Biofuel Revamp Debate Powers Up, Includes Higher Ethanol Blends

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By Brian Dabbs

Long-awaited efforts to modify biofuel policy are entering the limelight across Capitol Hill.

A Senate panel will host a hearing next week on a bill to allow summer sales of vehicle fuel with high concentrations of ethanol. Meanwhile, the House is wading through a series of discussions with interest groups aimed at overhauling the broad blending mandate, known as the renewable fuel standard (RFS).

While the two initiatives are moving in parallel, the Senate bill could ultimately play a critical role in revamping the standard, Rep. John Shimkus (R-Ill.), the House lawmaker leading the meetings, and industry specialists told Bloomberg BNA.

An overhaul could include sunsetting the program altogether or providing relief, possibly in the form of tax credits, for advanced biofuel producers, as well as a range of other proposals, but Shimkus said the contours of that effort are vague at best.

E15 Olive Branch

The Senate bill (S. 517) will go before the Senate Environment and Public Works Committee June 14, committee spokesman Mike Danylak told Bloomberg BNA. That measure would waive summer restrictions on transportation fuel containing 15 percent ethanol, known as E15, and higher ethanol blends. The Environmental Protection Agency restricted summer E15 sales as a way to reduce ground-level ozone pollution.

The bill could provide advocates for increased biofuels use with ammunition to push for a broad RFS revamp in the House, Shimkus, chairman of the environment subcommittee on the Energy and Commerce Committee, told Bloomberg BNA.

“It could be a helpful provision for us on a compromise plan,” he said.

Previous RFS overhaul bills, which haven’t received hearings, sought to cap the amount of biofuel required for blending. Biofuel groups, such as the Renewable Fuels Association, which represents ethanol producers, oppose any changes to the law while the oil industry is quick to bash the E15 waiver as strengthening a program they deem dysfunctional.

Still, any change will involve a broad deal, Scott Segal, an energy attorney who heads the policy group at Bracewell LLP, told Bloomberg BNA.

“I suspect that changes to the law will include a variety of topics,” he said. “It’s unrealistic for any participant in the RFS debate to think that the only changes that will be made will benefit their point of view. That’s not the history of the way the law was put forward.”

The RFS program, which became law in 2005 and was expanded in 2007, aimed to decrease hydrocarbon emissions and reduce dependence on foreign oil. It sets annually increasing biofuel quotas through 2022. Nearly all transportation gasoline in the U.S. now contains 10 percent ethanol, which is made from corn and other biomass, and biofuel groups are regularly pushing higher blend fuels into the market.

Confabs Underway

A bipartisan group of six House lawmakers, led by Shimkus, is scheduling meetings with other organizations that may be affected by a change in the RFS, such as convenience store owners and auto makers. The lawmakers met with the American Petroleum Institute, biofuel groups and others last week, Shimkus told Bloomberg BNA.

He is asking lawmakers to come to the table with a “clean slate.”

The meetings aim to flesh out potential compromises between the wide-ranging biofuel stakeholders. Biofuel groups staunchly support the current mandate, and the oil industry calls for its elimination, but both sides need to collaborate to avoid perils at a looming juncture, Shimkus said.

After 2022, the EPA will make decisions on biofuel volume mandates without congressional discretion.

“It’s the uncertainty that I think brings people to the table,” Shimkus said. Energy and Commerce Chairman Greg Walden (R-Ore.) tapped Shimkus to devise an RFS change at the outset of this Congress.

The 2022 deadline, along with concerns that the RFS program originally underestimated the market’s embrace of electric vehicles, is spurring efforts to make changes, Segal said.

But some oil industry groups denounce the bill to boost E15 concentrations in vehicle fuels.

“The high ethanol blend of gasoline is not recommended or warranted by the automakers for use with 85 percent of cars on the road,” Sabrina Fang, spokesperson for The American Petroleum Institute, told Bloomberg BNA. “The fuel was inadequately tested and could harm engines and fuel systems. This issue only further strengthens the need to fix the broken RFS program and we continue to urge Congress to do just that.”

The biofuel industry is equally aggressive. The Renewable Fuel Association didn’t comment to Bloomberg BNA, but a spokesman for POET LLC said the group is “committed to preserving the RFS, because we understand that the policy is working.”

Uncertainty also still prevails over the E15 bill in the Senate, which is generally more supportive of the RFS program than the House.

Sen. John Barrasso (R-Wy.), with the blessing of Senate leadership, committed to a hearing and markup weeks ago, but it’s still unclear whether the committee would approve the bill.

To contact the reporter on this story: Brian Dabbs in Washington at bdabbs@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

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