Biofuel leaders advocate for RFS during day 1 of House hearing

By Erin Voegele | July 23, 2013

The House Energy and Commerce Committee Subcommittee on Energy and Power is holding a two-day hearing on the renewable fuels standard (RFS), titled “Overview of the Renewable Fuel Standard: Stakeholder Perspectives.” The hearing kicked off July 23 with two panels featuring a total of 11 experts offering written and verbal testimony.

In his opening statement, Rep. Ed Whitfield, R-Ky., noted that the two-day hearing is the next step in the committee’s evaluation of the RFS, which has been ongoing throughout the year. The evaluation began with a series of white papers that were published to solicit input from interested stakeholders on all major aspects of the program. In addition, a hearing held in late June focused on testimony from government agencies that are tasked with implementing the RFS, including the U.S. EPA, USDA and U.S. Energy Information Administration.

“Despite the differing points of view from which stakeholders come to this issue, it is my hope that with today’s hearing we can start a process of consensus building on a path forward for the RFS. This includes potential adjustments to the RFS that align the program with current energy realities,” said Whitfield in a prepared statement. “Many businesses and many jobs are at stake - from corn farmer to refinery worker to gas station employee to lawnmower maker to ethanol plant worker. And, just as important, the interests of consumers are directly impacted by the RFS. The end goal of this process is an RFS that works as best as possible for everyone.”

Rep. Fred Upton, R-Mich., also delivered an opening statement, noting that fuels and vehicles operate as  system, and he thinks there is a need for an RFS that works within that system, given the changing dynamics of the current CAFE compliance system. “In my view, the current system cannot stand. I hope we can start a discussion that considers a host of potential modifications and updates to the RFS, with the end goal being a system that works best for the American people,” he said in a written statement. “To do that, we need everyone to come to the table with a commitment to listen and to be constructive. I welcome all proposals to improve the system and look forward to hearing ideas from today’s witnesses. I am especially looking forward to hearing what each stakeholder is willing to bring to the table to fix the current system. I am absolutely committed to ensuring we deliver workable reforms.”

The first panel of the day focused on the impact of the RFS on fuel production and featured testimony from representatives of the American Petroleum Institute, American Fuel & Petrochemical Manufacturers, the Renewable Fuels Association, the Advanced Biofuels Association, and the Union of Concerned Scientist. The second panel focused on fuel sales and use, and featured testimony from representatives of Growth Energy, The Alliance of Automobile Manufacturers, Briggs & Stratton Corp., AAA, the Society of Independent Gasoline Marketers of America and National Association of Convenience Stores, and the National Biodiesel Board. The third panel, scheduled to testify during the afternoon of July 24, is expected to focus on the agricultural sector and food supply.

In his testimony, Jack Gerard, president and CEO of the API, called the RFS well-intentioned, but untethered from reality. Unless the program is repealed, he said it would cost the economy and consumers billions of dollars, offering the recent increase in renewable identification numbers (RINs) as an example.

Charles Drevna, president of AFPM, also offered testimony on behalf of the oil industry. In written testimony, the organization put forth an argument that RFS implementation is flawed in that it makes fuel manufacturers responsible for consumer fuel demand by mandating how much biofuel must be consumed and putting the responsibility of obligation on upstream fuel manufacturers that don’t control blending or retail operations. Drevna also spoke of RIN prices, the blend wall and E15.

On the biofuels side, Bob Dinneen, president and CEO of the RFA, stressed that by virtually any measure, the RFS has been an unmitigated success by reducing our dependence on imported petroleum, stimulating investment in new technologies and reducing gasoline prices.

In his testimony, Dinneen offered data from several studies that have determined that ethanol lowers the price of fuel at the pump. He also highlighted the role of biofuels in increasing demand for agricultural products and enhancing farm income.

During a question and answer period following witness testimony, Dinneen disputed the argument set forth by Big Oil claiming that refiners that don’t have downstream blending opportunities can’t access RINs. “These companies have more market power than anybody in the universe,” he said. “And, in their contract negotiations they can make sure that the RINs are returned to then for ethanol that is blended with gallons they are providing.”

Michael McAdams, president of the ABFA, offered testimony on the blend wall, noting that the 500 million gallon mismatch of ethanol use in the gasoline pool that constitutes the blend wall represents 3.3 percent of the entire U.S. renewable fuels industry and less than 0.2 percent of the U.S. fuel market. “Calling for the full repeal of the RFS over a short-term issue impacting less than 1 percent of all fuels we use doesn’t make a lot of sense as a public policy issue,” he said in written testimony.

McAdams also stressed that the ongoing debate over the RFS is having a chilling effect on the investment community, restraining the growth and ability of advanced biofuel companies to move forward.

Responding to a question from a committee member, McAdams also noted that there has been a misconception that only ethanol can meet the D6 renewable fuel volume pool set by the RFS. While that pool was originally created with the corn ethanol industry in mind, McAdams said that the price in D6 RINs has actually encouraged some renewable diesel and biodiesel to come into the D6 pool. In addition, he noted that there are a variety of drop-in biofuels that can take the pressure off the blend wall moving forward. McAdams also warned that the firestorm of controversy around the RFS has resulted in negative impacts for advanced biofuel developers, making it more difficult to secure financing.

The second panel included testimony from Tom Buis, CEO of Growth Energy. In his written statement, Buis stressed the positive impacts the RFS has achieved in cracking the monopoly of petroleum-based fuels in the U.S. transportation system, providing a template to get fuel blends like E15 into the marketplace, lowering the price at the pump and supporting jobs and economic activity. “These are real, tangible results that benefit every American today. But if some of the panelists had their way, we would throw all of this progress away so the oil industry can shut out competition and maintain its grip on the wallets of American drivers,” he said in his written testimony.

When asked why the cellulosic industry has been so slow to develop, Buis pointed to the fact that legislation expanding the original RFS program into its present form didn’t pass until 2007, shortly before the major economic downturn took hold in 2008. During the downturn many investors and lenders sat on the sidelines, he said. That situation has been improving over the past year, he said, as significant investments in biofuel have been made. He also stressed that the blend wall contributed to slow growth in the cellulosic ethanol industry by chilling investor interest.

Joe Jobe, CEO of the NBB, offered two key messages in his testimony: the advanced biofuel and biomass-based diesel components of the RFS are working, and with help from the RFS, biodiesel is reducing prices at the pump. During the hearing, Jobe also spoke about the primary goal of the RFS, which he said is to diversify the fuel supply. “If we can make the transportation fuel supply look more like the power generation supply, make it more diverse, more domestically abundant, then we can really bring transportation fuel prices down,” he said. “That is going to have the biggest impact on the economy.”

Additional information on the hearing, including written testimony, can be accessed here.