To: | Environmental Protection Agency |
From: | Pete Sepp |
Subject: | Docket ID: EPA-HQ-OAR-2015-0111 |
On behalf of the members of National Taxpayers Union (NTU), I write to express our concerns regarding the recently issued “Standards for the Renewable Fuel Standard (RFS) Program for 2014, 2015, and 2016.” Though long overdue, the Environmental Protection Agency (EPA) deserves credit for recognizing in its announcement that “the volume targets specified by Congress in the Clean Air Act for 2014, 2015, and 2016 cannot be achieved,” by virtue of being overly ambitious and out of step with the current market. Nonetheless, despite modest reductions from the statutory levels, the Renewable Volume Obligations (RVO) targets prescribed under the proposed rule are not sufficiently limited to provide the relief taxpayers and consumers need.
In the regulatory announcement, the EPA purports to be using its waiver authority in order to address “[l]imitations in the volume of ethanol that can be consumed given practical constraints on the supply of higher ethanol blends to the vehicles that can use them.” Given this consideration, it is unclear why the EPA would propose a 2016 RVO that exceeds the E10 blend wall. The EPA seems to be operating under the assumption that there will be a dramatic increase in consumption of higher ethanol blends of gasoline such as E15 or E85, despite no evidence supporting an imminent, sudden surge.
According to AAA, 85 percent of vehicles on the road are not designed to use gasoline with more than 10 percent ethanol, and 94 percent cannot use E85. Misfueling can cause major damage and/or violate a vehicle’s warranty. Boats, motorcycles, and other small engines are also not equipped to use blends over E10. In addition to engine problems caused by higher temperatures, corrosion, and even phase separation, as ethanol content increases consumers are also subject to overall higher spending on gasoline. Because a gallon of ethanol contains roughly two-thirds the energy of a gallon of gasoline, as ethanol content increases gas mileage decreases, forcing consumers to fill up more often.
Not only are few consumers able to utilize E85 – the blend that the EPA anticipates will help alleviate the glut of ethanol created by the rule – only 2 percent of gas stations can provide the fuel. This paucity is directly related to the cost of upgrading those facilities, which can run as high as $200,000. The small business owners who run most gas stations operate on very thin margins and cannot afford such an investment, especially when the return is so uncertain. E15 faces similar demand and infrastructure problems.
Together, these factors severely limit the potential market for higher blends of ethanol and make it unlikely that there will be a dramatic increase in demand for ethanol in less than six months. Exceeding the blend wall poses a threat of heavier burdens on consumers as refiners will be forced to scale back production. After all, the ethanol blend is only suitable for fuel consumed in the U.S., leaving refiners with much less flexibility in absorbing the financial effects.
Higher prices at the pump are only one of many worries for consumers caused by the RFS. Greater transportation costs flow throughout the economy, raising the price of food and other goods that travel long distances.
Corn ethanol production diverts 40 percent of the corn crop into fuel. This increases the prices of feed for livestock such as poultry, pork, and dairy – costs that are necessarily passed onto the consumer. According to the Environmental Working Group, the corn ethanol mandate has been a factor in the closure of more than 60,000 pork, poultry, and beef operations since 2007.
A government-guaranteed market for one product artificially increases its value, making formerly marginal land worth the labor necessary for even small yields and decreasing the availability of land for other crops. This harms the environment and has led to higher prices for other food input commodities such as wheat and soybeans.
These compounding costs effectively constitute a type of “hidden tax” that pervades the economy and hurts consumers whose budgets are already stretched thin due to rising health care costs, stagnant wages, and an anemic economic recovery.
The widespread damage imposed by the RFS is an urgent reminder that government mandates make for bad economic policy. In a functioning marketplace for fuel, renewable or otherwise the ill effects described above would be quickly mitigated as a sustainable price equilibrium is reached between consumers and producers. An intractable government mandate is an obstacle to ever attaining such a balance.
Until Congress takes action to repeal or reform the broken RFS, the EPA has the authority and responsibility to set some sensible boundaries on this policy that will protect as many Americans as possible. The RVO levels established by the proposed rule continue to impose a significant cost to consumers; they should be brought into line with demand and avoid increasing ethanol content in the fuel supply.
Included, please find the comments of 783 NTU members, consumers, and taxpayers, who share these views. I hope the EPA will find these comments useful in its deliberations.
Sincerely,
Pete SeppPresident