Overview of the renewable fuel standard, U.S. House hearing 2013

House 113-61. June 26, 2013. Overview of the renewable fuel standard: Government perspectives. House of Representatives.

[Excerpts from the 104 page transcript follow]

Key points:

  • The implicit premise that cellulosic and other advanced biofuels would be available in significant quantities at reasonable costs within 5 to 10 years following adoption of the 2007 targets has not been borne out.
  • Ethanol faces some major demand and distribution system challenges that make it difficult to increase its use as a motor fuel.  Since gasoline usage has declined the past 5 years, there is less need for ethanol, not more, making it unlikely E-15 can be justified.
  • Feed grain prices have helped net cash income for row crop producers, but have raised feed costs and lowered profit margins for livestock, dairy and poultry producers. Feed costs make up 51% of expenses for dairy, 19% for beef cattle, 42% for hogs, and 35% for poultry
  • We have seen the expansion of corn ethanol increase corn prices by 36 percent from 2000 to 2009. CBO estimated that the use of ethanol for fuel accounted for about a 28 to 47 increase in the price of corn and a 10 to 15 percent increase in food prices. And it is important to note that these increases occurred during a time when the U.S. harvested a record 13.1 billion bushels of corn.
  • There are about 11 million flex-fuel vehicles on the road but consumers are not using them to buy E85. Only 100 million gallons of E85 were sold last year, because some owners don’t know they have got a flex-fuel vehicle, or live in states with few E85 stations (Texas has just one), or are reluctant to pay the high E85 price.

ED WHITFIELD, KENTUCKY: The topic of today’s hearing is an ‘‘Overview of the Renewable Fuel Standard: Government Perspectives.’’ As you know, this is one of those issues where we have a lot of different viewpoints on this important issue. And we have not really revisited the Renewable Fuel Standard since it was last expanded in 2007.

We have learned firsthand how the RFS implementation would be affected by drought that reduced corn yields, that occurred last summer.

Perhaps the biggest unexpected development has been the decline in gasoline usage over that past 5 years. As a result, we are facing the challenge of mixing the specified volumes of renewable fuels into a significantly smaller pool of gasoline. This has led to a number of issues we will address today, including the so-called blend wall and the approval of E–15. We have also learned, first hand, how the RFS implementation would be affected by a drought that reduced corn yields, as occurred last summer.

Mr. BARTON. The current law, as it is, is unworkable and unsustainable, and I support total and full repeal. I think it has outlived its usefulness.

BOBBY L. RUSH, ILLINOIS: Members of both sides of the aisle touted the potential benefits of enacting a Renewable Fuel Standard, which included reducing U.S. dependence on oil, enhancing energy security, bolstering the agricultural economy, and addressing the challenges of climate change by reducing greenhouse gas emissions from the transportation sector. Today, I believe the RFS has been successful in meeting each of these objectives while also helping to drive job creation and economic investment.

HENRY A. WAXMAN, CALIFORNIA. As long as our transportation system relies exclusively on fossil fuels, we will continue to make climate change worse. Fuel efficiency alone will not achieve the 80 percent reduction in climate pollution that we need by 2050 to avoid catastrophic climate change.

The shift to hybrids and electric vehicles is a big part of the solution. But low-carbon renewable fuels can also contribute significantly. And for some transportation sectors, such as aviation and shipping, low-carbon liquid fuels are the only option, besides efficiency.

But the RFS is not without flaws. As our gasoline consumption goes down and the renewable fuel mandates increase, we could reach the blend wall where adding more ethanol to the fuel supply could damage some engines. Drop-in biofuels offers one solution, but they are still being developed.

Mr. SIEMINSKI, EIA. The RFS program is not projected to come close to achieving the legislated target of 36 billion gallons of renewable motor fuels by 2022. Substantially increasing the use of biofuels can only occur in forms other than the low-percentage blends of ethanol and biodiesel that account for nearly all of their current use. Of the potential alternative pathways—one, increased use of higher ethanol blends; two, the advent of drop-in biofuels; or three, the development of compatible renewable fuel components such as biobutanol—of those, so far none have achieved a significant market role. The implicit premise that cellulosic and other advanced biofuels would be available in significant quantities at reasonable costs within 5 to 10 years following adoption of the 2007 targets has not been borne out.

Ethanol potentially has three distinct roles in motor fuels markets: one, as an octane source; two, as a volume enhancer; and three, as a provider of energy content. So an important behavioral question arises with the use of higher percentage blends, such as E15 and E85, and that is whether the shorter range provided by a tankful of fuel due to ethanol’s lower energy content per gallon will affect consumers’ buying decisions. In Brazil, where a high percentage of ethanol fuels are sold, consumers do indeed consider energy content pricing rather than simply buying the cheapest fuel.

Ethanol faces some major demand and distribution system challenges that make it difficult to increase its use as a motor fuel regardless of its source. Although the use of E15 in model year 2001 and newer light-duty vehicles is now allowed, very few gasoline retailers offer it out of concerns related to automobile warranties, potential liability for misfueling, infrastructure costs, and consumer acceptance. Ethanol blends above 15 percent, E85, are more widely available but can only be used in flex-fuel vehicles, which make up only about 5 percent of the light-duty fleet.

The complexity of refined product markets, of which biofuels are an important part, has led to a growing number of requests for EIA analysis. Last fall, we published a report, ‘‘Biofuels Issues and Trends’’—it is attached to my testimony—to provide an overview of the dynamics of production, consumption, trade in ethanol, biodiesel, and cellulosic fuels. We also hold regular workshops to solicit feedback on a variety of these subjects.

(For purposes of this figure and this testimony, RFS projections are discussed in terms of RFS credits, since biofuels receive credit towards the RFS targets on the basis of their energy content relative to ethanol rather than on a strict volumetric basis. For example, each gallon of biodiesel provides approximately 1.5 credits towards the overall RFS target.)

The RFS targets enacted in 2007 cannot be approached through the current low-percentage blending of ethanol and biodiesel into motor fuels. There are three potential alternative pathways (1) Increased use of higher ethanol blends, (2) the advent of drop-in biofuels, such as renewable gasoline or renewable diesel, that can be used as direct replacements for their petroleum-based counterparts, and (3) the development and use of new renewable fuel components, such as biobutanol, that might be more easily blended in increased volumes. To date, none of these options has achieved a significant market role.

The AE02013 Reference case projections assume continuing technology progress and cost reduction, but they do not assume any breakthroughs in transformational biofuels technologies, such as low-cost, scalable, algae biofuels.

Ethanol faces some major demand and distribution system challenges that make it difficult to increase its use as a motor fuel regardless of its source. While much of the wholesale distribution infrastructure is capable of handling ethanol, which to date has been moved by rail rather than pipelines, significant changes in the retail infrastructure would be needed to carry higher-ethanol blends of motor gasoline. The AE02013 Reference case anticipates some penetration of both E15 and E85, but not nearly enough to approach the legislated RF5 target. Although EPA has granted waivers allowing the use of E15 in model year 2001 and newer light-duty vehicles, very few gasoline retailers currently offer E15 for sale to the public due to concerns related to automobile warranties, potential liability for misfueling, infrastructure costs, and consumer acceptance. Also, E15 does not qualify for the one pound Reid Vapor Pressure (RVP) waiver that was legislated for ElO, so it would not be an environmentally compliant fuel in summer months when made using most current gasoline blend stocks. E85 is more widely available at retail fuel stations, but can only be used in designated flex-fuel vehicles (FFVs). Currently, there are about 11.5 million FFVs in use, about 5.1 percent of the overall light duty vehicle fleet. Manufacturers built flex fuel capability into these vehicles in order to receive credits towards compliance with fuel economy standards under provisions that are being phased out under the implementation offuture Corporate Average Fuel Economy (CAFE) and greenhouse gas emissions standards promulgated by the National Highway Traffic and Safety Administration (NHTSA) and the EPA.

Without vehicle manufacturer incentives to produce additional FFVs and absent a strong consumer demand for them, which will depend on consistent E85 pricing that at least reflects its lower energy content, the potential for growth in the E85 will remain limited.

The present challenges facing the RFS program are reflected in the value of Renewable Identification Numbers (RINs) that are used by EPA to implement the RFS. EPA has created several different varieties of RINs that correspond to the nested targets for different categories of biofuels in the RFS. The price of RINs which can only be used to satisfy the total RFS mandate (06 RINs) hovered close to zero through 2012, as the use of ethanol as an octane enhancer and volume enhancer, as previously discussed in my testimony, was more than sufficient for obligated parties to comply with the RFS program. Early this year, 06 RIN prices rose dramatically as the market reflected on the difficulty in meeting a rising RFS target given the difficulty of accommodating additional ethanol volumes within ElO gasoline. Since mid-March, the price of 06 (ethanol) RINs has closely tracked the price of 04 (biodiesel) RINs that can be used to meet the RFS targets for advanced biofuels and biodiesel as well as the overall target. The increase in the 06 RIN price provides an economic incentive for two changes in the market. First, a higher 06 RIN price tends to lower the cost of E85 gasoline relative to HO gasoline. Second, a 06 RIN price equal to or near the biodiesel RIN price may motivate blending of biodiesel that exceeds the biodiesel blending requirements that EPA announced in its proposed rulemaking for the 2013 RF5 program that has yet to be finalized. At the retail level, EIA expects diesel fuel prices to be most affected by higher RIN prices as typical biodiesel blending yields only about one-third ofthe RINs required and diesel fuel refiners who are obligated parties under the RFS program must make up for the shortfall by purchasing the now higher-priced RINs.

Over the last year, EIA held two workshops to engage the professional and academic communities on issues relating to biofuels projections. In August 2012, EIA held a workshop on advanced biofuels, which brought together around 90 representatives from government, national labs, research institutions, commercial biofuels producers, universities, non-profit organizations, and investment firms, so that they could share with us some of the opportunities and challenges of commercializing advanced biofuels technologies.

In March, we hosted a second workshop attended by over 200 people, over half via a live internet feed, to discuss results and solicit feedback on a variety of biofuels-related topics in preparation for future analysis.

CHRISTOPHER GRUNDLER. Although both ethanol and non-ethanol biofuels can be used to meet the RFS, ethanol has and will likely continue to be the predominant renewable fuel on the market for the foreseeable future.

As the statutory volume requirements of the RFS program increase, it becomes more likely that the volume of ethanol projected to meet those requirements will exceed the volume that can be consumed in the common blend of 10 percent ethanol and 90 percent gasoline, referred to as E10. Additional volume of ethanol would then need to be used at higher blend levels, such as E15 or E85, or significant volumes of non- ethanol would be needed to meet the targets. As a result, to the extent that ethanol is likely to be used to meet RFS volume requirements, the volume of ethanol that can be legally and practically consumed is a limiting factor in meeting the statutory volumes. This is commonly known as the blend wall.

JOSEPH GLAUBER. Corn ethanol production increased dramatically over the past decade from just over 2 billion gallons in 2002 to almost 14 billion gallons in 2011. Driven by favorable market forces and encouraged by government biofuel policies, including the RFS, that increase has spurred corn production and corn use for ethanol and has been a factor in the recent grain price boom and overall improvement in farm balance sheets, including record farm incomes over the past few years. This boom has not been shared equally by all segments of the ag sector, however. Livestock, dairy, and poultry producers have faced tighter margins due to higher feed costs.

The decline in corn use for feed has been partially offset by the increased availability of protein feeds, such as distillers’ dried grains, a co-product of the dry milling process. Nearly one-third of a bushel of corn used for ethanol production is returned in the form of DDGs.

The decline in U.S. Corn exports have been offset in world markets by increased exports from foreign suppliers, principally Brazil. Over the years 2000 to 2005, the U.S. exported on average 1.9 billion bushels of corn and accounted for about 60 percent of total world corn exports. By 2011/2012, U.S. corn exports had fallen to 1.5 billion bushels and accounted for 37 percent of total world exports. With drought-related reduced supplies in 2012/2013, U.S. corn exports are projected to fall to 700 million bushels, less than 20 percent of total world exports. U.S. corn exports are projected to recover to 1.3 billion bushels in 2013/2014, but they are projected to account for about a third of total world exports.

By contrast, livestock, dairy, and poultry producers have faced more uneven, in some cases declining returns since 2006. In general, higher feed grain prices have helped net cash income for row crop producers, but have also raised feed costs at lowered profit margins for livestock, dairy, and poultry producers. Feed costs make up about 51 percent of expenses for dairy, 19 percent for beef cattle, and 42 percent for hogs, and 35 percent for poultry farm business. Price-feed rations for most species show a decline throughout most of the period since 2006. Looking forward, increases in demand for corn to produce ethanol are expected to slow due to constraints on domestic ethanol consumption—as has been mentioned previous here, the so-called blend wall—increases in blending efficiency, and nearing the 15 billion gallon cap on conventional ethanol in the RFS, and finally, due to increased supply of ethanol from other feedstocks. Those will mitigate pressures on corn prices.

Com feed and residual disappearance declined by 26 percent from marketing year 2005/06 to 2011/12 while com exports declined by 28% over the same period. However, the decline in com use for feed has been partially offset by the increased availability of protein feeds such as distillers’ dried grains (DDGs), a co-product of the ethanol dry milling process. Nearly one-third of a bushel of com used for ethanol production is returned in the form of DDGs. The decline in U.S. com exports have been offset in world markets by increased exports from foreign suppliers, principally Brazil (see figure 4). Over (the trade marketing) years 2000/01 to 2005/06, the United States exported, on average, 47.8 million metric tons of com (1.9 billion bushels) and accounted for over 60 percent of total world com exports. By 2011112, U.S. com exports had fallen to 38.4 million tons and accounted for 37 percent of total world exports. With drought reduced supplies in 2012/13, U.S. com exports are expected to fall to 18.5 million tons, less than 20 percent of total world exports, and while U.S. com exports are projected to recover to 33 million tons in 2013114, they are projected to account for only 32 percent of total world exports.

Agricultural prices declined in real terms (that is, adjusting for inflation) throughout most of the 50 or so years following the end of World War II (see figure 5) reflecting strong gains in agricultural productivity over the period. Prices began to increase in real terms around 2000 with increasing population growth, rapid economic expansion in developing countries, and rising per capita meat consumption globally along with rising energy prices (see Trostle 2008). Those factors coupled with the rapid expansion of ethanol production following the phase out of MTBE 5 increased demand for com, for conversion into ethanol and for animal feed and pushed prices for com higher (see Collins 2006). Prices spiked in 2007/08, in 2010/11, and most recently in 2012 as supply shortfalls coupled with strong global demand saw inventory levels for major grains and oil seeds fall to low levels. Some studies suggested that the main factor for those spikes was increased ethanol production. For example, Mitchell (2008) attributed almost 75 percent of the increase in commodity prices during the 2007/08 price spike to the increase in biofuel production. Studies also examined whether com demand for ethanol production is less price responsive (under current economic and policy conditions), compared to other uses such as feed use or to meet export demand, which could exacerbate price volatility, particularly when stock levels are low (see for example Collins, 2006 and Wright, 2010).

More recently, the increase in U.S. ethanol production was estimated to account for about 36 percent of the increase in com prices over the period from 2006 to 2009 (see Babcock and Fabiosa 2011). More recent studies have found similar results (see recent reviews of econometric analyses of the impact of ethanol on corn prices can be found in Condon et al. 2013 and Hochman et al. 2013).

Higher corn and soybean prices are passed through to the consumer largely through higher fat and oil prices and indirectly through higher feed costs.

In general, higher feed grain prices have helped net cash income for row crop producers, but have also raised feed costs that lowered profit margins for livestock, dairy and poultry producers. Feed costs make up 51% of expenses for dairy, 19% for beef cattle, 42% for hogs, and 35% for poultry farm business. Price-feed ratios for most species show a decline throughout most of the period since 2005/06 (see figure 6). 8 Productivity gains, such as increased pigs per litter and increased milk production per cow, have helped offset higher feed costs, along with increased availability of DDGs as mentioned previously. Moreover, feeding of DDGs has replaced as much as 80 percent of the calories lost through the reduction of com fed to livestock, while adding to the overall protein content of feeds (Ferris 2013).

Ethanol production is primarily concentrated in the com producing states of the Midwest and much of it is transported to the coasts which represent the bulk of motor fuel demand.

Current penetration rates would imply a blend wall of less than 13.4 billion gallons for ethanol. Ethanol produced in excess of that amount must be held as stocks or exported. Lastly, while export markets have in the past welcomed U.S. ethanol production, current export prospects are reduced because of increased competition from Brazil and anti-dumping duties imposed on U.S. exports to the European Union. Indeed, EIA projects net imports of ethanol increasing over the next 5 years, rising to 1 billion gallons in 2018. Projecting trade of ethanol between the U.S. and Brazil remains highly uncertain and will depend on biofuel policies in both countries as well as fuel prices.

Examples of next generation fuels from materials that are not associated with food production include biomass, algae, and crop residues. Demonstration plants have been constructed to assess various conversion technologies that can produce next generation biofuels, such as cellulosic ethanol, butanol, biojet fuel, and Fischer-Tropsch diesel. The production costs associated with the development of these fuels remains high.

In order to get beyond the blend wall, there has been considerable investment in drop-in fuels, which are substantially similar to gasoline, diesel and jet fuels and therefore have less blending constraints than ethanol and can help, along with additional biodiesel use, overcome the blend wall. These fuels can be made from a variety of biomass feedstocks and are designed to “drop-in” to existing infrastructure. The Department has entered a partnership with the Department of Energy and U.S. Navy to invest up to $510 million during the next three years to produce advanced, drop-in aviation and marine biofuels to power military and commercial transportation.

Mr. GLAUBER. Well, I think, you know, it is clear that, as I said in my opening statement, that increased ethanol production has precipitated a large increase in corn production and a large increase in corn demand. With that, you see increased prices. Now, a lot of other factors are out there in the world that affect prices. There is a whole list of things that people typically talk about. But things like we had some fairly serious droughts over the period. We have had, you know, increase in foreign demand, a number of things have affected price. But most of the studies that we have looked at show that ethanol has contributed to some share of that increase. And I think my own study showed about 30 percent. That is similar to a lot of other studies that have been out there.

Mr. TERRY. Help me grasp this, so because cellulosic hasn’t really gotten out of the pilot to mass production yet, you were able to just waive that portion that was designated for this cellulosic growth? Mr. GRUNDLER. That is correct. We adjusted the volume down something like 98, 99 percent, based on our estimate about what that volume would be in the forthcoming year.

Mr. DOYLE. Dr. Grundler, I see the President’s Council of Economic Advisers is warning us that increasing production of food-based fuel, such as ethanol, not only increases the demand for agricultural feedstocks but may also make demand less elastic, through such measures as biofuel blending requirements, and as such, the integration of food and energy markets can cause shocks in one market that get transmitted to the other. We have seen the expansion of corn ethanol increase corn prices by 36% from 2000 to 2009. CBO estimated that the use of ethanol for fuel accounted for about a 28 to 47% increase in the price of corn and a 10 to 15% increase in food prices. And it is important to note that these increases occurred during a time when the U.S. harvested a record 13.1 billion bushels of corn. Grocery bills have been rising 3 to 4% every year, and they will rise by the same margin in 2013. In 2011, retail food costs rose 3.7 percent according to the USDA. After increasing corn ethanol mandate in 2007, the consumer price index for meat, poultry, fish, and eggs accelerated by 79 percent. The doubling of the ethanol mandate in 2007 caused a 30 percent increase in the price of corn from 2006 to 2010, according to economists. And the USDA is warning us that corn shortages, caused in part by the ethanol mandate, will drive up U.S. food prices by another 3 to 4 percent in 2013.

As we are moving from E10 to E15, what can you do to make sure that that space is not entirely filed by corn ethanol that can negatively affect feed prices and for farmers and food prices for consumers?

Mr. GRUNDLER. Well, sadly in addition to all the innovations that the RFS policy has inspired in terms of new technology, it has also inspired a lot of innovation in the criminal mind. And we have discovered what can only be called as counterfeiters, and we discovered this through our enforcement arm at the agency, through hotlines and tip lines. And as I hope you can appreciate, it takes a while to build a criminal case and to gather the evidence to make the prosecution. But the good news is that the United States achieved several convictions already with extended jail time, prison time for these counterfeiters as well as very high fines and confiscated private jets and luxury automobiles in the process.

The bad result that you are no doubt alluding to is this did create a chill in the marketplace.

Mr. Pompeo: Mr. Grundler, you have got a difficult challenge. You have got to implement not only this RFS but the CAFE and GHG standards for cars and trucks. The RFS last revised in 2007, we have got new CAFE and GHG rules. Have the CAFE and GHG rules affected compliance with the RFS in a material way?

Mr. GRUNDLER. What they have done is reduced the demand for gasoline in the country and that makes the blending challenge that much harder. So with respect to that, I don’t think it has affected it yet, but it has certainly accelerated this blend wall phenomena faster than anyone expected in 2007.

Mr. POMPEO. So we have got two sets of rules and we are now trying to mix too many renewable fuels into too little gasoline, that is the mathematical challenge you face is that correct?

Mr. GRUNDLER. Essentially. There is no doubt that consumers have not demanded high amounts of E85, and it is likely because of the way the product is priced. It is not today priced consistent with its energy content and I think consumers, some consumers have figured that out. And I would just say you are right, no one is going to put in infrastructure unless they have—are going to make those investments themselves unless they can see recouping those investments.

Mr. OLSON. This clearly is a very passionate issue that crosses party lines. But we owe the American people a thorough review of the RFS for one simple reason: The American energy outlook that drove the creation of ethanol tax subsidies in RFS is in the dustbin of history. Tax preferences for corn-based ethanol were created last century and mutated into RFS this century. Why the spur of government activity? Because we thought we hit peak gas. Meaning that to feed our ever-growing demand for gasoline we had to buy more and more oil from foreign sources that weren’t reliable. Our production was going down every single day. But the American innovator, with new technology, has pushed peak oil back to the next century. And while I think the best solution to this problem is to repeal RFS, my mind is not closed.

Yes or no: Does the EIA expect a spike in the use of either E15 or E85? Spike E15, E85, next couple years. Mr. SIEMINSKI. In production volumes?

Mr. OLSON. Production volume, use in automobiles, transportation.

Mr. SIEMINSKI. No, we are seeing a lot of difficulty in producing those fuels.

Mr. OLSON. So I think that is a no; no spike there. Yes or no: Does EIA expect sudden widespread production of advanced biofuels in the next few years?

Mr. SIEMINSKI. Not without a technological breakthrough.

Mr. OLSON. There we go. So in your opinion, these facts bode well for compliance with the RFS as it stands today?

Mr. SIEMINSKI. As my testimony said, the RFS as it is currently constituted simply can’t be met.

Mr. ENGEL. I first want to say that there has been a lot said, both good and bad, obviously, regarding the Renewable Fuel Standard. And the most important information I think to remember is that the RFS reduces our dependence on foreign oil and reduces our carbon emissions. And we will have to see whether or not it will be a success or a failure. But I think there are things we can do now to help strengthen the RFS, decrease our reliance on foreign oil, and improve our national security. For many years, and I just recently introduced the bill for this Congress, I call it the Open Fuel Standard Act, which I believe is a complement to the RFS. I introduced it in a bipartisan way,

And what the legislation essentially does is requires auto manufacturers to build cars that can run on alternative fuels in addition to gasoline. Mr. Shimkus and I have in previous Congresses teamed together to push this. This could include ethanol, methanol, natural gas, electricity, biodiesel, hydrogen, or a new technology. It would empower consumers to make a choice about which fuel was best for them. And I hope that we would take up this legislation.

Mr. GRUNDLER. Currently there are somewhere between 10 and 12 million flex-fuel vehicles on the road right now. But it appears, based on the evidence, that consumers are not using them to buy E85. I think roughly 100 million gallons of E85 was sold last year. Perhaps Mr. Sieminski has got a better number. And it is likely that is due to a number of factors. Some owners don’t know they have got a flex-fuel vehicle. Some owners have these flex-fuel vehicles but they may live in Texas where there might be one station selling E85. And some are discouraged by the price of E85. So if there were more flex-fuel vehicles available I doubt that would change this pricing dynamic.  Ford and General Motors are roughly making 40% of their vehicles as flex-fuel; and Chrysler is making a significant percentage as well. So they are on track to meet their commitment of 50% of production. And yet the evidence to date shows that consumers have not been choosing to use the higher blend ethanols.

As you probably know, Congress, in developing the RFS, came up with basically two different categories of fuels and chose to grandfather any facility that hadn’t commenced construction at the time of passage. So corn-based ethanol, most of that volume is, in fact, grandfathered, and so it is not required by law to meet the 20% greenhouse gas reduction threshold. We know over time that there are a number of economic incentives to improve the efficiency of your operation to look for cheaper crops, seek higher yield feedstocks. So we expect that that efficiency will improve. And, in fact, in our analysis of new plants and future plants out in 2022, when we did the impact analysis, did determine that those new plants would achieve the 20 percent reduction.

Mr. MATHESON. But the current plants, because they are grandfathered, are not.

Mr. GRUNDLER. Well, it depends. It was going to be a plant-specific thing. For example, those plants that may have switched from coal to natural gas would be more efficient.

 

Mr. WELCH. I have sat through this hearing because I have come to the conclusion that corn ethanol is a bad environmental policy, bad energy policy, bad food policy. And that is largely because of two things that I have been hearing over and over again from everyday Vermonters, first farmers, who have just been hammered with the increase in the feed cost that is associated in part with the corn-based ethanol. And then, secondly, a lot of the small engine repair people are absolutely convinced that the ethanol is detrimental to these engines. And if I didn’t believe it, my own chain saw got wrecked, and I am pretty upset about it, let me tell you.

Last year when we had the worst drought in 50 years, more than 70 percent of the cattle country was impacted. Ten Governors, 156 Members of Congress, including me, in a broad coalition of farm and food groups requested an EPA waiver. And that was denied. But in denying the waiver, the EPA appears to have created a stricter standard than Congress had, at least that is how I read it, rejecting harm to States or regions and instead determining that the agency needed to show that RFS implementation would severely harm the entire U.S. Economy. So I need some clarification on that, because the spike in feed prices certainly hurt us. It hurt every agricultural activity associated with livestock. So I am wondering what it would take from the perspective of where you sit for a waiver to have a valid factual basis for you to act.

References

Coyle, W.T. 2010. Next-Generation Biofuels: Near-Term Challenges and Implications for Agriculture, U.S. Department of Agriculture, Economic Research Service, May 2010. www.ers.usda.gov/publicationslbio-bioenergy/bio-O 1-0 I.aspx#. UcCzuNiSJIO Energy Policy Research Foundation, inc.

(EPRINC). 2012. Ethanol’s Lost Promise: An Assessment of the Economic Consequences of the Renewable Fuels Mandate. Washington, DC. Ferris, J. 2013. “Impacts of the Federal Energy Acts and Other Influences on Prices of Agricultural Commodities and Food.” Michigan State University, Department of Agricultural, Food and Resource Economics. Staff Paper 2013-02.

Ferris, J. 2013. “Impacts of the Federal Energy Acts and Other Influences on Prices of Agricultural Commodities and Food.” Michigan State University, Department of Agricultural, Food and Resource Economics. Staff Paper 2013-02.

 

 

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