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Frank Macchiarola's Public Hearing Statement On RFS




As prepared for delivery

RFS Public Hearing: API Testimony
Frank Macchiarola
Group Director for Downstream and Industry Operations
American Petroleum Institute
Washington DC, August 1, 2017


Good morning and thank you for the opportunity to testify today. My name is Frank Macchiarola. I am Group Director for Downstream and Industry Operations at the American Petroleum Institute (API). API is the only national trade association representing all facets of the oil and natural gas industry. API’s more than 625 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, marine businesses, and service and supply firms.

Blendwall

API’s primary RFS concern is with the ethanol blendwall. Serious vehicle and retail infrastructure compatibility issues continue to exist with gasoline containing more than 10 percent ethanol. Gasoline demand increases projected at the inception of the RFS did not materialize, nor did the commercialization of cellulosic biofuels. The ethanol blendwall is a real constraint on today’s fuel supply system that makes the statutory volumes unattainable, and limits the use of ethanol below 15 billion gallons. Congress provided EPA with waiver authority and we encourage EPA to use this authority to further reduce the 2018 volumes to avoid negative impacts on America’s fuel supply and to prevent harm to American consumers.

9.7% & EO

EPA is proposing a standard that exceeds 9.7% ethanol in the gasoline pool. A small tolerance below 10% is needed to account for the difficulty of blending ethanol into every gallon, to ensure a fungible RIN market, and to preserve a market for consumers that choose E0, or clear gasoline. Strong consumer demand for E0 continues to exist, and EPA should work with EIA in predicting its actual demand to ensure that consumer ability to choose E0 is preserved in the marketplace.

E15 & E85

E15 and E85 are not answers to the ethanol blendwall. EPA presumes demand for these blends will drive total ethanol volumes to exceed 10% of gasoline supply in 2018. History demonstrates that motorists have largely rejected E85 because – according to AAA data – the fuel economy penalty ends up costing consumers more money in the long run. It is unreasonable for EPA to assume any significant near-term ethanol volume increases from E15 or E85. EPA’s unrealistic market scenarios fail to account for the significant retail investments that are needed, particularly when only 8 percent of vehicles on the road were designed to use E85, and only about 15% (including FFV’s) were designed to use E15.

Energy Security

A primary goal of the RFS was to enhance our nation’s energy security by diversifying our sources of energy supply. That goal has been achieved, but not because of the RFS. Our dependence on foreign sources of oil and products has dropped from 58% in 2007, to 24% today, and nearly half of our imports are from Canada. Meanwhile today, the RFS is encouraging imports, particularly of biodiesel, to meet the mandated volumes. We support an open and competitive market.

Conclusion

In closing, EPA’s proposal to reduce the RFS volumes from the unattainable statutory levels is appropriate, but does not go far enough. Until Congress repeals or significantly reforms the RFS, EPA must address the outdated volume requirements by exercising its waiver authorities. EPA should further reduce the ethanol volume to not exceed 9.7% of gasoline demand to allow continued consumer access to E0, and to recognize the vehicle and infrastructure constraints that limit E15 and E85.

Thank you again for the opportunity to discuss these issues, and I am happy to answer any questions.