Fuels agreement will survive in 108th Congress

Size, complexity of energy bill means it could be several months before RFS is passed in 2003
By Tom Bryan | November 01, 2002
A renewable fuels standard (RFS) will be included in the revived U.S. energy bill in 2003 and little of substance will be compromised in the legislation, according to ethanol industry insiders.

After the GOP took control of both houses of Congress in November, lawmakers decided to defer consideration of the energy bill until the 108th Congress, which means certain aspects of the legislation could be subject to change. But that doesn't mean the RFS fuels agreement will be diminished, according to Renewable Fuels Association President Bob Dinneen.

"When it's all said and done in 2003, I think the leadership changes in Washington will have little impact on the RFS," Dinneen told EPM. "The leadership has shifted, but the broad bipartisan support for ethanol has not. We had 70 members (of the Senate) in support the fuels agreement and I don't think that has changed."

The RFS, created by Democrats and Republicans alike and backed by both ethanol and petroleum industry executives, called for a 5 billion gallon per year U.S. ethanol production capacity by 2012. The bill contained a historic agreement that provided gasoline refiners with greater flexibility by eliminating the reformulated gasoline oxygen requirement while banning the fuel additive MTBE, known to pollute drinking water.

After the mid-term elections, Senate Republicans and Democrats in the House-Senate energy bill conference decided that differences over substantial issues in the energy bill were too complex to resolve in the remaining days of the 2002 Congressional session. While the legislation is now widely referred to as "dead," Washington insiders realize the matter has simply been handed over to the new Republican-majority Congress for consideration.

Nevertheless, Dinneen said, energy legislation passed in the new Congress will be a "new bill and a new effort."

Ethanol industry frustrated, resolved
The ethanol industry was collectively disappointed and frustrated when the energy bill did not pass in 2002, Dinneen said, but those sentiments quickly turned into resolve to see the legislation through next year.

"It is frustrating to see that many different groups agree on something and spend so much time and effort to make it happen - creating the coalition and generating public support - to see it not pass," Dinneen said. "But we have tremendous optimism. Every group involved in this fuels agreement remains very confident."

GEC chairman says RFS will pass in 2003
Outgoing chairman of the 27-member Governors' Ethanol Coalition (GEC) said he is confident an RFS will pass in the 108th Congress and believes the ethanol industry will reach unprecedented levels of production in 2003.

"Even though we were all disappointed (that the energy bill did not pass), we hope the bipartisan support for the renewable fuels standard we have seen in this Congress will be reflected in the new one as well," said GEC Chairman and Missouri Gov. Bob Holden (D).

Holden asked GEC members to "maintain momentum" in 2003.

"Americans have demanded more alternative fuels - and we have delivered," he said. "Even without immediate action on the energy bill, the outlook for ethanol is strong."

NCGA leaders discuss energy bill goals
In anticipation of the commencement of the 108th Congress, National Corn Growers Association (NCGA) President Fred Yoder got a head start communicating NCGA's legislative agenda last month when he met with likely future Senate and House agriculture committee chairs Sen. Thad Cochran (R-MS), and Rep. Bob Goodlatte (R-VA).

During the Capitol Hill meetings, Yoder discussed a number of Congressional priorities for NCGA including passage of a national renewable fuels standard and the acceptance of genetically modified corn in Europe and Africa. He also talked about NCGA's interest in advancing research initiatives, rural economic development, strengthening the livestock industry, and creating more value added opportunities for all farmers.

The NCGA's Ethanol Committee has been exploring ways to get "back on track" to push for an energy bill, according to the organization's leaders.

"We're lining up efforts to maintain the alliances we had this year with the original bill that died in conference. We're looking at hitting the Hill hard at the first of the year and getting this thing rolling," Yoder said.

A representative of the U.S. Department of Energy (DOE) told the board last month there is speculation that the energy bill could show up as early as House Resolution 3 when Congress starts in 2003.

"There is support to continue to fight for this energy bill," Yoder said. "After talking to our D.C. staff and the Ethanol Committee, we know this is going to be an uphill battle, but all systems are go and we're going to go after this hard and heavy and we're going to get an energy bill."

Indeed, most industry insiders believe an RFS will move forward in 2003, largely due to the ethanol industry's bipartisan support. In fact, sentiments expressed by Republicans and Democrats alike have shown that members of both parties were extremely disappointed that the energy bill died in 2002. Sen.Trent Lott (R-Miss.) expressed his disappointment last month that a handful of bills, including the energy bill, were not passed, but said he is optimistic that an energy bill will pass in 2003.

"Do you think we didn't, and still don't, want an energy bill? We do. I feel passionate about that. I think for national security and economic security, clearly, I think we should have done that," Lott said at his last official press conference of the 107th Congress. "We will have an energy bill next year," he vowed.

Bush supports RFS
Of high importance to ethanol producers is President W. Bush's support of renewable fuels and an RFS provisions in the energy bill. Bush has repeatedly expressed his support for greater use of ethanol as a gasoline additive, and a means of limiting our nation's heavy reliance on foreign oil. In the latter respect, the Bush administration has touted ethanol production and use as a matter of national security and economic stimulus.

"The Bush administration has been supportive," Dinneen told EPM. "In particular, the Bush administration has provided (the fuels agreement coalition) with tremendous technical support. The President remains strongly in support of ethanol."

Are changes unavoidable?
Although the energy bill will certainly be revived in 2003, the shear size and complexity of it almost guarantees that it will not be passed for several months. In 2002, U.S. House and Senate lawmakers were hindered for months over the huge bill, which covered dozens of issues from pipeline safety and nuclear power plant insurance to oil drilling in the Arctic National Wildlife Refuge (ANWR).

While Republicans will control the new Congress, it is still uncertain whether they will be able to pass a bill that includes Arctic oil drilling. Republicans remain short of the 60 votes needed in the Senate to cut off debate and vote on such a measure. Ethanol proponents say that could add up to further delays for the RFS and limit investment into new ethanol production plants. At EPM press time, nine ethanol plants were under construction in the U.S., and dozens more are in the planning stages.

Ethanol backers say delays in restarting the energy bill debates could hurt investment in new plants and create uncertainty for plants under construction. All the more reason to work fast and diligently, Dinneen said.

"We are going to look at potential vehicles to move the fuels agreement fast," Dinneen said. "That could mean putting it on faster track than the energy bill, such as tacking it on to the economic growth package. After all, there's no better example of economic growth in this country than what the ethanol industry has shown us."

The fuels agreement will not be compromised, Dinneen said, but it could "change around the edges" as the political wrangling begins.

"The bottom line is all sides need to be somewhat flexible in order move this legislation early in the session," Dinneen said. "I won't pretend that it will be easy, but it will get done."

API still supports agreement

Dinneen said the American Petroleum Institute (API), which was instrumental in shaping the RFS package legislators agreed on in early 2002, still backs the plan.

"API officials are standing by the agreement," he said. "They want this to move as quickly as we do. They want to be out of MTBE and have the flexibility to not have to deal with the gasoline oxygen requirement."

5 billion gallon mark to remain intact
Both houses of Congress agreed earlier this year on a target of 5 billion gallons of annual ethanol use, but wrangled over the exact timing and schedule of the RFS. The Senate bill was more aggressive, calling for increased ethanol use to start in 2004 and meeting the 5 billion gallon goal by 2012. The House proposed a phase-in between 2005 and 2014.

"We would not support a bill that would delay or diminish the amount of renewable fuels called for in the Senate-passed bill," said Monte Shaw, spokesman for the RFA.

In fact, Dinneen added, the original schedule of the fuels agreement may no longer be an appropriate goal for the ethanol industry.

"That number no longer reflects what the industry is capable of," he said. "We are producing 2.7 billion gallons a year now - we will be at the 3 billion gallon point next year. We are not ruling out a push to phase the plan in more aggressively."

The new timeline
If the RFS stays with the 2003 energy bill, the legislation could be considered in the House by the end of April, but political insiders say it could be as late as summer or early fall before the bill is ready for the Senate's consideration.

When the 108th Congress begins business in January, one of the first items on the agenda will be spending bills. The Senate adjourned last month without resolving the U.S. government's budget for fiscal year 2003, which began Oct. 1. They did pass a continuing resolution that funds the federal government through Jan. 11, 2003.
The resolution states that $500 million can be provided to the Office of Homeland Security if it is determined by the Secretary of Homeland Security and the Office of Management and Budget to be in the national interest.

In January, members will return to Capitol Hill and face unfinished business, including budgets for federal agencies, among them, the EPA and the Department of Energy (DOE).