Proposed RFS Changes Weighed At EPA Hearing

The renewable fuel, livestock and petroleum lobbies take on big day of debate on Renewable Fuel Standard volume obligations

Published on: Dec 6, 2013

A "who's who" of the Renewable Fuel Standard debate appeared at an Environmental Protection Agency hearing Thursday to either defend the EPA's proposed 2014 RFS volume decreases or advocate instead for restored mandates.

The hearing comes in response to EPA's November proposal which suggested 2014 mandated production levels that were lower than originally projected. The proposal capped total renewable fuel blending requirements at no more than 15.52 billion gallons, about 1 billion gallons fewer than 2013 totals.

Fuel and ag industry heavyweights like the Renewable Fuels Association, National Corn Growers Association and American Petroleum Institute were among stakeholders offering comments. Those supporting the decrease largely argued the merits of ethanol quality and ethanol's impact on the free market, while opponents suggested the decrease would slow growth in biofuels use and economic development.

The renewable fuel, livestock and petroleum lobbies take on big day of debate on Renewable Fuel Standard volume obligations
The renewable fuel, livestock and petroleum lobbies take on big day of debate on Renewable Fuel Standard volume obligations

Nearly 150 people signed up to voice comments on the proposal before the EPA committee.

Economy, job growth key element of RFS trickle-down

Supporters rallied behind a call to return renewable volume obligations back to levels in line with 2013, citing potential harm to rural economies that depend on jobs and revenue generated at ethanol plants and from the corn used to produce the fuel.

Iowa Republican Gov. Terry Branstad, who issued a plea Wednesday during a Renewable Fuels Association teleconference, delivered a fiery message to EPA's panel centered on the economics of the RFS rollback.

"We don't need to drive the number of people employed down, we need to drive it up," Branstad said, estimating that 45,000 jobs would be lost as a result of the EPA proposal.

"Forty-five thousand families would face undue financial hardship and stress simply at the hands of EPA catering to big oil. And they aren't satisfied – they won't be satisfied until you repeal it altogether," Branstad said.

Still others suggested that the EPA proposal could not only eliminate jobs and rural economic growth, but also have an impact on future development.

Jan Koninckx, Global Biofuels Business Director for DuPont, said the proposed rule would undo the progress the industry has made over the past several years.

"It sends a signal to investors that the U.S. can't play the long game anymore, that as a nation we cannot envision a better future and stick with it long enough to see it through – that we're not serious about opening a marketplace for new fuel technologies, and that perhaps, the money is better spent somewhere else," Koninckx said.

Ethanol by-products became a common topic, too. Fuel companies and ethanol supporters argued that fuel plants can produce thousands of tons of feed through marketing of by-products. Dried distillers grain, argued Iowa livestock producer Mark Leonard, costs 80% of the price of corn while providing 20% more energy and 300% more protein.

"When you see all the facts you realize ethanol is good for your vehicle, it's good for the economy and we need to keep the RFS," he said.

Artificial market and higher prices

But nearly every comment from an RFS proponent was countered at some point by an RFS opponent. Many said a major drawback of the RFS is the "artificial market" it creates.

Congressman Bob Goodlatte, R-Va., an outspoken opponent of the RFS, said the policy unnecessarily drives up the price of corn, feed for animals and food prices for consumers. And he noted, 169 bipartisan House members agreed by signing on to a letter to oppose the RFS.

"We appreciate that the EPA has imposed a slight reduction," Goodlatte said, but "it is not enough to provide the much need relief businesses farmers and consumers need."

The policy, which Goodlatte argued creates an artificial market for corn ethanol, is also based on the assumption that gasoline use will continue to rise into the future, argued Bob Greco of the American Petroleum Institute. However, Greco said, the opposite is occurring.

Greco also said there are concerns about vehicle and retail infrastructure compatibility with the use of ethanol blends higher than 10%, which is why the "blend wall" is API's main concern.

The blend wall refers to the point at which the amount of ethanol produced will be too large to blend into the available fuel supply without raising blend levels.

"Left untouched, the statutory mandates could cause fuel rationing … and lead to a 770 billion decrease in U.S. GDP," Greco said, referencing a 2012 API-commissioned NERA consulting study.

Though many referenced concerns of engine compatibility with ethanol blends higher that 10%, National Association of Convenience Stores' Director of Government Relations Paige Anderson said her group was concerned about consumer preferences and environmental impacts.

Though Anderson stressed that NACS does not support complete RFS repeal, she said the proposed volumes were a positive development due to lack of interest in higher fuel blends.

"We sell what the consumer wants," Anderson said, noting that consumers are getting information that E15 and E85 is bad.

"The majority of our stores and retailers are not seeing the demand that we were hoping they would see with higher blends of ethanol," Anderson said.

That outlook resonates with comments from other groups, which suggested that instead of the EPA mandating ethanol production, the market should decide how much to produce and when to produce it.

"We are not against corn ethanol, we are not against ethanol. What we are against is the hand of government directing this market and giving it false signals," said Mike Brown, National Chicken Council President, suggesting legislative action to repeal the RFS.

"Let the free market work – come on in, the water's warm," Brown said

Each person who testified Thursday has submitted written comments to the EPA regarding the RFS rollback. Comments will be accepted until Jan. 28.