US energy, refining officials urge repeal of biofuel mandate

23 July 2013 18:49  [Source: ICIS news]

WASHINGTON (ICIS)--US energy sector and refining industry officials on Tuesday called on Congress to repeal the federal biofuels mandate, arguing that the programme is driving up fuel costs and is no longer valid in the new energy-rich US environment.

In a hearing before the House Subcommittee on Energy and Power, industry leaders charged that the eight-year-old Renewable Fuel Standard (RFS) is now invalid and economically costly because US energy production and consumption projections underlying the original RFS statute have been proven erroneous.

In contrast, representatives of the biofuel industry urged the panel to sustain the RFS because the programme “has been an unmitigated success” and should be continued without alteration.

Speaking for the US refining sector, Charles Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), said that the RFS “has created numerous unintended consequences and is failing to achieve its goals, due in large part to the fact that most of its foundational assumptions have proven to be false”.

The RFS was part of the 2005 Energy Policy Act and was greatly expanded under the Energy Independence and Security Act (EISA) of 2007.  The RFS mandated certain levels of US consumption of biofuels with increasing annual volumes that US refiners are required to blend into the nation’s conventional oil-based fuels.

But in a briefing paper issued before the subcommittee hearing, the panel noted that since 2007 “several implementation challenges have emerged that received little if any consideration prior to passage of EISA”.

“Furthermore, the overall energy landscape has changed,” the brief said, adding: “It is time to undertake an assessment of the RFS.”

In his testimony, Drevna highlighted the profound change in the US domestic energy profile, noting that “the US has undergone an unanticipated oil and gas revolution” that has put the nation on course to become energy self-sufficient within a few years.

Jack Gerard, president of the American Petroleum Institute (API) argued that the RFS “is a relic of America’s bygone era of energy scarcity”.

“The RFS was designed to reduce emissions, make the US more energy secure and provide a reliable source of domestic energy that would lessen energy imports from less stable parts of the world,” Gerard said.

“Today, the US is closer to achieving those important goals not because of the RFS but because of the oil and natural gas industry’s technological advances and vastly expanded energy resources,” he said.

In a suit brought by API, a federal appeals court ruled early this year that the RFS mandate for some 8m gallons of cellulosic ethanol consumption in 2012 was invalid because there were no commercial volumes of that fuel available that year.

Gerard called on the Obama administration to waive the existing biofuels mandate, and he urged Congress “to finally repeal this fundamentally broken law”.

But Bob Dinneen, president of the Renewable Fuels Association (RFA), argued that “by virtually any measure, the Renewable Fuel Standard has been an unmitigated success”.

He said the RFS has reduced US dependence on imported oil, stimulated technology developments, reduced fuel prices, created jobs and saved taxpayer dollars.

To drop or significantly alter the RFS programme, he said, “would devastate investments that have been made in next generation biofuels technologies and stop the evolution of the transportation fuels market just as it is getting started”.

Tom Buis, chief executive of Growth Energy, another biofuels trade group, argued that the RFS mandate has “cracked the monopoly stranglehold that petroleum-based fuels have on our transportation system, injecting much needed competition and providing drivers a choice at the pump”.

Buis also challenged the contention that with vastly expanded US domestic oil and natgas production, the RFS mandate is no longer needed.

“Despite having record levels of domestic oil production, gasoline prices are still high and only going higher,” he said.  “This is because we don’t control the cost of oil [which] is still set in the global marketplace.”

The subcommittee hearing on Tuesday was one of a series of congressional panels that has aired issues surrounding the RFS.  Many in the House want to see the mandate ended, but the RFS still has strong support among representatives from corn-growing states.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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