House Subcommittee Concludes RFS Hearing

WASHINGTON, D.C. -- Testimony from two sides representing very different viewpoints about the renewable fuel standard (RFS) filled two days of hearings conducted by the U.S. House Energy and Commerce Committee's Subcommittee on Energy and Power.

At one point, U.S. Rep. John Shimkus (R-Ill.) advised both the ethanol and petroleum industries to drop their discussion points and help Congress make needed revisions to the RFS, reported Bloomberg.

"We are committed to move on a fix, and it would be helpful for you to get in line and start negotiating in good faith," said the politician.

The RFS, instituted by Congress in 2007, requires refiners to use 13.8 billion gallons of ethanol this year and 15 billion by 2015. Ethanol is typically combined with gasoline in a formula of up to 10 percent, which is referred to as the blend wall.

During the hearing, American Petroleum Institute President and CEO Jack Gerard, represented the petroleum industry. He testified that the RFS is broken beyond repair, but disaster can be diverted.

"The RFS isn't just a relic of America's bygone era of energy scarcity, it is a grave economic threat," said Gerard. "Unless it is immediately halted, it will unnecessarily cost our economy and consumers billions of dollars. To avert the disaster, we call on the administration to immediately waive the volume requirements and for Congress to finally repeal the fundamentally broken law."

Also testifying for the repeal of the mandate was Ed Anderson, a small business owner of a Wendy's franchise, stating the RFS is driving up food prices for restaurants and consumers.

"What sounded like a good idea has had serious consequences and artificially driven up the price for food both at home and in our restaurants," said Anderson. "Restaurant owners and employers like us are being hit at a time when our economy can't afford it."

However, on the other side of the ledger, Growth Energy CEO Tom Buis testified that the RFS is a resounding success that has created American jobs, revitalized rural America and injected much-needed competition into a "monopolized" fuels market.

The RFS has also helped to lower prices at the pump, improved the environment and made the country more energy independent, he added.

In addition, the Iowa Renewable Fuels Association (IFRA) issued a statement that the oil industry has used public policy to "tilt the energy playing field in its favor and today is no different." 

"Big Oil is following the old tactic of attempting to repeat something enough that people mistakenly believe it's true," said IFRA Executive Director Monte Shaw. "In reality, Big Oil constantly and aggressively pursues an anti-free market designed to perpetuate its monopoly over transportation fuels."

MIDDLE GROUND

NACS, the Association for Convenience and Fuel Retailing, and the Society of Independent Gasoline Marketers of America (SIGMA) represented a view that took on more of a middle ground. Joe Petrowski, CEO of The Cumberland Gulf Group, represented both groups at the hearing.

In his testimony, Petrowski said that NACS and SIGMA do not support of the repeal of the RFS. However, both groups asked for adjustments, as times have changed since it was first instituted in 2007. He pointed out that the United States is on the verge of hitting the blend wall, when the RFS' annual volume obligations exceed the volume of renewable fuel the market can reasonably absorb. This could cause gasoline and diesel prices to increase, generating severe economic harm to the country, Petrowski added.

Therefore, the CEO concluded that the Environmental Protection Agency (EPA) possesses and should exercise its statutory waiver authority to adjust volume obligations to avoid hitting the blend wall. In addition, Congress must determine whether the EPA will use its waiver authority, he added. If not, legislation may be necessary.