Will 2015 be the year of Renewable Fuel Standard Reform?

Posted by Marita Noon @ Breitbart

The fact the Senate Homeland Security and Government Affairs Committee is attacking the Environmental Protection Agency’s (EPA) management—er, mismanagement—of the federal renewable fuel standard (RFS) is indicative of the growing frustration over both the agency and the RFS itself.

At the June 18 hearing, EPA’s Acting Assistant Administrator, Janet McCabe was grilled by Senators from both sides of the aisle. Senator James Lankford (R-OK), who chaired the Subcommittee on Regulatory Affairs and Federal Management, opened the hearing by calling the RFS “unworkable in its current form.” In her comments, Senator Heidi Heitkamp (D-ND) claimed that the EPA’s management of the RFS ignored “congressional intent,” while creating “uncertainty” and costing “investment.”

The RFS has been under fire from all sides. It is the product of a different energy era—one in which presumed scarcity was the norm and reducing greenhouse gases was the concern. As a solution to both problems, Congress passed the Energy Policy Act in 2005, which established the first renewable-fuel volume mandate. Two years later, through the Energy Independence and Security Act, the RFS program was expanded, requiring 36 billion gallons of renewable fuel be blended into gasoline and diesel by 2022 (annual targets were outlined). The EPA website explains the RFS: “achieving significant reductions of greenhouse gas emissions from the use of renewable fuels, for reducing imported petroleum, and encouraging the development and expansion of our nation’s renewable fuels sector.”

The EPA administers the RFS and is required to finalize the next year’s proposed fuel volumes by November 30 of each year—something it has failed to do, as Lankford pointed out: “On June 1, the amounts for the proposed mandates 2014, 2015, and 2016 volumes were all released together…some say better late than never, but we need to take a serious look at why these delays are unavoidable every year now, under current law.” The EPA has failed to meet the deadline every year since 2009.

When the 2014, 2015 and 2016 proposed volumes were released—in the middle of 2015—almost no one was happy. It reduced the amount of corn-based ethanol blended into gasoline, while slightly increasing the share of biofuels.

One day before the Subcommittee on Regulatory Affairs and Federal Management hearing on “Re-examining EPA’s Management of the RFS Program,” the American Petroleum Institute held a press call in which an unlikely coalition of RFS opponents—the American Motorcyclist Association, the Environmental Working Group and the National Council of Chain Restaurants— sounded optimistic that 2015 is the year for RFS reform. The Environmental Working Group says the RFS has led to more greenhouse gas emissions. The leading chain restaurant trade group, the National Council of Chain Restaurants, is opposed to the RFS because of its alleged effect on food commodity prices.

Corn growers aren’t happy with the EPA’s new proposed corn ethanol volumes—covering 2014-2016—that are well below the benchmarks established by Congress. NPR’s Ari Shapiro, in a June 10 Morning Edition broadcast, stated: “Farmers in the Midwest have made good money growing corn for ethanol. To do that, they’ve plowed up lots of grassland. And that cancels out much of the hope for carbon savings. While the EPA still supports ethanol, it wants to take some of the focus off corn, and put it back on greener ways of making ethanol.”

The National Journal states: “The EPA cited market forces, specifically lower-than-expected growth of non-ethanol renewables and lower gasoline use than projected, in lowering the ethanol mandates.”

One of the problems with the 2007 targets is that they are based on an assumption of increased fuel usage and require ever increasing “volumes,” or gallons, of ethanol be produced rather than a percentage of ethanol being blended into gasoline. The combination of more fuel-efficient vehicles, the economic downturn, and an aging population has contributed to “lower gasoline use than projected.”

Last week, I was on the radio with Baron Lukas, President of Vital Strategies Management Consulting, a firm working in the oil-and-gas sector. He explained: “With the advent of the U.S. shale revolution, we have a lot more oil and gas than we thought possible just a couple of years ago. This is a true paradigm shift in how we view our domestic energy situation. The impact is compounded by aging demographics for Japan, China, Russia, Europe, and for the short-term, the United States, which will reduce or at least dampen domestic and global fuel requirements—older people simply drive less and represent lower industrial needs. Lastly, continuing technological advances are increasing fuel efficiency for a broad spectrum of applications, further placing downward pressure on hydrocarbon fuel demands. The bottom-line is a new reality of impending U.S. energy independence, continuing lower crude oil and natural gas prices, and far less dependence on OPEC for us and potentially for our allies.”

While EPA’s newly released renewable-fuel volumes don’t meet the law’s target of 22.25 billion gallons for 2016, they do increase year after year—with the 2016 target being an increase over current use. Addressing EPA’s new numbers, USNews reports: “The update calls for a 27 percent increase in what the EPA calls ‘advanced biofuels’ from 2014 through 2016, a catch-all category that includes cellulosic ethanol made from corn stalks, husks and other leftovers from a harvest, plus fuel converted from sugar cane, soybean oil, and waste oils and greases, such as from fast-food restaurants. Combined with conventional corn ethanol, the proposed volumes overall rise 9 percent.”

Associated Press reporting adds: “The EPA said the standards set by the law cannot be achieved, due partly to limitations on the amount of renewable fuels other than ethanol that can be produced. Next-generation biofuels, made from agricultural waste such as wood chips and corncobs, have not taken off as quickly as Congress required and the administration expected. Also, there has been less gasoline use than predicted.”

Increasing targets may encourage the renewable fuels industry. They are, however, unrealistic and, as the June 18 hearing revealed, are expected to be “reset.”

In pressing McCabe on the RFS and the consistently missed deadlines, Lankford asked: “How does RFS get back on schedule? Or, has Congress put a requirement on EPA that it can’t fulfill?” McCabe promised they were working on it and offered some vague explanations. He then asked: “I assume you would agree there’s no chance we will hit the target for 2017 based on the statute required for 2017, so we’ll have to reset it…unless there is a tremendous amount of cellulosic ethanol that comes on board.” Lankford continued, discussing the way the law was written to decrease corn ethanol use and increase cellulosic fuel, which he pointed out isn’t “possible based on production.” McCabe agreed that the cellulosic number would need to be decreased by at least 50 percent.

Later in the hearing, Lankford called cellulosic fuels “great in theory,” but acknowledged that “No one has been able to make it in a quantity that is affordable yet.” He alluded to the fact that the cellulosic industry has struggled—with the largest manufacturer of cellulosic product going bankrupt. He said: “No one can seem to crack the code to be able to make this in a way that’s actually affordable.”

Others support Lankford’s view. On the June 10 NPR broadcast, Rob Mitchell, a researcher for the U.S. Department of Agriculture who studies how to make switchgrass grow for cellulosic ethanol, acknowledged: “We’re not producing any ethanol from switchgrass at this point on a large scale.”

Tim Snyder, agriculture economist with Agri-Energy Solutions, Inc., a Lubbock, Texas-based agriculture- and energy-consulting group, explains: “Because cellulosic ethanol is made from the ‘non-food’ portions of plants, this type of ethanol has gained widespread grassroots interest. Lignocellulosic fibers are found in plant materials like stalks, leaves and stems. These cellulosic fibers contain long chain sugars that are tied together by lignin. Only the sugars are needed to produce ethanol. Lignin is necessary to keep these chains of sugar bonded together. However, lignin renders the sugars unusable, and so it has to be extracted. Once the lignin is stripped away, yeast is added to convert the remaining cellulosic fibers or unbound sugars into ethanol. This description is extremely simplified, but should help to understand that adding steps to the production process that corn-based ethanol does not employ, adds to its overall production cost. Stripping lignin adds significant costs to the production process; even more than corn-based ethanol.”

Additionally, Snyder continues: “From the standpoint of land use, it takes significantly more land to produce ethanol from cellulosic materials than it does from corn. Additionally, it will take totally new transportation, initial processing and storage infrastructures that currently do not exist on a commercial scale.”

Clearly, to reference Lankford, the RFS is a program, required by Congress in 2005/2007, that can’t be fulfilled. No wonder it has so many who see the EPA’s failures as proof that 2015 is the year for RFS reform. Senator Jim Inhofe (R-OK), chairman of the Environment and Public Works Committee says: The mandate is in need of significant reform and oversight.”

Maybe, just, maybe, 2015 will be the year it happens.

(Author’s note: Please tune into America’s Voice for Energy, Thursday at 11:00AM ET to hear more from Baron Lukas discussing changing global demographics and the impact on energy demand and Tim Snyder on the economics of cellulosic ethanol and the impact on the ranching community.)

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column.