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.”