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API's Frank Macchiarola calls on Congress to repeal RFS in conference call with reporters

Press Conference Call on the Renewable Fuel Standard
Frank J. Macchiarola, Group Director, Downstream & Industry Operations, API
Tuesday, February 23, 2016

Opening statement, as prepared for delivery:

Good morning, and thank you for joining us today.  My name is Frank Macchiarola. I am Group Director of Downstream and Industry Operations at API.

Tomorrow, the U.S. Senate Committee on Environment and Public Works will hold an oversight hearing on the Renewable Fuel Standard. Ahead of the hearing, we are reminding policymakers and the public that the oil and natural gas industry is stepping up our call for Congress to protect consumers from this harmful mandate. 

We continue to seek the repeal of or significant reforms to the RFS.

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. 

It is well past time to reform outdated energy policies to reflect the energy realities of today and tomorrow. 

I think it is important to briefly examine the history of the ethanol mandate to explain why it is such a broken policy.  At the time of its passage a decade ago, the stated intent of Congress was to strengthen America's energy security by displacing imported oil with homegrown ethanol.  Back then, the idea that an American energy renaissance would dictate that the American people would seek an end to a decades long export ban on crude oil would be unthinkable.  Just as the energy reality of today drove the need to examine that policy, reality dictates that we must re-examine the ethanol mandate. 

Since the RFS was enacted, the US has significantly increased domestic crude oil production from less than 6 million barrels per day to more than 9 million barrels per day.  Over the past decade, the US has also transitioned from a net importer of refined petroleum products to a net exporter of refined products. 

Today, most gasoline contains 10 percent ethanol by volume. But if the RFS requirements continue to be implemented, our nation could hit the blend wall in the next year as more ethanol would be forced into the fuel supply than is safe. 

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 on the road today. And automakers have warned these fuels could void new car warranties.  Simply stated, this is bad public policy that creates a potential harm to the American consumer.  And, it must be fixed.

The American people agree.  US consumers have already spoken with their wallets; they do not want these fuels.

For example, the overwhelming majority of owners of cars approved for E85 choose not to use it.  Why?  One explanation is that ethanol has 30 percent less energy per gallon than gasoline. According to AAA and the Department of Energy, E85 has cost more than conventional gasoline when adjusted on an energy content basis.

Numerous studies also warn of the consequences for consumers from breaching the blend wall.

A June 2014 report by the nonpartisan Congressional Budget Office found that breaching the blend wall could increase the price of gasoline by up to 26 cents per gallon.

And a NERA study projected a possible 30 percent reduction to the fuel supply and “severe economic harm” across the nation due to fuel shortages and rationing.

On top of everything else, the Environmental Working Group says corn ethanol mandates lead to higher greenhouse gas emissions.

Across the political spectrum, voters are concerned about the significant damage the RFS-mandated higher ethanol blends could cause.

Seventy-five percent of respondents in a public opinion poll conducted by Harris Interactive on behalf of API are concerned that most auto manufacturers do not warranty their vehicles if they are fueled with an ethanol blend that is over 10 percent. Breaking it down by party, 80 percent of Republicans, 80 percent of independents and 74 percent of Democrats expressed concern.

Despite all these concerns and despite a lack of market demand, vehicle compatibility and the additional consumer costs associated with this mandate, EPA continues to implement increased ethanol volumes.

This policy is outdated, and this program is broken.

With our current energy realities in mind, API is stepping up our call for Congress to repeal or significantly reform the RFS to protect American consumers.

We are optimistic because Congress is taking notice.  Late last year, 185 House members signed a letter urging EPA to keep the ethanol mandates below the blend wall to protect American consumers. We believe support for repeal or reform is growing

And we are making this a top priority this year because we need Congress to act, and act quickly, to protect consumers from this harmful mandate.

Thank you for your time and attention. Now, I’ll be happy to take your questions.