House committee hearing aims to perform "check-up" on RFS
The U.S. House of Representatives Energy and Commerce Committee’s Energy and Power Subcommittee held a hearing June 26 on the renewable fuel standard (RFS). The hearing, titled “Overview of the Renewable Fuel Standard: Government Perspectives,” featured testimony from representatives of the U.S. Energy Information Administration, the USDA and U.S. EPA.
In his opening statement, Energy and Power Subcommittee Chairman Ed Whitfield, R-Ky., said the hearing aimed to compare original expectations for the RFS with actual experiences. “I think we’ll find that in some respects the RFS is going well, but in others there are emerging issues and room for improvement,” he said. “The landscape has changed significantly since the RFS was last revised in 2007. Indeed, there is a long list of energy policy assumptions back then that differ greatly from the realities of 2013.”
Energy and Commerce Committee Chairman Fred Upton, R-Mich., noted that this is the subcommittee’s first hearing specifically devoted to the RFS since 2007. “The purpose of this initial hearing is essentially to perform a check-up on the RFS – what has gone according to plan and what has not,” he said in his opening statement. “No policy is perfect, especially one that is now more than five years old. It’s time to assess the RFS in light of what we now know.”
Adam Sieminski, administrator of the EIA, opened his testimony by noting that his office does not project the RFS will meet the legislative targets set through 2022. This is not a new or surprising finding, he said, as the EIA has long indicated that the EPA would need to apply the flexibility provided in the law to reduce requirements for cellulosic, advanced and total biofuels from their legislatively-specified targets. The latest edition of the EIA’s Annual Energy Outlook shows a shortfall of 17 billion credits by 2022. Sieminski said that shortfall, projected primarily in the category of advanced biofuels, would improve in later years as the use of biofuel increases.
In his testimony, Sieminski also pointed about that the use of biofuels can only substantially increase if they can be used in forms other that the low-percentage blends of ethanol and biodiesel that account for nearly all current use. He described three basic ways this issue can be overcome. The use of higher ethanol blends can be increased, drop-in biofuels can be used, and new renewable fuel components, such as biobutanol, could potentially be used more easily in higher blends.
Ethanol, Sieminski said, plays three distinct roles in the motor fuels market. It serves as an octane enhancer, a volume source and a provider of energy content. While ethanol has achieved considerable market success in the first two roles, the third presents an economic hurdle, he continued. Sieminski also noted that although much of the wholesale fuel distribution infrastructure is capable of handling ethanol, changes are needed in retail infrastructure to enable the sale of higher blends. Sieminski’s testimony also addressed renewable identification numbers (RINs) and lower projected consumption levels for transportation fuels.
Joseph Glauber, chief economist at the USDA, opened his testimony by explaining any increase in farm prices for corn and soybeans due to increased biofuels production has likely had only a small effect on U.S. retail food prices. Rather, he said the rise in commodity prices over the past few years has been due to a variety of factors, including increasing global demand, production shortfalls due to droughts, and increasing energy prices.
While many studies have tried to evaluate the impact macroeconomic factors and state and federal policies have had on the expansion of the biofuels industry, Glauber noted that with a large production capacity already in place, a more relevant question today might be what the effect of adjusting biofuels policies might be.
Many analyses last year examined petitions to waive the RFS submitted to the EPA by state governors. These analyses determined that the impact of a short-term waiver is likely to be small. In addition, Glauber said that the impact of a longer-term waiver would depend on ethanol prices. So long as ethanol is priced lower than gasoline, it is unlikely there would be much reduction in ethanol usage from current levels, he continued.
Glauber also stressed that the growth of the ethanol industry has brought jobs to rural America and has contributed to economic growth.
In his statement, Christopher Grundler, director of the EPA’s Office of Transportation and Air Quality’s Office of Air and Radiation, provided hearing attendees with an overview of the RFS and how the EPA sets specific volume requirements for each compliance year. He also spoke about the process EPA undergoes to evaluate and qualify new biofuel pathways.
Grundler noted that both ethanol and non-ethanol biofuels can be used to meet the RFS volume requirements, but that ethanol will likely continue to be the predominant fuel in the market for the foreseeable future. The EPA will continue to consider the potential impacts of the E10 blend wall over the near-term and longer term, continued.
Growth Energy has spoken out in response to the testimony presented at the hearing. Tom Buis, CEO of Growth Energy, said Glauber’s testimony “validates what we in the biofuels industry have been saying since the RFS was enacted—that the production of biofuels does not have any substantive correlation with the rising cost of food prices.”
The Fuels America coalition called the hearing a reminder that the renewable fuels industry is already making a positive impact on our nation’s transportation fuel sector and benefitting Americans. “Renewable fuel displaced 462 million barrels of imported crude oil in 2012 and reduced greenhouse gas emissions from on-road vehicles by 33.4 million tons,” said the group.
The American Coalition for Ethanol said that while several members of the committee put forth the notion that “times have changed” since the RFS was expanded in 2007 and the U.S. no longer has an foreign oil dependence problem, the idea that the U.S. has kicked its addition to foreign oil is not based in fact. “Last year’s 14 percent increase in domestic oil production is good for energy security, but it’s a drop in the bucket when it comes to foreign oil dependence,” said Brooke Coleman, executive director of AEC. “The United States provides about 8 percent of the world’s oil, we are again on pace to spend more than $400 billion on foreign oil in 2013, imports from the Persian Gulf and Saudi Arabia were up (not down) in 2012, and this supposed oil renaissance has done nothing to reduce the price of a gallon of gasoline for American consumers or the U.S. economy as a whole.”
Additional information on the hearing is available here.