A battle royal is brewing between Big Oil and the ethanol lobby over something most folks have never heard of—the Renewable Fuel Standard (RFS). This government mandate, enacted in 2007, directs refiners to include increasing amounts of ethanol (including the cellulosic form) in gasoline and diesel, in turn gaining renewable credits.
Production was supposed to grow from nine billion gallons in 2008 to 36 billion gallons by 2022, but that latter target is looking less and less realistic. And now the EPA is backtracking big time, citing a “blend wall” because cellulosic ethanol (the greener form) hasn’t yet emerged as a commercial fuel, and Americans just aren’t using as much gasoline as predicted.
Needless to say, the RFS has been controversial, especially when regulators approved the blending of up to 15 percent ethanol in gasoline—automakers squawked, and so did boat owners. The worry was that more biofuel would ruin engines or shorten their useful lives. For oil companies, the RFS is a sop to big corn states. But ethanol producers say that the U.S. saved $50 billion in oil imports in 2011, thanks to renewable fuel, and that American farm assets have increased $500 billion in value since the RFS was enacted in 2007.
And the ethanol folks also claim that American Petroleum Institute (API) pressure is behind the EPA’s decision to cut back on ethanol production requirements. In part because our gasoline use is “less than anticipated,” the EPA said its reducing both the advanced biofuel requirement and the total RFS for 2014. Back in 2007, we thought the U.S. would burn through 25 percent more gasoline than we’re actually going to use based on current federal estimates.
It's getting dirty. The ethanol industry points to reports that API takes a lot of Saudi money, and API churns out reports and press releases claiming that the RFS is a failed boondoggle.
The cutback is still in the proposal stage, and the ethanol industry-supported Fuels America Coalition on Earth Day (Tuesday) announced a big PR campaign “to highlight how the oil industry has rigged the system at the expense of our economy, our national security and the health of the planet.”
Bob Dinneen, president and CEO of the Renewable Fuels Association, said in a conference call:
It galls me that API is out there with ads saying ethanol is responsible for turning native lands into corn production. That’s not true. They live in a glass house: the Deepwater Horizon oil spill alone covered a land area as big as Oklahoma. Oil and gas leases on federal lands would cover the whole state of Georgia. Oil’s carbon profile is getting worse with every well drilled in the Gulf of Mexico, and every tree that comes down in Alberta for tar sands.
Dinneen said that the EPA had received 130,000 comments on the proposed rule “mostly in opposition to what the EPA is doing.” He also said that the Department of Energy is projecting increased fuel demand. And Brent Erickson, executive vice president of the Biotechnology Industry Organization, claimed that the RFS is “having the biggest impact so far” in reducing carbon emissions in the transportation sector. He added, in response to my question about the lagging state of advanced biofuels, that cellulosic ethanol is going into commercial production in many parts of the country this year.
API's Carlton Carroll says that Dinneen is known for "explosive language" and "can be very colorful." He says the RFS unchecked "would mandate putting more ethanol in gasoline than the majority of cars can handle." He said only a small number of new cars are certified to handle E15, the 15 percent blend that EPA approved. And, he said, consumers aren't using E85 ethanol in their "flex fuel" vehicles, because it has lower energy content than gasoline and ends up being more expensive. Did API strong-arm the EPA? "We showed them that severe economic harm could occur if we hit the ethanol blend wall," he said. EPA did not respond to a request for comment.
API sees a “reality gap” between projected American gas consumption back in 2007 and the diminished reality. And, it says, “Cellulosic technologies were expected to develop within a few years [of that date], but there are no commercial plants to date.” Only 20,000 gallons, all exported, were produced in 2013. The EPA cellulosic mandate, API said, is “disconnected from reality.”
Them’s fighting words that Fuels America's new website, Oilrigged.com, is designed to counter. It’s likely that its blasts against Big Oil will get a sympathetic hearing, but that may not extend to a huge outcry defending the status quo for the RFS. As I noted, most people have never heard of it, and it’s hard to argue with the “blend wall” argument. And it’s good news, really. Let’s celebrate the fact we’re driving less in more fuel-efficient cars.
Here's one of the Fuels America Coalition oil-baiting videos: