Sitting on opposite sides of the fence, refiners and producers of biofuels are anxiously awaiting a decision by the Obama administration on the amount of renewable fuels Washington will mandate for use in the transportation sector.
In November 2013, the Environmental Protection Agency (EPA) proposed a significant reduction in the federally mandated volume of biofuels in its Renewable Fuels Standard (RFS) for 2014. Biofuels include ethanol from corn or other crops, soy-diesel, fuel from waste cooking oil, other vegetable oils or plant matter. EPA proposed limiting the mandate of domestic corn-based ethanol use to 13 billion gallons, and reducing its target for cellulosic ethanol to 17 million gallons.
Overall, EPA recommended cutting the renewable fuels mandate from 18.15 to 15.21 billion gallons. Under a 2007 law creating the RFS, refiners are required to blend increasing quantities of biofuels into the nation’s motor fuel supply every year, reaching 36 billion gallons a year by 2022. The law, however, gave EPA some flexibility in setting annual mandates should conditions warrant. In the seven years since the statute was enacted, conditions have changed considerably.
Unforeseen Developments
Contrary to the expectations of lawmakers in 2007, cellulosic fuel made from switchgrass, corn stover, wood chips, and other materials has not been produced in sufficient quantities. Nevertheless, EPA has targeted refiners with steep fines for not blending the unavailable cellulosic ethanol into the fuel. Also, gasoline consumption rose less than expected, primarily as a result of the 2007-08 recession and the subsequent weak economic recovery. People are driving less and companies are shipping less than anticipated when the levels were set.
Meanwhile, U.S. production of crude oil has skyrocketed as a result of hydraulic fracturing (fracking) and horizontal drilling in shale formations. With an abundance of domestic gasoline available, the argument the United States needs to devote substantial amounts of farmland to the production of fuel, instead of food for humans or livestock, is being increasingly called into question.
These developments prompted EPA to take a second look at the RFS. Christopher Grundler, head of EPA’s Transportation and Air Quality Office, told the Senate Environment & Public Works Committee in December 2013 the RFS was forcing refiners to produce a blend of gasoline cars can’t use.
Competing Interests
In a letter coordinated by the American Fuel & Petrochemical Manufacturers, a group of more than 30 refiners urged President Obama to stick with the lower RFS EPA proposed last year.
“Although renewable fuels already have a place in the fuel supply, the federal government should not force consumers to use certain fuels, and particularly those that cannot be safely integrated into existing vehicles, small engines [such as lawn equipment and marine engines], and retail infrastructure,” the letter said.
“EPA proposed a reasonable set of RFS standards for 2014 that will maintain ethanol’s market share, addressed the issue of E10 blend wall, and provided cellulosic biofuel growth,” the refiners pointed out. “Although Congress still needs to reform the RFS for the long term, EPA’s proposal is doing the right thing for the short term. Now is not the time to backtrack on a proposal to avoid economic disruption.”
More Biofuels Requested
For their part, biofuels producers are urging the administration to reject EPA’s lower RFS. In the run-up to the 2014 midterm elections, the biofuels industry ran a series of ads on radio and the Internet, praising renewables fuels’ contributions to the nation’s energy supply. One ad showed Obama speaking in March 2010 saying, “There shouldn’t be any doubt that renewable, homegrown fuels are a key part of our strategy for a clean energy future.” The video then says, “Mr. President, keep your promise. Don’t gut the renewable fuels mandate.”
Fuels America, a coalition of biofuels, agriculture, and national security groups, was behind the ads.
EPA sent its final RPS rule to the White House Office of Management & Budget for review in August. Release of the final rule is expected shortly.
“The RFS should be reformed, and the current reduced mandate is a step in the right direction,” said Tom Tanton, director of science and technology assessment for the Energy & Environment Legal Institute.
Promises Unfulfilled
“Biofuels have not lived up to their promise,” Tanton explained. “Has the RFS reduced prices? No. Consumers continue to pay high costs for the short supply, relative to the mandate. That’s not even including the lower energy content and increased refueling inconvenience.”
In addition, Tanton said, “The RFS was supposed to offset importing petroleum, but that didn’t happen either. The U.S. has drastically increased domestic production of oil through hydraulic fracturing and is approaching the ever-elusive goal of energy independence. The RFS was supposed to reduce air pollution. That hasn’t borne out either. The RFS is a classic case of unfulfilled technological overkill when government mandates and subsidies are the only way to succeed.”
Bonner R. Cohen, Ph. D. ([email protected]), is a senior fellow at the National Center for Public Policy Research in Washington, DC.
INTERNET INFO
Center for Regulatory Studies, “Fact of the Day: EPA’s Failure to Finalize 2014 Renewable Fuel Levels Creates Uncertainty, Potentially Higher Prices,” October 27, 2014: http://centerforregulatorysolutions.org/fact-of-the-day-epas-failure-to-finalize-2014-renewable-fuel-levels-creates-uncertainty-potentially-higher-prices/
Laura Barron-Lopez, “Group hits Obama over fuel mandate in ads,” The Hill, October 23, 2014: http://thehill.com/policy/energy-environment/221645-group-hits-obama-over-fuel-mandate-in-ads.
Radio Ad: Fuels America, In his Own Words, https://soundcloud.com/fuels-america/radio-in-his-own-words
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
