The People of America's Oil and Natural Gas Indusry

Consumer Interests Paramount in Pending Fuels Policy

Mark Green

Mark Green
Posted October 18, 2016

The Renewable Fuel Standard, created a decade ago to strengthen U.S. energy security and benefit American consumers, is doing neither. The RFS is broken and should be repealed or significantly reformed – with the interests of consumers the top priority.

That’s the message API Downstream Group Director Frank Macchiarola delivered during a conversation with a group of energy reporters this week. By law, EPA must announce how much ethanol will be mandated in the 2017 fuel supply by Nov. 30 under the RFS. Protecting consumers should be the agency’s focus.

rfs_pullquoteMacchiarola reminded reporters that the RFS was created as a response to falling domestic energy production and rising crude imports – circumstances that have been reversed thanks to America’s energy renaissance and flat demand for gasoline. “The market has shown that the (RFS) policy is outdated,” Macchiarola said.

Macchiarola was joined by representatives of other groups with concerns about continued implementation of the RFS in its current form: the National Marine Manufacturers Association (NMMA) and the National Chicken Council (NCC). Macchiarola said there’s bipartisan support in Congress for action on the RFS:

“There is a growing number of both Republicans and Democrats who understand that the (RFS) policy is broken and that there’s a real opportunity to provide reform and that the blend wall and the encroaching breach of the blend wall could be that impetus for those (reforms).”

NMMA’s Michael Lewan said EPA would restrict choice for boaters, among whom zero-ethanol fuel is popular, because higher ethanol blends can damage marine engines. An EPA draft proposal would mandate ethanol at levels in the fuel supply that would limit E0 to about 200 million gallons – compared to the 5.3 billion gallons the U.S. Energy Information Administration estimates were used in 2015. Lewin:

“They’re denying consumers the choice – our consumers the choice. … We can’t use those mid- and high-level (ethanol) blends. So, on the one hand they’re telling us we can’t use the fuel that we can use, but we also cannot use the fuels that they are increasing in the marketplace.”

The NCC’s Tom Super said ethanol mandates impact corn prices, which then affects the cost of chicken feed. Though corn prices have moderated recently, Super said, “We’re only one freeze, flood or drought away from another disaster for our members.”

At a minimum, EPA should use its waiver authority under the RFS to adjust its 2017 ethanol mandate down from levels that were written into law by Congress nearly a decade ago, while also ensuring that an adequate supply of E0 is available for consumers who want it. The concern is that EPA will mandate more ethanol in the U.S. fuel supply than can be safely absorbed as E10 gasoline, the country’s standard fuel. Breaching the “blend wall” could force more E15 fuel into the marketplace, fuel that studies have shown can damage vehicle engines and fuel systems. Macchiarola:

“We are not opposed to ethanol. We’re opposed to the mandate. What we are saying is the whole purpose of mandates and incentives is typically policymakers wanting to boost a nascent technology or industry to be competitive in the marketplace. At what point is this mandate going to go away, and we’re going to have a level playing field where people compete for the fuels that consumers use? … Our position is a free-market position that allows competition in the fuels market, and we believe that the RFS stands in the way of that.”

Consumer interests, not ethanol interests, should be reflected in EPA’s ethanol mandates – even as Congress considers its next step. Consumers have weighed in, 77 percent of registered U.S. voters expressing concern about government requirements to increase ethanol in gasoline. It should guide policymakers and agency policy-crafters. Macchiarola:

“From our experience, it’s one thing for groups in Washington, D.C., to sit around and talk about what’s important for the American consumer. It’s quite another when consumers are talking about what’s important to the American consumer.”

ABOUT THE AUTHOR

Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.