The People of America's Oil and Natural Gas Indusry

RFS: Still Broken, Still in Need of Action

Mark Green

Mark Green
Posted December 2, 2016

Fourteen months ago, during a U.S. Senate hearing on the Renewable Fuel Standard (RFS), EPA was asked to explain how it decides how much ethanol will be blended into the nation’s fuel supply each year under the agency’s RFS authority. You can read about that conversation here, but the gist of the exchange is that EPA’s RFS assumptions are largely based on subjective judgments about consumers and the fuels marketplace.

The history of the RFS is that EPA’s enthusiasm for the program has seen the agency mandate ever-increasing volumes of ethanol in the fuel supply, potentially putting consumers at risk by pushing fuels into the marketplace that could damage the engines of vehicles, motorcycles, boats and small power equipment. At the same time the RFS’ original purpose of developing a commercially viable, national supply of cellulosic biofuel has become submerged in a growing ocean of corn ethanol.

In short, that’s where America and the RFS stand today after EPA recently issued ethanol requirements for 2017 that could breach the refining “blend wall” – the point at which the RFS forces more ethanol into the fuel supply than can be safely blended as the E10 gasoline that’s standard across the country.

API calculates the 2017 volumes would put the ethanol-to-gasoline ratio at 10.4 percent. That’s higher than the 9.7 percent recommended by API – both to avoid crashing through the blend wall and to preserve a place in the overall supply for ethanol-free gasoline, which significant numbers of consumers want.

A couple of charts. Below, EPA’s ethanol-use requirements since 2014, which shows a steadily climbing government mandate:

revised_rfs_volumes

In the chart below we see the increasing size of corn ethanol in the overall RFS mandate (yellow bar), compared to the original volumes set by Congress in 2007 (orange bar) and EPA’s preliminary proposal for each respective year (green bar):

corn_ethanol  

In past years EPA has used its authority to waive the statutory volume, as it recognized lower fuel demand. The agency’s 2017 draft indicated it would waive the statutory target for next year as well, but the finalized rule backtracked from that.

There’s another new development. A pair of U.S. Government Accountability Office (GAO) reports this week that say advanced and cellulosic biofuels – again, one of the original purposes of the RFS was to develop these – are unlikely to reach the RFS’ increasing targets. GAO:

Cellulosic biofuels—specifically cellulosic ethanol and renewable natural gas from landfills—are also technologically well understood, according to experts, but current production is far below the volume needed to meet the target for these fuels. Specifically, in 2015, about 142 million gallons of cellulosic biofuel overall—including about 2 million gallons of cellulosic ethanol and about 140 million gallons of renewable natural gas—were produced. This cellulosic biofuel volume was less than 5 percent of the statutory target of 3 billion gallons. According to experts, there is limited potential for expanded production of cellulosic ethanol in the next 5 years to meet the higher volumes called for in the statute.

Frank Macchiarola, API downstream group director, said the GAO reports show that the ethanol mandate isn’t working:

“The GAO concluded the RFS is broken, and we agree. … A decade ago, the ethanol mandate was created in response to falling domestic energy production and rising crude imports – that reality no longer exists. The U.S. is now leading the world in production of oil and natural gas and in the reduction of carbon emissions, which are near 20-year lows. This success is achieved through market-based solutions, not top-down mandates that pick winners and losers.”

Macchiarola said there’s bipartisan support in Congress – and broad support in the country – for repeal or significant reform of the RFS:

“An ever-increasing number of Americans are urging policymakers to fix the broken RFS mandate. The market has shown that the RFS is outdated, and an increasing chorus of Republicans and Democrats understand that the policy is broken and that there is a real opportunity for reform.”

The GAO reports and the trajectory of ethanol mandates in EPA’s latest mandates argue for action. API supports bipartisan reform legislation in the House to address the RFS program’s numerous dysfunctions. U.S. voters have spoken up, 77 percent of them in a recent poll expressing concern about government requirements to increase ethanol in gasoline. It’s past time to act on the broken RFS.


ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.