Comments on Impacts of RFS

The House of Representatives Committee on Energy and Commerce is issuing a series of white papers as the first step in reviewing the Renewable Fuel Standard (RFS). Each white paper poses a series of questions on the pitfalls of the RFS to stakeholders in affected sectors.

From skyrocketing RIN prices to engine damage, land-use competition to higher animal feed costs and feeding the world’s hungry, organizations are dealing with the effects of this government boondoggle every day.

Below, you can read the comments on the first two white papers and check back as we update for each white paper issue area.

Paper 1- Blend Wall / Fuel Compatibility Issues

• American Fuel and Petrochemicals Manufacturers Comments
• Institute for Energy Research Comments
• Competitive Enterprise Institute Comments
• EPRINC Comments
• Clean Air Task Force Comments

Paper 2- Agricultural Sector Impacts

• American Fuel and Petrochemicals Manufacturers Comments
• National Chicken Council Comments
• Competitive Enterprise Institute Comments
• ActionAid Comments
• American Frozen Food Institute Comments
• National Turkey Federation Comments
• Advanced Economic Solutions Comments
• Grocery Manufacturers Association Comments
• FarmEcon, LLC Comments
• National Council of Chain Restaurants Comments
• National Restaurant Association
• New England Complex Systems Institute Comments

ActionAid: Drive Aid

Opposition for biofuels stretches across the globe.

In the video above, Action Aid UK calls attention to the folly of burning our food for fuel.

In 2011, the United States—the world’s largest food exporter—converted 40 percent of its corn crop into fuel in order to satisfy the Renewable Fuel Standard (RFS). In fact, the total amount of ethanol produced in the United States in 2011 was 13.95 billion gallons, enough to feed 570 million people that year. This practice of converting food into fuel drastically restricts global corn supply, and continues to have real consequences for the 1.2 billion people around the world living on $1.25 or less per day.

Sign our pledge to demand change. 

The Dangers of E15: What You Need to Know

In the video above, Jim Currie of the National Marine Manufacturers Association, a Smarter Fuel Future partner, discusses the dangers of E15.

E15 is a blend of fuel containing 15 percent volume ethanol and 85 percent volume gasoline. While E10 has been proven to be a safe and reliable gasoline for more than 20 years, the same cannot be said about E15. Despite this reality, EPA approved E15 for sale into the general gasoline pool for vehicles made in and after 2001.

Numerous studies show that gasoline blends containing more than 10 percent ethanol can cause engine damage in boats, cars and smaller engines including chainsaws, lawnmowers, and snowmobiles. As a result, vehicle manufacturers have warned that the use of E15 will void warranties, leaving consumers vulnerable to expensive repair bills.

Politico: Delivering ‘Big Ethanol’ a reality check on RINs

Charles Drevna, April 25- The adverse impacts of the Renewable Fuel Standard on consumers, a range of industries and the environment are becoming increasingly apparent to lawmakers and Americans across the nation. In response, the corn ethanol lobby is shouting propaganda in an attempt to divert attention from its faulty information and brittle arguments — most recently evident in an April 17 (“Setting the Record Straight on U.S. Gas Prices”) POLITICO op-ed.

But it is time for Big Ethanol to have a reality check.

Renewable Identification Numbers — credits managed by the EPA to determine compliance with ethanol blending requirements — are not free, as ethanol lobbyists inanely claim. If RINs are free, why did market analysts put out the warning on March 13 that RIN prices have skyrocketed from less than a penny a gallon for ethanol in late 2012 to more than $1 a gallon, significantly increasing the cost of RFS compliance for U.S. refiners in 2013?

Keep in mind that ethanol producers have no obligation to supply their product under the RFS mandates; their limited responsibility in this process entails attaching a RIN to each gallon of biofuel they produce. Refiners and importers, on the other hand, are obligated to demonstrate to the EPA that they’ve blended the RFS-mandated volumes of ethanol into gasoline, or obtained sufficient RINs if they’ve reached the point at which their fuel cannot hold any more ethanol (due to lack of consumer demand and the constraints of infrastructure). When refiners and importers have reached this ethanol maxing-out point, or “blend wall,” they have to buy those RINs on the open market — but they’re not the only entities buying and selling.

Marketers who buy the base gasoline from refiners and importers and combine it with ethanol receive those ethanol RINs. These marketers have no obligation under the RFS and are free to sell the RINs on the open market or directly to obligated parties.

In addition to the “free RINs” sham, the ethanol lobby touts that corn ethanol is lowering gasoline prices, but they fail to account for the fuel’s lower energy content. Perhaps they’re simply not aware that ethanol contains 33 percent less energy per gallon than gasoline contains. Vehicles fueled with ethanol cover fewer miles per gallon than those running on conventional gasoline, meaning that if more ethanol makes its way into gasoline, consumers will be filling up their vehicles more often. Furthermore, when adjusted for this energy difference, AAA’s fuel gauge report shows E85 is more expensive than gasoline. On Friday, April 19, for example, nationally energy adjusted E85 at $4.13 per gallon was running 62 cents per gallon higher than regular gasoline, which averaged $3.51 per gallon.

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Energy Townhall: MURPHY: Ethanol Proponents Mislead on Gas Prices

Robert Murphy, April 22- In their recent op-ed on the ethanol mandate and gas prices, Tom Buis and Bob Dinneen greatly misled Politico’s readers with both contradictory claims and withholding crucial facts. Both the government’s own analysis and common sense tell us ethanol mandates are costly. The way to bring down gas prices is less government interference, not more.

The reader doesn’t need a PhD in economics to see the smoke and mirrors in the Buis and Dinneen piece. Early on, they claim that Renewable Identification Number (RIN) credits for ethanol are “free,” and that they were “created at the oil companies’ insistence.” Then in the very next sentence they say that early this year “the price of RINs rose dramatically,” and later in their op-ed state that petroleum industry trade groups are spending “millions of dollars” to attack the renewable fuel mandates.

Now regardless of what the reader may think about oil companies, the above claims make no sense. Here’s what really happened: The federal government has established a Renewable Fuel Standard (RFS) that requires refiners to blend in a minimum amount of ethanol into the nation’s fuel mix. Recognizing that certain refiners are closer geographically to the source of ethanol, the refining industry asked that a credit trading system be implemented. This way, if it were cheaper for Refinery X to blend in additional gallons of ethanol, it could more than meet its quota of the mandate, to take the onus off of Refinery Y, where it would be more expensive. In order to share the pain equitably, Refinery X would sell its surplus RIN credits to Refinery Y. Thus, the nation as a whole would still meet the aggregate ethanol mandate required by the federal government, while minimizing the economic costs of compliance. This is the limited sense in which the oil industry “asked” for the RIN system.

As far as Buis and Dinneen’s claims that RINs are “free,” the simple fact is that RIN credits spiked from 7 cents early in 2013 to over $1 in March. Of course this represents a genuine burden to refiners. The federal mandate is causing individual companies to do things that they otherwise would not choose to do. If it really made economic sense to blend in 13.8 billion gallons of ethanol into the fuel mix this year (what the RFS requires), you wouldn’t need a federal mandate forcing the refiners to act this way.

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EarthTechling: Biofuel Pullback Urged To Relieve Food Pressure

Pete Danko, April 21- Biofuels made from nonfood feedstocks, after years of failing to emerge at anticipated levels, are beginning to trickle into the market. But because the amounts are likely to remain disappointingly small, the Union of Concerned Scientists is urging that federal regulators back off on the overall biofuel mandate in order to relieve pressure on food prices and supplies.

The U.S. renewable fuel standard is set to grow from 15.2 billion gallons of biofuels to 36 billion gallons by 2022. The presumption when the timetable was written in 2007 was that cellulosic biofuels – those made from nonfood plant matter like switchgrass and corn stover – would make up the vast majority of the new supplies.

That hasn’t happened. As the UCS noted:

When created in 2007, the RFS contained a 2013 goal of one billion gallons of cellulosic ethanol. While the industry is rapidly commercializing — two commercial cellulosic biofuel facilities are starting up, and others are under construction – it is happening slower than anticipated due to the 2008 financial crisis, resulting in a revised goal of 14 million gallons that reflects current production capacity.

The UCS, like many analysts, doesn’t expect the industry to come anywhere near its 16 billion gallon target by 2022 – the Energy Information Adminstration last year put the projected shortfall at a whopping 13 billion gallons.

That, says the UCS, leaves the Environmental Protection Agency with a crucial decision: keep the overall target at 36 billion gallons, using food-based “advanced” biofuels – such as biodiesel made from soy and ethanol made from sugarcane – to cover the non-food feedstock shortfall; or adjust the overall advanced mandate by the amount of the cellulosic shortfall. That would likely result in 15 million gallons of mostly corn ethanol, 5 billion gallons of advanced  (“primarily sugarcane ethanol and vegetable oil biodiesel,” UCS said), and then as much cellulosic biofuel as the industry manages to turn out.

There are fans of sugarcane ethanol out there, who cite its “energy balance” (the energy input/output ratio) advantage over corn ethanol, and the U.S. could import more such ethanol from Brazil. That, however, would likely prompt Brazil to import more corn ethanol from the United States to meet its own domestic demand. So the result would be more pressure on U.S. corn supplies.

“The RFS was designed to promote renewable fuels that don’t compete with food supplies,” Jeremy Martin, senior scientist with UCS’s Clean Vehicles Program, said in a statement. “We can’t afford additional strains on our food supplies, especially when the drought is expected to continue through 2013.”

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Even the Ethanol Lobby Agrees RFS Mandates are Unreasonable

 The Financial Times reports that the Renewable Fuels Association, the primary organization supporting the ethanol mandate, has asked Washington to revisit biofuels targets set by the Renewable Fuel Standard (RFS). In a letter to the Environmental Protection Agency (EPA), the RFA recommends a “reduction in the overall RFS” citing “uncertainty” over how to meet the mandated goals.

Bob Dinneen, RFA president, told the Financial Times, “We’re trying to be reasonable,” in light of the fact that production of advanced biofuels, like sugarcane-based ethanol, is essentially nonexistent.

One of the primary goals of the RFS is to promote domestic fuel production. However, biofuels producers have been relying on sugarcane-based ethanol imports from Brazil to satisfy the advanced biofuels requirement of the RFS. The RFS is not only failing to achieve its intended goals, but this latest news proves that the controversial and unrealistic mandate is completely out of step with market conditions here in the United States and across the globe. 

Now even the ethanol lobby is admitting it. Read the full article here and below.
 

Gregory Meyer, April 18- The US ethanol lobby has asked Washington to put the brakes on government biofuels targets, in an acknowledgment of a widening gap between policy goals and reality at petrol stations.

The request is a significant policy reversal by the Renewable Fuels Association, which was a powerful force behind the passage of the US’s aggressive ethanol mandate in 2007.

The mandate has helped the ethanol industry to double output and increase its corn consumption to more than 40 per cent of the domestic crop. Known as the Renewable Fuel Standard, the requirement is under attack by the oil and meat industries and some food policy experts.

This year’s draft mandate requires the sale of 16.55bn gallons of biofuel inside the US. Citing “uncertainty” over how to meet this goal, the Renewable Fuels Association advised the government to pursue a “reduction in the overall RFS” in a letter to the Environmental Protection Agency.

This was the first time the association recommended cutting the total renewable fuel mandate, the association confirmed. “We’re trying to be reasonable,” Bob Dinneen, president, told the Financial Times.

The mandate has become increasingly hard to achieve. Flat US gasoline demand limits how much ethanol can be blended. Oil companies refuse to sell fuel containing more than 10 per cent ethanol, creating a “blend wall”.

The fuels association said it asked Washington for the reduction because production of “advanced biofuels” made from biomass other than grain was falling short of its 2.75bn-gallon portion of the mandate.

Sugarcane-based ethanol imported from Brazil can also satisfy the advanced biofuels requirement. The Renewable Fuels Association argues this supply is too irregular to meet the mandate.

“Brazil has not been a terribly reliable supplier. I want EPA to take a real hard look at the potential for Brazil, and make a determination,” Mr Dinneen said.

Unica, Brazil’s sugar and ethanol industry group, wants the mandate upheld, saying the country “will be able to meet and, if necessary, surpass” US import projections.

Bill Lapp, of agricultural consultancy Advanced Economic Solutions, said that the mandate’s supporters until recently spoke with one voice on the mandates.

“Upon reaching the blend wall, we find the different factions first favouring their share of the pie, ahead of any support for the overall biofuel policy objectives,” he said.

CME May ethanol futures were at $2.469 per gallon Thursday, up 0.5 per cent. Nymex May gasoline was at $2.7249 per gallon, down 0.2 per cent.

The biofuels mandate, which stood at 4.7bn gallons in 2007, is scheduled to keep rising beyond this year’s level to 36bn gallons in 2022. The EPA has never before reduced the overall mandate.

Forbes: It’s Time To Repeal The Renewable Fuel Standard

Robert Bradley Jr., April 17- But we’re not living in that world. The U.S. Environmental Protection Agency (EPA) is gearing up to expand a destructive program that is criticized at both ends of the ideological divide.

The Renewable Fuel Standard (RFS), implemented in 2007, requires the gasoline industry to blend increasing amounts of biofuels into traditional gasoline. The EPA is now seriously considering a proposal — RFS2 — that would tighten one of the law’s key provisions, requiring oil refineries to replace “e10″ gasoline mixed with 10 percent ethanol with “e15,” containing 15 percent ethanol.

Unintended Consequences

The RFS was ostensibly designed to produce cleaner car emissions and decrease America’s dependence on foreign oil. Sounds good—but not in practice. Environmentalists complain that the side effects of ramped up corn and ethanol distillation have more negatives than positives. And the quota is actually driving up the price of many basic consumer goods and undermining economic recovery. The EPA shouldn’t strengthen RFS — it should rescind it.

The chief ingredient in ethanol is corn. America is the Saudi Arabia of corn, growing 40 percent of the world’s supply. Last year alone, the Standard diverted 40 percent of all U.S. corn towards ethanol production. This massive market reallocation in such a short time has led to drastic price increases in all corn-based goods, from cereals to ethanol itself. What’s more, thousands of barrels of ethanol are now going unused in the nation’s Corn Belt, thanks to government mandates that required ethanol production regardless of market forces. There’s such a surplus that fully 10 percent of the nation’s ethanol plants stopped production in the past year.

Even the Nebraska Ethanol Board has soured on its home team. “It’s a more somber mood,” says Todd Sneller, the board’s administrator. He thinks growth opportunities still exist “in theory,” but the reality is that it will take “an awful lot of time, money and political battles” to realize them.

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Wall Street Journal: An Ethanol Spring

When Churchill said Americans do the right thing after exhausting all the other options, he was unacquainted with modern Washington. But every now and again that maxim turns out to be true, and so it may be this year with ethanol.

A growing right-left bicoastal coalition is loosening the ethanol lobby's thrall over U.S. politics, and now it may succeed in introducing some rationality to the renewable fuels mandate that passed amid the George W. Bush energy panic in 2007.

Back then everyone assumed domestic gasoline demand would rise to almost 150 billion gallons in 2012 and 155 billion this year. The irony is that 2007 marked the peak of U.S. demand. Last year the country used merely 89% of that projection, and 2013 will probably come in at 80%, or 124 billion gallons. The decline is due mainly to slow economic growth and better fuel economy.

But the 2007 mandate still requires that certain volumes of ethanol be blended into the gas supply each year, with the amount rising over time, which means that more gallons of ethanol are chasing fewer gallons of gas. These quotas will soon force the ethanol to gas ratio to blow past 10%.

Exceeding this per gallon limit harms consumers, who are forced to buy more of product that is less energy efficient yet is also more expensive. Every one-cent increase at the pump steals about $1 billion from the larger economy that consumers would have otherwise saved or spent on something else. Ethanol mixtures above 10% are also unsafe, damaging engines and exhaust systems in older cars and trucks, as well as everything from boats to wood chippers and well pumps.

The Ethanol Promotion Agency—er, the Environmental Protection Agency—could have modified this year's ethanol quotas to reflect market conditions, but it didn't. That decision defies a D.C. Circuit Court of Appeals ruling this January vacating part of the 2012 mandate, so reformers in Congress are now moving to intervene.

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EPRINC: Get Ready for a Bumpy Ride – It Could be a Turbulent Year for Gasoline Prices

From the summer of 2012 through mid-February of this year, the price differential, or spread, between gasoline in New York Harbor and the Gulf Coast (NYH 2 GC) had been wider than at any similar period in recent history. During this time, retail gasoline in PADD 11 (East Coast) typically sold at a premium of $0.20-$0.30 per gallon to retail gasoline in PADD 3 (Gulf Coast), well above the historical premium.

The spread peaked at $0.41 per gallon in November, although this peak is partially attributed to Hurricane Sandy. The spread began to collapse in mid2February with improvements in the Northeastern supply chain and temporary refining issues in the Gulf Coast. The spread currently sits at a more ‘normal’ level of about $0.05 per gallon. However, it is far from certain that this calm will persist given the upcoming summer driving season, the tenuous supply situation in the Atlantic Basin (U.S. East Coast and Europe), and several regulatory hurdles which are emerging as serious barriers to the supply of refined products in the United States.

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