Waving the White Flag on the RFS

on November 25, 2014 at 1:00 PM

Tankers Leave Oil Refineries As Strike Action Looms

For months we’ve been pointing out the brokenness of the Renewable Fuel Standard (RFS), the federal law requiring ever-increasing use of ethanol in the nation’s fuel supply.

We’ve written about the impending “blend wall,” the point where the RFS would require blending more ethanol into gasoline than could be safely used as E10, potentially putting motorists at risk for damage to vehicles while also potentially risking small-engine equipment and marine engines. We’ve written about RFS-mandated use of “phantom” liquid cellulosic biofuels – a fuel that hasn’t been commercially available despite the recent inclusion by EPA of landfill bio gas in that category (more about that in a future post). And we’ve written about how the 2014 requirements for ethanol use were months and months late from EPA, caught up in election-year politics.

The RFS is indeed broken. Late last week EPA basically agreed, announcing it’s waving the white flag on trying to issue ethanol-use requirements for 2014, which has just a little over one month to go. Instead, the agency said it will complete the 2014 targets in 2015 “prior to or in conjunction with action on the 2015 standards rule.”

Yet, EPA already has publicly acknowledged that it will be at least six months late in proposing the 2015 requirements that are due by the end of this month. It’s a vast understatement to say EPA is playing a game of catch-up. The agency’s inability to meet the RFS deadline – it hasn’t actually met the statutory deadline once in the past five years (though the 2011 rule was only nine days late, close enough to call it on time) – offers little hope that things will improve:


ExxonMobil’s Ken Cohen writes on the Perspectives Blog:

The government is required to announce before the start of each year exactly how much ethanol refiners will be required to blend into the nation’s fuel supply. Set aside for a moment the negative environmental and economic impacts of ethanol that I’ve written about many times. By law, the volume amount must be finalized by the end of November of the previous year, giving companies time to adjust before the new year begins. As I wrote months ago, it’s common sense as well as common fairness. … ExxonMobil, like everyone else in the country, is required to follow all applicable laws and meet all legal deadlines – and we do to the best of our ability.  Shouldn’t Washington do so too?

What to make of it? Simply, that the RFS is flawed, busted and dysfunctional – as is EPA’s management of the program. The RFS is an example of top-down central planning that’s detached from reality and which has created distortions in the marketplace and uncertainty among those who’re obligated to operate under it. API President and CEO Jack Gerard:

“The rule is already a year overdue, and the administration has no intention of finalizing this year’s requirements before the year ends. It is unacceptable to expect refiners to provide the fuels Americans need with so much regulatory uncertainty. This is an example of government at its worst.”

What the RFS has become is an illustration of the pitfalls of government trying to mandate consumer behavior through a program whose goals have largely been achieved by surging U.S. energy production. Congress created the RFS in 2007 as a measure to reduce oil imports by requiring increased use of renewable energy. The law was designed to encourage production of advanced biofuels made from agricultural waste. Instead, ethanol from corn has largely filled the volumes required by the RFS, raising food-for-fuel objections from some groups as well as concerns that corn-based ethanol increases emissions of greenhouse gases.

Now, with EPA’s plan to delay the 2014 ethanol volumes – as well as those for 2015 that are due in less than a week – it’s fundamentally clear the RFS should be repealed. Gerard:

“The Renewable Fuel Standard was flawed from the beginning, horribly mismanaged, and is now broken. The only real solution is for Congress to scrap the program and let consumers, not the federal government, choose the best fuel to put in their tanks. Failure to repeal could put millions of motorists at risk of higher fuel costs, damaged engines, and costly repairs.”

By Mark Green

Originally posted November 24, 2014

Energy Tomorrow is brought to you by the American Petroleum Institute (API), which is the only national trade association that represents all aspects of America’s oil and natural gas industry. Our more than 500 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry.