Fuels & Renewable Policy
Since the inception of the ethanol mandate a decade ago, the United States has undergone an energy transformation from a nation of energy dependence and scarcity to one of energy security and abundance. America has significantly increased domestic crude oil production and transitioned from a net importer of refined petroleum products to a net exporter. It is well past time to reform outdated energy policies to reflect the energy realities of today and tomorrow.
Today, most gasoline contains 10 percent ethanol by volume. However, if the Renewable Fuel Standard (RFS) requirements continue to be implemented, our nation could exceed this level of ethanol in the fuel mix. Extensive testing by the automotive and oil industries shows higher ethanol blends may result in damaged engines and fuel systems for owners of the overwhelming majority of cars as well as boats, lawnmowers and other gasoline engines. Automakers have warned these increased blends of ethanol could void car warranties. Increased RFS volumes could also cost consumers money and choice, and threaten far higher costs in the form of engine damage.
Simply stated, the RFS mandate creates potential harm to the American consumer. And it must be fixed. Recent surveys show that the American people agree, with nearly three-quarters of voters concerned about the potential harms created by the increasing prevalence of ethanol blends to over 10 percent of the fuel mix. The RFS has proven to be an unworkable program that must be eliminated.
Congress must repeal or significantly reform the RFS to protect American Consumers.
API commissioned an analysis prepared by Covington & Burling to better understand the market behavior and consumer impacts of EPA’s proposed reforms. The report makes clear that the administration’s reform proposal for biofuels credits, known as Renewable Identification Numbers or RINs, under the Renewable Fuel Standard (RFS), both misdiagnose the problem and provide misguided and counterproductive cures.
Among the findings:
- 79% of voters are concerned about EPA expanding the use of E15 (slide 6), and this concern is nonpartisan (slide 7: R=78%; I=77%; D=81%)
- 83% of voters are concerned an E15 mandate could increase costs to consumers (slide 10) and, again, this is nonpartisan (slide 11: R=85%; I=78%; D=85%)
- 68% of voters are concerned consumers could mistakenly use E15 and damage their engines (slide 8)
- 81% of voters are concerned about government requirements that could breach the “blend wall” (slide 12)
In an effort to expand the nation’s renewable fuels sector while reducing reliance on imported oil and reduce greenhouse gas emissions, Congress created the renewable fuel standard (RFS) program. The program does not, however, effectively achieve its intended goals.
The Point of Obligation debate asks whether the RFS can be implemented at distribution sites, rather than at refineries. Moving the point of obligation removes the imperative for refineries to bear the brunt of the regulation, but it does not fix the broken RFS policy. Moving the point of obligation is merely passing the responsibility from one segment of the industry to another.
Changing the point of RFS obligation would create additional uncertainty in the RFS program and in the RIN market and, as suggested in comments submitted to the EPA, could result in increased retail fuel costs. RFS compliance plans, investments and commercial agreements that were premised on the current structure would be disrupted. Others have highlighted that such a major structural change a decade into the program creates additional uncertainty about other critical components of the program.
On May 18, 2016, the Environmental Protection Agency (“EPA”) released its Proposed Renewable Fuel Standards for 2017 and the Biomass Based Diesel Volume for 2018. As policymakers and the public consider this proposal, it is important to provide an overview of current Renewable Fuel Policy and a roadmap for fundamental policy change. Renewable Fuels have been mandated under federal law for over a decade, and our current renewable fuels policy is outdated, and ineffective. Government fuel blending requirements are constraining free market forces, supporting uneconomic activity, and limiting consumer choice.
The Energy Independence and Security Act of 2007 included an expanded Renewable Fuel Standard, which the EPA used to develop a final rule effective July 1, 2010. To comply with the Standard, biofuel producers and importers must blend increasing amounts of biofuels into gasoline and diesel.
Only six out of 100 cars on the road today can even use E85.
The Energy Independence and Security Act of 2007 (EISA) expanded the Renewable Fuel Standard (RFS) with significant increases in biofuel volume mandates. However increasing ethanol blends to E15 for use in millions of cars currently on the road could damage vehicles, void engine warranties, and damage gasoline station infrastructure. E85 remains a specialty fuel, with low consumer demand, and infrastructure investments from gas station owners would be required to expand distribution.
What other parties are saying about the Renewable Fuel Standard and concerns regarding E-15 and E85.