Ag Policy Blog

The U.S. oil industry is taking its case for repeal of the Renewable Fuel Standard to Washington this week, as the American Petroleum Institute organized a fly-in for oil company executives starting Wednesday in the nation's capital.

API is hosting eight refining executives representing both large and small refiners for a series of meetings with members of Congress. They are expected to discuss how they believe the RFS no longer reflects energy realities. Executives are scheduled to meet with House and Senate leadership as well as members of select committees such as Energy and Commerce.

API released details about the information on the RFS it plans to provide to lawmakers, during a press conference Tuesday.

Michael McAdams, president of the Advanced Biofuels Association, said during the National Advanced Biofuels Conference in Omaha last week that those members of Congress who have been leading the RFS debate in recent months, including the drafting of a series of white papers on various aspects of the RFS and committee hearings, have assured the industry that the RFS will not be repealed.

API's Downstream Group Director Bob Greco said Tuesday that the RFS was "broken beyond repair" and outdated.

"The state of energy and the economy were very different when Congress passed the Energy Independence and Security Act of 2007," he said.

"We're calling this the RFS reality gap."

Greco said demand for gasoline is down and the U.S. has "drastically increased" domestic crude oil production and lowered imports.

"The EIA now projects the U.S. will produce 64 million barrels more and import 241million barrels of crude fewer than was projected back in 2007," Greco said.

"Translation: our nation's energy security outlook is much improved not through ethanol mandates but through increased domestic production, a primary goal of the RFS."

In addition, he said assumed production levels of advanced cellulosic biofuels have "disappointed" year after year.

"All of this proves that while the RFS may have been well-intentioned six years ago, it is a dangerous relic of America's era of fuel scarcity," Greco said.

"Today, the RFS is not just outdated; it is bad public policy that is poised to harm millions of consumers. We're meeting with members of Congress to help them understand the severe economic consequences that could occur unless they take action."

Greco cited a recent study that shows the RFS could cause a drastic reduction in America's fuel supply, possibly leading to "dramatic fuel cost increases and fuel supply disruptions rippling adversely though the economy."

Greco said the RFS will cause a $770 billion decrease in U.S. gross domestic product and a $580 billion decrease in take-home pay for American workers.

"Any one of these outcomes is a crisis," he said. "Taken in total these consequences will cause severe harm to America's economy as a whole and to virtually all consumers.

"Not surprisingly, a growing chorus of concerned groups is urging repeal of the RFS, and we're meeting with members of Congress to help them understand the severe economic consequences that could occur unless they take action."

Greco called said the battle to repeal the RFS is about "bad government policy."

"Clearly there is interest on the Hill for repeal and reform," he said.

"We're not hearing anyone out there saying don't change it. Our focus is on repeal. We think we have a strong message and it is resonating with the public."

In particular, Greco said the public is starting to understand that the E10 blend wall is causing for gasoline retailers.

The U.S. Environmental Protection Agency has taken a lot of heat for not providing updated RFS mandates on schedule. Greco said this has created much uncertainty in the market.

EPA recently sent the 2014 RFS mandate numbers to the Office of Management and Budget. In addition, the API has asked EPA to waive the RFS for 2014 at a time when EPA has indicated it intends to lower the mandated volumes.

"EPA has not given anything substantive yet," Greco said.

"EPA is starting to understand the severity of the problem. The blend wall is a real issue for 2014."

ETHANOL NOT HAPPY

Tom Buis, chief executive officer of ethanol interest group Growth Energy, said in a statement that API continues to "distribute misleading information."

"Apparently API thought it was a good idea to make the 1,000th day that gasoline has averaged more than $3 a gallon to announce a policy agenda designed to keep us addicted to fossil fuels foreign oil and high gas prices," he said.

"Talk about irony and a total disconnect from reality. We have lowered our foreign oil imports by approximately 20% since the RFS was enacted in 2005 and API wants to roll back our progress to retain their market share and record profits. Seems to me they are aiming for another 1,000 days of record profits and consumer pain at the pump."

Buis said ethanol continues to trade 80 cents lower that regular unleaded gasoline.

"This is about market share, plain and simple," he said. "Big oil is looking to block any alternatives that are less expensive and threaten their bottom line."

Check out API's analysis here, http://tinyurl.com/….

Follow me on Twitter @toddneeleyDTN

© Copyright 2013 DTN/The Progressive Farmer. All rights reserved.