EPA likely will need to take the lead in rescuing U.S. consumers from the potential negative impacts of the federal ethanol mandate, given the shrinking chance that Congress will pass significant reforms to the broken Renewal Fuel Standard (RFS) program.
That’s the view of the natural gas and oil industry, which continues to warn of the possible consumer risks posed by the RFS, which was launched before the shale energy revolution and has been largely made obsolete by surging domestic production.
With EPA poised to announce how much ethanol refiners will be required to blend into the nation’s fuel supply in 2019, Frank Macchiarola, API vice president of downstream and industry operations, briefed reporters on the RFS during a conference call:
“Over the years the RFS has bedeviled both parties. We’re hopeful that we can make some progress on reforming the RFS, but there are other avenues outside of the legislative process where you can at least mitigate some of the problems with this program – that’s with the RVO (renewable volume obligations) process, that’s with the potential reset – and so we’re hopeful that if the legislation doesn’t move that at least the agency can help mitigate these larger problems with the program.”
Because EPA has used its waiver authority to reduce ethanol requirements from levels set out in the program’s enacting legislation, it can reset the volumes moving forward, Macchiarola said, and industry supports the agency doing so. After 2022, the statutory required volumes go away completely and, again, EPA has the authority to set them for future years. Macchiarola said EPA needs to act to bring the program in line with current realities:
“If we do our analysis of where our current energy situation is today relative to when the act was passed in 2007, we think that EPA is then presented with a pretty compelling case on why they should depart from the statutory volumes and how they should approach this program going forward. In our view, the program should be sunsetted, but that requires an act of Congress. In lieu of that sunset, we believe the volumes should be set at a level that avoids breaching the blend wall, it should be set at a level that reflects the energy market realities, both from an infrastructure standpoint and a vehicle compatibility standpoint and also taking into account the vast resources domestically that we have that we did not anticipate having in 2007.”
Macchiarola’s conference call remarks, as prepared for delivery, follow:
Every Fall the EPA releases its final Renewable Fuel Standard volumes, providing an annual reminder to consumers that the RFS is backward-looking policy that does not reflect today’s energy market realities. As the agency calculates ethanol volumes for 2019 and biodiesel for 2020 under the RFS, consumers need to know that the EPA’s increasing biomass-diesel and the overall biofuels volumes is an example of government putting its thumb on the scale, picking winners and losers. Consumers are the biggest losersas this proposal will likely threaten to breach the blend-walland push us closer to a situation in which potentially incompatible higher ethanol blends proliferate fuels markets.
Today, most gasoline contains 10 percent ethanol by volume. However, if the RFS requirements continue to be implemented, our nation could exceed this level of ethanol in the fuel mix. Automakers have warned these increased blends of ethanol could void car warranties. Testing found that higher ethanol blends, such as E15, could harm enginesand fuel systemsand potentially impose costly repairs on consumers. Nearly 75 percent of the vehicles in the U.S. fleet were not built for E15 (chart), and this fuel is not compatible with motorcycles, boats, lawn equipment, and ATVs.
Implementing this broken program year-after-year is not a forward-looking energy strategy. The RFS mandate was established over a decade ago to expand our use of renewable fuels while reducing reliance on imported oil. Since then, the United States has undergone a transformation from a nation of energy dependence and scarcity to one of energy security and abundance. America has significantly increased domestic crude oil productionand transitioned from a net importer of refined petroleum products to a net exporter. Bad policies, like the RFS, threaten this progress.
To be clear – we are not opposed to ethanol. However, we are opposed to a mandate that pushes higher levels of ethanol into the fuel mix based on a mandate that is outdated and broken. The result is a bad deal for consumers.
Without action from Congress, we call on the EPA to limit the effects of this broken program, and we urge the agency to set its final 2019 RFS obligations for ethanol at or below 9.7 percent of gasoline demand, an amount that allows for E0 sales and recognizes the vehicle and infrastructure constraints that limit the ability to use E15 and E85. EPA should also continue to reject efforts by some to reallocate volumes from small refinery exemptions onto the backs of those who comply with the program.
The reality is market forces, technological innovations and investments by the oil and gas industry have combined with increased domestic crude oil production to render the RFS outdated.
We continue to urge lawmakers to work together to find meaningful and long-term solutions that address the potential harm that the RFS could bring to the nation’s consumers through higher energy costs and repairs to their engines.
By Mark Green
Originally posted November 19, 2018
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.
