Gridlock in D.C. may give edge to renewables

Source: Written by CHRISTOPHER DOERING, Des Moines Register • Posted: Monday, July 2, 2012

While oil and natural gas spend far more on lobbying, several factors are hindering a big shift in energy policy.

WASHINGTON — Big oil and natural gas companies vastly outspend and outman the renewable fuels industry on Capitol Hill, but the general gridlock in Washington gives advocates of wind, ethanol and other new-age sources an edge in the growing battle to overhaul U.S. energy policy.

“This Congress seems unable to make a national energy policy,” said Bruce Babcock, an Iowa State University economist. “The renewable fuels have an advantage in that they are part of current law, and it’s always easier to maintain current law than it is to change it.”

Among the factors that would make a major shift of U.S. energy policy difficult are the upcoming elections, the inability of lawmakers to reach a consensus on how to change the policy, and the high costs necessary to expand consumer access to fuels such as natural gas at U.S. filling stations.

That hasn’t stopped the oil industry from aggressively wooing congressional lawmakers on hot-button issues, including lobbying against renewable fuels.

Last year alone, ConocoPhillips, Royal Dutch Shell, Exxon Mobil, Chevron and the American Petroleum Institute, the trade group that represents 500 oil and natural gas companies, used $66.2 million for lobbying efforts, nearly 44 percent of the $150 million total spent by the oil and gas industry, according to data compiled by the Center for Responsive Politics. Collectively, nearly 800 lobbyists worked on behalf of oil and gas interests in 2011.

That total towers over the $53 million spent by what the center classifies as the “miscellaneous energy” industry — which counts the Renewable Fuels Association, Growth Energy and the American Wind Energy Association as its members. The grouping includes 751 lobbyists.

Despite the huge financial disadvantage, renewable fuels groups remain unconvinced that the public relations push by the fossil fuel industry will be enough to get lawmakers in Washington to act.

“I think what you’re seeing out here over the past couple of years is the oil industry has tried to run up the negatives on any type of renewable energy,” said Tom Buis, head of Growth Energy, which represents ethanol producers. “They’ve pushed real hard on the political front and certainly on the advocacy front.”

Buis said the deep financial pockets of API and its members have placed his industry at a “significant disadvantage.”

“You have to compete for the attention of the American public and the policymakers and others, and unfortunately, they have unlimited resources to do that,” he said.

A spokesman with API downplayed the notion of an energy industry feud.

“We do not consider the renewable fuels industry as a threat at all,” said Carlton Carroll, who touted his industry’s investments in renewable fuels such as wind and solar. “We need all forms of energy going forward, including renewables.”

Still, ExxonMobil and other oil companies have fought against the Renewable Fuel Standard, which in 2007 required that at least 10 percent of the U.S. gasoline supply come from biofuels, and the Environmental Protection Agency’s approval of E15, a blend of 15 percent ethanol and 85 percent gasoline. E15 was given the go-ahead for sale at U.S. fueling stations in June.

The API has spoken out against the EPA’s decision, saying its enthusiasm for E15 clouded its judgment and that it approved the fuel “prematurely” before sufficient research had been conducted.

Geographic factors drive energy policy

Any action by Congress to end or alter the Renewable Fuel Standard or to allow existing subsidies for wind to expire at the end of this year would hobble the industry.

It also would batter states such as Iowa that have thousands of jobs and millions of dollars invested in the sector.

The Renewable Fuel Standard has been a financial boon to the Iowa economy, creating jobs and helping to prop up corn prices. The measure, which will require 36 billion gallons of renewable fuels to be used in 2022, up from 9 billion in 2008, has been central to helping shape Iowa’s more than $20 billion renewable energy industry and making it a major financial force for the state’s economy.

This year alone, the standard requires the use of 13.2 billion gallons of alternative fuels, with most of it coming from corn. Iowa is the nation’s largest ethanol producer, with 41 plants that in 2011 produced about 3.7 billion gallons.

The surge in natural gas production in the United States, which has resulted in record low natural gas prices, poses a major threat to renewable energy.

Natural gas prices fell to a 10-year low of $1.902 per million British thermal units twice earlier this year. But since the April low, market prices have increased 45 percent to about $2.75 per million British thermal units, reflecting strong demand from utilities and unseasonably warm temperatures across much of the country.

In addition to creating a new threat to renewable fuels, the surge in new oil and natural gas production further highlights the geographical and political division between grain-dependent biofuel states in the Midwest versus the fossil fuel juggernaut of Texas.

“You always have geographic concerns. Texas is a big oil state,” Buis said. “I don’t think we’re going to win over too many people in that state, but if you look at the policy, Congress hasn’t changed the policy, and I don’t think they will.”

“There will be attempts (to roll back the Renewable Fuel Standard) by the same people who didn’t support it originally, probably the industry that starts with O and ends with L, but I think it will prevail,” he said.

Texas, Iowa share interests in wind

Iowa’s wind energy network has nearly 4,500 megawatts of electricity generation capacity and produces about 25 percent of the state’s electricity, according to the Iowa Wind Energy Association. A federal wind energy tax subsidy is set to expire at the end of this year, and it remains uncertain whether Congress will renew it.

The American Wind Energy Association, which has pushed for not only a renewal of the Production Tax Credit but also a long-term extension, has warned that a failure to renew it could result in the loss of 37,000 U.S. jobs.

The tax credit provides a 2.2-cent-per-kilowatt-hour benefit for electricity generated from utility-scale turbines during the first 10 years of a facility’s operation.

The association said low natural gas prices are unlikely to hurt the chance for the renewable tax credit to be extended.

“The Production Tax Credit remains popular and has bipartisan support, but the issue with everything in Washington is gridlock, so as soon as there is a tax vehicle, a piece of legislation that moves, we’re confident it will be included,” said Rob Gramlich, a senior vice president with the association.

With wind energy, Texas and Iowa are on the same side. Gramlich is optimistic the wind industry could help buffer itself from potential attacks by taking advantage of the fact that Texas is the largest wind producer, and Iowa is second.

Rep. Gene Green, D-Texas, supports the wind credit but openly admits he’s “not a big proponent of ethanol” because of its role in raising the price of corn.

Green, whose Houston district includes several refineries and oil and gas companies, said the United States needs a diverse energy mix that includes wind, solar and nuclear energies, along with natural gas and oil.

“It will probably happen after the election,” said Green of the wind credit renewal. “I think there is broad support in Congress for wind, and it cuts across party lines because of geography.”

Sen. Tom Harkin, D-Ia., painted a far more pessimistic picture on whether the wind tax credit will be extended.

“People are so intent on cutting everything that it’s going to be hard on getting these production credits,” he said, “even though I think they work and they do good things for renewable energy development.”

Renewables’ future? ‘Miles ahead of us’

Agriculture Secretary Tom Vilsack, who benefited from the torrid growth in the renewable fuels industry as Iowa’s governor during the last decade, said U.S. energy policy needs to be a “25-, 35-, 45-, 50-year thing.” But the political climate, he said, results in energy policy being crafted in a much narrower time frame, increasing the need for the country to depend on a diverse basket of energy sources to quench its energy demand.

Vilsack touted the work done by the Obama administration to reduce the country’s dependence on foreign oil — now at 45 percent, down from 62 percent in early 2009. A major part of that drop resulted from the Renewable Fuel Standard, which was adopted in 2007, a provision Vilsack said “has to stay as part of the country’s energy policy.”

“There’s a battle (between the Midwest and Texas) because people are saying, ‘Well, we’ve got natural gas and oil,’ ” Vilsack said. “As the president likes to say, ‘It’s all of the above. There is no single silver bullet.’ ”

“The biofuels’ best days are clearly not in the rear-view mirror,” he said. “We’ve got miles ahead of us.”