Producers push for repeal of Renewable Fuel Standard

Jun 28, 2013

The Subcommittee on Energy and Power, chaired by Rep. Ed Whitfield, R-KY, continued its review of the Renewable Fuel Standard (RFS) with a hearing that included testimony from the government agencies that play a role in implementing the statute: the Environmental Protection Agency (EPA), the Energy Information Administration (EIA), and USDA. Last Wednesday’s hearing followed a series of bipartisan white papers issued by the committee examining a number of emerging concerns with the current RFS system, specifically in light of changes to the overall energy landscape in the past five years.

“This is the committee’s first hearing specifically devoted to the RFS since the program was last revised in 2007,” said full committee Chairman Fred Upton, R-MI.

“The purpose of this initial hearing is essentially to perform a checkup on the RFS—what has gone according to plan and what has not. No policy is perfect, especially one that is now more than five years old. It’s time to assess the RFS in light of what we now know.”

“The landscape has changed since the RFS was last revised in 2007 and there are policy assumptions from then that differ from the realities of 2013,” added Whitfield. “We can now look back on several years of practical experience with the RFS, and it is time to ask what that experience has taught us. It is also time to review the RFS as we continue to implement its increasing targets.”

Members and witnesses discussed several implementation challenges and issues that have emerged since the RFS was last revised, including blend wall and fuel compatibility issues, impacts of the RFS on energy markets and the agricultural sector, and environmental concerns.

Joseph Glauber, chief economist at USDA, described the effects of the RFS on U.S. corn production. “Corn ethanol production increased dramatically over the past decade, from just over 2 billion gallons in 2002 to almost 14 billion gallons in 2011,” said Glauber. “Driven by a combination of favorable market forces and government biofuel policies, including the RFS, the increase has spurred corn production and corn use for ethanol and has been one of the factors in the recent grain price boom and overall improvements in farm balance sheets including record farm incomes over the past few years.”

Christopher Grundler, director of the Office of Transportation and Air Quality at EPA, explained that ethanol will likely continue to play a leading role in RFS implementation but warned that refiners may soon hit the “blend wall.” “Both ethanol and non-ethanol biofuels can be used to meet the RFS requirements; however, ethanol has and will likely continue to be the predominant renewable fuel in the market for the near and foreseeable future,” said Grundler. “As the volume requirements of the RFS program increase, it becomes more likely that the volume of ethanol projected to meet those requirements will exceed the volume that can be consumed in the common blend ratio of 10 percent ethanol and 90 percent gasoline, referred to as E10.”

EIA Administrator Adam Sieminksi also suggested that RFS targets would not be achievable with current ethanol blends due to demand challenges and the lack of alternative biofuels. He stated, “The RFS program is not projected to come close to achievement of the legislated target that calls for 36 billion gallons of renewable motor fuels use by 2022. Substantially increased use of biofuels can only occur if they can be used in forms other than the lowpercentage blends of ethanol and biodiesel that account for nearly all of their current use. The implicit premise that cellulosic and other advanced biofuels would be available in significant quantities at reasonable costs within five to 10 years following adoption of the 2007 RFS targets has not been borne out.”

Upton concluded, “The white papers and having [Wednesday’s] hearing have gotten the discussion off to a positive start. I look forward to working with all of the members of this committee in the coming weeks as we continue our oversight and work toward addressing the very real issues that implementation of the RFS presents going forward.”

While the hearing was at least a start on RFS discussion, others, including Sens.

John Barrasso, R-WY, Mark Pryor, D-AR, and Pat Toomey, R-PA, have taken it a step farther, introducing the bipartisan Renewable Fuels Standard Reform Act (S. 1195). The National Cattlemen’s Beef Association (NC- BA), National Chicken Council (NCC) and the National Turkey Federation (NTF) are urging Congress to repeal the RFS.

“The RFS has been such a poorly managed mess, it’s time to drain the swamp,” said NTF President Joel Brandenberger. “The RFS needs a fresh start in order to put in place a smarter policy on the mix of fuel and feed.”

The RFS last year required 13.2 billion gallons of corn-based ethanol to be blended into gasoline; it mandates that 13.9 billion gallons be blended in 2013, an amount that will use about 4.9 billion bushels of corn, or about 40 percent of the nation’s crop.

“Chicken producers are already competing with the weather,” said NCC President Mike Brown. “Why must we also compete with an inflexible federal mandate that voluntarily places another strain on our limited resources? I commend Sens. Barrasso, Pryor and Toomey for taking an approach that would let the free market decide whether corn should go to food or to fuel.”

Livestock and poultry groups called on the administration last fall to waive the RFS for the second time since 2008. And for the second time, in spite of the widespread drought and lowered harvest, EPA refused to use the safety valve built into the biofuels mandate.

“Cattlemen and women are self-reliant, but in order to maintain that, we cannot be asked to compete with federal mandates like the Renewable Fuel Standard for the limited supply of feed grains,” said NCBA Policy Vice Chair Craig Uden, an Elwood, NE, cattle feeder. “When EPA is unable to provide even a temporary waiver of the RFS during the worst drought in 50 years, it is apparent the RFS is broken and we appreciate the efforts of Sens. Barrasso, Pryor and Toomey to fix this flawed program.”

“In a letter addressed to the House, NCBA urged congressional members to support the RFS Reform Act, legislation that would provide relief to those affected by this unworkable federal policy. This legislation will help ease concerns created by the ethanol mandate and allow cattle producers to be able to compete on a level playing field for a bushel of corn by prohibiting cornbased ethanol from being used to meet the RFS, and reducing the total size of the RFS over the next few years,” Uden said.

Fast food chain Wendy’s, along with White Castle, also put in their two cents supporting the repeal.

The chain restaurants, who partnered with their industry’s trade association, the National Council of Chain Restaurants, contends that fuel manufactured from corn, soy, and other agricultural crops pushes food and commodity prices up. In addition, if left unchanged, the RFS will cost chain restaurant operators up to $3.2 billion each year. The restaurants believe that the costs are then passed along the supply chain, impacting producers, farmers and franchise owners, and are eventually transferred to diners and consumers nationwide. — Traci Eatherton, WLJ Editor