Washington Insider--Friday

More Pressure on RFS

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Doha Round Going Nowhere

The World Trade Organization's Doha Round talks have reached an impasse and without a serious effort from its 161 member countries. Any attempt even to produce a work program for concluding the talks will fail, the organization's head has warned. That message from WTO Director-General Roberto Azevedo is a far cry from the usual optimism he expresses publicly in spite of 13 years of off-again, on-again Doha negotiations.

Earlier this week, WTO agriculture negotiators in Geneva struggled to agree on new ideas for cutting tariffs, part of an effort to aim for more modest reform than is envisioned in the current draft text. That document has been under consideration since 2008.

The United States already is on the record warning that failure to move forward at the next WTO ministerial conference in Nairobi, Kenya, in December would kill the Doha Round. That may appear to be a harsh pronouncement, but it is one that has been made by numerous countries many times in the past. Whether this is the year that the world finally gives up on trade reform is likely to become known by Christmas.


Proposed FDA Funding May be Inadequate to Carry Out New Food Safety Law

President Barack Obama signed the Food Safety Modernization Act into law in January 2011. Since then, the Food and Drug Administration has been issuing regulations and proposing rules to implement the act, called the most sweeping reform of U.S. food safety laws in more than 70 years,

One of the problems FDA has with carrying out Congress' intentions on FSMA is that Congress also has been intent on providing inadequate funds to implement the law. For example, House appropriators this week approved legislation that would allocate less than half of the increase FDA requested to implement FSMA in fiscal 2016. The FDA had asked for $110 million in budget authority over the previous year's baseline, but would receive a $41.5 million increase under legislation released by the House Appropriations Committee on Wednesday.

A major goal of the law is to enable FDA to prevent foodborne illness outbreaks rather than reacting to them. If Congress truly wishes the agency to keep up with its food safety oversight responsibilities, it also should keep up with the rising costs of carrying out those responsibilities. On the other hand, with the federal budget being what it is, any increase should be seen as an anomaly.


Washington Insider: More Pressure on RFS

It seems increasingly official these days that nobody likes the Environmental Protection Agency's new, long-delayed renewable fuels proposal. Big Oil clearly hates it, which was no surprise. Biofuel producers and environmental advocates also are unhappy -- and took the trouble to express disappointment recently ahead of a public hearing on the rule.

A Senate subcommittee grilled senior EPA officials about management of the program Thursday ahead of a public hearing set for June 25 in Kansas City.

Opponents want the standards repealed. Farmers and renewable fuel producers see the KC meeting as an opportunity to press for higher levels of support.

"EPA has become timid in the face of an unrelenting campaign by Big Oil," Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, told reporters earlier this week. Dinneen asserted that EPA's proposal is a capitulation to the petroleum industry, which is resisting efforts to bring higher ethanol blends into the gasoline market.

Dinneen notes that while most gasoline contains up to 10% ethanol -- the level that has been approved for use in all vehicles -- EPA has also approved a 15% ethanol blend for model year 2001 and newer vehicles. In addition, there are so-called flex-fuel vehicles capable of using gasoline containing up to 85% ethanol. However, the petroleum industry frequently says there is little to no consumer demand for those higher ethanol blends.

Jack Gerard, president and chief executive officer of the American Petroleum Institute, told the press that E85 represented only a tiny share -- "0.15% of gasoline demand in 2014" -- while gasoline without any ethanol was 7%, double the demand from 2012. "You can't try to compel the consumer to do something that the consumer knows is not in their best interest," Gerard said. "That's why you can't breach the blend wall."

EPA's current proposal would reduce the amount of biofuels required to be blended into the fuel supply in 2014, 2015 and 2016. The new requirements are below those specified in the law -- to 15.93 billion gallons of renewable fuels for 2014, increasing to 16.3 billion gallons in 2015 and then to 17.4 billion gallons in 2016. The Energy Independence and Security Act would have required those amounts to be 18.15 billion gallons in 2014, 20.5 billion in 2015 and 22.25 billion in 2016.

EPA says the proposal responds to the fact that it is running headlong into the ethanol blend wall, the point at which the amount of ethanol required to be blended into the gasoline supply would exceed 10%.

If supporters of the original RFS are unhappy, so are opponents, who say EPA is missing an opportunity to reform or even repeal the law this year. Several bills have been filed in both the House and Senate that would either scrap the program entirely or eliminate the corn ethanol blending mandate, leaving only requirements to blend biomass-based diesel or advanced biofuels like cellulosic ethanol.

In addition, environmentalists have become severe critics. "Few things are worse for the environment than gasoline, but corn ethanol is one of them," Heather White, executive director of the Environmental Working Group, told reporters on a joint conference call with the American Petroleum Institute.

API's Gerard said many in Congress have been waiting for the EPA to issue its overdue rule before deciding how to address the renewable fuel standard. He said there is growing concern about the management of the program from a variety of perspectives that could drive bills to reform the law. "The stars are beginning to align," he said.

Any really significant changes concerning the basic RFS policies will be hugely controversial and therefore quite unlikely in the run-up to the 2016 elections, Washington Insider believes.

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