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Senate Hearing Exposes RFS Economic Threat

by Nan Swift / /

Yesterday, the Senate Environment and Public Works Committee held a hearing on “Oversight of the Renewable Fuel Standard (RFS),” which focused on the difficulty of implementing the statute within the context of competing interests and challenges.

Janet McCabe (Acting Assistant Administrator for the Office of Air and Radiation) spoke on behalf of the Environmental Protection Agency (EPA). She acknowledged how hard the RFS was to administer, explaining that taking the disparate factors – gasoline consumption, distribution, production, and others – into consideration when setting annual volume obligations was complicated and time consuming. At the same time, McCabe proclaimed the RFS is “ambitious, yet achievable,” and that she hoped to get the program “back on track,” signaling the Administration’s ongoing commitment to the policy.

Howard Gruenspecht (Deputy Administrator, Energy Information Administration) cited major hurdles in executing the RFS including:

  • Increasing biofuel use in order to comply with the RFS would require blending greater quantities of ethanol into the gasoline supply.
  • Last year cellulosic biofuel producers – supposedly the real goal for future fuels – only generated less than 1/10th of one percent of the billions of gallons required by the statute.
  • Low ethanol demand and distribution challenges stemming in part from the lower energy content of corn ethanol.
  • The declining trend in motor gasoline use.
  • Decreased reliance on oil imports (down to 20 percent from 60 percent in 2005 when the RFS was initiated).
  • Near and long-term costs associated with complying with the RFS, especially during a time of low oil prices.

Gruenspecht concluded that in this environment the mandates set out in the RFS won’t be achieved by the time the EPA fully assumes control of the standard in 2022.

Lucian Pugliaresi (President, Energy Policy Research Foundation, Inc.) likewise laid out the many problems fuel producers have in adhering to the RFS, explaining that the lack of consumer demand for higher blends and difficulty in getting those blends to market made it too costly and hard to produce or blend gasoline with more than 10 percent ethanol (E10). With no availability of lower cost compliance options, when producers hit the E10 blendwall consumers could see higher gasoline prices and restricted supplies. (For more information, read the Energy Policy Research Foundation report on “The Biofuel Mandate: Technical Constraints and Cost Risks” here.) 

It's not news that the RFS is a broken, unworkable policy. However, as economic realities and consumer behavior deviate further and further from the bad assumptions on which the original policies were premised, the shortcomings posed by the RFS are only intensifying. Congress needs to take action before the economic benefits of low gas prices are cancelled out by harmful ethanol mandates.