Posted September 11, 2014
Mixing politics and energy makes for bad energy policy. Exhibit A: the Renewable Fuel Standard (RFS).
We’ve posted a couple of times (here and here) on EPA’s failure to be on time with its annual requirements for ethanol use, which is critical for refiners to comply with the law. If you missed it, the 2014 requirements were due Nov. 30, 2013, nine months ago. That’s a broken program. Now politics may enter in where it shouldn’t.
Last fall EPA indicated it could lower the ethanol mandate for this year from the congressionally mandated levels. But in recent weeks the agency has signaled it might instead raise the mandated level – which could be a factor in a key U.S. Senate race. Bob Greco, API’s downstream group director, talked about the RFS and ethanol politics during a conference call with reporters:
“Unfortunately, the administration seems to be playing politics with the RFS rule instead of doing what’s best for consumers. You don’t have to be a political insider to see how the Iowa Senate race – and the White House’s fear they will lose control of the Senate – plays into this decision.”
Greco said one of the Iowa candidates, U.S. Rep. Bruce Braley, recently asked the White House Office of Management and Budget to increase the ethanol mandate. Soon, EPA Administrator Gina McCarthy indicated the agency was looking at raising the mandates, he said, which is not the way to make public policy:
“I think it’s not unreasonable to see a scenario where this comes out just before the election, with higher mandates. Which is exactly the wrong reason to be driving RFS policy. Let’s base it on sound policy, protect the consumers. … EPA could have finalized this earlier in the year and been completely outside of the election cycle. Now it’s been dragged into the election cycle, dragged into election-year politics. That’s not the way to make this policy. It’s not the way to protect consumers.”
The potential politicization of long-overdue ethanol requirements for 2014 adds to arguments that the RFS should be repealed. We’ve covered other reasons: the potential for damage to engines and fuel systems in vehicles that weren’t designed for higher ethanol-blend fuels like E15, prompting automakers to warn such damage wouldn’t be covered by their warranties; potential damage to power equipment and marine engines; and the risk of broad harm to the economy if RFS ethanol mandates force breaching of the “blend wall,” the point where more ethanol is forced into the fuel supply than can safely be absorbed with conventional fuels. Greco:
“The ethanol blend wall is real, and the administration can’t use gimmicks to avert it. Industry and government studies show that EPA can’t just force more ethanol into gasoline than the current automotive fleet is equipped to handle. Higher ethanol blends can harm engines and fuel systems. Worse, studies show that higher ethanol mandates could cause severe fuel rationing, substantially raise fuel costs, and deal a blow to our economy.”
The RFS is a relic of the era of U.S. energy scarcity. Greco said the reasons for the program’s creation – rising imports, energy dependence and greenhouse gas emissions concerns – all have been addressed by an American energy revolution that, helped by flat gasoline demand, is reducing oil imports. Meanwhile, affordable natural gas use has lowered nationwide GHG emissions to their lowest levels in two decades.
Ethanol producers have suggested that more E85 fuel (up to 85 percent ethanol) is a way for refiners to comply with ever-increasing ethanol mandates under the RFS. Greco:
E85 “can be used in up to 6 percent of the cars that are on the road, flex-fuel vehicles, but consumers are not demanding it. In Iowa, where you’d expect demand to be a little higher, it’s only 1 percent. … One of the challenges with E85 is lower energy content. When you’re 25 percent lower energy content than gasoline, you’re filling up four times instead of three times. Consumers notice that. … If the market wants it, E85 can and will be provided. But (demand) is not there, so you can’t force it by having this administration … assume phantom demand for a fuel.”
Greco said consumers are being lost in EPA’s RFS calculations. The lack of demand for E85, he said, contrasts starkly with consumer demand for E0, non-ethanol gasoline used in boats, lawn equipment and recreational vehicles that has recently grown to 5 percent of gasoline demand. Greco:
“In its comments and actions, EPA has shown more concern regarding mandating a market for fuels for which there is no demand, than it has for protecting the fuels for which actual consumers have shown a substantial demand.”
The RFS should be repealed. In the meantime, EPA should get its 2014 requirements finalized as soon as possible, protecting consumers by setting the mandate low enough to allow for non-ethanol gasoline for consumers who want it. Real consumer choice, consumer protection is the right path for policymakers – reflected in our RFS ad:
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.