Ethanol and oil leaders come together on RFS

Historic compromise establishes five billion gallon market for ethanol, other renewable fuels
By | March 01, 2002
Bridging longtime differences between ethanol and oil interests, a bipartisan group of senators agreed March 8 to enact a renewable fuels standard as part of the pending Senate energy bill. This "historic agreement" will nearly triple U.S. ethanol production while toxic MTBE is phased out nationwide.

"This compromise signals a new era of cooperation, growth and stability for the ethanol industry," said Bob Dinneen, president of the Renewable Fuels Association. ". . .Consider what has been accomplished here. You have the nation's oil companies supporting a five billion gallon market."

RFS inclusion in the energy bill was made possible, in no small part, by an unlikely alliance between the RFA and the American Petroleum Institute. API President Red Cavaney spoke before 620 ethanol proponents at the National Ethanol Conference: Policy & Marketing in San Diego last month, perhaps squelching any doubts he may have had about the ethanol industry's ability to supply the market.

"We have embarked on a new era together - an era of compromise," Cavaney hinted at the National Ethanol Conference. "I am optimistic we will succeed."

After the RFS compromise was made, Cavaney lauded, "We think this is a win for the consumers and a win for the farmers. . . It's a win for the environment and it's also a win for national security."

Dinneen said the RFS compromise was made possible by Secretary of Energy Spencer Abraham, Senate Majority Leader Tom Daschle (D - S.D.), a bipartisan group of senators, representatives of the RFA, API, American Farm Bureau Federation, National Corn Growers Association and Northeast States for Coordinated Air Use Management.

Together, Dinneen said, the RFS alliance created a "new paradigm, based on mutual respect and shared interest."

What's in the current RFS legislation?
The RFS compromise basically assures that a package of new gasoline requirements will be included in the energy legislation pending in the Senate (at the time this magazine went to print). The key requirements are intended to provide refiners greater flexibility while also helping farmers grow and sell more crops. Importantly, the legislation disallows "backsliding" on air quality standards.

The agreed upon RFS would require at least 5 billion gallons of ethanol (or other biofuels) nationwide by 2012. The first stage of the RFS would take effect in 2003. MTBE would eventually be banned in every state, and the federal oxygenate requirement would be eliminated. The oil industry would still have to meet clean air rules but would have more flexibility in doing so.

Furthermore, a certain percentage of each refiner's gasoline volume would include ethanol or other safe biofuel additives. If for some reason ethanol was not desired or available, a refiner could purchase ethanol credits from another refiner that had already exceeded its allotted requirement.

Industry analysts say the RFS will reduce oil imports by 500 million gallons over the next decade and create thousands of new jobs for Americans. According to one independent study, the legislation would also reduce the U.S. trade deficit by $34.1 billion, boost demand for grain (mostly corn and soybeans) by more than 1.5 billion bushels by 2012, increase new investment in rural communities and expand household income by an additional $51.7 billion over the next decade.