The House Energy and Commerce Subcommittee on Energy and Power held a hearing on June 22 to examine the Renewable Fuel Standard's (RFS) implementation, market impact, and possibilities for reform. Although Congress is not expected to consider any serious legislative proposal revising or repealing the RFS this year, legislators are likely to examine reform ideas in the next Congress beginning in 2017. The June 22 hearing provided a preview of what that debate will look like.
For more than a decade, the RFS has required every fuel refiner and importer to generate an increasing volume of renewable fuel annually. These "obligated parties" must attain a particular number of renewable fuel credits, known as "RINs" (Renewable Identification Numbers) to show that they are in compliance with the RFS. Many obligated parties are unable to directly generate their mandatory volume of renewable fuel; in these instances, they rely on others to introduce renewable fuel into commerce for them. Many NATSO members do this in a manner that enables them to sell fuel at a lower price and realize greater margins on sales.
The subcommittee heard from two panels last week: The first panel consisted of government officials, and the second consisted of market participants, including refiners, retailers, and the biofuels community.
In the first panel, Janet McCabe, EPA's Acting Assistant Administrator of the Office of Air and Radiation, provided an overview of EPA's recent proposed volume obligations for 2017 , in which EPA increased the volumetric obligations over 2016 but nonetheless exercised its waiver authority to lower the mandate from what Congress had originally called for nearly a decade ago. She received often hostile questions with respect to both of these issues. McCabe said EPA's approach was to mandate "achievable" renewable fuel volumes without irresponsibly requiring more renewable fuel than the market can reasonably be respected to consume.
In the second panel, the witness representing the retail community lauded the EPA's proposal, noting that EPA's waiver authority to lower volume obligations to achievable levels was important to the RFS's long-term viability, and that further renewable fuel growth in the United States is hampered by retailers' concerns over insufficient consumer demand and equipment compatibility and liability concerns. Additionally, the retailer witness's testimony opposed changing the definition of "obligated party" under the RFS from refiners and importers to blenders (or "position holders" at the rack) as some refiners have advocated. Several members of the committee expressed support for this idea. NATSO has and will continue to strongly oppose this policy shift.
The witness representing the refining community admonished the EPA for overestimating the amount of corn ethanol the market can absorb. Refiners by and large support a cap of 9.7 percent ethanol in the gasoline supply, while EPA's proposed 2017 mandate exceeds 10 percent. This proposal does not sufficiently account for the demand for E0, according to the refining community. There is legislation currently introduced in the House of Representatives that would cap the annual corn ethanol mandate at 9.7 percent of demand. Several members of Congress from both sides of the aisle supported this legislation at the hearing. Some members also floated the idea of eliminating the corn ethanol mandate entirely.
There were several representatives from the renewable fuel industry testifying at the hearing, all of whom generally think that EPA should have proposed higher volume requirements than it did. Capturing that sentiment, a separate letter signed by 39 United States Senators was sent to EPA calling on the Agency to increase the annual renewable volume obligations to the numbers that Congress originally called for in 2007. That letter can be read here.
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