Legislator calls for truce in renewable fuel fight

Whenever Republican Rep. John Shimkus drives across his sprawling Illinois congressional district, he sees evidence of a fight over renewable fuels policy everywhere he looks.

 

Legislator calls for truce in renewable fuel fightIn between a giant ketchup bottle and oversized wind chimes are thousands upon thousands of acres of corn fields, dotted by five facilities that turn the grain into ethanol. But the district also is home to refineries that transform oil into conventional transportation fuel.

“Wherever you drive, there are corn and soybeans — and some refineries,” Shimkus recalled at Platts Energy Podium on Tuesday.

Shimkus has pleaded with those diverse home-state interests to help lawmakers craft a compromise to revamp the eight-year-old federal renewable fuel mandate.

“We are committed to move on a fix,” he bluntly told witnesses from the ethanol and oil industries during House hearings in July. “It would be helpful if you all start negotiating in good faith.” Otherwise, Shimkus added, “nobody’s going to be happy, and nothing’s going to be done.”

But so far, that hasn’t happened.

Biofuels backers, including the Renewable Fuel Association and Growth Energy, insist Congress should keep its hands off the renewable fuel standard. Current law already gives federal regulators enough flexibility to deal with changing market conditions, the biofuels boosters say.

But the oil industry — represented by the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers — insists that nothing short of a repeal will do. The trade groups say refiners have run into a “blend wall,” a point where mixing enough ethanol into gasoline to satisfy annual renewable fuel quotas would result in blends that surpass a 10 percent limit approved for all cars and trucks.

Neither side shows any side of giving in.

“In my district I have all the stakeholders,” Shimkus said. “I’d like for them to play better in the sandbox. But they’re not yet.”

Dueling television advertisements on the issue from API and Growth Energy aren’t helping, Shimkus said.

“The battle ads that are running . . . in some parts of the country (do) not make for good negotiations,” Shimkus said at the event organized by the energy information arm of McGraw Hill Financial.

A team of lawmakers on the House Energy and Commerce Committee who have been working on the issue had hoped a series of congressional hearings, white papers and closed-door negotiations would encourage consensus. Their goal was to unveil broad legislative principles for an overhaul — or actual legislation — once they secured support from key stakeholders.

But Shimkus suggested even a broad outline or proposal is far way. At this point, he predicted, committee leaders are likely to make a decision by the end of the year on whether to try and advance legislation overhauling the renewable fuel standard.

Although Shimkus shied away from specifics, he signaled that the biggest opportunity for change may be in tackling some discrete issues, such as the opaque market for selling and buying renewable identification numbers, the credits refiners use to show compliance with the mandate. The New York Times on Sunday described how Wall Street banks have engaged in speculative trading of the RINs, possibly helping credits to spike to nearly $1.50 this summer, up from a price of pennies per credit last year.

One possibility for Congress is to freeze volumetric targets for advanced biofuels and renewable fuel at current levels. But Shimkus said setting a new cap is a non starter.

“I think it sends terrible market signals,” he said. “When you start doing that, you start sending a signal that no we don’t want an alternative fuel choice for the American public.”

Fundamentally, Shimkus stressed the importance of consistent government policy in the area, given that companies developing next-generation biofuels have invested in new facilities based on the market demand created by the renewable fuel standard.

“You have capital investment out there,” Shimkus said. “People are working hard based on a promise from the federal government and you just can’t walk away from that. You just can’t say ‘Huh, you spent 2 billion dollars, you’re out of luck and you shouldn’t trust the government.’”

The Environmental Protection Agency took some pressure off Congress to act when it finalized 2013 renewable fuel quotas in August and promised to pare the requirements next year in response to concerns.

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