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Bob Greco's remarks at press conference call ahead of 2014 RFS proposal

As prepared for delivery

Press Conference Call ahead of 2014 RFS proposal
Bob Greco, API downstream group director
Thursday, October 24, 2013

Opening statement, as prepared for delivery:

Good morning and thank you for joining our call today.

I want to take a few minutes to share with you what API is looking for in the soon – we hope – to be released 2014 RFS volume mandates.

As we have said many times in the past, the RFS is a relic of a bygone era of energy scarcity for our nation. The policy goal of the law that created the RFS, the Energy Independence and Security Act of 2007, was energy security, which is being met through the energy-from-shale revolution that has, in fact, made this nation the number one oil and natural gas producer.

When coupled with the fact that demand for gasoline is down significantly, it is clear that the rigid mandates of the RFS have no place in today’s energy market. This is because the mandate was based on gasoline use rising significantly when the opposite is occurring.

The RFS’ volume mandates have not kept up with our nation’s energy realities, and EPA’s continued delays in responding to those realities have put our nation and American consumers in a dire situation. In what is termed the ethanol blend wall, consumers are now faced with putting in their tanks more ethanol than their engines were designed to accommodate, more than engine manufacturers will guarantee for the safety of their engines. And, what’s puzzling is that this regulatory mess could be entirely avoidable.

What would the result be of breaching the blend wall?

According to a study by NERA Economic Consulting, passing the blend wall could cause a drastic reduction in America’s fuel supply, possibly leading to:
  • Dramatic fuel cost increases and fuel supply disruptions rippling adversely though the economy, ultimately leading to:
  • A $770 billion decrease in U.S. GDP and a $580 billion decrease in take-home pay for American workers.

Consumers could be forced to buy a fuel that may be unsafe for their engines.

Higher and higher ethanol volume mandates could eliminate the availability of ethanol-free gasoline, which could expose millions of sportsmen, boat owners and anyone who uses a small engine to costly repair bills.

It is for these and many other reasons that we call on Congress to repeal this unworkable mandate. In the meantime, while the legislative process continues, we also urge the administration to waive parts of the RFS for 2014 to provide temporary relief from the disastrous effect of the blend wall.

In our meetings with EPA and OMB officials to discuss the 2014 RFS requirements, we’ve asked the Agency to set next year’s total ethanol requirements at or below 9.7 percent of projected gasoline demand. By EIA’s latest projection, that would mean lowering the mandate to at most 12.9 billion gallons of ethanol. This would help us avoid the blend wall for now while also preserving the availability of E0 – ethanol free gasoline – for consumers who demand it, especially boaters and owners of older vehicles and motorcycles.

We also insist that the EPA set reasonable volume requirements for cellulosic fuels. The ongoing practice of setting a cellulosic volume mandate that can never be met by cellulosic fuel manufacturers is not just bad public policy, it flouts a recent federal District Court decision that directed the EPA not to “let its aspirations for a self-fulfilling prophecy divert it from a neutral methodology” when setting cellulosic mandates.

To that end, we continue to demand that the EPA base its cellulosic mandates on actual production rather than projections that – year after year – have fallen far short of reality.

Finally, we’re prepared to file suit should EPA fail to finalize the 2014 requirements by the statutory deadline of November 30.

The U.S. refining industry is a major industry supporting over $268 billion in US GDP and refiners need regulatory certain in order to provide the billions of gallons of gasoline, diesel and other fuels to support the U.S. economy each year. The industry cannot stop and turn on a dime based on late EPA regulatory rules, or back up midyear and reconfigure an entire industry based on overdue rules. As you recall, EPA didn’t finalize this year’s requirements until two-thirds of the year had already passed.

Based on the widely leaked proposal, we are guardedly optimistic that the EPA is at least moving in the right direction; however, if accurate, EPA’s 2014 volume mandate is still a problem. Our bottom line remains that the RFS must be stopped once and for all.

To be clear, no one disputes the value of renewable fuels. In fact, the oil and natural gas industry is the largest investor in renewable fuel technology and innovation. But the RFS, as a vehicle for advanced fuels, is simply broken – and it presents a clear danger to our economy and our citizens’ investments in their vehicles.

We cannot allow the bad public policy of the outdated RFS mandate to harm consumers or put our nation’s economy at risk. That’s why we need EPA to act immediately to provide relief for consumers while we continue to work with Congress to enact a full repeal.

Now, I’d be happy to take your questions.