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Frank Macchiarola press call on Point of Obligation EPA Comments

As prepared for delivery

Point of Obligation EPA comments
Frank Macchiarola, API downstream group director
February 22, 2017

Good morning, and thank you for joining our call.

Later today API will submit comments in support of EPA’s proposed denial of petitions to move the Point of Obligation for RFS compliance. Moving the point of obligation does nothing to alleviate the structural problems with the RFS, and will not materially impact the consumption of renewable fuels. Rather, such a change would create significant uncertainty in the RFS program, and in the Renewable Identification Number (RIN) market. Moving the point of obligation would also complicate the program, adding a time and an administrative burden for both EPA and regulated entities, particularly the small and mid-size businesses that would be newly designated as obligated parties. The RFS program is broken, and changing the point of obligation only creates new problems for an additional group of entities.

The focus of policymakers should be on fixing the blend wall problem and setting fuel policies consistent with vehicle compatibility. Nearly 85 percent of vehicles on the road today were not designed for higher ethanol blends, such as E15. And many automakers say that using E15 could potentially void automobile warranties. These higher ethanol blends threaten engines and fuel systems – potentially forcing drivers to pay for costly repairs, according to extensive testing done by the auto and oil and natural gas industries.

The bottom line is the RFS is broken and it must be fixed, and Americans should not be forced to pay more at the pump because of this broken policy. The Congressional Budget Office found that forcing ethanol consumption through this mandate, mainly by using higher ethanol blends like E85, could cost consumers an additional 26 cents per gallon at the pump. Moving the point of obligation does nothing to relieve potential pressure on consumers created by the RFS mandate.

When Congress amended the RFS program in 2007, it relied on many assumptions behind the RFS that have proven to be wrong. Congress expected ever-increasing fuel demand, increased reliance on imported petroleum, and the rapid development of next-generation advanced and cellulosic biofuel technologies. These assumptions were proven wrong. Our domestic energy security has increased significantly since 2007, and reliance on petroleum imports has dropped. These achievements are the result of innovation and technology in our domestic oil and gas industry.

An ever-increasing number of Americans are saying “No More” to the ethanol mandate, and lawmakers need to listen to them. We support the bipartisan efforts in Congress to repeal or significantly reform the program. But until Congress acts, lowering volume requirements in 2018 is a preferred way for EPA to address the short term RFS challenges facing the refining industry, and we must avoid creating a new regulatory burden for small and mid-size businesses that could become obligated parties. EPA should base its 2018 RFS standards on realistic assumptions about the adoption of cellulosic technologies, E15 and E85 use, and recognize the real demand for E0 from boaters, classic car owners and owners of small engines who prefer to use ethanol free gasoline.

The United States is the world’s number one producer and refiner of oil and natural gas, and we lead the world in reducing carbon dioxide and other emissions. For this success to continue, we need to do everything we can to help consumers benefit from this energy renaissance, and that means fixing the broken Renewable Fuel Standard.

Thank you, and I will be happy to take any questions you have.