Big Oil revs up effort to repeal rules forcing ethanol in the mix
The ethanol industry is again under fire from critics who want to eliminate the federal mandate that oil companies blend biofuels into the gasoline supply.
The House Energy and Commerce Committee is holding hearings on the Renewable Fuel Standard, which called for 15 billion gallons of biofuels to be used in 2012. The requirements reach 36 billion gallons by 2022.
Oil and gas companies say that level will be impossible to hit, and they warn of the unintended consequences of trying to meet it, such as car problems and higher food prices. Ethanol supporters say the rationale behind using biofuels remains strong, including reducing the country’s dependence on foreign oil.
The American Petroleum Institute recently gathered refining executives in Washington, D.C., for meetings with the administration and Capitol Hill lawmakers to press the case for ending what it describes as “the nation’s unworkable biofuels mandate.”
The chief trade group for the oil and gas industry says ethanol is fast approaching the point at which higher blends, above 10 percent, will be necessary to meet the rising requirements. That could be unsafe for many cars, according to the group.
“A growing chorus of concerned groups is urging Congress to repeal the Renewable Fuel Standard before the mandate potentially puts consumers in harm’s way, hurts the economy and disrupts the nation’s fuel supply,” API President and CEO Jack Gerard said in a statement. “The biofuels mandate was originally intended to reduce our dependence on foreign oil, but increasing domestic production of oil is accomplishing that goal.”
Rep. Lee Terry, R-Neb., a member of the Energy and Commerce Committee, said it’s clear that members from Texas and Louisiana will be targeting the usage requirements.
“There will be a push in our committee by some, Republicans and Democrats, to do away with the RFS, saying that it’s just completely unnecessary today, that we have enough gas and oil, that we just don’t need another fuel source, let alone subsidizing it,” Terry said.
An Environmental Protection Agency analysis found that the renewable fuel requirements will displace billions of gallons of petroleum-based fuel consumption, reduce domestic motor fuel prices and increase U.S. farm income. But it also found the potential for higher food prices.
In 2000, ethanol accounted for about 6 percent of the nation’s corn crop. Last year, it accounted for 40 percent of the corn crop.
That’s why the standard’s critics include the grocery industry and some livestock producers that want cheaper grain to feed their animals.
Todd Sneller, administrator of the Nebraska Ethanol Board, said biofuel’s impact on food prices is minimal compared with the impact of fuel costs.
“If you listen to the rhetoric today this will ruin car engines, it will void warranties, it will cause all sorts of ills,” he said. “And none of that is factual.”
The ethanol industry has come a long way over the years and is now surviving without tax credits. Still, it faces the strange situation that ethanol must be blended into gasoline, a process controlled by its biggest competitor — the oil industry.
Sneller said there already is a built-in mandate favoring oil and gas companies, and ethanol is just looking for a level playing field.
“We don’t have a choice at the pump,” he said.
Terry will make the case for keeping the requirement, although he said he is open to tweaking it in an effort to allow more flexibility.
“It’s just inherently better to have a diverse portfolio, and you need some level of ethanol and biofuels,” he said.
Terry has been a champion of the Keystone XL pipeline, making him an ally of Gulf Coast lawmakers and the oil industry on that issue.
Their split over the ethanol issue causes some awkward moments, he said.
“I say, ‘You do realize I’m from the Cornhusker State,’” Terry said. “If I was from Dallas, you know, who knows? I’d have a different view on the RFS.”