Policy Fight Heats Up on Ethanol Support

DC Dialogue

Calls for reforming or repealing Renewable Fuels Standard expected to increase in 2013 as fight over biofuels mandate continues.

Published on: November 29, 2012

The Environmental Protection Agency's expected denial of the Renewable Fuels Standard (RFS) waiver request sets up a showdown over whether the RFS is broken or working as intended. The RFS has come under increasing pressure on Capitol Hill and likely will continue in the 113th Congress.

As expected, the respective sides lined up stating the RFS needs fixing or was working as intended after EPA's decision to deny the waiver Nov. 16.

David Holt, president of the nonpartisan Consumer Energy Alliance (CEA), noted that there is a national discussion on how well the RFS is working and it is a prudent and responsible discussion to have.

"All sides need to be listened to and we can't polarize this issue," Holt said. CEA has been supportive of the RFS and an all-of-the-above approach to energy diversification. "We need to make sure as a society, and consumers of that society, that the RFS is working as intended and not pitting one agricultural industry against another and unfairly raising energy prices for consumers around the country."

Holt noted that as the cellulosic component continues to underperform, it shows that the RFS needs a closer look. Renewable fuels industry players say the RFS provides the needed incentive to help support the next generation of biofuels by encouraging investment in advanced biofuels.

When Congress expanded the RFS in 2007, certain “safety valves” were added to the law. One provision allows the EPA administrator to reduce the required volume of renewable fuel in any year based on severe harm to the economy or environment of a state, a region or the United States.

In addition to the livestock, poultry and dairy organizations, a bipartisan group of 34 U.S. senators and 156 House members and nine governors petitioned EPA to grant a waiver of the federal requirement for the production of corn ethanol because the mandate, coupled with a drought that has reduced yields and pushed up prices of feed grains, has caused the severe economic harm for which Congress added the “safety valves,” petitioners said.

EPA said it had not found evidence to support a finding of severe “economic harm” that would warrant granting a waiver of RFS. The agency had set the bar high in its waiver denial in 2008, and as studies showed, the economic impact had already been felt and a waiver would only redistribute the economic losses.

The RFS requires 13.8 billion gallons of corn-based ethanol to be blended into gasoline in 2013, an amount that will use about 4.5 billion bushels of the nation’s corn crop, according to the U.S. Department of Agriculture. 

Fight far from over

Rep. Bob Goodlatte, R-Va., has proposed legislation to repeal the mandate as well as a bill designed to scale-back the RFS when corn-to-stock ratios reach lower levels. Goodlatte said he will be working hard to educate other members of Congress, which will be needed to reverse the policy. "I will be your ally to overturn the RFS," he said. "I'm a strong supporter of the RFS, but the current policy is unfair and is causing unintended consequences," he said during a press conference with members of National Council of Chain Restaurants (NCCR) Nov. 28.

He noted that he's looking to build consensus in the new Congress and determine whatever is "politically achievable" in reforming the RFS and provide something that involves less government interference and something more feasible.

Goodlatte said the RFS is no longer a debate about fuel versus food, but rather about fuel versus small businesses and families. To date, the food retail sector has not spoken out in the debate, but a new study released by NCCR and conducted by PwC quantified the impact of the RFS on chain restaurants.

PwC estimated the impact under several scenarios and concluded that the RFS mandate could cost chain restaurants up to $3.2 billion annually, with quick-service restaurants witnessing cost increases upward of $2.5 billion, and full-service restaurants seeing increases upward of $691 million.

Ed Anderson, chairman of Wendy's Quality Supply Chain Cooperative and owner of a franchisee of four Wendy's restaurants in Virginia, called on Congress to repeal the RFS in hopes of leveling the playing field between the food and agriculture community and ethanol manufacturers.

"We're not asking Congress for a bailout, but rather to dig into the true impact of renewable fuels standard at the expense of small business owners," he said.

In a statement, Fuels America noted that oil prices, not corn prices dictate food prices. "Out of every dollar spent on food, 84 cents goes to transportation, packaging, and other inputs that are dependent on oil. In fact, there is a direct correlation between food prices and oil prices – as oil prices rise, so does the cost of food," the group noted.

The American Petroleum Industry (API) also held a press conference Nov. 27 with renewed calls for eliminating the RFS saying it is "unworkable and should be repealed," according to API Downstream Group Director Robert Greco.