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Expanding RFS to Natural Gas: Typically Terrible DC Idea

Nan Swift
June 27, 2013

Sadly for taxpayers, it’s no longer surprising when, as the market economy evolves, Washington is called in to try and “rebalance” things – with predictably disastrous results.  So it is with a recently introduced bill, H.R. 1959, which would expand the terrible Renewable Fuels Standard (RFS) to include natural gas derived ethanol. 

NTU has weighed in extensively on the damaging ethanol mandate enshrined in the RFS.  Pouring ever-increasing gallons corn ethanol into our fuel tanks has led to higher food and fuel prices, environmental and economic damage, and has even exacerbated hunger problems in developing nations. An urgent reform, or better yet, repeal of the RFS is long overdue.

Lumping bad policy on top of bad policy is far from a good fix. Despite strong pushes for reform from dairy and livestock producers, anti-hunger groups, taxpayer groups, engine manufacturers, and environmentalists, the powerful corn lobby ensures that corn ethanol remains entrenched in our public policy, even in the face of damning evidence of its harm. Though supporters of H.R. 1959 say the bill will help to cut Big Corn’s influence in Washington, this noble goal will almost certainly backfire. Extending the same guaranteed market to another energy source will only further cement the feds in the energy sector and create another rent seeker at the government trough.

As the incredible natural gas boom drives prices down, relying on the market, not federal favors, is the best response. That means pursuing free market solutions to boost profitability such as exports and technology that will help consumers use more affordable natural gas as an energy source.  And in turn, Congress should make sure that big government isn’t standing in the way. Getting government out of the energy industry by leveling the playing field and not picking winners and losers be they renewable or otherwise, is a far better path for consumers and the natural gas industry than tweaking current bad laws.

 If H.R. 1959 goes forward, it might help to ease the pressure on feed stocks, but consumers will still be facing many of the same problems the RFS presents today. Even worse, when tomorrow comes, the natural gas industry will have an incentive for urging the EPA to push for E-15 and higher blends of ethanol regardless of the cost or damage to many engines, in order to use increasing volumes of their products as refineries inch closer to the dreaded “blend wall.”

That’s why NTU lent its principled opposition to H.R. 1959 by joining a CEI-led coalition letter that explains:

By artificially increasing the demand for natural gas, H.R. 1959 would spawn its own wealth transfers and market distortions. For example, higher gas prices would inflate household utility bills and could erode the competitiveness of U.S. manufacturers.

Natural gas has no need of special privileges to flourish in the motor fuel market, as two articles in the June 20, 2013 Wall Street Journal clearly show. Worldwide, gas demand in road transport increased tenfold from 2000 to 2010. The International Energy Agency expects gas in road and maritime transport to “do more to reduce the medium-term growth in oil demand than both biofuels and electric cars combined.” This spring Cummins released two new long-haul truck engines that run on gas rather than diesel. The company developed the engines “without a penny of government support.”

Rather than attempt “fixes” that create new carve-outs (and encourage more lobbying to retain them), NTU urges Congress to consider bills that will help truly reform or repeal the RFS.  Several good bi-partisan reforms are currently on the table in both chambers including the “Renewable Fuel Standard Reform Act” in the House led by Congressmen Goodlatte (R-VA), Costa (D-CA), Womack (R-AR), and Welch (D-VT) and the “Renewable Fuel Standard Repeal Act” in the Senate led by Senators Barrasso (R-WY), Pryor (D-AR), and Toomey (R-PA).



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