Revise obsolete federal renewable fuel mandates, House panel urged

Federal renewable fuel mandates that don’t reflect market changes and distribution obstacles must be reworked, two oil industry witnesses told a US House Energy and Power subcommittee.

The US Environmental Protection Agency has allowed the renewable fuel standard’s volume requirements to drive decisions that are inappropriate and unwise, American Petroleum Institute Pres. Jack N. Gerard said. “The law has become increasingly unrealistic, unworkable, and a threat to consumers,” he told the subcommittee. “It needs an overhaul, especially in respect to the volume requirements.”

The reason retailers aren’t able to easily accommodate additional renewable fuel volumes begins with the equipment at their outlets that must be certified by a nationally recognized testing laboratory, noted Joseph H. Petrowski, chief executive of the Cumberland Gulf Group in Framingham, Mass.

Retailers whose equipment is not certified violate US Occupational Health and Safety Administration regulations and possibly tank insurance policies, state tank fund program requirements, bank loan covenants, and other local regulations, he said in his written testimony. “This brings us to the primary challenge: If no dispenser prior to early 2010 was listed as compatible with fuels containing greater than 10% ethanol, what options are available to retailers to sell these fuels?” Petrowski said.

Shane Karr, vice-president for government affairs at the Alliance of Automobile Manufacturers, said the US is on a pace to consume 132 billion gal of gasoline in 2012, less than in 2011 because of higher prices, improved fuel efficiency in new vehicles, and a slower pace of broader economic recovery.

‘Virtually no room’

“As it happens, the [RFS] requires blenders to purchase 13.2 billion gal of corn ethanol this year, almost exactly 10% of the total gasoline pool, which will be taken up almost exclusively by E10, leaving virtually no room for higher level blends,” he said in his written testimony.

Once the E10 blend wall is reached, Gerard noted that refiners will have only two options: E15, which is outside most US motor vehicle engines’ designed operating range and has not been fully evaluated, and flexible fuels, which only about 1% of the owners of flex-fuel vehicles actually use. “The RFS law needs to be altered to fix what isn’t working and take into account the ability of the vehicle fleet and fueling infrastructure to safely use renewable blends,” Gerard maintained.

Witnesses representing the US alternative motor fuels industry painted a different picture. “The RFS is among the most successful energy policy this nation has ever adopted; it is working exactly as intended,” said Renewable Fuels Association Pres. Bob Dineen in his written statement. “However, a continued commitment to the production of alternative fuel vehicles, and specifically flexible fuel vehicles, is absolutely critical to the long-term success of the RFS.”

Advanced Biofuels Association Pres. Michael J. McAdams agreed that the RFS is largely responsible for progress so far in biofuels development. “A number of sophisticated manufacturing companies are poised to build the first generation of commercial scale advanced biofuels plants in the US, with over a billion dollars of private capital poised to enter the market,” he told the subcommittee. “As you well know, uncertainty chills investment—and uncertainty about whether Congress might change the rules at this critical time by changing the RFS would have serious negative implications for those who have already invested to build this industry.”

Contact Nick Snow at nicks@pennwell.com.

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