API will pursue RFS reform during 2016 lame-duck Congress and beyond

Source: By Nick Snow, Oil & Gas Journal • Posted: Friday, October 21, 2016

American Petroleum Institute plans to press members of Congress to reform the federal Renewable Fuel Standard when the federal lawmakers return for their 2016 lame-duck session following the Nov. 8 elections, an API official said.

“We’ll try to work with members after the election because it would get the process started,” Downstream and Industry Operations Group Director Frank J. Macchiarola told reporters during an Oct. 18 luncheon at API’s headquarters. “Incoming members also could pick it up in 2017, especially if they’re from the same party.”

He said API believes HR 5180, which Reps. Bill Flores (R-Tex.), Peter Welch (R-Vt.), Bob Goodlatte (R-Va.), and Jim Costa (D-Calif.) introduced this past spring (OGJ Online, May 12, 2016), will be the best legislative vehicle because it has broad bipartisan support. The measure has 107 Republican and 10 Democratic cosponsors.

“[Rep.] Welch is a good example,” said Macchiarola. “He spoke at length during the RFS hearing about his experience with fuel and his chain saw, and how it made him look more closely at the situation. At the end, it will be the consumers who educate their representatives in Congress best about why the RFS is broken and needs to be reformed or repealed. He normally doesn’t agree with [Rep.] Flores on nearly everything, but agrees with him on this. We think a new, different coalition is possible to get this done.”

Concerns about problems with ethanol mandates under the RFS go beyond the oil and gas industry. The National Marine Manufacturers Association and nine other trade groups said that more needs to be done to protect consumers from damaging recreational vehicle engines by accidentally using fuels that have ethanol concentrations of 15% or higher in an Oct. 13 letter to leaders of the US Senate Environment and Public Works Committee and House Energy and Commerce Committee.

“This is the No. 1 issue for our member companies and their consumers,” said Michael Lewan, NMMA’s senior manager for government relations, who also spoke at the Oct. 18 luncheon.

Addressing RINs fraud

Macchiarola acknowledged that the US Department of Justice and Environmental Protection Agency have moved recently to crack down on renewal fuel credits fraud under the RFS (OGJ Online, Oct. 13, 2016Sept. 30, 2016), but added that API would not comment on specific cases.

“We have said repeatedly that the [EPA’s Renewable Identification Numbers] compliance mechanism doesn’t work,” he said. “We also think some people have used isolated instances to support moving the point of obligation, which we don’t believe would work. EPA has looked at this idea twice in implementing the RFS. We’re confident that they’d reject it again.”

The American Fuel & Petrochemical Manufacturers petitioned EPA in early August to move the RINs program’s point of obligation to the owner of hydrocarbons at the rack, the same point at which excise taxes are collected (OGJ Online, Aug. 5, 2016). “We believe full RFS reform, such as the Flores-Welch legislation, would be more effective,” Macchiarola said.

He said he expects EPA to issue 2017 renewable fuel quotas under the RFS in November that are similar to what it proposed this past spring (OGJ Online, May 19, 2016). “The Renewable Fuels Association and others have challenged EPA’s use of its waiver authority, which is ongoing,” said Macchiarola. “From EPA’s implementation, it’s clear they’re concerned with the blend wall. Beyond that, I can’t say.”