Sunday, June 25, 2017

Competitive Enterprise Institute calls for repeal of federal biofuels mandate

A bipartisan group of 39 U.S. senators is trying to make it more expensive for Americans to fill up their cars, effectively making them pay more for everything they buy, a Competitive Enterprise Institute (CEI) expert says.

“Congress should repeal the Renewable Fuel Standard (RFS) so that consumer preference and competition, rather than central planning policies, determine which fuels succeed or fail in the U.S. marketplace,” Marlo Lewis Jr., a CEI senior fellow who focuses on global warming, energy policy and public policy issues, concluded in a new report.

Failing a repeal of the RFS, Congress should sunset the standard so that it ends after 2022, while in the meantime capping mandatory biofuel sales at the E10 blend wall, Lewis said. He is the author of Running Drivers into the Blend Wall: Push to Ratchet up Renewable Fuel Standard Rewards Ethanol Lobby at Consumers’ Expense, which was released July 25.

The Environmental Protection Agency (EPA) also should allow biofuel producers to sell as much additional renewable fuel as consumers actually want to buy, he wrote.

The CEI report calls for the repeal, rollback and/or capping of the EPA's RFS just as the EPA works to meet a Nov. 15 deadline for developing the next round of requirements that call for finalizing both the 2017 RVS requirements for total renewable, cellulosic, and advanced biofuels, and the 2018 requirement for biomass-based diesel.

Specifically, the RFS requires specific volumes of biofuels to be sold in the U.S. motor fuel supply over a 17-year period, increasing the quota for total renewable fuels from 4 billion gallons in 2006 to 36 billlion gallons in 2022, Lewis explains.

The RFS also sets sub-quotas within each year’s target for four separate biofuel categories: conventional, advanced, cellulosic and biomass-based diesel. But the problem, Lewis explained, is that the RFS also authorizes the EPA to reduce the annual statutory targets if the EPA determines there’s an “inadequate domestic supply.”

That situation actually occurred in 2013 when the EPA for the first time proposed reducing the total annual RFS mandate below the statutory target and decreased the target based on the “blend wall,” what Lewis defined as a set of market conditions that limit the quantity of ethanol that may actually be sold to about 10 percent of the nation’s gasoline supply.

“One important constraint is that the overall size of the gasoline market is now projected to be 19 billion gallons smaller in 2017, and 40 billion gallons smaller in 2022, than Congress anticipated,” Lewis said.

Other barriers include the incompatibility of mid- and high-ethanol fuel blends with the vast majority of vehicles and fueling infrastructure, and the lack of consumer demand for such fuels, he said.

The 2013 EPA proposal outraged the biofuel lobby, Lewis said, and the agency dawdled over the next two years until the final rule was adopted in November 2015, restoring some of the cutbacks proposed in 2013 and requiring refiners’ production levels to exceed the blend wall this year.

“Yet, that was not enough to satisfy biofuel interests — or their Senate allies,” Lewis said.

Although the EPA’s proposed 2017 blending target for so-called conventional biofuel is 300 million gallons higher than the 2016 target, biofuel lobbyists now complain that the 2017 target is 200 million gallons shy of the 15 billion gallon goal set forth in the statute, he added.

On June 24, the group of senators led by Sen. Chuck Grassley (R-IA) and Sen. Amy Klobuchar (D-MN) wrote to EPA Administrator Gina McCarthy urging the agency to get the RFS “back on track” — which Lewis said essentially means making refiners comply with the program’s statutory goals.

And in a March 23 letter to McCarthy, the senators claimed the EPA could not take the blend wall into consideration when determining refiners’ annual requirements, known as Renewable Volume Obligations.

However, the senators don’t provide a source for their statutory interpretation, Lewis, who called their claim irrelevent.

“The blend wall had no bearing on the RFS as created in 2005, because the original RFS annual blending targets maxed out at 7.5 billion gallons in 2012," he said. "That is only about half the quantity of ethanol U.S. markets can absorb as E10 — gasoline blended with 10 percent ethanol. Under the 2005 RFS, there was simply no prospect of biofuel production running up against the E10 blend wall."

And if latent consumer demand for E15, E30, and E85 is as large as the ethanol lobbyists suggest, “Why don’t they put their money where their collective mouth is and invest in the retail infrastructure on which the success of these blends supposedly depends?” Lewis said.

Read the report in its entirety online at: https://cei.org/content/running-drivers-blend-wall.

Organizations in this story

Competitive Enterprise Institute 1899 L St NW Washington, DC 20036

U.S. Environmental Protection Agency (EPA) 1200 Pennsylvania Ave NW Washington, DC 20460

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