Industry to Inhofe: Don't mess with the RFS

By Kris Bevill | April 13, 2011

The Senate Environment and Public Works Committee held an oversight hearing initiated by Ranking Member Sen. James Inhofe, R-Okla., on April 13 to examine the entire domestic renewable fuels industry, “from ethanol to advanced biofuels.” While no representatives of the corn ethanol industry were invited to present testimony, officials from the USDA, the U.S. EPA and the U.S. DOE offered supportive statements for the industry, which were echoed by statements from advanced biofuel representatives. But Inhofe made clear from the start of the two-hour hearing that he will continue his push to eliminate all policy support for corn ethanol and plans to introduce a bill that will allow states to opt out of the corn ethanol portion of the renewable fuel standard (RFS). “I believe Congress blundered in pushing too much corn ethanol too fast,” he stated. “Ethanol has serious problems, including its compatibility with existing engines, its environmental sustainability, as well as its transportation and infrastructure needs.”

Agriculture Secretary Tom Vilsack offered 17 pages of testimony outlining the USDA’s various programs focused on accelerating renewable fuels production but chose to use his five minutes of oral testimony “to speak from the heart” about the importance of the biofuels industry to the rural economy and the arguments against ethanol. “We need to redefine this debate,” he told committee members. “Instead of trying to limit America’s opportunities, particularly in rural areas, we need to look for ways to expand our opportunities.” He offered statistics showing that poverty and unemployment are persistent issues in the vast majority of rural communities and said the renewable fuels industry, and specifically ethanol, is providing jobs and economic stimulus to those communities.

Inhofe pressed Vilsack for reasons why his bill to allow states to opt out of the corn ethanol mandate would be undesirable if corn ethanol is already near its 15 billion gallon RFS commitment. “If we’re near the cap anyway, what’s the objection to passing my legislation that doesn’t reduce what you want to have, it merely says you have a choice in your state to have clear gas?” he asked. “Why would it not be a good idea to have it market-based so that if somebody, like my wife - who won’t put corn ethanol in her car, wouldn’t have to do it? We’d have the choice.” Vilsack pointed out that the RFS requires a total of 36 billion gallons of renewable fuels to be used in 2022 and said corn ethanol is a viable mechanism to reach that goal. Most of the gasoline available in the country now is blended with ethanol, he said, adding, “I think consumers have made a choice.”

EPA Assistant Administrator Gina McCarthy and Henry Kelly, acting assistant secretary for the DOE’s office of energy efficiency and renewable energy, offered testimony in support of the RFS and increasing the market for ethanol. Kelly spoke on the importance of expanding domestic renewable fuel production to meet the administration’s goal of reducing oil imports by one-third by 2025. “Biofuels are a key part of the solution,” he said. “Home-grown biomass can provide a cost-effective alternative to oil imports while creating business opportunities and jobs in the U.S. - including rural areas.” The DOE’s office of energy efficiency and renewable energy has a three-pronged strategy for expanding the market for ethanol, he said, including increasing the amount of ethanol that can be blended into gasoline, ensuring fuel dispensers and vehicles can use higher ethanol blends, and conducting research to commercialize advanced biofuels.

Inhofe’s plan to allow states to opt out of the ethanol mandate would require the EPA to reduce the corn ethanol portion of the RFS to match the percentage opted out of by any state that chooses not to use corn ethanol blends. McCarthy cautioned against modifying the RFS, stating that the program provides security and environmental benefits. “We estimate that the use of renewable fuels to reach the 36 billion gallons mandated by 2022, relative to market projections in the absence of the mandate, will displace over 13 billion gallons of petroleum-based gasoline and diesel fuel, decrease oil imports by $41.5 billion, and result in additional energy security benefits of $2.6 billion,” she said. “The RFS should also reduce greenhouse gas emissions from the transportation sector by an average of 138 million metric tons of CO2 equivalent per year when the program is fully implemented—equivalent to annual emissions produced by 27 million vehicles.” When asked what might happen to the industry if the RFS were changed, McCarthy spoke about the potential of the RFS to support a growing cellulosic industry. “These are small, growing companies that are really looking for investors and want the stability to know that we can make decisions about their feedstocks quickly and they’ll have an ability to get up and running,” she said. “They tell us this program is very important for their business and the innovation that they’re trying to grow in our economy.”

Inhofe said that despite his issues with corn ethanol, he supports advanced biofuels, including cellulosic ethanol. The hearing’s final panel included several representatives of the advanced biofuels industry, and all of them testified that modifying the RFS would endanger their emerging industry. Advanced Biofuels Association President Michael McAdams said his organization’s members have made important progress in the last two years and credited the RFS for enabling those advancements. “These developments would simply not be occurring if it were not for the vision of this committee and Congress from 2005 to date to enact a framework to expedite the development of advanced and cellulosic biofuels,” he said. “Our association and member companies strongly believe the current RFS is the most important federal policy in supporting the development for a biofuels industry in this country. We would specifically urge this committee and the Congress not to tinker with the statute at this time.”

Jan Koninckx, global business director of biofuels for Dupont Applied BioSciences, told committee members that the most important thing Congress can do is to provide a stable policy for the biofuels industry. “Keep the RFS and advanced biofuels tax policies as they are,” he said. “We simply ask that you do no harm. With stable policy and access to the fuel pool we will succeed.”

Brooke Coleman, executive director of the Advanced Ethanol Council, offered comprehensive written testimony, but summed it up simply in his oral comments. “The marketplace is not competitive,” he said. “It is monolithic. Our cars are not flex-fuel vehicles like they are in Brazil, there’s no choice at the pump. The incumbent oil companies, who have had subsidies for 100 years continue to get subsidies. The blend wall, which people talk about as a corn ethanol problem, is really a problem for us because our investors are looking out five years and seeing questionable demand. What are we going to do about it? The most important thing—no backsliding. We have to keep the RFS. We have to open up the marketplace. We need the opportunity to compete. Everybody wants to see a free marketplace, but it’s not as easy as showing up with a cost-competitive, cheaper fuel in this marketplace. We need tax policy that reflects 2011 and the commitment that Congress has made in the RFS instead of tax policy that’s oriented 100 years ago, when it was very important to produce more oil and mitigate the cost of drilling. We stand ready to produce these gallons and what we need more than anything else is certainty over time.”