Ethanol groups, oil industry pan RFS ‘middle ground’ 

Source: Tiffany Stecker, E&E reporter • Posted: Wednesday, December 17, 2014

A team of biofuel experts has released recommendations on how to reform the contentious federal renewable fuel standard, after years of turmoil between vested interests.

The report by the Bipartisan Policy Center, titled “Options for Reforming the Renewable Fuel Standard,” lays out 40 recommendations, with pros and cons, for updating the RFS and promoting biofuels generally.

BPC seeks a “middle ground” between maintaining the status quo and repealing the policy, said Scott McKee, senior policy analyst at the think tank.

“We think tangible progress can be made to reform, but not repeal, the RFS,” he said.

Initially passed into law in 2007 as part of the Energy Independence and Security Act, the legislation gave U.S. EPA authority to devise annual gallon numbers to meet a 36-billion-gallon goal by 2022 — but has been repeatedly challenged in court. Policy and economic factors, like lower gas consumption due to vehicle efficiency standards coupled with a domestic oil glut, have also shaken the underlying assumption that biofuel use would need to increase with rising gasoline demand.

EPA, the administrator of the RFS, dealt the industry an unexpected blow last month when it announced it would not release the final biofuel volume obligations for 2014 this year — a rule that should have been finalized in late 2013 (Greenwire, Nov. 21).

The report, which seeks both regulatory and legislative fixes to the program, was panned by the polarized players in the debate — the biofuel and petroleum industries.

The Advanced Ethanol Council and Biotechnology Industry Organization, two associations that have actively pushed for the preservation of the RFS, said the process was tainted by oil interests. In a statement, they ask policymakers to “take a hard look behind the curtain on the BPC report.”

“Key leaders in the advanced biofuel sector sat out the process because participants were required to stipulate to a predetermined outcome sought by the oil industry — that the RFS is not working and needs to be reformed by Congress,” they stated. “With the report’s recommendations now in hand, the oil industry’s influence over the process is even clearer.”

According the two associations’ statement, the legislative modifications in the report are the same as those sought by the oil industry in 2005 and 2007. Although the recommendations seek to promote the commercial development of advanced biofuels, “the core legislative recommendations would give the oil industry control over the trajectory of the RFS,” they write.

While petroleum companies have criticized the RFS for imposing unworkable requirements on the industry, it’s also one of the biggest investors in advanced biofuels, fuels that do not need to be blended with gasoline and do not rely on food crops like corn. Oil companies have poured in nearly $10 billion since 2005 to develop advanced fuels, according to a 2013 Bloomberg New Energy Finance report.

Biofuel interests were reluctant to join BPC’s effort early on. An email obtained by E&E Daily in May indicated that the absence of biofuel interests skewed the process on the side of the oil industry (E&E Daily, May 23).

The Renewable Fuels Association, one of the trade groups for the ethanol industry, denounced the report’s suggestion that the RFS needs any legislative reform.

“When Congress passed the RFS in 2007, it provided unprecedented flexibility to the Environmental Protection Agency that could be used to address some of the concerns raised by the Bipartisan Policy Center (BPC). Given this flexibility, BPC must understand that legislative action to reform the RFS is not the answer,” the Renewable Fuels Association said in a statement.

The American Petroleum Institute, whose members were not part of the advisory board, broadly panned the report for suggesting anything short of a repeal.

“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,” said API spokesman Carlton Carroll in an email. Carroll did not comment on AEC and BIO’s claims of influence.

The advisory group that put together the report represented views from across the policy spectrum, from the American Petrochemicals and Fuels Manufacturers and Shell Oil, to environmental and scientific groups like the Natural Resources Defense Council and the Union of Concerned Scientists, to biofuel manufacturers like KiOR and Amyris, to Toyota Motor North America.

Recommendations were made on both the production and consumption side of biofuels.

For producers, EPA should seek to quantify the value of biofuels through more than just energy density of the fuel but also rural development benefits and greenhouse gas cutting benefits, said the advisers. The report also calls on EPA to push new biofuel technologies, or pathways, through approval, given that the environmental impacts are accounted for.

“While you do want to expedite technology pathways, you want to make sure you don’t sacrifice environmental performance,” it said.

BPC also offered a nod to small engine manufacturers who say that ethanol ruins boat, motorcycle and power tool motors. One of the recommendations suggests that EPA include E0 — gasoline with no ethanol — in the annual renewable volume obligations.

One recommendation also requests a recalculation of EPA’s greenhouse gas emissions assessments, a point that corn ethanol producers say keep them at a disadvantage to imported Brazilian sugarcane ethanol, which has a smaller carbon footprint.

The report calls for several changes in EPA’s renewable identification number (RIN) program, a credit-trading scheme that has fostered fraud in the biofuel market.

In comparison to production, factors to change the consumption side “tend to be outside of the RFS program,” said McKee, including efforts to boost exports and increase the number of flex-fuel vehicles — which can take up to 85 percent ethanol blends — on the road.

The recommendations draw from a number of requests over the years from opposing sides of the RFS debate and “don’t reflect the consensus of the advisory group,” McKee said.

Not all biofuel groups criticized the report. The Advanced Biofuels Association thanked BPC and the advisory group “for their thoughtful, objective suggestions” on Twitter.

Rosemarie Calabro Tully, a spokeswoman for BPC, said the organization pursued input from “other stakeholders” in the biofuels sector at various points during the process. They refused.

“Some stakeholders did not agree with our project scope — ways to improve the Renewable Fuel Standard without repealing it — taking the position the program does not need any changes. We disagree, believing that many recognize that the RFS program is in need of some reforms to more effectively accomplish its mission and objectives,” she wrote in an email.