As prepared for delivery
Press briefing teleconference on renewable fuels standard
Bob Greco, API group director for downstream and industry operations
Wednesday, August 8, 2012
Good morning everyone. Thanks for calling in.
The federal renewable fuels standard – or RFS – has substantially expanded the use of biofuels in America and is designed to bring even more into the nation’s energy mix over the next decade.
Unfortunately, automatic annual increases in the amounts of biofuels blended into gasoline under the RFS program – and questionable management decisions by EPA – could hurt consumers and undermine the program. The paper we sent to you this morning provides an overview of the problems. The purpose is to educate people, including policymakers, and help encourage improvements to the program.
Since 2004, U.S. refiners have steadily increased the amount of biofuels blended in motor fuels. We are now close to the point at which every gallon of gasoline sold in the nation will contain 10 percent ethanol by volume. Ten percent ethanol is the maximum safe level. It requires no modifications to vehicles and no major changes to service station pumps and storage tanks.
Automakers do not endorse use of ethanol above 10 percent. Some warn that higher concentrations risk damage to engines, and that any such damage may not be covered by warranties. Testing by the Coordinating Research Council earlier this year showed E15 could harm vehicle engines. Testing by Mercury Marine last year showed that E15 damaged boat engines. Testing in government labs has raised red flags about the compatibility of E15 with much of the dispensing and storage infrastructure at our nation’s gas stations.
The biofuels volume requirements established by Congress will soon push concentrations above the safe E10 level. Volumes will grow from more than 13 billion gallons this year to 36 billion gallons in 2022. If the RFS is fully implemented, it would raise the per gallon ethanol concentration in gasoline to an average exceeding 20 percent.
To increase the amount of biofuels blended in gasoline, EPA has approved the sale of E15 for a portion of the nation’s vehicle fleet. EPA approved E15, even though it knew or should have known of the existence of compatibility problems and even though it knew engine testing was ongoing.
EPA has still not resolved the problem of fraudulent renewable fuel credits purchased by some refiners. EPA told refiners the bad credits were the companies’ problem and they’d have to purchase more RINs, potentially adding more costs to making gasoline. This is a problem the agency could have, and should have, resolved by now. Instead, the situation has introduced uncertainty in the RINs market and hurt some smaller biofuels producers.
Finally, EPA continues the bizarre requirement that refiners blend cellulosic ethanol into gasoline, even though no one is producing any cellulosic ethanol for commercial use. Nevertheless, EPA has ruled that refiners must purchase credits for this non-existent fuel.
Requiring refiners to pay for a fuel that doesn’t exist is regulatory absurdity. It drives up costs and does nothing to increase use of biofuels. It may even undermine public confidence in the RFS program itself.
The RFS program has been the most important mechanism for bringing biofuels into the nation’s energy mix. But it is being undermined by impractical requirements and bad agency decisions.
We need to take a fresh look at this program, make changes to improve it, and do a better job implementing it.
Thanks, and now I’ll take your questions.