Panel concedes RFS reform unlikely this Congress 

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, February 25, 2015

GRAPEVINE, Texas — Reform of the renewable fuel standard is doubtful this Congress despite ongoing difficulties with setting annual targets under the program, a panel of both biofuel proponents and critics of the RFS said last week at an annual gathering of ethanol producers.

The panel generally said the chances for a successful reform package are slim, given congressional gridlock and political calculations surrounding the 2016 elections.

The odds are low even with Sen. James Inhofe (R-Okla.) atop the Senate Environment and Public Works Committee, said John Eichberger, vice president of government relations at the National Association of Convenience Stores. Neither Inhofe — who has been a vocal critic of the nation’s biofuel policy — nor his counterpart in the House, Energy and Commerce Chairman Fred Upton (R-Mich.), has listed the RFS as a top priority this Congress.

“It’s not going to happen. They’re not going to be able to do anything,” Eichberger said. “I think Sen. Inhofe has always been a loud critic of the RFS. I think that will continue, and from his position, he’ll be able to make a lot of noise.”

Eichberger added, “He may have a lot of hearings, but in terms of mustering the votes to make significant changes, I think the only thing that could potentially precipitate Congress to take action and make changes to the RFS is an economic situation.”

Brooke Coleman, executive director of the Advanced Ethanol Council, likewise said chances are dim. “The political math is not clear and is muddier this year,” she said.

Congress passed the renewable fuel standard in 2007 to require that the nation incorporate 36 billion gallons of biofuels a year into petroleum fuel by 2022. Supporters of the RFS say it lowers the transportation sector’s greenhouse gas emissions and promotes energy independence, but opponents say the increased ethanol production brought on by the RFS has had a negative impact on food prices, car engines, the environment and the livestock industry.

Cellulosic biofuel, or fuel made from plant-based materials other than corn, has also consistently come in far below the levels that Congress laid out in 2007.

The RFS has come under intense scrutiny in the last few years, due in part to drought and to concerns raised by the oil industry about the blend wall, or the maximum amount of ethanol that the market can handle in the short term. But while RFS critics have thrown many reform packages at the wall, so far none of them has stuck.

Earlier this year, an amendment to legislation to approve the Keystone XL pipeline that would have eliminated the corn ethanol portion of the RFS failed to receive a vote.

In a panel last week at the Renewable Fuels Association’s National Ethanol Conference here outside of Dallas, stakeholders said they didn’t expect much to change.

Jon Doggett, executive vice president of the National Corn Growers Association, said he was concerned that legislation similar to the Keystone XL amendment proposed by Sens. Pat Toomey (R-Pa.) and Dianne Feinstein (D-Calif.) could make a reappearance, but that the chances of it passing are slim.

Ethanol proponents, he said, have enough of a majority to vote down procedural motions that would allow similar legislation to move forward.

Biofuel proponents also believe that the upcoming 2016 elections will play in their favor.

“If you look at 2016, you have tremendous exposure for the Republican Party in agricultural states because ethanol is a huge part of GDP in those states,” said Coleman of the Advanced Ethanol Council. “A couple dozen senators are up in the Republican Party, and it’s going to be hard for [Majority Leader Mitch McConnell of Kentucky] and the leadership to justify going after the RFS.”

Bob Greco, downstream director for the American Petroleum Institute, still expressed optimism last week that RFS reform could happen and receive bipartisan support. He was the lone member on the panel who did not immediately shoot down the possibility of reform this Congress.

While API has supported reform efforts, the oil industry trade group has said that its ultimate aim is full repeal of the RFS.

“I think we’re going to see a Senate that at least is having debates and taking votes,” Greco said. “I’m not sure how that’s going to play out, but we did not have that previously.”

The comments on the panel last week come as U.S. EPA continues to grapple with where to set the annual targets under the RFS after failing to complete a rule establishing the mandates for 2014. The agency had proposed to significantly scale back refiners’ required levels of biofuels, but then pulled back on the rule after facing a deluge of criticism by biofuels supporters and opponents alike. By law, EPA should have finalized the targets by Nov. 30, 2013.

Last week, EPA Office of Transportation and Air Quality Director Christopher Grundler laid out plans for the agency to propose three years’ worth of targets this spring to get the program “back on track,” but the rulemaking is expected to be highly controversial (Greenwire, Feb. 20).

Shane Karr, vice president of government affairs at the Alliance of Automobile Manufacturers, said EPA’s actions in the three-year rulemaking will likely influence reform efforts, but that it is unclear yet what impact they will have.

“It’s going to depend a lot on what EPA does this year, as to whether or not momentum comes back,” Karr said. “EPA effectively killed whatever momentum there was in the last Congress” through its proposal.

Earlier this month, a bipartisan group of House members introduced an RFS reform package that would eliminate corn ethanol from the requirements of the RFS, cap the amount of ethanol that can be blended into petroleum gasoline and compel EPA to set cellulosic biofuel targets based on actual production.

Supporters of that legislation said EPA’s plan for a rulemaking this spring and its continuing difficulties in deciding where to set the annual targets are just another signal that the policy needs to be adjusted to reflect today’s declining gasoline demand. They say refiners are pushing up against the so-called ethanol blend wall.

“The data the original mandates were based on dealing with gasoline consumption are critically out of touch with market realities, and now one set of the [renewable fuel targets that] EPA is releasing regulate a year that closed out two months ago,” Nicole Wood, a spokeswoman for marine trade group BoatUS, said in an email. “I’m not sure how much more evidence is needed to declare this policy reform a priority for this Congress.”