Charles T. Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), is calling on the US Congress to repeal the nation's Renewable Fuel Standard (RFS), saying the program was based on erroneous market assumptions.
Drevna testified Tuesday at a House Subcommittee on Energy and Power hearing titled Overview of the Renewable Fuel Standard: Stakeholder Perspectives."
Drevna characterized Congress enactment of the Energy Independence and Security Act of 2007 as a contract with the American people -- one which promised steps toward energy independence and national security, along with added environmental protections.
He said that one major component of this energy legislation was the RFS, which called for massive amounts of renewable fuels to be blended into the nations transportation fuel supply.
In 2013, we now know that the RFS is a program based upon erroneous market assumption, obstacles that prevent the safe consumption of ethanol at increasing mandated levels, and many other unintended negative consequences, Drevna said. In short, Congress should declare the contract null and void and repeal.
One of the most urgent problems with the RFS, according to Drevna, is the E10 blendwall, which represents the maximum amount of ethanol that can be blended safely into gasoline without damaging engines.
This year, consumer consumption will fall short of meeting the mandated volumes of ethanol that are required to be blended into the fuel supply, he said. And, while refiners are often not the party blending ethanol into gasoline, they are the obligated party responsible for ensuring that all mandated levels of ethanol are introduced into US fuel supply.
When the gasoline supply contains the maximum amount of ethanol it can handle, as is expected this year, refiners must purchase ethanol credits or Renewable Identification Numbers (RINs), to make up the shortfall and show compliance with the RFS.
Drevna told the subcommittee that this blendwall has driven the price of RINs from 4 to 7 cents in January to as much as $1.48 for the week of July 15, forcing refiners to make difficult decisions.
When refiners are unable to purchase sufficient RINs for compliance, they may be left with only bad options, which force them to reduce the amount of fuel they supply to the US market. Likewise, importers of gasoline, also obligated parties, will look elsewhere to market their product, Drevna said.
Drevna said the AFPM trade group is not anti-ethanol or anti-biofuels, adding that both can play an important role in the fuel mix if safely integrated into the fuel supply and accepted by consumers.
"AFPM does, however, oppose mandates and subsidies because they limit consumer choice, stifle innovation, and in the case of the RFS, are harmful to consumers, he said.