that it took 20 years for the U.S. ethanol industry to reach a capacity of 2 billion gallons. However, since the RFS was first enacted in 2005, the industry has “exploded” and now produces about 14 billion gallons. The expanded RFS was enacted just five years ago, he said, adding that in that short amount of time, advanced biofuels facilities have been built and more are on the way. “We are putting steel in the ground and creating jobs for American all over this country today,” he said. “My message is simply that it has only been five years. The RFS is fundamentally working, and we are just getting started. Uncertainty in the RFS today would have a chilling effect on these investments.”

American Petroleum Institute President and CEO Jack Gerard focused his comments on the ethanol blend wall and lack of cellulosic biofuels as reasons why the RFS should be opened for modification. Once the E10 blend wall is reached, refiners will have to choose between blending E15 or E85 in order to meet the policy’s increasing volume requirements, he said. API does not believe that either of those options presents a solution. The group continues to contend that E15 has not yet been adequately tested and it does not support the use of that fuel blend in any vehicle. Meanwhile the number of flex-fuel vehicles (FFVs), vehicles that can utilize E85, comprises only 5 percent of the total vehicle fleet, Gerard said, and those vehicle owners don’t always fuel with E85. Therefore, API doesn’t believe increasing amounts of E85 will be effective in meeting future RFS volume requirements. API is currently suing the U.S. EPA for its implementation of the cellulosic biofuels portion of the RFS and Gerard touched on that argument as well, stating that the agency should not be allowed to require the use of fuels that haven’t yet been produced commercially. “The RFS law needs to be altered to fix what isn’t working and take into account the ability of the vehicle fleet and fueling infrastructure to safely use renewable blends,” he said. “Mandates must have periodic technology/feasibility reviews to allow for appropriate adjustments.”

California is often thought to be the nation’s leader in environmental policy, but Tom Tanton, executive director of the American Tradition Institute, an environmental issue think tank, testified against the state’s policies toward renewable fuels to date. California’s various energy policies simply haven’t worked, he said, adding that they are “inextricably linked” to the state’s economic problems. According to Tanton, the main problem with California’s energy policies is that they have not taken consumers into consideration. “As of 2009, California had just over 136,000 alternative fuel vehicles, out of 826,000 nationwide,” he said in his written testimony. “The state with perhaps the longest and most aggressive programs to encourage alternative fuels is not much further along than the rest of the nation. The 136,000 represents less than one-half of one percent of the state’s vehicles, even after 30 years of incentives, mandates and other programs. Programs were initially predicated on petroleum security, but more recently have focused on either air quality and/or greenhouse gas emissions. The mechanisms have changed little, and remain mandates and subsidies. Neither has consumer demand changed appreciably, even with today’s relatively high gasoline price. Consumer demand has not changed appreciably primarily because available alternatives are second best options, costly at best and with negative performance. California’s history illustrates that mandates and subsidies are not simple or even appropriate solutions to petroleum security.” Tanton recommended that federal fuel policies shouldn’t even mention specific fuels much less attempt to focus on the “technology du jour.” Instead, policies should accommodate technology, resource and market changes and enable true consumer choice.

Later in the hearing, Rep. Mike Pompeo, R-Kan., took Dinneen to task on his statement that the RFS should not be modified, mocking the fact that the U.S. EPA has reduced the cellulosic biofuels mandate by 95 percent of Congress’s initial annual goal each year the cellulosic mandate has been in place. “What a mess we made,” he said, referring to Congress’s volume requirements. Dinneen defended the EPA’s action, stating that the economic collapse of 2008 is responsible for the lack of cellulosic production to date. Pompeo also questioned consumer demand for E15 and said he hasn’t received any calls from his constituents asking for access to the fuel. He referred to E15 as a mandated fuel, which led to a heated exchange with a frustrated Dinneen, who attempted to point out that E15 is an optional choice for consumers and is in no way a mandate. “Yes, it is,” Pompeo said. “You’re looking for a government mandate for your product.” Dinneen said the U.S. has essentially mandated the use of petroleum for the past 100 years, but Pompeo quickly declared the RFA has no proof to support that claim.