Renewables group jumps ahead of Senate hearing to dispel RFS myths, as House panel sets more discussion

Source: Laura Barron-Lopez, E&E reporter • Posted: Tuesday, July 16, 2013

Members of a coalition dedicated to protecting the renewable fuel standard, Fuels America, were quick to attempt to dispel myths about the relationship between soaring gas prices and renewable fuel policies that they expect to hear from businesses testifying before the Senate Energy and Natural Resources Committee today.

At the same time, a House Energy and Commerce subcommittee last night announced it would hold a hearing next week on the renewable fuel standard.

The Senate panel is set to explore variables in U.S. oil and gas prices as ways of producing and transporting fuels change amid shifts in the nation’s energy industry (E&E Daily, July 15).

“We fully expect some of the businesses [today] to blame biofuels and the renewable fuel standard for the higher fuel prices that we are seeing — that, of course, is utterly ridiculous,” said Geoff Cooper, vice president of research and analysis at the Renewable Fuels Association, on a conference call yesterday. “Ethanol is reducing, not increasing, gas prices for consumers.”

In the past few weeks, gas prices have jumped from 25 to 30 cents per gallon, the highest seen in a little over a month. Since the Energy Independence and Security Act of 2007 increased the RFS — the requirement placed on fuel refiners, blenders and importers to blend transportation fuels with renewables — ethanol has been cheaper than gas at the wholesale level, Cooper said. The difference in cost between the two fuels reached 67 cents per gallon Friday, the highest it has been in the past three months.

“Blending less expensive ethanol with more expensive gasoline is going to result in lower prices for a blended product at the pump,” Cooper said.

But Cooper expects oil companies will claim at the hearing today that the RFS drives up gas prices.

Chris Plaushin, director of federal relations for AAA, will likely note that automakers have little, if any, interest in the use of a higher-level RFS — but that just isn’t accurate, Cooper insisted.

Roughly 15 million flex-fuel vehicles on the road today are capable of using up to 85 percent ethanol, he said.

The back and forth between interested parties and policymakers on setting concrete renewable fuel standards is the primary reason startup companies like California-based NexSteppe can’t attract serious investors, said Anna Rath, founder and CEO of the 3-year-old company.

The company, backed with venture capital funds, hopes to be the “next step” in an expanding biofuels marketplace through the cultivation of specific crops designed for such an end-use.

NexSteppe’s crops, Malibu sweet sorghum and Palo Alto sorghum, have taken off in Brazil but aren’t finding the same traction in the company’s home country.

“The big distinction between what’s happening in Brazil and what’s happening in the U.S. is that in Brazil, they have very clear and very well-defined and favorable policy aimed at advanced and cellulosic biofuels,” Rath said, “whereas in the U.S., with all of the attacks on the RFS, there is a lot of policy uncertainty, which makes it very difficult for people to make the kind of large investments necessary to really build infrastructure and begin producing these advanced biofuels.”

The attacks on RFS are counterintuitive when one investigates the catalyst for higher gas prices, said Ann Korin, co-director of the Institute for the Analysis of Global Security, a think tank focused on energy security.

Korin blamed the Organization of the Petroleum Exporting Countries, calling it the big elephant in the room on the matter of increasing gas prices.

OPEC, which sits on three-quarters of the world’s oil reserves, continues to produce roughly the same amount of fuel it did 40 years ago, jumping from 30 million to 35 million barrels per day. And that is the reason oil prices are high, Korin added.

Whether or not the Senate panel will delve as deeply into RFS issues as Fuels America expects, it is certain to raise questions about the Keystone XL oil pipeline and whether it may offer a solution to the nation’s fuel refining and transportation needs (see related story).

 House hearings

Meanwhile, the Energy and Commerce Energy and Power Subcommittee will continue its exploration of the RFS with a two-day hearing next week.

Next week’s hearing follows a June 26 subcommittee hearing that reviewed government implementation of the RFS and also comes on the heels of the committee’s release of a series of bipartisan white papers examining a range of emerging concerns with the current statute. The two-day hearing will feature testimony from three panels of stakeholder witnesses including fuel users, developers and representatives from the agricultural and environmental communities.

“The renewable fuel standard is a broad and complex statute that affects several different sectors of our economy. I’ve met with stakeholders on all sides of the issue, and I believe now is the time to take an in-depth look at the RFS and compare our original expectations for the program with the actual experience,” said subcommittee Chairman Ed Whitfield (R-Ky.).

The subcommittee will convene at 10 a.m. on July 23 for the first two panels and will reconvene on July 24 at 1:30 p.m. for the third panel.