Senate Grapples With Failures of Renewable Fuel Standard

WASHINGTON (CN) – Government officials testified before the Senate on Thursday that sluggish development of ethanol and other biofuels has hampered attainment of the Renewable Fuel Standard.

Enacted in 2005, the Renewable Fuel Standard or RSF requires that all transportation fuel sold in the United States contain a minimum amount of renewable fuels.

The Senate Subcommittee on Regulatory Affairs and Federal Management called a hearing Thursday afternoon to look at two new reports from the Government Accountability Office on the standard’s feasibility.

“The most salient finding here is that it is unlikely that advanced biofuels can meet the statutory targets to RSF,” said Frank Rusco, director of natural resources and environment.

“They fell below targets by well over 1 billion gallons in 2014 and we’re expecting a 5 billion gallon shortfall for 2017,” Rusco added.

Sen. James Lankford, R-Okla., released a statement after the hearing calling for Congress to repeal the standard, saying Thursday’s reports prove that it imposes unrealistic and costly mandates.

“The RFS program isn’t meeting the greenhouse gas emission goals, it is unsustainable, and it yields few benefits, while it has inflicted substantial costs on consumers,” Lankford said in a statement. “The renewable fuel standard mandate simply doesn’t work.”

Rusco explained that the first report studied the federal effort that supported research and development into advanced biofuels, looking as well at how technologically equipped the agency is to reach its target fuel-development goals.

The second report studied how the Environmental Protection Agency administers the RFS program, what could be improved and what the prospects look like for reducing greenhouse-gas emissions.

Senators, all members of the Homeland Security & Governmental Affairs, pushed Rusco and EPA administrator Janet McCabe to provide a reason for the lukewarm outcome.

“The price of gas is too cheap,” McCabe said. “If gas was $5 per gallon, there would be more incentive. Or the cost of ethanol or cellulosic fuel would be closer in price.”

Cellulosic ethanol is made from the stringy fibers of a planet as opposed to its seed or fruits; ethanol is a byproduct of corn and/or sugarcane biomass materials.

McCabe also urged the committee to temper their expectations, given the short time that the science has had to develop in a volatile marketplace.

Sen. Heidi Heitkamp, a North Dakota Democrat, admitted that she was underwhelmed with the results but echoed McCabe’s sentiments.

“It’s critical that we understand how natural resources work in our country,” Heitkamp said. “We’re hopeful that we’ll have consistency going forward. Just because you don’t meet the targets doesn’t mean that all of this is a failure or needs amending. We have a process in place to sort and correct.”

Heitkamp asked Rusco and McCabe if they felt it would be necessary to activate a “reset authorization” outlined in a provision found in the RSF.

Neither did.

“It is clear from most of the people we spoke with – including producers of biofuels and researchers – that the biggest issue is the price of oil,” Rusco said. “If the price is very high, then there’s going to be more investment in alternatives and when the price was high a number of years ago, even some oil companies were diversifying in biofuel technology.”

With the market for oil taking a tumble, and slower growth overall since 2005, Rusco said most investors simply didn’t see biofuel as a winner.

It’s a science that he described as “multigenerational.” Compounded by a lack of public knowledge on the fuels themselves, uncertainty about how tax credits can be optimized is another major factor that contributed to the disappointing results, Rusco added.

Bob Dinneen, president of the Renewable Fuels Association, released a statement after the hearing, saying that the committee “missed the point.”

“The Government Accountability Office ignores a number of important factors that impeded more rapid growth in advanced and cellulsic biofuel production,” Dinneen said. “The Great Recession and financial crisis, lengthy delays by the EPA in setting annual RFS volume requirements, uncertainty caused by oil industry lawsuits and repeal efforts and Organization of Petroleum Exporting Countries (OPEC) manipulation of world markets are just a handful of unforeseen challenges that have undercut more rapid development of next generation biofuels.”

The American Petroleum Institute countered with a statement of its own Thursday afternoon.

“The GAO concluded the RFS is broken and we agree,” said Frank Macchiarola, director of API Downstream Group. “The government findings that ethanol mandate is not working only strengthen our case to significant overhaul the program.”

That overhaul could come by way of the Food and Fuel Consumer Protection Act, a bill sponsored by two Republicans, Reps. Bill Flores of Texas and Bob Goodlatte of Virginia, and a single Democrat, Rep. Peter Welch of Vermont.

In a statement online, Rep. Welch said the bill would cap the amount of ethanol blended into gasoline, providing a “much needed certainty on future RFS volumes.”