Biofuel Groups Defend RFS in Comments to House Committee

Several biofuel-related groups defended the Renewable  Fuel Standard (RFS2) in conjunction with last Friday’s deadline to submit  comments to the House Energy and Commerce Committee on the fifth and final  white paper on the program.

Committee Chairman Fred Upton (R-Mich.) and Ranking  Member Henry Waxman (D-   Calif.) released the white paper earlier this month.  Specifically, it discussed EPA’s requirement to set annual targets under RFS2,  focused on EPA’s proposed cellulosic biofuel requirements and highlighted  several incidents of renewable identification number (RIN) fraud within the  U.S. biodiesel industry.

The American Coalition for Ethanol (ACE) signaled its  support for RFS, saying it “wasn’t enacted by Congress to make life  comfortable for oil companies or vertically integrated food conglomerates who managed  to operate quite comfortably before the RFS and continue to generate handsome  profits today.”

Instead, ACE said, it was “enacted to dramatically  improve the way we produce and use transportation fuel, to reduce our dangerous  dependence on foreign oil, to create jobs, to reduce gas prices and greenhouse  gases and to spark innovation in new technologies.”

“In its wisdom, Congress provided EPA with  appropriate authority and flexibility to implement the RFS, and EPA has  judiciously and exercised that authority,” it added, calling RFS “a  classic American success story.”

“RFS is working, and Big Oil companies are desperate  to repeal it so they can control the fuel market,” ACE said.

ACE Executive Vice President Brian Jennings commented  upon rising RIN prices, saying the hike has occurred “because oil  companies don’t want to comply with the law.”

“While oil companies were reluctantly comfortable  with 10% ethanol in all gasoline, they prefer to control the remaining 90% of  the gasoline market by preventing the sale of E15 and other mid- and high-level  blends of ethanol called for under the RFS,” he wrote.

“That oil companies are willing to pay $1 or more  for a RIN, just to avoid buying ethanol at 70 cents per gallon less than  gasoline and offering consumers safe, tested, and affordable blends such as E15  and E85, should tell Congress everything it needs to know about the RFS: It is  needed now, more than ever.”

Jennings added that the “lack of transparency in the  RIN trading marketplace leaves open the possibility that unscrupulous traders  or even oil companies could create skewed transactions for the purpose of  manipulating the RIN market for financial gain or to make a political  point.”

If Congress reduces or repeals the RFS, he wrote,  “it rewards oil companies’ bad behavior, ensures they will control 90% or  more of the gasoline market and forces consumers to pay more for dirty fuel by  restricting their access to more affordable and cleaner blends such as E15 and  E85.”

Growth Energy CEO Tom Buis called on the oil industry to  adopt higher blends of ethanol.

“The RFS was enacted nearly six years ago — it is  time for the petroleum industry to move to higher biofuel blends and comply  with the law,” he said.  “They have several options to do so, including  moving to E15, blending more E85 or other midlevel ethanol blends such as E30.  The easiest way to comply is to simply blend E15 and higher ethanol  blends.”

Buis added that as “more and more participants in  the liquid fuel marketplace move to higher biofuel blends, consumers will  benefit at the pump, while obligated parties will be able to more easily meet  their RFS requirements.”

Buis said that moving to higher blends of ethanol would  address RIN costs as well.

“The easiest way to bring down RIN prices and reduce  compliance costs is to increase market access for higher blends of  biofuels,” he wrote. “If the major oil companies stop erecting  artificial hurdles to E15 and midlevel ethanol blends, there would be ample  RINs available to meet obligations under the RFS.”

Advanced Ethanol Council Executive Director Brooke  Coleman said the white paper process “allows Congress to pressure test  some of the arguments being offered by the oil industry to support the notion  that the RFS is not working.”

He added that oil interests have testified before  Congress that buying a RIN credit is a cost of compliance with the RFS,  “when in fact it’s a voluntary cost of non-compliance.”

“The oil trades are dancing around the fact that  their members receive a RIN for free when they acquire a gallon of renewable  fuel, and may be the ones profiting from higher RIN prices,” he wrote.  “The oil trades are pretending that they cannot blend more renewable fuel,  while some of their members threaten franchisees who are trying to do just  that.

“There are things that could be improved  administratively with the RFS, including greater transparency in RIN trading  markets, but hopefully this process will separate fact from fiction when it  comes to RFS implementation.   There are only downsides to re-legislating the RFS just  one third of the way through a 15-year commitment.”

The Renewable Fuels Association (RFA) also weighed in,  touting the flexibility of RFS in setting yearly renewable volume obligations  (RVOs).

“The annual RVO-setting process is effective and  allows EPA to adjust the required volumes of cellulosic and advanced biofuel  annually based on the best available data of production capacity,” said  RFA President and CEO Bob Dinneen, adding that no statutory changes are needed.

“As it developed the RFS provisions of the Energy  Independence and Security Act of 2007 (EISA), Congress knew the timing of  cellulosic and advanced biofuels commercialization was somewhat  uncertain,” he added. “Accordingly, Congress gave EPA significant  authority and flexibility to set the standards annually based on the short-term  outlook for the availability of these biofuels.”

That flexibility can also be seen as cellulosic biofuels  enter the market, Dinneen indicated.

“While cellulosic biofuel production capacity has  not materialized as rapidly as desired, the cellulosic biofuel provisions of  the RFS have worked effectively and allowed EPA to adjust the required volumes  as needed,” he said. “Congress granted EPA broad authority to adjust  the cellulosic biofuel requirements annually and the Agency has done so each  and every year since the RFS2 became effective. Through the annual RVO-setting  process, EPA has waived 98% of the cellulosic biofuel requirements from  2010-2013.”

Dinneen said the current system also quickly and  efficiently handles cases of RIN fraud.

“In the isolated cases where biodiesel RIN fraud did  occur, EPA enforcement was swift and effective and the perpetrators of the  fraud were successfully prosecuted,” he wrote. “EPA has already  demonstrated that it does in fact have the resources to effectively monitor the  RIN program and take enforcement actions when necessary.”

In contrast, the American Petroleum Institute (API)  panned RFS, saying there are “numerous problems” with the  implementation of the program and that it “has not delivered the energy  security or other benefits” envisioned by EISA.

RFS, it said, “contains unfulfilled aspirational  goals and numerous unintended consequences and other adverse impacts.”

“The RFS has not unfolded as expected, and we agree  that several implementation challenges have emerged that received little if any  consideration prior to passage of EISA,” API stated. “The life-cycle  impacts of biofuels on air quality, water and land were not fully comprehended  at the time when the law passed. There is insufficient supply of domestic  advanced biofuels, including cellulosic, and the approaching blend wall could  result in severe fuel supply disruptions in the U.S.”

API concluded that RFS “has become an infeasible  mandate and Congress should repeal it.”


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