Here’s an update on recent news items and other public policy developments during the last month or two relating to the U.S. Renewable Fuel Standard (RFS).
Proposed bills target cellulosic volume mandates. Rep. Gregg Harper (R-Miss.) introduced legislation that would require the EPA to base its cellulosic biofuel volume mandates under the RFS on the prior year’s actual production. The bill, H.R. 550, or the “Phantom Fuel Reform Act of 2013,” would require EPA to calculate the average monthly volume of cellulosic fuels each year, and directly extrapolate that average to set the volume target for the subsequent year. Industry groups have expressed opposition to this bill, since it would guarantee that each year’s target volume would be no greater than the actual production for the prior year, thus removing the incentive for the industry to grow. The bill is similar to legislation introduced last year by then-Rep. Jeff Flake (R-Ariz.), and its filing clearly seems to have been triggered by the Appeals Court decision to vacate EPA’s 2012 cellulosic volume mandates. Flake, who is now a senator, reportedly introduced the same bill in the Senate after Rep. Harper filed H.R. 550 in the House.
Ranking Republican on Senate Energy Committee skeptical of RFS. Senator Lisa Murkowski (R-Alaska), the ranking minority member of the Senate Energy Committee, has called for reevaluation and reform of the RFS, as part of an overall energy proposal she unveiled on February 4.
Chain Restaurants Issue Anti-RFS Study. In the latest food industry attack on the RFS and biofuels, the National Council of Chain Restaurants has issued a report which it had commissioned from PricewaterhouseCoopers that is critical of the RFS and its corn-ethanol mandate. The report claims that in some scenarios, the RFS could cost chain restaurants over $3 billion annually, and the group called for repeal of the RFS. The report has been roundly criticized by industry groups, who have pointed out flawed assumptions and outdated data used in the study.
Farm Bureau expresses support for the RFS. At a meeting in January, delegates for the American Farm Bureau Federation overwhelmingly voted to support continuation of the Renewable Fuels Standard. This vote comes even though Farm Bureau membership includes livestock producers who might have been expected to oppose the RFS out of concern over the alleged impact of corn ethanol on feed costs.
New group critical of the RFS has formed. A coalition of interest groups have called for reform of the RFS, claiming the program negatively impacts the environment, farmers and taxpayers. The coalition includes the Environmental Working Group, ActionAid, American Fuel and Petrochemical Manufacturers, Environmental Working Group, FarmEcon LLC, National Marine Manufacturers Association and Taxpayers for Common Sense. Ethanol industry groups such as the American Coalition for Ethanol have disputed the group’s contentions.
Industry/NGO Op-Ed published. DuPont Industrial Biosciences President Jim Collins and Jeremy Martin of the Union of Concerned Scientists (UCS) have written an op-ed article in Politico.com expressing strong support for the RFS, saying that cellulosic biofuels are a key element of UCS’s plan to projected oil use by 50% over the next 20 years.
University of Missouri RIN Analysis. The Food and Agricultural Policy Research Institute at the University of Missouri has published a report forecasting how three different scenarios could impact markets for ethanol and conventional (i.e. corn ethanol) Renewable Identification Numbers (RINs). The report analyzes how the value of conventional RINs may be affected by the blend wall and possible revisions to the RFS volume obligations.
University of Illinois RIN projections. A University of Illinois economist has published a report projecting how 2012 ethanol production will impact the number of banked RINs available for RFS compliance in 2013. The economist, Nick Paulson, projects that the combination of 2012 production and banked 2011 RINs will result in the availability of 1.895 billion RIN-gallons for carry-over for 2013 compliance. This represents a lower number of banked RINs than in any prior year since 2008. Paulson’s report also showed that the value of “conventional” (corn ethanol) RINs tracked the price of corn, with a low of $0.01/gallon in June 2012 but rising as high as $0.05/gallon in July and August as the effects of the drought were becoming clear. The latest RIN price cited in the report was about $0.04/gallon in late October. Also click here for more information.
ISU Policy Brief projects outlook for ethanol RINs. The Center for Agricultural and Rural Development (CARD) of Iowa State University has issued a Policy Brief analyzing the economic factors that are likely to affect the value of corn ethanol RINs in 2013 and 2014. The Brief, written by Bruce Babcock, concludes that profit margins for corn ethanol will be low in 2013 due to the high corn prices caused by the 2012 drought, and may continue to be low if ethanol prices need to be discounted to meet the RFS mandates. Babcock believes that the U.S. ethanol market is saturated at 10% of total gasoline usage due to the “blend wall,” so that the rising RFS mandates will be hard to reach unless ethanol prices drop low enough to foster increased usage of E85, or unless barriers to E15 usage are overcome. The Brief speculates on whether banked RINs will be used in 2013 to help offset current high production costs or in 2014 to help offset low ethanol prices.
New study documents economic impact of the RFS. Researchers at Oak Ridge National Laboratory published a paper in January analyzing the impacts of the RFS on the U.S. economy. According to the paper, the RFS has had several beneficial effects, including reducing crude oil prices and decreasing oil imports, which have resulted in a modest increase in the U.S. gross domestic product, and having only minor impacts on global food markets and land use. However, if future RFS mandates are met by biofuel imports, the favorable impacts on the U.S. economy would be lessened. The study, which is available for purchase here, apparently makes use of global economic modeling to forecast the impacts of the RFS through 2022.
Previous Biofuel Policy Watch posts on RFS policy:
- February 1, 2013: EPA’s 2013 Proposed Rules under the RFS
- January 25, 2013: Appeals Court Ruling on Cellulosic Volume Mandate
- January 15, 2013: RFS Issues and Controversies Part 2
- January 14, 2013: RFS Issues and Controversies Part 1
D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass also serves as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ government and regulatory consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Advanced Biotechnology for Biofuels.