OPIS Biofuels Headlines

April 9, 2014
Would Congress Approve RFS if Not Law? Sources Say Unlikely in Current Form

During a Senate Agriculture Committee hearing on Tuesday, Sen. Heidi Heitkamp (D-N.D.) wondered aloud whether the renewable fuel standard (RFS2) would pass today if it were voted by Congress. According to an informal survey conducted by OPIS, most observers don’t believe the RFS would be approved, at least not in its current form.

“Would lawmakers, stakeholders and consumers want an alternative to petroleum-based energy and a federal policy to promote its development and adoption?  Yes, I think they would,” said one source in the biofuels industry. “Would it look exactly like it does today? Legislation is the careful product of the events driving the day, the lawmakers voting and the president signing it in to law,” the source noted.

As Heitkamp told the Senate Agriculture Committee hearing on advanced biofuels Tuesday, “As we move forward, I think the real challenge is not only a regulatory challenge, but it’s also a public policy challenge. I don’t know what would happen if you put renewable fuel standards to a vote today in the United States Congress. We’d like to think we’d maintain it and be able to present those arguments, but it may not be factual. I think it’s really important that we start talking about what’s the next generation of incentives,” she added.

In a statement issued to OPIS today, Heitkamp said “the RFS is a successful policy that I’ve long advocated for, and it deserves the support of Congress.”

A Heitkamp staffer clarified to OPIS that the senator “would absolutely vote for it [the RFS], which is why she has and continues to be so vocal about it.”

The Energy Independence and Security Act of 2007, which included the 36 billion gal RFS2 by 2022, passed the House in January 2007, the Senate in June 2007 and after conference negotiations, was signed into law on Dec. 19 the same year. RFS2 was an expanded version of the first RFS, which passed in 2005 and called for 7.5 billion gal by 2012.

A second biofuels source didn’t believe RFS2 would be approved today in Congress. “The coalition that gave us the RFS — oil, enviros and farm lobbies — are now enemies. The stars were aligned back then, but not anymore,” the source said.

However, Ben Evans, spokesman for the National Biodiesel Board, said he believes the RFS or something similar would pass. “If the RFS didn't exist today, our dependence on oil would be all the more glaring and there would be even more recognition in Washington that we need to diversify the transportation sector,” he said. “There would have been no meaningful progress in cutting greenhouse gas emissions in vehicle fuels, with virtually no prospects for improvement on the horizon. And we would be importing more fuel with less U.S. refining capacity. That is not a scenario that would sit well in Congress, and it would create tremendous pressure to act as Congress did in a bipartisan fashion in 2005 and 2007,” he continued.

“Obviously, Congress is far more polarized and gridlocked today, which makes it increasingly difficult to pass major legislation. But even in today's political environment, I believe the economic and environmental harm from unchecked oil dependency would compel Congress to pass something similar to the RFS,” Evans added.

Meanwhile, the petroleum industry is actively pushing for the RFS to be repealed. Under that context, it’s not surprising that petroleum representatives believe the biofuels provision would fail if put to a vote in Congress.

“Members of Congress have seen firsthand how oil and gas production has flourished without a government mandate. The unintended negative consequences for consumers are now clear and it is inconceivable that Congress would vote to enact the RFS today,” said American Fuel & Petrochemical Manufacturers President Charles Drevna.

“We’ve seen growing concern in both sides of the aisle that the Renewable Fuels Standard is a failed policy. The world is a much different place today than it was when Congress passed the RFS,” said American Petroleum Institute Spokesman Carlton Carroll. “Today, we are reducing our reliance on foreign oil and lowering our carbon footprint. But it’s not because of ethanol mandates.  It’s because of increased production of domestic oil and natural gas.  So the short answer is no I don’t think the RFS would become law if put up for a vote today,” he added.

“The 2007 RFS provision would probably not pass today given what enough folks now know about the problems with corn ethanol and the financial challenges surrounding advanced biofuels,” said Stephen Brown, vice president and counsel in the Federal Government Affairs division of Tesoro. “The volumes back then were ridiculous even to folks who put them in. The thinking was that a subsequent Congress would be able to come back in” and fix it, he added.

“Recognizing that this is an election year, it might be difficult to pass any controversial energy legislation at this time without a major catalyst, including the hypothetical scenario that you’ve posed,” said Timothy Cheung, vice president and research analyst at ClearView Energy Partners. “There are other things to consider. When Congress passed EPAct05 and EISA07 [RFS1 and RFS2, respectively], U.S. crude oil production was still declining and consumption was increasing,” he noted.

However, Brent Erickson, executive vice president of Biotechnology Industry Organization’s Industrial & Environmental Section, did not want to deal in hypotheticals. “It is not a matter of would it pass. It has passed and it is law. The key part of her [Heitkamp’s] statement was we need to be looking at the next generation of biofuel incentives,” he added.

--Rachel Gantz, rgantz@opisnet.com


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