[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
DISCUSSION DRAFT: THE 21ST CENTURY TRANSPORTATION FUELS ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENVIRONMENT
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 11, 2018
__________
Serial No. 115-172
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
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36-787 PDF WASHINGTON : 2019
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COMMITTEE ON ENERGY AND COMMERCE
GREG WALDEN, Oregon
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
FRED UPTON, Michigan BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee GENE GREEN, Texas
STEVE SCALISE, Louisiana DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida PAUL TONKO, New York
BILL JOHNSON, Ohio YVETTE D. CLARKE, New York
BILLY LONG, Missouri DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana KURT SCHRADER, Oregon
BILL FLORES, Texas JOSEPH P. KENNEDY, III,
SUSAN W. BROOKS, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California
RICHARD HUDSON, North Carolina RAUL RUIZ, California
KEVIN CRAMER, North Dakota SCOTT H. PETERS, California
TIM WALBERG, Michigan DEBBIE DINGELL, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina
______
Subcommittee on Environment
JOHN SHIMKUS, Illinois
Chairman
DAVID B. McKINLEY, West Virginia PAUL TONKO, New York
Vice Chairman Ranking Member
JOE BARTON, Texas RAUL RUIZ, California
MARSHA BLACKBURN, Tennessee SCOTT H. PETERS, California
GREGG HARPER, Mississippi GENE GREEN, Texas
PETE OLSON, Texas DIANA DeGETTE, Colorado
BILL JOHNSON, Ohio JERRY McNERNEY, California
BILL FLORES, Texas TONY CARDENAS, California
RICHARD HUDSON, North Carolina DEBBIE DINGELL, Michigan
KEVIN CRAMER, North Dakota DORIS O. MATSUI, California
TIM WALBERG, Michigan FRANK PALLONE, Jr., New Jersey (ex
EARL L. ``BUDDY'' CARTER, Georgia officio)
JEFF DUNCAN, South Carolina
GREG WALDEN, Oregon (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 2
Prepared statement........................................... 2
Hon. Paul Tonko, a Representative in Congress from the State of
New York, opening statement.................................... 4
Prepared statement........................................... 5
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 7
Prepared statement........................................... 8
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, prepared statement........................ 195
Witnesses
Steve Zimmer, Executive Director, United States Council for
Automotive Research............................................ 9
Prepared statement........................................... 12
R. Timothy Columbus, Counsel, National Association of Convenience
Stores and Society of Independent Gasoline Marketers of America 19
Prepared statement........................................... 21
Wesley Spurlock, Past President and Chairman, National Corn
Growers Association............................................ 34
Prepared statement........................................... 36
Emily Skor, Chief Executive Officer, Growth Energy............... 44
Prepared statement........................................... 46
Geoff Cooper, President and Chief Executive Officer, Renewable
Fuels Association.............................................. 55
Prepared statement........................................... 57
Chet Thompson, President and Chief Executive Officer, American
Fuel and Petrochemical Manufacturers........................... 68
Prepared statement........................................... 70
Brooke Coleman, Executive Director, Advanced Biofuels Business
Council........................................................ 97
Prepared statement........................................... 100
Michael McAdams, President, Advanced Biofuels Association........ 118
Prepared statement........................................... 120
Manning Feraci, Director of Federal Affairs, Coalition for
Renewable Natural Gas.......................................... 148
Prepared statement........................................... 150
David Fialkov, Vice President, Government Relations/Legislative
and Regulatory Counsel, National Association of Truckstop
Owners......................................................... 162
Prepared statement........................................... 164
Kurt Kovarik, Vice President of Federal Affairs, National
Biodiesel Board................................................ 180
Prepared statement........................................... 182
Submitted Material
Discussion Draft, H.R. ___, the 21st Century Transportation Fuels
Act, submitted by Mr. Shimkus.................................. 196
Summary, Discussion Draft, 21st Century Transportation Fuels Act,
submitted by Mr. Shimkus....................................... 230
Letter of December 11, 2018, from Frank J. Macchiarola, Vice
President, Downstream and Industry Operations, American
Petroleum Institute, to Mr. Shimkus and Mr. Tonko, submitted by
Mr. Shimkus.................................................... 236
Letter of December 3, 2018, from Ted Mottaz, President, Illinois
Corn Growers Association, to Mr. Shimkus, submitted by Mr.
Shimkus........................................................ 239
Letter of December 11, 2018, from Todd J. Teske, Chief Executive
Officer and President, Briggs & Stratton, to Mr. Shimkus and
Mr. Tonko, submitted by Mr. Shimkus............................ 241
Statement of the National Farmers Union by Roger Johnson,
December 11, 2018, submitted by Mr. Shimkus.................... 243
Letter of December 10, 2018, from Dr. David Cooke, Senior
Vehicles Analyst, Clean Vehicles Program, Union of Concerned
Scientists, to committee members, submitted by Mr. Shimkus..... 245
DISCUSSION DRAFT: THE 21ST CENTURY TRANSPORTATION FUELS ACT
----------
TUESDAY, DECEMBER 11, 2018
House of Representatives,
Subcommittee on Environment,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2123, Rayburn House Office Building, Hon. John Shimkus
(chairman of the subcommittee) presiding.
Members present: Representatives Shimkus, McKinley, Barton,
Olson, Johnson, Flores, Hudson, Walberg, Carter, Duncan, Walden
(ex officio), Tonko, Ruiz, Peters, and Green.
Also present: Representative Loebsack.
Staff present: Jerry Couri, Deputy Chief Counsel,
Environment; Wyatt Ellertson, Professional Staff Member, Energy
and Environment; Adam Fromm, Director of Outreach and
Coalitions; Ali Fulling, Legislative Clerk, Oversight and
Investigations, Digital Commerce and Consumer Protection;
Jordan Haverly, Policy Coordinator, Environment; Mary Martin,
Chief Counsel, Energy and Environment; Sarah Matthews, Press
Secretary, Energy and Environment; Brandon Mooney, Deputy Chief
Counsel, Energy; Caitlin Haberman, Minority Professional Staff
Member; Rick Kessler, Minority Senior Advisor and Staff
Director, Energy and Environment; Alexander Ratner, Minority
Policy Analyst; Tim Robinson, Minority Chief Counsel; Andrew
Souvall, Minority Director of Communications, Member Services,
and Outreach; Teresa Williams, AAAS Fellow.
Mr. Shimkus. The Subcommittee on the Environment will now
come to order.
Before I do my opening statement, I want to--my last chance
to be in the chair, I want to thank the loyal opposition and
the minority.
I think the subcommittee has had a pretty good record of
moving some very contentious pieces of legislation, from TSCA
to the Safe Drinking Water Act to Brownfields to the nuclear
waste reauthorization language that passed 340 to 72.
In all honesty, couldn't do it without your help, and so I
want to publicly say that and thank you.
I'll now recognize myself for 5 minutes for an opening
statement.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Good morning, and thank you all for being here. Given the
large number of witnesses and in the interest of maximizing
time for questions and discussions, I will keep my opening as
brief as possible and welcome others to do the same.
Over the last 2 years, many of you have heard me say
transportation fuels legislation was one of my ``reach goals''
for this Congress.
To that end, interested Members participated in three
stakeholder roundtables to get this conversation started and
the Environment Subcommittee held five hearings to further
explore the future of transportation fuels.
I want to thank Chairman Walden for not just allowing but
encouraging this effort. I also want to thank the witnesses
before us today who actively engaged in those roundtables and
hearings, and I especially want to thank Congressman Flores who
coauthored the resulting discussion draft with me.
Rather than looking at individual Federal transportation
fuel policies on their own, the draft 21st Century
Transportation Fuels Act takes a wider view of those
policies and considers how they might work together to
bring more value to consumers and more certainty to
stakeholders.
The draft would transition from blend-specific mandates to
performance-based standards for future fuels and vehicles,
remove long-standing barriers to the availability and usability
of higher ethanol blends, provide an additional decade of
certainty for advanced biofuels, and harmonize EPA and DOT
vehicle efficiency programs.
The need for this type of comprehensive reform is timely.
Stakeholders on all sides of this debate have been whipsawed by
months, by rumors and actual administration actions, and that
uncertainty will only increase after 2022 when EPA receives
even broader discretion to set biofuel blending requirements.
In fact, given EIA projections of declining liquid
transportation fuel demand, it's difficult to envision a post-
2022 scenario in which biofuel volumes would not actually be
lower than they are today.
I look forward to a constructive dialogue about what the
future holds as well as what the discussion draft would mean
for the various stakeholders.
[The prepared statement of Mr. Shimkus follows:]
Prepared statement of Hon. John Shimkus
Good morning and thank you all for being here. Given the
large number of witnesses, and in the interest of maximizing
time for questions and discussion, I will keep my opening as
brief as possible and welcome others to do the same.
Over the last 2 years, many of you have heard me say
transportation fuels legislation was one of my `reach goals'
this Congress. To that end, interested Members participated in
three stakeholder roundtables to get this conversation started,
and the Environment Subcommittee held five hearings to further
explore the future of transportation fuels. I want to thank
Chairman Walden for not just allowing but encouraging this
effort, I also want to thank the witness before us today who
all actively engaged in those roundtables and hearings, and I
especially want to thank Congressman Flores who coauthored the
resulting discussion draft with me.
Rather than looking at individual Federal transportation
fuel policies on their own, the draft 21st Century
Transportation Fuels Act takes a wider view of those policies
and considers how they might work together to bring more value
to consumers and more certainty to stakeholders. The draft
would transition from blend-specific mandates to performance-
based standards for future fuels and vehicles, remove long-
standing barriers to the availability and usability of higher
ethanol blends, provide an additional decade of certainty for
advanced biofuels, and harmonize EPA and DOT vehicle efficiency
programs.
The need for this type of comprehensive reform is timely.
Stakeholders on all sides of this debate have been whipsawed
for months by rumored and actual administrative actions, and
that uncertainty will only increase after 2022 when EPA
receives even broader discretion to set biofuel blending
requirements. In fact, given EIA projections of declining
liquid transportation fuel demand, it's difficult to envision a
post-2022 scenario in which biofuel volumes would not actually
be lower than they are today. I look forward to a constructive
dialogue about what the future holds as well as what the
discussion draft would mean for the various stakeholders. And
with that I yield the remainder of my time to Mr. Flores.
Mr. Shimkus. And with that, I yield the remainder of my
time to Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman.
I appreciate you calling this hearing on today's discussion
draft. I'd also like to extend a warm welcome to one of the
folks that grew up in the same little town I did up in the
Texas Panhandle, Mr. Wesley Spurlock. Great to have you here as
a witness.
Since the RFS was first established in 2005 and expanded in
2007, much has changed in the market for transportation fuels.
If Federal policies are not routinely evaluated and updated to
reflect market conditions, consumers end up having less than
optimal choices.
Let me give you a few examples of the concerns that have
been raised before this committee about the current status quo
of American fuels policy.
Number one, biofuels producers raise concerns on the annual
implementation of the RFS and other regulatory barriers to the
market.
Two, refiners face increasing cost of complying with the
RFS.
Three, automakers face challenges in complying with
efficiency programs under two different agencies inside the EPA
and the DOT.
As Chairman Shimkus--number four, some environmental
communities believe that the current generation ethanol or gen
1 ethanol is an environment--creates environmental problems.
As Chairman Shimkus stated, the 21st Century Transportation
Fuel Act Discussion Draft takes a larger view of Federal
transportation fuel policies.
This draft incorporates into legislative text many of the
ideas from three bipartisan roundtables and five subcommittee
hearings.
For consumers, higher-octane fuels can bring increased
economy and performance for the next generation of engines for
stakeholders transitioning to the RFS.
Transitioning RFS to national octane standards creates a
new market opportunity for biofuels producers and gives
compliance certainty to refiners and automakers.
And before the panel starts, I have a few reflections on
the testimony that I read today. One is we have to put the
consumers and the environment first, not our self-interest.
Number two, the choice is clear. We can either go with the
status quo, which almost everybody has said is broken, or we
can have a compromise solution because I can guarantee you
there is not going to be a perfect solution that's going to
make each of you 100 percent happy.
These organizations spent valuable time giving feedback on
this and that constructive feedback was appreciated. Some
organizations spent their time bashing other stakeholders. That
was not productive.
And so the thing I would ask you is to stay engaged and
remember that we don't all get 100 percent of what we want. We
are trying to come up with an optimal solution for the
consumers and the environment.
Thank you, and I yield back the balance of my time.
Mr. Shimkus. The gentleman yields back his time.
The Chair now recognizes the ranking member of the
subcommittee, Mr. Tonko, for 5 minutes.
OPENING STATEMENT OF HON. PAUL TONKO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK
Mr. Tonko. Thank you, Chair Shimkus.
And Mr. Chair, I do want to thank you for your leadership
of the subcommittee and your cooperative spirit that has moved
us along in the right direction.
I agree with your assessment. We have been productive and
very successful as a subcommittee. And I thank our witnesses,
not just for joining us this morning but also for your input in
this process over the course of the 115th Congress.
Before we go any further, I do want to recognize Chair
Shimkus and Mr. Flores for all the work that went into
producing this discussion draft. For the past 2 years, the
subcommittee has hosted three stakeholder roundtables and five
hearings on transportation fuels policy.
As we heard at previous hearings, this is a complicated
problem with no easy solution. So I appreciate the effort that
went into developing the proposal.
These Members were given an incredibly difficult
assignment, trying to find common ground on an issue where many
stakeholders say it does not exist.
While I have some serious concerns with the draft as it is
currently written, I do think that the chair and Mr. Flores
have done an admirable job and conducted a process in good
faith to try to create that common ground.
For the past 2 years, we have heard about issues with the
implementation of the Renewable Fuel Standard program, which
has existed under administrations from both parties.
In my mind, the program can certainly be improved. We will
hear about the use of small refinery waivers and the challenges
with pathway approvals this morning and, despite some flaws, I
believe it is critical, whether through RFS or another program,
that the benefits of our Nation's clean energy transition are
shared throughout the country including rural communities.
Unfortunately, this administration's actions indicate that
they do not share this belief. We have seen it through
unnecessary trade disputes that hit farmers hardest. We have
seen it when the president continues to deny the threat of
climate change, despite the National Climate Assessment's
finding that changes in precipitation coupled with rising
extreme temperatures could reduce Midwest agricultural
productivity to levels of the 1980s before midcentury.
These types of actions are harming and will continue to
harm rural economies and undermine the goals of the RFS. We
should be working on legislation that meets our collective need
for a cleaner energy future while directly benefitting and
creating opportunities in rural communities.
From the start of this process I have told stakeholders
that I support the RFS or its potential replacement to the
extent that it results in fewer greenhouse gas emissions.
I am not certain that would be the outcome under the
proposal before us. So while I look forward to hearing
everyone's feedback, I do have concerns in its current form.
I specifically want to mention the proposal's changes to
the CAFE program in Title 3 of the draft. Perhaps all of
today's witnesses will acknowledge the potential for high-
octane fuels as a method to achieve fuel economy standards.
If CAFE compliance will become easier through a high-octane
performance standard on top of the administration's freeze of
previously announced standards, I do not think we should also
provide additional credits to achieve compliance as would occur
under Title 3.
If we really want to drive efficiency and innovation while
creating certainty, this discussion draft should drop the so-
called harmonization language and include legislation written
by our colleague, Ms. Matsui, to preserve the previously
announced CAFE standards.
Finally, I want to say perhaps the only thing that will
unite today's witnesses--granted, it is unity through
opposition.
It is my belief that the Federal Government should be
advancing policies that reduce demand and reliance on liquid
fuels. I am not naive enough to think this will happen
overnight. But we know that the transportation sector is now
the greatest source of greenhouse gas emissions in the United
States and that our climate policy must address it.
Earlier this year, we held a hearing that focused on
electrification. But, sadly, none of the ideas discussed are
reflected in the 21st Century Transportation Fuels Act.
If we are going to do a major overhaul of Federal fuel and
vehicle programs, we must look at how to further promote EVs as
well.
For the time being, while liquid fuels continue to be the
predominant energy source in transportation, these fuels should
be as clean and used as efficiently as possible.
I thank you again, Mr. Chair, for your hard work on
developing this proposal and with that, yield back.
[The prepared statement of Mr. Tonko follows:]
Prepared statement of Hon. Paul Tonko
Thank you, Chairman Shimkus. And thank you to our
witnesses, not just for joining us this morning, but also for
all your input in this process over the course of the 115th
Congress.
Before we go any further, I want to recognize Chairman
Shimkus and Mr. Flores for all the work that went into
producing this discussion draft.
For the past 2 years, the subcommittee has hosted three
stakeholder roundtables and five hearings on transportation
fuels policy.
As we heard at previous hearings, this is a complicated
problem with no easy solution, so I appreciate the effort that
went into developing this proposal.
These Members were given an incredibly difficult
assignment, trying to find common ground on an issue where many
stakeholders say it does not exist.
And while I have some serious concerns with the draft as it
is currently written, I do think the Chairman and Mr. Flores
have done an admirable job and conducted a process in good
faith to try to create that common ground.
For the past 2 years, we have heard about issues with the
implementation of the Renewable Fuel Standard program, which
have existed under administrations from both parties.
In my mind, the program can certainly be improved. We will
hear about the use of small refinery waivers and the challenges
with pathway approvals this morning.
And despite some flaws, I believe it is critical--whether
through RFS or another program--that the benefits of our
Nation's clean energy transition are shared throughout the
country, including rural communities.
Unfortunately, this administration's actions indicate that
they do not share this belief.
We have seen it through unnecessary trade disputes that hit
farmers hardest.
We have seen it when the President continues to deny the
threat of climate change, despite the National Climate
Assessment's finding that changes in precipitation, coupled
with rising extreme temperatures, could reduce Midwest
agricultural productivity to levels of the 1980s before
midcentury.
These types of actions are harming, and will continue to
harm, rural economies and undermine the goals of the RFS.
We should be working on legislation that meets our
collective need for a cleaner energy future while directly
benefiting, and creating opportunities in, rural communities.
From the start of this process, I have told stakeholders
that I support the RFS, or its potential replacement, to the
extent that it results in fewer greenhouse gas emissions. I am
not certain that would be the outcome under the proposal before
us, so while I look forward to hearing everyone's feedback, I
do have concerns in its current form.
I specifically want to mention the proposal's changes to
the CAFE program in Title III of the draft.
Perhaps all of today's witnesses will acknowledge the
potential for high-octane fuels as a method to achieve fuel
economy standards.
If CAFE compliance will become easier through a high-octane
performance standard--on top of the administration's freeze of
previously announced standards--I do not think we should also
provide additional credits to achieve compliance, as would
occur under Title III.
If we really want to drive efficiency and innovation while
creating certainty, this discussion draft should drop the so-
called ``harmonization'' language and include legislation
written by our colleague Ms. Matsui to preserve the previously
announced CAFE standards.
Finally, I want to say perhaps the only thing that will
unite today's witnesses--granted, it is unity through
opposition. It is my belief that the Federal Government should
be advancing policies that reduce demand and reliance on liquid
fuels.
I am not naive enough to think this will happen overnight.
But we know that the transportation sector is now the greatest
source of greenhouse gas emissions in the United States, and
that our climate policy must address it.
Earlier this year we held a hearing that focused on
electrification, but sadly, none of the ideas discussed are
reflected in the 21st Century Transportation Fuels Act.
If we are going to do a major overhaul of Federal fuel and
vehicle programs, we must look at how to further promote EVs as
well.
For the time being, while liquid fuels continue to be the
predominant energy source in transportation, these fuels should
be as clean, and used as efficiently, as possible.
Thank you again, Mr. Chairman, for your hard work on
developing this proposal. I yield back.
Mr. Shimkus. The gentleman yields back his time.
The Chair now recognizes the chairman of the full
committee, Chairman Walden, for 5 minutes.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Thank you, Mr. Chairman.
I appreciate that, and I want to thank you and Mr. Flores
and others for their work on this recent release of your
discussion draft on the topic of our hearing today.
You have done an amazing job on this and it is tough work,
and I appreciate the seriousness that you have brought to this
matter and I am glad you have followed through on your promise
to push toward a legislative solution rather than let the
traditional parties on this issue comfortably sit in their
foxholes in perpetuity.
It is one of the reasons why this hearing today is so
important. This draft did not happen overnight.
We all know that, and I want to acknowledge and commend the
countless hours both you and Mr. Flores and our staffs and your
staffs have spent trying to figure out what makes sense for our
Nation's transportation fuel mix.
As you have already said, Mr. Chairman, over the past 2
years, this subcommittee has held three roundtable discussions
to educate Members and another five hearings--today marking the
sixth--to fine tune the committee's understanding of a range of
issues related to liquid fuels and the motor vehicles powered
by them.
Throughout this process, I have been struck by the
acknowledgment that liquid-fuel-powered motor vehicles are
expected to be the dominant type of vehicle used by Americans
for decades to come and no one knows what is going to happen
regarding our Nation's renewable fuel mix beginning in 2023,
which is why this draft is so important.
By transitioning to higher-octane fuel blends and vehicles
whose engines are designed to maximize fuel efficiency, we can
both incorporate more renewable liquid fuels into the fuel
supply while also increasing miles per gallon for consumers.
I am pleased the discussion draft includes provisions I
strongly support, especially the one which removes the gross
inequity in Federal fuel policy regarding wood and forest
management, so that woody biomass can play a larger role in the
RFS program.
But as the chairman stated, this draft is not a final
product. We all know that. Getting this policy right is not
easy, especially with complex and sometimes contentious issues
like the Renewable Fuel Standard and vehicle fuel economy
standards.
Like any major legislation just starting out, it needs
additional refinement. I am interested in learning from
stakeholder expertise about what necessary refinements are
needed for this bill and to hear about any important items that
are not contained in it but that you believe should be.
I am also concerned about what makes sense for the
interests of consumers, especially as it relates to access to
and pricing for and the availability and quantity of the
engines and fuels that consumers demand or that Federal
legislation requires.
These are issues that were tangentially discussed in our
hearings, but I feel can only be appropriately honed when
people are evaluating a concrete proposal and providing real
feedback about the best way to accomplish these goals.
So to me, the bottom line is that new fuels and vehicles
must first and foremost deliver benefits to consumers while
improving our environment.
I know some folks will want to discuss electric vehicles in
conjunction with this bill and, frankly, as a hybrid driver on
both coasts, I am certainly interested in hearing more on this
subject. But liquid fuels for motor vehicles and the looming
question arising in 2023 make the most sense to tackle right
now.
As I said at our third hearing, as things stand right now I
have great concerns about the viability of EVs in meeting the
needs of rural America, not to mention range and price issues
that make EVs unrealistic for many Americans today, even as new
innovations make their use more and more reasonable for many in
our urban and suburban areas.
I want to welcome our witnesses and those who chose to send
the committee their comments to be included in the record. I
look forward to learning from stakeholder expertise and really
appreciate you all being here today.
I know some interests have chosen either to be
hypercritical or not to offer suggestions. But recognizing time
is short for addressing this issue in a timely manner, I think
they do so at the peril of their members.
With that, Mr. Chairman, I thank you and Mr. Flores and
others for your work, and I yield back the balance of my time.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
Thank you, Mr. Chairman, for recognizing me for an opening
statement.
I congratulate you and Mr. Flores on the recent release of
your discussion draft, the topic of our hearing today. I
appreciate the seriousness that you have brought to this
matter; and I am glad you have followed through on your promise
to push toward a legislative solution rather than let the
traditional parties on this issue comfortably sit in their
foxholes in perpetuity. It is one of the reasons why this
hearing today is so important.
This draft did not happen overnight.
I want to acknowledge and commend the countless hours both
you and Mr. Flores, and your staffs, have spent trying to
figure out what makes sense for our Nation's transportation
fuel mix. As you have already said, Mr. Chairman, over the past
2 years, this subcommittee has held three roundtable
discussions to educate Members and another five hearings--today
making six--to fine tune the committee's understanding of a
range of issues related to liquid fuels and the motor vehicles
powered by them.
Throughout this process, I have been struck by the
acknowledgement that liquid fuel powered motor vehicles are
expected to be the dominant type of vehicle used by Americans
for decades to come and that no one knows what is going to
happen regarding our Nation's renewable fuel mix beginning in
2023, which is why this draft is so important. By transitioning
to higher-octane fuel blends and vehicles--whose engines are
designed to maximize fuel efficiency, we can both incorporate
more renewable liquid fuels into the fuel supply while also
increasing miles per gallon for consumers.
I am pleased the discussion draft includes provisions I
strongly support--especially the one which removes the gross
inequity in Federal fuel policy regarding wood and forest
management so that woody biomass can play a larger role in the
RFS program; but as the chairman stated, this draft is not a
final product. Getting the policy right isn't always easy,
especially with complex and sometimes contentious issues like
the Renewable Fuel Standard and vehicle fuel economy standards.
Like any major legislation just starting out, it needs
additional refinement. I am interested in learning from
stakeholder expertise about what necessary refinements are
needed for this bill and to hear about any important items that
are not contained in it, but they believe should be.
I am most concerned about what makes sense for the
interests of consumers, especially as it relates to access to,
pricing for, and the availability and quality of the engines
and fuels that consumers demand or that Federal legislation
requires. These are issues that were tangentially discussed in
our hearings, but I feel can only be appropriately honed when
people are evaluating a concrete proposal and providing
feedback about the best way to accomplish these goals. To me,
the bottom line is that new fuels and vehicles must first and
foremost deliver benefits to consumers while improving our
environment.
I know some folks will want to discuss electric vehicles in
conjunction with this bill. As a hybrid driver on both coasts,
I am certainly interested in hearing more on this subject, but
liquid fuels for motor vehicles and the looming questions
arising in 2023 make the most sense to tackle right now. As I
said at our third hearing, as things stand right now, I have
great concerns about the viability of EV's in meeting the needs
of rural America, not to mention range and price issues that
make EVs unrealistic for many Americans today, even as new
innovations make their use more and more reasonable for many in
our urban and suburban areas.
I want to welcome our many witnesses and those who chose to
send the committee their comments to be included in the record.
I look forward to learning from stakeholder expertise about how
to improve this bill. Further, since we want discussion, I
encourage you to be forthright, but constructive about these
proposals. I know some interests have chosen either to be
hyper-critical or not to offer suggestions, but recognizing
time is short for addressing this issue in a timely manner, I
think they do so at the peril of their members.
Thank you, again, Mr. Chairman, for this time. I yield back
whatever remaining time I might have.
Mr. Shimkus. The gentleman yields back the balance of his
time.
The ranking member of the full committee is not able to be
here. So we will now conclude with Members' opening statements.
The Chair would like to remind Members that, pursuant to
committee rules, all Members' opening statements will be made
part of the record.
We want to thank our witnesses for being here today and to
testify to the subcommittee. Today's witnesses will have the
opportunity to give opening statements followed by a round of
questions from Members.
And our first witness panel is seated. I will introduce you
as you're asked to speak, and we would like to start with Mr.
Steve Zimmer, executive director, United States Council for
Automotive Research, USCAR.
Sir, you are welcome and you're recognized for 5 minutes.
STATEMENTS OF STEVE ZIMMER, EXECUTIVE DIRECTOR, UNITED STATES
COUNCIL FOR AUTOMOTIVE RESEARCH; R. TIMOTHY COLUMBUS, COUNSEL,
NATIONAL ASSOCIATION OF CONVENIENCE STORES AND SOCIETY OF
INDEPENDENT GASOLINE MARKETERS OF AMERICA; WESLEY SPURLOCK,
PAST PRESIDENT AND CHAIRMAN, NATIONAL CORN GROWERS ASSOCIATION;
EMILY SKOR, CHIEF EXECUTIVE OFFICER, GROWTH ENERGY; GEOFF
COOPER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RENEWABLE FUELS
ASSOCIATION; AND CHET THOMPSON, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICAN FUEL AND PETROCHEMICAL MANUFACTURERS
STATEMENT OF STEVE ZIMMER
Mr. Zimmer. Thank you.
Chairman Walden, Chairman Shimkus, Ranking Member Tonko,
and members of the committee, my name is Steve Zimmer,
executive director of the United States Council for Automotive
Research, LLC, also known as USCAR.
It's a collaborative automotive technology research
organization of FCA US, Ford Motor Company, and General Motors.
USCAR provides a legal framework for its three members to
conduct noncompetitive research supporting a broad technical
research portfolio in eight broad areas: power trains,
electrification, electronics, batteries, hydrogen and fuel
cells, manufacturing safety and materials.
The research conducted at USCAR results in a shared
knowledge base that enables development of new automotive
technologies that solve industry-wide challenges and
strengthens the U.S. auto industry.
This approach supports multiple pathways to continually
improve or evolve new automotive propulsion systems that meet
current and future fuel efficiency, emissions and safety
requirements, and creates innovative and environmentally
responsible solutions for customers.
Each USCAR member has its own independent research
organization and portfolio, but at USCAR they work together.
These research tasks would be impossible to achieve as quickly,
if at all, as individual companies.
I appreciate the committee's invitation to appear today to
address the discussion draft for the 21st Century
Transportation Fuels Act. As you know, personal mobility is
changing at an unprecedented pace.
The automobile industry has and will deliver mobility
options that balance many technical, safety, and society
requirements for the driving public.
However, now more than ever all major mobility stakeholders
must better coordinate and develop integrated energy and
mobility strategies together.
This committee's discussion draft is a great milestone and
excellent example of such an integrated approach. Setting a
national minimum octane standard is a necessary step towards
the continuing development of the next generation of high-
efficiency vehicles.
We commend the committee and the industry stakeholders
involved and for their collaboration in this effort. We believe
the proposed increase to 95 research octane number, or RON, as
the new U.S. standard for regular gasoline for year 2023 and
beyond will be a win for consumers, the auto industry, fuel
producers, agriculture, retailers, and society.
USCAR and its member companies are encouraged by the
proposed 21st Century Transportation Fuels Act, the discussion
draft that provides an excellent starting point for national
octane standard legislation, higher-octane-rated gasoline
facilities and the development of more efficient spark ignition
engines.
It is estimated that an increase in RON to 95 enables an
average 3 percent improvement in fuel economy of newer
vehicles. Increasing octane is beneficial for virtually all
spark ignition engines regardless of the manufacturer, engine
size, or architecture and does include both hybrid, electric,
and plug-in hybrid electric vehicles.
While establishing a new 95 RON grade is the critical piece
of this proposed approach, it doesn't preclude the availability
of a higher RON octane grades for use in high-performance
vehicles.
In Europe, 95 RON is regular while performance grade is 98
RON or higher. While we view the discussion draft as a
significant step in the right direction, we have some concerns
and questions regarding several provisions.
These include the provisions relating to a waiver for fuels
containing up to 20 percent ethanol, vehicle design
requirements and NIST fueling provisions.
USCAR and its member companies look forward to working with
the committee to address our concerns in other areas of the
legislation.
Ultimately, we believe the discussion draft led by this
committee is the only viable near-term pathway for
implementation of a 95 RON minimum and the benefits it can
deliver.
USCAR members are ready to move forward and implement this
initiative. Thank you again for the opportunity to be here with
you today and to provide testimony in support of this
discussion draft proposing a high-octane fuel that will enable
higher efficiency vehicles.
Thank you very much.
[The prepared statement of Mr. Zimmer follows:]
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Mr. Shimkus. Thank you.
The Chair now recognizes Mr. Timothy Columbus, general
counsel, Steptoe & Johnson, on behalf of the National
Association of Convenience Stores and Society of Gasoline
Marketers.
You are recognized for 5 minutes, sir.
STATEMENT OF R. TIMOTHY COLUMBUS
Mr. Columbus. Here we are again, Mr. Chairman.
Mr. Chairman, Ranking Member Tonko, members of the
committee, my name is Tim Columbus. I am with the law firm of
Steptoe & Johnson. I appear today on behalf of our clients, the
National Association of Convenience Stores and the Society of
Independent Gasoline Marketers of America.
These associations represent something over 80 percent of
the retail fuel sales in the United States.
It's important that you understand that neither association
today has a position on the discussion draft we are talking
about. We do not support it. We do not oppose it.
We commend the committee and the staff who have put a lot
of time into this and we think it's an excellent start. There's
still questions you have to answer and we have to answer before
we know where we'll end up on this.
In my written statement I touch on a number of issues and
suggestions. I am going to touch on only five of those today.
Specifically, we would suggest the draft language be
modified to, one, make clear that any technological solution
adopted to prevent misfueling must be cost effective with the
auto makers but also for retailers.
It is important to the retailing community that we don't
end up carrying the costs of implementation on this ourselves.
These are mostly small businesses and they're very cost
sensitive. They will be happy to do their part, but this is
going to have to be everybody doing their part.
Number two, make clear that a retailer who complies with
the misfueling prevention requirements is protected from
liability resulting from any consumer activity, i.e., behaviour
over which it has no control.
Number three, make clear that existing dispensing equipment
need not be hardened to ethanol blends above E10 unless those
higher blends are in fact dispensed through that pump or
dispensing equipment.
Require EPA and FTC to harmonize their labelling regimes
and those required labels must be clear regarding the octane
and content levels being dispensed from any particular pump.
That is not--they don't have to say exactly what it is but
there should be some this would be up to E15, this could be up
to E20.
The fact is that the legacy fleet is not ready. I am an old
man. The chairman knows this. I drive a very old car. It's very
happy on E10. It is not prepared to drink E15 and it will spit
up E20.
So I have to know when I take that car to fuel what I am
buying and that's really what we are looking for here.
Finally, make clear that any price posting requirements
that you set forth be compatible with relevant State and local
laws and, crucially, not impair a retailer's ability to
communicate cost-saving offers to consumers.
Let me give you an example here. Most State laws require
that the highest price for anyone to come in and buy a
particular commodity be posted and we are fine with that.
However, many retailers offer multiple prices at a pump.
For example, if you come in and buy a carwash you may get 8
cents a gallon off. Or if you are a member of an affinity
program, you may have a bargain.
The key here is to make sure that we can comply with State
law but also not interfere with retailers' ability to offer
consumers via the price signs a means of saving money.
With that, I am going to wind up. I am not going to use all
my time.
Again, we don't have a position on this today. We look
forward to working with all of you, going forward, on this
project and commend you for what you have done so far.
I will be happy to respond to any questions my testimony
may have raised. Thank you.
[The prepared statement of Mr. Columbus follows:]
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Mr. Shimkus. The Chair thanks the gentleman.
The Chair now recognizes Mr. Wesley Spurlock, past
president and chairman of the National Corn Growers
Association.
Sir, you're recognized for 5 minutes, and welcome.
STATEMENT OF WESLEY SPURLOCK
Mr. Spurlock. Thank you, Chairman Shimkus, Ranking Member
Tonko, and subcommittee members. I appreciate the opportunity
to be here for the National Corn Growers Association.
I am Wesley Spurlock and our family raises corn, cotton,
and cattle in the Texas Panhandle. As producers of the primary
feedstock used in ethanol, corn farmers have a strong vested
interest in the future of transportation fuels.
The Renewable Fuel Standard has created significant
opportunity for the farmers. The RFS is one of the most
ambitious and successful energy, environmental, and economic
policies Congress has enacted not only for farmers and rural
communities but also for our drivers, our air quality, and our
Nation's energy security.
As use of homegrown renewable fuels has grown and has
farmers have become more productive using fewer resources, the
benefit of the RFS has exceeded the congressional projected.
Agriculture met the challenge to help fuel America, not by
putting more land into production but by becoming more
productive with existing resources.
Farmers today produce more corn with less land because the
average has increased on corn by more than 25 bushels since
2007.
Ethanol production creates value-added coproducts such as
distiller's grain for feed, corn oil for biodiesel, and some
corn provides--the same corn provides food and fuel. The value
added by ethanol and increased farmer productivity has had a
positive impact on rural America, helping the next generation
return to their family farms.
But it's not only the farmers who benefit from the
renewable fuels. Renewable fuels save drivers money.
Environmental advocates backed enactment of the RFS. The RFS is
the only Federal law that requires greenhouse gas emission
reductions.
Based on actual corn and ethanol production, the
sustainability improvements in both today's corn ethanol
results in 43 percent lower greenhouse gas emissions than
gasoline. Clean burning ethanol is the fuel that displaces the
more harmful compounds in gasoline, reducing tailpipe emissions
and improving air quality.
Chairman Shimkus' and Congressman Flores' discussion draft
includes provisions corn growers do support. In addition to the
RVP parity that allows higher ethanol blends and lower
evaporative to be sold year round, we also support more
regulatory certainty when it comes to approval of the higher
blends such as E20.
We support a high-octane vehicle test fuel so automakers
can expedite new optimized vehicles. However, NCGA believes
this discussion draft would undo successful renewable fuel
policy. The net impact of this proposal would not maintain the
market access renewable fuels currently have with the RFS and
offer opportunity to expand ethanol as an octane source.
Corn growers support high-octane fuels such as midlevel
ethanol blends. We know high-octane fuels would give automakers
the ability to design optimized engines with greater fuel
efficiencies and with fewer greenhouse gas emissions.
Ethanol is the lowest-cost, lowest-carbon octane source.
Today's corn production practices are increasing soil carbon
sequestration and ethanol's carbon footprint is shrinking.
NCGA recently submitted comments on the administration's
safe vehicle rule outlining the fuel economy of emissions
benefits from a high-octane, low-carbon midlevel blend.
We recommend regulatory steps that would remove barriers to
fuel competition and high-octane fuel. An octane standard such
as 95 RON that refiners can easily meet with current premium
fuels cannot replace the market access for renewable fuels
provided by the RFS.
We cannot continue to reduce emissions with an octane
standard that could be met by using octane from hydrocarbons.
Chairman Shimkus, corn growers are grateful for your
advocacy for farmers and the renewable fuels. We appreciate the
time you have spent considering future transportation fuel
needs.
We also appreciate being asked to contribute to today's
discussion. Should the committee undertakes future legislative
discussion we ask that incoming Chairman Pallone and Tonko
consider NCGA a source on renewable fuels policy and allow us
to continue to work with the committee.
Thank you.
[The prepared statement of Mr. Spurlock follows:]
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Mr. Shimkus. Thank you.
The Chair now recognizes Ms. Emily Skor, chief executive
officer of Growth Energy. You're recognized for 5 minutes, and
welcome.
STATEMENT OF EMILY SKOR
Ms. Skor. Thank you.
Chairman Shimkus, Ranking Member Tonko, members of the
subcommittee, thank you for the opportunity to provide our
perspective on the discussion draft being discussed today.
My name is Emily Skor and I am the CEO Of Growth Energy,
the leading ethanol industry association representing 100
producer plants, more than half of the industry's total
production.
A transportation fuel mixed with more ethanol lowers costs
for consumers, revitalizes our country's rural economy, and
improves our environment. Our members thank you for attending
to our 21st century transportation needs and recognizing the
important of high-octane and continuing to advance these
national interests.
We have thoroughly reviewed the discussion draft and
applaud the authors for, first, recognizing that octane plays a
critical role in helping automakers meet fuel economy and
greenhouse gas standards; second, allowing the year-round sale
of higher ethanol blends like E15; and, third, granting Federal
approval for fuel beyond E15, demonstrably supporting the
research that affirms ethanol blends above 10 percent do not
harm passenger vehicles.
However, where we believe this draft falls short is in the
assumption that the Renewable Fuel Standard, the RFS, is broken
and needs to be fixed. We wholeheartedly disagree with that
perspective.
In fact, despite years of mismanagement, the RFS has
fulfilled its congressional intent to increase domestic energy
supplies, improve farm incomes and reduce carbon emissions with
the added benefit of lowering the price at the pump.
By any objective measurements, the RFS has been an
overwhelming success. Repealing the RFS is unnecessary and will
further destabilize a struggling farm economy and ethanol
sector.
Moreover, the draft does nothing to stop EPA's continued
misuse of the small refinery exemption authority or even
acknowledge the agency's unprecedented and possibly illegal use
of this authority.
EPA has already waived up to 2.25 billion gallons of
biofuel blending, undermining demand by failing to reallocate
those gallons in line with congressional intent and we face
additional exemptions for 2018 and in the recently released
2019 RFS rule.
We applaud the examination of an octane standard. But the
draft's proposed 95 RON is easily met with today's premium
gasoline, which costs consumers about 50 cents more per gallon
than regular fuel.
A recent report from the Energy Information Administration
cites that refiners would only need to make minor operational
adjustments to supply the increased octane requirement of a 95
RON baseline fuel.
And in previous congressional testimony refiners stated
that they planned to meet the 95 RON fuel standard with a
current 10 percent ethanol blend.
Today, ethanol is 25 cents less per gallon than gasoline
and was as much as 90 cents earlier this year. As I previously
testified, the past decade has shown oil companies will
actively ignore economic incentives to prevent market entry of
higher ethanol blends.
Only by coupling a stable RFS to maintain market access
with a significant boost in octane from a midlevel ethanol
blend can consumers realize significant cost savings, increased
engine efficiency, and substantial environmental benefits.
Unfortunately, this draft as proposed will lead to reduced
blending of cleaner biofuel and it will raise fuel costs for
American drivers.
We commend the authors for following sound science in
approving E20. But the draft provides minimal guidance on
approving ethanol blends beyond E20.
E15 was approved nearly a decade ago and we are still
working through hurdles erected to keep this legal fuel out of
the market. This draft should recognize and seek to eliminate
the myriad challenges to approving ethanol blended fuels to
enable a reasonable pathway for their entry into the
marketplace.
While one of the draft's primary goals is to make the U.S.
fuel supply uniform, it does not unify the availability of
ethanol-blended fuels above 10 percent. Simply preventing
future actions does nothing to break down State-level hurdles
that exist today.
This draft may even block the States from moving forward
with higher blends. We must avoid backsliding on the progress
of the RFS which has helped launch a more affordable low-carbon
alternative to traditional petroleum fuels.
While we do support certain aspects of this discussion
draft, we believe it misses an opportunity to lay out a bold
vision for the future of affordable liquid fuels and to make a
significant impact restoring growth in America's rural
communities and decarbonizing our Nation's fuel supply.
Thank you, and I look forward to your questions.
[The prepared statement of Ms. Skor follows:]
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Mr. Shimkus. The Chair thanks the gentlelady.
The Chair now recognizes Mr. Geoff Cooper, president and
CEO of the Renewable Fuels Association.
You're recognized for 5 minutes.
STATEMENT OF GEOFF COOPER
Mr. Cooper. Thank you.
Good morning, Chairman Shimkus, Ranking Member Tonko, and
members of the subcommittee.
My name is Geoff Cooper, and I am the new president and CEO
of Renewable Fuels Association, the national trade group
representing the U.S. ethanol industry.
I want to thank the chairman and the members of the
subcommittee for your thoughtful consideration of our Nation's
future energy policy needs and objectives.
RFA has been an active participant throughout this process
and we have appreciated the opportunity the share our
perspectives on the vital role that biofuels can play in our
energy future.
The draft legislation we are here to discuss today
represents an important first step forward in the debate about
future fuels policy and specifically the role of high-octane
fuels.
Because ethanol is by far the most economical and cleanest
source of octane available on the market today, it would seem
on the surface that any effort to establish a high-octane fuel
standard would benefit ethanol producers and the farmers who
supply them.
But it's not quite that simple. As currently drafted, RFA
cannot support the proposal because it falls short of providing
the future market certainty and the clear path to growth that
our industry needs.
By eliminating the Renewable Fuel Standard requirements for
conventional biofuels in 2022 and adopting a no-growth
methodology for advanced biofuel requirements through 2032, the
draft bill would destabilize the considerable progress our
Nation has made for greater energy security, economic vitality,
and environmental health.
We simply cannot support eliminating the RFS program as the
draft envisions without a much stronger signal to the market
that ethanol's role in our fuel supply will continue to grow.
Even though ethanol is far superior to other octane
boosters in terms of cost and environmental performance, a 95
RON standard, when paired with elimination of the RFS, would
not result in increased market opportunities for ethanol.
To the contrary, we believe the 95 RON standard in the
absence of the RFS or other environmental performance
requirements could reduce demand for ethanol.
Refiners and blenders would simply meet demand for more
octane by increasing reformer severity and producing greater
volumes of higher-octane hydrocarbons like aromatics, which are
often toxic in nature, worsen air quality, and are typically
two times the cost of ethanol.
Thus, consumers would just end up paying more for dirtier
gasoline.
In fact, a new EIA Commission Study concludes that oil
refiners would have, quote, ``no problem,'' quote, meeting a
requirement to produce 95 RON gasoline beginning in 2022 and
assumes that refiners would meet that standard with E10
gasoline.
The study found that, quote, ``no significant changes in
refinery configuration our through put would be required to
meet the minimum 95 RON gasoline requirement,'' end quote.
And contrary to testimony previously offered to this
subcommittee, the EIA study finds, quote, ``no industry wide
capital intensive projects would be needed to meet the
requirements,'' end quote.
There are elements of the discussion draft that we do find
very encouraging. We appreciate the provision requiring
automakers to warrant vehicles built in 2023 and later for E20
and we welcome the requirement that EPA approve an E20 fuel
waiver.
However, we believe ethanol blends above E20 like E25 and
E30 will be necessary to deliver the octane levels that best
facilitate greater fuel economy and emissions reductions.
We also very much appreciate that the discussion draft
again demonstrates this subcommittee's support for addressing
the antiquated RVP barrier that is currently keeping E15 out of
the marketplace on a broader scale.
In closing, RFA strongly believes a high-octane fuel
standard can work I concert with, not in conflict with, the
RFS. The measures would be complementary and the RFS would
assure that clean renewable octane sources like ethanol are
able to access a high-octane fuel market that might otherwise
be closed to competition.
With proper oversight and implementation, the RFS can
continue to work in tandem with a high-octane fuel standard to
continue to drive innovation, support rural economies, and
provide cleaner fuel choices at the pump well beyond 2022.
We thank you again for starting this very important
conversation and look forward to its continuation.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Cooper follows:]
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Mr. Shimkus. The Chair thanks the gentleman.
And last but not least on the first panel we have Mr. Chet
Thompson, president of American Fuel and Petrochemical
Manufacturers.
Sir, you're recognized for 5 minutes, and welcome.
STATEMENT OF CHET THOMPSON
Mr. Thompson. Thank you, Mr. Chairman, Ranking Member
Tonko, other members of the subcommittee. I really appreciate
the opportunity to be here this morning and share the views of
the U.S. refining industry on this discussion draft.
Let me start by thanking you, Mr. Chairman, Mr. Flores, and
your committee staff for the incredible work you have done over
the last year on this really critical topic.
No doubt the easy thing for you to have done was to run
quickly away from this issue a year ago. You didn't. You chose
to stick it out, and we appreciate it.
We also appreciate the release of this discussion draft.
Mr. Chairman, when you told us a few months ago this was
coming you promised us it would be far from perfect. You also
promised us that all of us stakeholders would find something in
it that we loved and something in it that we hate.
Rest assured, your premonition was spot on. Well,
unfortunately, we are not in a position to support the draft in
its current form. But we do think it moves the ball.
We think and hope it will generate momentum for further
discussion and eventually statutory reform--reform that most of
the stakeholders believe is so critical.
As I have testified before this subcommittee on multiple
occasions, most recently last April, the RFS in its current
form is unsustainable. It's bad for consumers and it's only
destined to get worse if reform does not happen before EPA
takes over this program in 2022.
I also testified that a proper transition from the RFS to a
fuel-neutral 95 RON octane standard would be better for all
stakeholders and could better harmonize our country's fuel and
transportation policies.
A 95 RON standard would help our auto companies improve the
efficiency and reduce the emissions of the existing fleet and
future fleets and comply with CAFE.
It would provide retailers with optionality, to quote Mr.
Columbus. It would provide farmers and ethanol producers with
the potential for greater market share, contrary to what you
have heard already this morning, and it would certainly provide
relief for my members from the broken RFS.
But most importantly, it would provide relief to
consumers--relief in the form of lower prices.
Against this backdrop, there are aspects of this discussion
draft that we support and those that we don't. So let me start
with the positive--what we can support.
We certainly support the sunsetting of the RFS in exchange
for 95 RON standard, you know, presuming or assuming it's done
correctly.
After years of study with the autos, a 95 RON performance
standard has been demonstrated to be the most cost effective
option for consumers for improving the efficiency of the
transportation fleet, at least in the near term.
Indeed, there's no other fuel option that is realistic I in
the time frame we are talking about this morning. We support
requiring all light-duty vehicles starting in 2023 to be
designed specifically to run on this fuel, on at least a 95
octane rating and potentially higher.
Finally, we support the comprehensive misfueling
requirements and liability protections afforded in the--in the
draft. However, we do believe those protections need to be
expanded to include the U.S. refining industry.
Unfortunately, and, again, as highlighted much more
extensively in my testimony, there are a few provisions, Mr.
Chairman, as you might imagine, we can't support. So let me
just highlight a few.
First, we absolutely can't support a new 15 billion gallon
per year mandate for a conventional ethanol. Such a mandate is
unfeasible.
Let me put this in a perspective. To hit this mark by 2020,
which the draft would require, ethanol blending in our country
would have to increase by 700 million gallons. Seven hundred
million.
Because of the blend wall, which is real, this would
require E15 sales to increase by 3,000 percent--3,000 percent
in a mere 12, 13 months. This is simply not possible.
Nor can we support extending the RFS program until 2032.
The program must end when a new 95 RON standard takes effect in
2023.
Nor can we support the draft's various E20 mandates. Autos
should decide how to harden their vehicles to run on a new 95
RON fuel, not the Government, and environmental and technical
analysis that supports subsim determinations that can't be
short-circuited through legislation.
E20 should not be authorized to be released and used in the
market until we have a full understanding of what the impact of
E20 would be on existing automobiles.
Finally, we do not support establishing 98 RON as a
certification fuel. There is simply no nexus between a 98 RON
cert fuel and a 95 RON that the draft would develop and create.
There's already a pathway for EPA and for the autos to
pursue to get a new cert fuel and there's absolutely no reason
that this legislation needs to address this issue.
So, again, in closing, let me say we appreciate your
leadership over the past years, Mr. Chairman. Again, Mr. Flores
and staff, we appreciate everything you have done.
There are real opportunities here. The folks at this table
have been at this for many years and we believe we are really
starting to advance and there's lots of opportunities around a
95 RON standard. We hope this remains a priority for this
subcommittee next year.
So I look forward to answering any of your questions.
Thank you.
[The prepared statement of Mr. Thompson follows:]
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Mr. Shimkus. The Chair thanks the gentleman.
We appreciate you all being here today, and now I will
recognize myself for 5 minutes to open up the round of
questions for this panel.
2022 is a real date. We've asked the EPA about what could
happen and EPA has told us that they have, quote-unquote,
``broad authority'' they will have in 2023 and beyond, which
could result in biofuel volumes lower than those provided in
the statutory tables.
Given that EIA projects a 31 percent decrease in motor fuel
consumption between 2017 and 2025, do you expect RVOs to be
higher or lower post-2022 than they are today?
Mr. Zimmer, do you have any input? No.
Mr. Columbus?
Mr. Columbus. I will take pass on that.
Mr. Shimkus. Mr. Spurlock.
Mr. Spurlock. As the----
Mr. Shimkus. You heard how I laid out the question. 2022
liquid transportation fuels are projected to decline. EPA has
broad authority to reset the tables.
Will they be higher or will they be lower post-2023?
Mr. Spurlock. I think we will show that we have done such a
great job with the ethanol and where it's at as a additive in
the fuel system that we'll be--we will come through fine on the
reset.
Mr. Shimkus. You say higher?
Mr. Spurlock. Yes, sir.
Mr. Shimkus. Ms. Skor.
Ms. Skor. We would anticipate that the RVOs--if the
blending is--the actual blending is consistent with the
numbers, you'd be at 15 billion gallons of conventional corn-
based ethanol.
Mr. Shimkus. Mr. Cooper.
Mr. Cooper. Well, we certainly see no rationale for
reducing the volumes post-2022 and EPA is----
Mr. Shimkus. Do you accept the premise that the EIA
information--that there will be less liquid transportation fuel
on our market?
Mr. Cooper. I do.
Mr. Shimkus. OK.
Mr. Cooper. Yes, I agree that we are going to see a decline
in gasoline consumption long term.
Mr. Shimkus. Do you think EPA will then raise the blending
limit?
Mr. Cooper. Again, I think there's no rationale for going
below the 15 billion for conventional biofuels.
Mr. Shimkus. OK. Mr. Thompson.
Mr. Thompson. There's absolutely a rationale for doing it
and if EPA follows the data they must do it. If transportation
fuel demand goes down, E15 blending by definition goes down and
the E15 market is still so nascent as not to pick up the slack.
It has to go down.
Mr. Shimkus. Thank you.
Let me go to Mr. Spurlock. First of all, I want to thank
the Corn Growers for being very involved in this work and I
want to recognize that.
In your testimony, you state that without the mandates in
the RFS refiners would immediately default to petroleum-based
octane enhancers to rise from their own feedstocks.
Given that ethanol is such an overwhelmingly cheap octane
enhancer in addition to your noted environmental benefits,
wouldn't some refineries be more competitive if they were to
opt for this lower cost source of octane?
Mr. Spurlock. Yes, I feel that they would.
Mr. Shimkus. OK. Let me go to Mr. Columbus.
Would your retailers like lower prices for the exact same
fuel or higher prices for the exact same fuel?
Mr. Columbus. Now, that I will not pass on. Retailers want
lower prices. We interface with the consumer every day and the
simple reality is that the competition drives the price to the
lowest plausible level and that includes the use of feedstocks
by midlevel blenders as well as refineries to generate the
lowest cost of product for the consumer.
Mr. Shimkus. Let me go back to Mr. Thompson. I would like
for you to comment on Mr. Cooper's quote of the EIA study on
renewable fuel. Can you comment on that?
Mr. Thompson. Is that for me, Mr. Chairman?
Mr. Shimkus. Yes, sir.
Mr. Thompson. Yes, I can. I mean, it's a--unfortunately,
it's a mischaracterization of the analysis. Look, and it's
consistent with what we've been saying.
The EIA is a nothing burger. They said if we look in 2023
would there have to be substantial new investment assuming E10
in order to make a 95 RON fuel. No, of course it wouldn't.
At that point the new fleet of autos that require 95 would
just be taking off. It also assumes E10, which contrary to what
we said, assumes that the status quo remains--that the ethanol
is using at baseline.
Then the EIA analysis only went out to 2023, I believe. So
it's 5 years of implementation. So all it says is that the U.S.
refining industry, based on E10, has enough octane capacity if
it wants to meet the needs.
It doesn't speak to what happens when the program is fully
implemented and at that point we think there are 19 billion
gallons of octane up for grabs, and we think that that octane
could be met through lots of sources including ethanol.
Ethanol has a 4-cent advantage over other sources of
octane. This is--it's inaccurate to suggest this is not
potentially good market share for the ethanol industry.
Mr. Shimkus. Thank you. My time has expired.
The Chair now recognizes the ranking member of the
subcommittee, Mr. Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair.
I would like to get witnesses' views on the preemption
language that's included in the discussion draft. While
California's low California fuel standard is not strictly in
ethanol law, ethanol is certainly one potential pathway to
compliance with the law.
Based on your reading, do you have any thoughts as to
whether Section 204 would prohibit another State from adopting
a low-carbon fuel standard similar to that of California's
program?
Mr. Zimmer, can we start with you?
Mr. Zimmer. Excuse me. I don't have a comment on this
specific question.
Mr. Tonko. Mr. Columbus.
Mr. Columbus. The fewer people defining different fuels in
the United States, the more efficient the overall system is
going to be. So, historically, our clients have supported
preemption of State fuel standards and State mandates.
Mr. Tonko. And Mr. Spurlock.
Mr. Spurlock. I will take a pass on that. I am not sure
what our standing would basically be on the question, and I do
understand what you're asking.
Mr. Tonko. OK.
Ms. Skor.
Ms. Skor. We believe that the preemption language doesn't
go far enough. It's looking at future actions but it isn't
looking at eliminating many of the legitimate roadblocks that
exist in several States today.
So what we would be looking for is to make sure that what
happens at the Federal level is also followed through in all 50
States.
Mr. Tonko. Mr. Cooper.
Mr. Cooper. We did not take a position on the preemption
provisions in the draft. However, our read of it, I guess,
would be that yes, future policies like a low-carbon fuel
standard potentially would be preempted.
But, again, we did not take a position.
Mr. Tonko. And Mr. Thompson.
Mr. Thompson. I would certainly interpret 204 to
potentially prohibit other States from adopting a low-carbon
fuel standard if they actually specify how much ethanol can and
cannot be in a gallon of gasoline.
So I would interpret it that way and we would support that.
You know, there's a lot of resources by all the stakeholders
that would go into establishing a new 95 RON standard and a
patchwork system does not work.
Mr. Tonko. Do you believe this language might impact
California's ability to expand or make changes to its existing
program?
Let me start with you, Mr. Thompson, and work back.
Mr. Thompson. I don't think it would. It's my understanding
that the draft says expressly that this doesn't impact existing
prohibitions and to the extent California has prohibitions
already on the books, by definition this provision wouldn't
touch it.
Mr. Tonko. And Mr. Cooper.
Mr. Cooper. I would agree with that response with the one
caveat being if California did at some point in the future
decide to increase the level of ethanol that's permitted in the
State, this provision could potentially keep them from doing
that.
Mr. Tonko. Ms. Skor.
Ms. Skor. I would agree that if California wants to go
further in terms of blending more renewable biofuel it might be
prohibited, based on the language that we see in the discussion
draft.
Mr. Tonko. And Mr. Spurlock.
Mr. Spurlock. Yes, I would agree with Emily and Geoff.
Mr. Tonko. And Mr. Columbus.
Mr. Columbus. I think they're all right about this. So the
reality is yes, it can get in the way of California doing
something.
Mr. Tonko. And finally, Mr. Zimmer.
Mr. Zimmer. [No audible response.]
Mr. Tonko. It's my understanding that while ethanol may be
the cheapest source of octane, at the moment there's no
guarantee in this discussion draft that it will be used in a
future high-octane fuel.
Would anyone like to comment on why or why not the source
octane should be left open?
Mr. Cooper.
Mr. Cooper. Well, thanks, and I would like to use my time
responding to that question to really respond to what Mr.
Thompson said about the EIA report.
I mean, I do think it's a very good study that underscores
exactly that point, that refiners would not likely choose
ethanol as the source of octane for a 95 RON fuel.
You know, there's a number of refinery modeling studies out
there that show refiners could get to 95 RON with just an extra
2 or 3 cents per gallon in incremental costs. They could
happily pass that along to the consumer and, you know, the
other thing the EIA study pointed out, and it did look longer
term than just 2023. They did look further into the future and
analyse whether the refining sector could meet an incrementally
larger demand of high-octane in the future and came to the same
conclusion.
The study also found that there is a significant amount of
underutilized reforming and alkylation capacity today in the
refining sector that could easily be switched on to provide
that extra octane.
Mr. Tonko. Ms. Skor.
Ms. Skor. You're absolutely right. By taking away the
guardrails provided by the RFS that enable market access you're
essentially closing the market from competition.
The transportation fuel marketplace it is not a free
market. If it were a free market, right now the better quality,
better-priced octane enhancer would be in much higher demand
than it is today.
So a high octane standard coupled with guardrails to ensure
that we are using renewable octane would be the path forward.
Mr. Tonko. Thank you.
And Mr. Columbus.
Mr. Columbus. With respect, I disagree with Ms. Skor. I
think the most important thing is refiners are not the only
source of motor fuel in the United States.
People who don't own refineries manufacture motor fuel via
blending of components which are available from domestic
refineries as well as foreign sources.
Mr. Tonko, you and I have had this conversation before.
What drives the costs to manufacture is the big stupid price
sign at retail. The lowest cost wins. If a refiner wanted to
forget about the lowest-cost octane source in the country, I
don't believe his competitors would permit that in a commercial
sense. Competition actually works.
Mr. Shimkus. The gentleman's time has expired.
The Chair now recognizes the chairman emeritus, Joe Barton,
for 5 minutes.
Mr. Barton. Well, thank you, Mr. Chairman.
The former Senator from the great State of Texas, Phil
Gramm, whom many of you know, had a saying: ``Truth is a
powerful drug. Use it sparingly.''
And as a retiring Member, this may be my last hearing after
32 years on this committee. So I am going to tell us what I
think are some Barton truths. Now, they may not be truth, but I
think they're truth.
First of all, I think that Mr. Flores and Mr. Shimkus have
done a very good job in trying to patch together a compromise
bill that's good politics, and I think it would also work.
I don't think it would work perfectly, but I think it'd
work and I think the politics of it, potentially, work.
Now, having said that, let me give you the Barton Bill and
just raise the hackles on everybody's hair in this room. I
would repeal every existing regulation and law on oxygen and
CAFE standards. Repeal them all except for a few and maintain
the oxygen requirement in the Clean Air Act. I think that makes
sense.
I would require that any money put into the leaking
underground trust fund, which the acronym is LUST, actually be
used to clean up leaking underground storage tanks.
And I might--and I would listen to my corn growers on this
one--I might keep the quotas on imported ethanol. I might not.
But I would repeal everything else.
If we did that and went to a pure market for ethanol, it
would work. It would work. Back in 2005 when I was chairman, we
passed the Energy Policy Act of 2005 and at the request of
then-Speaker Denny Hastert we put in mandates to use ethanol,
or renewable fuels.
We also created a lot of research programs for renewable
fuels and alternative energy, and if you look at the energy
markets in the United States today, solar is doing very well.
Wind is doing very well, and I--although the ethanol market has
been up and down, I think you could argue that at least it's a
mature market. It's not a struggling start-up market.
But then in 2007 we came back and increased these mandates
and we also increased the fuel--the CAFE standards. And the
current law, folks, is unworkable. It's not going to work, and
come 2020 don't kid yourself. If we throw all this to whoever's
running EPA, they don't have any magic wands over there.
They're not going to be able to bring order out of chaos.
So, again, I want to go back to Mr. Shimkus and Mr. Flores.
They have tried to look at the politics of it, I think, and
they've tried to come up with something that works.
Now, having said that, it's not going to--we are certainly
not going to mark this bill up tomorrow and put it on the floor
next week and go to the Senate and the Senate miraculously pass
it.
But you might--you have got a fighting chance to do
something in the next Congress. So this is a good--this is a
good place to start.
So my question, you know, since this is the question
period, Mr. Chairman, I got to ask at least one question. I
can't just vent here.
Mr. Shimkus. You haven't done that before, though, so----
[Laughter.]
Mr. Barton. I have. So I am going to ask Mr. Thompson. You
won the lottery here. If we did what I said, pass the Barton
Bill and don't--the politics of that are terrible, so I know
that's not a starter, but it is true--would ethanol be used?
Would there be a market that ethanol would compete for and be
successful competing--corn-grown ethanol from the United
States?
Mr. Thompson. Thank you for the question, and we would
support the Barton Bill. But absolutely ethanol would continue
to compete. The RFS could go away tomorrow and the E10 would be
the dominant fuel in this country.
It is the cheapest source of octane and, as you know, when
you go to the pump we are trying to put octane into the fuel
from regular grade up to premium grade. It is the cheapest
source of octane.
It has a 4-cent advantage over anything else. You know, E0
is 22 cents more expensive to make than E15 and it's, like, 15
cents more expensive than E10.
My guys are a lot of things, but wasteful of money is not
one of them. The refiners own 20 percent of the ethanol market.
Ethanol is here to stay. The notion that it won't be is just--
it's inconsistent with reality.
Mr. Shimkus. The gentleman's time has----
Mr. Barton. The last thing I will say, Mr. Chairman, I
ought to be commended because the Barton Bill did not bring
back MTBE, and if I really wanted to be competitive I would
make it legal to----
Mr. Shimkus. The gentleman's time definitely has expired.
[Laughter.]
The Chair recognizes the gentleman from California, Mr.
Peters, for 5 minutes.
Mr. Peters. Thank you. I want to thank Mr. Barton for his
service but I also want to say I endorse the Barton Bill with a
couple of amendments. I would also repeal all the tax credits
that we have for energy and I would send a market signal that's
technology neutral through a carbon tax.
And we could--I know, so maybe the amendment--you know, I
won't get your vote in the next Congress either, I know. But I
think that would be the appropriate way to push these
incentives.
But for the time being, I wanted to talk to Ms. Skor. We
have another witness who I think is on the next panel, Brooke
Coleman, who is the executive director of the Advanced Biofuels
Business Council.
Her testimony includes the following and I would like you
to react to this because you talk about backsliding. She says,
quote, ``The RFS is indirectly to date a renewable octane
cetane requirement. The 21st Century Transportation Fuels Act
would phase out the renewability requirement and the greenhouse
gas requirement contained in the RFS and, as discussed, all
companies will use more petroleum additives instead of biofuels
because it's in their economic self-interest.'' She goes on to
explain how that's backsliding.
Is that the concern you expressed and can you maybe flesh
out a reaction to that?
Ms. Skor. That's absolutely our concern.
If you look at the price of ethanol today, if we are
talking about price competitiveness today wholesale it sells 25
cents lower per gallon than gasoline. But what you see is
absent a mechanism to force competition and give the ethanol
producer access to the end user, the consumer, we don't have a
way to compete in this marketplace.
The RFS provides important guardrails and not only for
market access but for environmental impact. As Mr. Spurlock
said, 43 percent reduction in greenhouse gas emission--that's
with conventional biofuel. Advanced biofuel is up to 100
percent.
So we are cleaning the air because we've got fewer--and
it's good for not only environmental health but human health as
well.
Mr. Peters. You recognize the bind the Government is in
with the bill the way it is. What would be your suggestions
about how to move?
Ms. Skor. I mean, you know, our overall suggestion is that
you couple--we absolutely applaud seeking a high-octane, low-
carbon national standard. But that's got to be coupled with the
guardrails that we see in the Renewable Fuel Standard that
provide for market access.
That would be the path forward for the most significant
cost savings, the greatest fuel economy, and the greatest
environmental benefit.
Mr. Peters. OK. Well, again, I think we are sort of in this
contortion to respond to these markets and I think that, again,
a market--a market incentive that's technology neutral is
preferable to this. It could save us a lot of time and meetings
next year.
But I do appreciate you taking it up. I think there's more
work to do on this. I know it's not easy, and I look forward to
working with you in the next Congress.
And I yield back.
Mr. Shimkus. The Chair thanks the gentleman.
The Chair now recognizes the gentleman from West Virginia,
Mr. McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman.
Over the last number of years, we've talked a lot about and
I've heard a lot of folks talk about the greenhouse gas
emissions and how we need to address it through a variety of
standards, regulations, or whatever.
But this is a summary from the MIT study that says if you
want to reduce greenhouse gas emissions it's six to fourteen
times more effective if you put a gasoline tax on than worried
about efficiencies.
I've never heard any--here anyone ever, if they're really
serious on the other side, talking about reducing greenhouse
gases why they have not proposed raising the gasoline tax.
Secondly, we've also talked around this table a lot about
uncertainty. I am concerned about, for example, a small
refinery trying to make the change, going to spending millions
to convert to 95 or some other level of octane standards. But
yet there's a movement coming from the other side of the aisle
that within the next 10 years we are going to decarbonize our
transportation fuels.
I don't know whether to take them seriously or not. But I
see it in the media as beating the drum every day that over the
next 10 years the Green New Deal should be sweeping through
Congress.
It should be taken very seriously. So the uncertainty is
that why would a small refinery or any refinery go out and
spend billions of dollars--billions of dollars--to make a
change in carbon fuels when in 10 years we are going to do away
with them anyway?
So I just--my question to you, to any of you, essentially
is is it realistic to be thinking about this Green New Deal and
all the effort that's been made in crafting this legislation
that goes out the window if we are going to pass something
within the next 10 years that does away with fuel?
Starting with you--starting with you, how realistic is
this? Is this some crackpot idea?
Mr. Zimmer. Well, thank you.
And, first of all, we think that going to a 95 RON regular
is extremely important and very doable for the stakeholders as
well as--and a value proposition to the consumer.
So we think it is the only--the low-cost solution to
improving the fuel efficiency of vehicles and it's broadly
applied and it will impact a lot of----
Mr. McKinley. If we are trying to eliminate greenhouse
gases, why isn't someone promoting a gasoline tax because it's
proven time and time again that that's going to be the quickest
way to eliminate greenhouse gases? No one's doing that.
So we are talking about a--I want to know more about what
effect--we are going to see a lot of debate over the next 2
years over this Green New Deal.
Is it realistic to do away with fossil fuels in
transportation, as they're calling for? I would like to hear
from any one of you. I only have a minute left.
Mr. Columbus. In the short term, sir, no. It's not going to
happen in the short term, and I certainly commend Mr. Tonko and
his colleagues for starting that conversation.
There are a lot of things about EVs that have to be sorted
out. There are a lot of things about EV recharging structures
that have to be sorted out.
I can remember many years ago people talking about we are
going to have----
Mr. McKinley. Could we have the other people answer as
well, just--so yours is--it's not realistic.
Mr. Spurlock.
Mr. Spurlock. As we look at the news recently and we are
talking about putting a high fuel tax on in order to improve
greenhouse gas and cut the fuel down, I think if we look at
what's happening in France, that's what they tried to do in
France. That is not working very well publicly right now.
Ms. Skor. Liquid fuels will remain the dominant fuel source
for many years to come, and so what is realistic is to look for
ways to provide automakers with greater fuel economy, consumers
with cost savings, and cleaner air.
So there is an important conversation to be had and a path
forward in that regard.
Mr. Cooper. It takes, roughly, 17, 18 years for the fleet
to turn over, right. So every new vehicle being sold today, the
overwhelming majority of which are internal-combustion-engine,
liquid-fuel vehicles, are going to be around on the roads
driving on liquid fuel for, you know, the better part of the
next 20 years.
It is going to take a long time to get to the electric
vehicles and some of the ideas that are contemplated in a Green
New Deal.
So, you know, we think there's an immediate opportunity to
help decarbonize that liquid fuel that's going to be used in
that intervening period.
Mr. Thompson. Yes. We firmly believe that fossil fuels and
the internal combustion engine will be here for many decades to
come.
Mr. McKinley. Thank you.
I guess what I am--my point is----
Mr. Shimkus. Gentleman's time has----
Mr. McKinley [continuing]. That I am worried about, Mr.
Chairman, and as we close out on this is small refineries are
going to be challenged under this. I just hope there's some
language--something can be worked into your bill that takes
care of the small refineries that gives them some protection as
compared to the larger--the Marathons and the Mobils.
Mr. Shimkus. We'll talk about that. The gentleman's time
has expired.
Mr. McKinley. Yield back.
Mr. Shimkus. The Chair now recognizes the gentleman from
Texas, Mr. Olson.
Mr. Olson. I thank the chair.
I would like to open my questions by saying congratulations
to Chairman Shimkus, not only for this bill but this past
Saturday his Army squeaked by my Navy in a football game in
Philadelphia.
Mr. Shimkus. I was being kind and didn't dig anything into
you. So it's your mouth to God's ears, right?
Mr. Olson. I said congratulations. Congratulations.
Also congratulations to my Texas colleague, Bill Flores.
You guys have done a lot of hard work to get this bill where it
is right now--this discussion draft.
It's too late for this to become law in this Congress. But
the table has been set for real action in the 116th Congress,
and thank you all for that.
My first question is for you, Mr. Zimmer. In your testimony
you mentioned that 95 RON is a, quote, ``fundamental enabler,''
end quote, for lower emissions. As someone who represents an
area that's made great emissions progress--Houston, Texas
area--and is making every effort right now to reduce emissions
but are still in noncompliance.
I know that vehicle emissions are critical to continuing
this trend we see. My question is can you talk about what sort
of environmental benefits we've seen from moving to 95 RON?
Mr. Zimmer. Thank you for the question.
We believe that 95 RON with engines that are designed to
use it effectively, and it's that system that's very important,
can achieve on average 3 percent fuel efficiency across the
board and it's, you know, a broad spectrum of products. Doesn't
matter who the manufacturer is or the architecture--we'll see
that benefit.
So we think it's--we think RON 95 is doable right now--it's
the only thing that's really doable--and deliver that type of
result.
It also--you will find a lot of internal combustion engines
are used in hybrids and plug-in hybrids. Those vehicles will
also benefit from that efficiency improvement.
Mr. Olson. Good point.
Question for you, Mr. Columbus, and I want to first off
thank you. You hosted me at a Stripes store at the Westpark
Tollway in Texas 22 a couple weeks ago, or a couple years ago,
actually.
I worked the cash register. I rolled out the worst
tortillas ever in American history--terrible, terrible,
terrible--and I also pumped E10 gasoline.
And so most Americans have no idea at the pump what we are
talking about today. They just hear the word ethanol and see it
on the gas tank but have no implications--no idea what
implies--happens to their whole vehicle system with this in the
product.
They know what ethanol is but all they want is for their
car to work and their fuel to be affordable prices. So I am
always concerned about issues with misfueling and our policies
can make the lives of average Americans easier.
Can you talk--in your opening statement you had some
comments about issues with misfueling. How about more details
on what you see at your stores with misfueling challenges with
E15 today and how these new challenges, going forward, may
impact the price at the pump and also just the perception of
people that are paying for the gasoline?
Mr. Columbus. OK. With respect to E15, as you're aware, in
many areas of the country we can only sell it 8 months a year
because of the ozone season. So in that sense, the products had
a very hard time catching on, going forward.
There are many retailers who do not have the facilities at
their retail outlets to sell anything more than E10. The
Environmental Protection Agency requires a retailer to be able
to demonstrate on an affirmative basis that his dispensing and
storage equipment is compatible with whatever's in the ground
with the product.
So having said that, our experience is that, very simply,
consumers want the lowest cost motor fuel they can put their
hands on on which their cars will run.
In my comments, I said as long as people are aware this car
is warranted up to E15--this car is warranted up to E20,
whatever--as long as those levels are posted at the retail
outlet, the overwhelming preponderance of consumers take their
own self-interest into account and fuel properly.
There are those for whom I have no help. I cannot help
people who put gasoline in a diesel engine. I cannot help
people who see a big sign that says, this car has to be used
for something--don't use this fuel for anything before 2001
model year and pump it into my 1987 car.
If I do that, it's my fault. It's not the retailer's. But I
believe that low-cost provider still wins in the retail market.
I think it would----
Mr. Olson. Time to yield back?
Mr. Shimkus. The gentleman's time has expired.
Mr. Olson. Congratulations, Mr. Chairman.
Mr. Shimkus. Thank you very much.
Mr. Olson. Three years in a row.
Mr. Shimkus. A little streak.
The Chair now recognizes the gentleman--the other gentleman
from Texas, Mr. Flores, for 5 minutes.
Mr. Flores. Thank you, Chairman. I appreciate--again, I
appreciate all of you participating in this hearing today.
So I have--let me start with one question for each of you
and that is you got two options. One is keep the status quo the
way it is today. Make no changes. Let the regulatory agencies
sort out how CAFE is going to work, how the emissions
requirements are going to work, and how the RFS is going to
work.
So that's option A. Option B is let's come up with a
statutory solution to fix this. So which do you prefer, Mr.
Zimmer? Option A or option B?
Mr. Zimmer. B.
Mr. Flores. Mr. Columbus.
Mr. Columbus. There are things in this bill that my clients
support. There are things in this bill that my clients do not
support. So I can't really choose today. I got to see that
final product.
Mr. Flores. I understand that. But do you--in the absence
of----
Mr. Columbus. There are things in the fuel system that are
broken, Mr. Flores. So if you say is improvement possible, the
answer is yes.
Mr. Flores. OK. Good. That's close enough.
Mr. Spurlock.
Mr. Spurlock. I would agree with Mr. Columbus. There are
things that can be improved and need to be improved and look
through all levels as we go with that direction.
Mr. Flores. OK.
Ms. Skor.
Ms. Skor. I would say that improvements need to be made on
the administration side--the implementation of the Renewable
Fuel Standard currently on the books.
Mr. Flores. OK. Do you believe that the EPA has sufficient
statutory authority to do the things that you'd like to do
without litigation?
Ms. Skor. We do, and reed vapor pressure is a very good
example of something that's within the EPA's ability to make it
happen.
Mr. Flores. Mr. Cooper.
Mr. Cooper. I would agree that certainly there are things
that could be improved with the current program but we agree
that EPA does have the administrative authority to make those
fixes.
In fact, they have the administrative authority to adopt an
octane----
Mr. Flores. So are you and Ms. Skor saying that no
statutory solution is the preferred outcome? Is that what I am
hearing from you?
Mr. Cooper. If the--if option B is the draft currently----
Mr. Flores. That's not what I asked. I mean, option B is
does a--is a statutory solution going to be a better solution
than relying on the uncertainty that currently exists with the
law and the administrative structure of that?
Mr. Cooper. I think it depends on what that statutory
solution is.
Mr. Flores. OK. All right.
Mr. Thompson.
Mr. Thompson. Yes. We support legislative reform of the
RFS.
Mr. Flores. OK. Well, every roundtable we've had and almost
in every hearing we've had virtually every one of you has
always said the statutory solution is better.
And so that's the reason we need to stay engaged on this
rather than trying to run to--as you heard earlier, run to our
respective foxholes and not get anything done.
Mr. Columbus, one of the things that has been claimed is
that the consumer doesn't really control the cost of gasoline.
I mean, can you--can you address that?
For instance, if the cost of gasoline--if the cost of
liquid fuel is artificially raised doesn't the consumer have a
say on what the price is going to be by lowering their demand
for that product?
Mr. Columbus. I think the short answer to that is
absolutely.
First of all, I don't know how you artificially raise the
motor fuel price. If we knew how to do that, I am telling you
we would have done it a long time ago.
I always laugh about the prices signs. But this is the most
transparent commodities market on the face of the earth.
Mr. Flores. So at the end of the day, the committee----
Mr. Columbus. So it drives price down every day to the
lowest level, to the level the low-cost provider is prepared to
sell it.
Mr. Flores. So if we are talking about increasing octane,
the consumer is going to revolt if the refining--if the
suppliers elect anything other than the lowest cost solution.
Would you agree with that?
Mr. Columbus. Totally. I promise you they will vote with
their feet.
Mr. Flores. OK. So there's no incentive for Mr. Thompson or
his constituents to suddenly come up with a nonoptimum solution
that the consumers are going to revolt against.
Mr. Columbus. I believe that's true and, more importantly,
as those consumers vote with their feet those companies'
shareholders will vote with their lawyers. So, I mean, they
have an obligation to maximize profit and don't do that by
selling a high-cost product in a low-price market.
Mr. Flores. OK.
Ms. Skor, I am going to go over a few provisions of the
draft legislation. Would you please answer two questions on
each of these?
Number one, the ethanol industry has asked the EPA to take
administrative action on and, number two, which of these
provisions do you anticipate the EPA can accomplish through
rulemaking without legal challenge?
The first one is can the EPA require all vehicles beginning
in 2023 to use high-octane fuels. Have you--have you asked the
EPA to do that?
Ms. Skor. We have asked the EPA to certify and approve
higher level ethanol blends with a specific date in mind, no,
we have done that.
Mr. Flores. And can they accomplish that without legal
challenge?
Ms. Skor. Yes. We believe EPA has the ability to set--EPA
has the ability to put in place a 95 RON national standard
fuel.
Mr. Flores. I would assert that that's probably not going
to be the case.
That said, I have other questions for you. I will
supplementally provide those to you and ask you to
supplementally answer those.
Thank you. I yield back.
Ms. Skor. Thank you.
Mr. Shimkus. The gentleman yields back his time. The Chair
now recognizes the gentleman from Michigan for 5 minutes.
Mr. Walberg. Thank you, Mr. Chairman, and thank you for
holding this subcommittee hearing today and for working
continuously to address the issues with the RFS.
I know it's something that you and Mr. Flores have worked
on for some time and you have held numerous round tables and
hearings on this issue and heard from all parties involved
numerous times and I, for one, would like to see this issue is
finally resolved but in ways that I and my constituents would
like them to be resolved.
It's no secret that I am an avid Harley rider and any
vehicle with an engine between two wheels. I am also the
cochair of the Congressional Motorcycle Caucus, and I have
concerns there as well.
I also have the pleasure of representing the Great Lakes
State of Michigan, which is surrounded by most of the 20
percent of the world's fresh water resources and filled with
boating enthusiasts all around that State and connected to
other States as well.
So they have obvious reasons to be concerned about fuel in
their engines and motors as well. Michigan is also the
birthplace of the modern auto industry and continues to be very
much concerned in that area with a lot of research and
development.
It's also the place that is very much given to antique and
classic vehicles, one being my own, which has great concerns
about continuing and not just being put on a shelf somewhere
and looked at but, rather, driven, used, continue to be used.
And so, Mr. Zimmer, with those statements I would like to
ask you a question and then open it up to any others who would
address it, though maybe out of your purview.
This question--how will this current draft legislation
impact small engine manufacturers like Harley Davidson and the
boating industry--Evinrude, Mercury, et cetera--and the classic
and antique vehicles as well?
Mr. Zimmer. I can't speak to those specific industries but
I do think and I think our members believe that, you know, in
this collaborative approach they should be--come to the table
in here and have those inputs because, you know, I understand
that there are different issues in those engines and those
markets than we might have in the automobile industry.
But just to reiterate, we believe the 95 RON is extremely
important to the automakers will enable--improve fuel
efficiency in a broad range of products.
Mr. Walberg. Anyone else want to----
Mr. Thompson. Let me add that--just to be clear that under
this draft legislation the 95 RON fuel would be developed, you
know, to be used with a new automobile fleet.
It would add--either replace premium or add another grade
of fuel to the mix. It would not impact our ability to deliver
regular grade gasoline. Hopefully, you know, E0 for boaters and
motorcyclists.
So we will continue to supply that very important market.
Mr. Walberg. Certainly--certainly at a higher cost but it
needs to be there.
Mr. Zimmer, you mentioned that misfueling devices beyond
nozzle size are available. What are those and should they be
required?
Mr. Zimmer. It's a very, very important topic to the car
makers--misfueling in this area, and historically we've
addressed--when we went to unleaded we addressed misfueling
with nozzle sizes and that's in the current proposal.
This is--this can be--I think it's quite complex because of
the--in the retail market and I think the retailers could talk
about the multiuse pumps and stuff like that. But we think
there is technology out there that might be, you know, very
robust in this area and we would encourage, you know, an in-
depth discussion there and that's basically communications
between fueling pump and the vehicle and we think that's
probably something that's doable. We think it's probably a good
option and we would encourage people to look at them. We'd be
very happy to work with----
Mr. Walberg. Require a lot of flexibility and then
consideration of defeat devices also?
Mr. Zimmer. Excuse me?
Mr. Walberg. I would assume it would require a lot of
flexibility and then syncing up an understanding with the
defeat devices that could be a part of the problem.
Mr. Columbus. Yes, sir, and the discussion draft addresses
that and we would endorse that. In fact, a group of us have
been working on misfueling prevention for a while and that
includes the autos, retailers, to jobbers.
I think there's probably a way through this. The question
is cost. The equipment manufacturers have indicated to us a
cost of something under $300 per pump for a multiproduct
dispenser that dispenses all three products or four products,
whatever, through a single hose. That's it.
But this is addressable, I believe, and one of the things
we are holding off on is--I know what Gilbarco has told us. I
want to actually see it. I want to see an invoice.
Mr. Walberg. Thank you. I yield back.
Mr. Shimkus. Gentleman's time has expired.
The Chair now recognizes the gentleman from Georgia, Mr.
Carter, for 5 minutes.
Mr. Carter. Thank you, Mr. Chairman, and thank all of you
for being here. This is certainly an important subject,
something that we've talked about before. Some of you have been
here before.
Mr. Cooper, I haven't heard much from you so I wanted to
start with you today and ask you a question.
First of all, full disclosure. I represent the entire coast
of Georgia, over a hundred miles of coastline. Therefore,
marine engines are extremely important to us and the impact
that some of these fuels have on--the negative impact that some
of them can have on marine engines are certainly of interest
and certainly of concern.
Biobutanol--as I understand it, it has properties that more
closely align with gasoline than ethanol does and it has much
less--I am sure much less of a negative impact on engines.
And, in fact, the National Marine Manufacturers Association
and the American Boat and Yacht Council did a 5-year study with
the Department of Energy and found out that--they studied the
properties of isobutanol fuels on engines and that was very
helpful for all of us.
Just wanted to ask you, if biobutanol were widely available
in the market, how would it fit into the current supply? How
would we be able to incorporate it?
Mr. Cooper. Well, thank you for the question, and I guess
the first thing I would say is, you know, first of all, E10--10
percent ethanol blends--are approved and warrantied for all
off-road engines today including outboard marine engines and
motorcycles. So the fuel that is most common in the marketplace
today is absolutely fine for use in outboard engines and marine
applications.
In terms of biobutanol, you know, certainly, we do see some
promise there. We have some member companies who are either
producing or very interested in producing biobutanol along with
ethanol.
So yes, I mean, I think there are other molecules, other
applications, other biofuels that at higher blend levels could
be suitable for today's----
Mr. Carter. Are there any obstacles for the companies that
want to market this? Are they having any barriers they're
having to overcome?
Mr. Cooper. Primarily cost, today.
Mr. Carter. Is that right?
Mr. Cooper. I mean, you can't--biobutanol just can't
compete with ethanol and other components in terms of
production costs.
Mr. Carter. How much of a difference are we talking about?
Mr. Cooper. I would have to get back to you on that.
Mr. Carter. Is it significant enough to where it's----
Mr. Cooper. I think it's significant enough that we are not
seeing widespread adoption of biobutanol today.
Mr. Carter. OK.
Mr. Thompson, I will go to you. As I understand it, 95
octane is the correct octane level. In fact, you mentioned in
your testimony that the ideal level was 95 for maximizing
output of vehicles.
How did you arrive at that? How did you arrive at the 95
octane being the maximum level?
Mr. Thompson. Thank you for the question.
You know, this is the conclusion we reached with working
with several stakeholders but with--really, with USCAR and
others where we got technical expertise from the refineries and
from the autos and, frankly, they worked for almost 2 years
exploring a lot of things and looking at the whole system cost.
If you were looking to get a three to four improvement--
efficiency improvement out of the autos, what would be the
cheapest way for consumers to get there, either all the
improvements from the auto side or all the improvements coming
from fuel, and this is documented in my testimony before this
committee in April, but we did simply a cost analysis and what
we found is that the cheapest way to get that 3 to 4 percent
efficiency improvement came from 95 RON.
The other part of this was one of the big factors was
making sure whatever we selected, according to the autos and
rightfully so, the fuel had to be available on day one and had
to be available nationwide.
Anything other than 95 RON is not available nationwide.
California and nine other States, you know, prohibit higher
levels of octane.
Mr. Carter. So you couldn't go to 97 in California?
Mr. Thompson. Under their predictive model our conclusion
was no.
Mr. Carter. OK. OK. Well, thank you for that.
One other question just to follow up. Does your
organization have any specific numbers on how gas mileage would
improve for customers across the U.S.?
Mr. Thompson. Well, again, a couple things. One, it would
be a 3 to 4 percent improvement--efficiency improvement--and
that translates into gas miles.
And the other thing it's for those who--it's equivalent to
putting 720,000 electric vehicles on the road year after year
after year. So there's a substantial improvement--efficiency
improvement by doing this.
Mr. Carter. I suspect that would--that would be hard to
sell to a consumer who just concentrates on price?
Mr. Thompson. I would hope--I would hope we would have a
good story to tell. This is--would be a high-efficiency fuel
that helps make their cars more efficient, it keeps
optionality. It allows them to choose an internal combustion
engine that's more efficient over, say, electrified vehicle
they may not want.
I mean, I think the consumer, when they fully understand
the offering, will be supportive.
Mr. Carter. Great. My time has ended and I yield.
Mr. Shimkus. The gentleman yields back.
Waiving on to the committee as he has in the past, Mr.
Loebsack from Iowa, for 5 minutes.
Mr. Loebsack. Thank you, Mr. Chair. I really do appreciate
you allowing me to waive on. You have been very generous, and
especially knowing that we don't necessarily agree on these
issues.
So I really appreciate that a lot. We don't agree on the
outcome of the football game either, since I have a stepson and
his wife who are Naval Academy grads. But for me--for me, the
only surprise was the margin--that it wasn't greater.
But at any rate, to the panel I do appreciate your being
here. In some ways, it's deja vu all over again because many of
you have been here before.
Mr. Cooper, welcome. I know Bob did a great job, but you're
going to do a fantastic job as well. Thank you for taking over
that position.
Look, folks, we know that the RFS was created to diversify
America's liquid fuel market, grow our world economy, and cut
harmful emissions and it has succeeded in those efforts.
I don't think there's any question about that at all. The
RFS has helped America achieve greater energy security. It's
decreased our reliance on foreign oil.
My Marine kids perhaps don't have to go fight wars because
of that in the future, hopefully, and that has, in turn,
protected our national security.
Fuels have lower cost at the pump and in Iowa and other
parts of the Midwest the RFS has clearly been an economic
driver--that's indisputable--creating thousands of good-paying
jobs at biofuels plants and establishing a significant market
for our farmers. Very important now, especially given our trade
issues that we see happening to our farmers.
We need to be looking toward growth in the future instead
of taking steps backwards. This has been a very tumultuous year
for biofuels producers and farmers.
We know that the EPA has granted waivers to 48 refiners
that have cut more than 2 billion gallons of biofuels out of
the market with no plan to reinstate those gallons, and that's
unfortunate, to say the least.
This sort of action destabilizes the agricultural economy
and that has implications for years to come and, again, we have
to be thinking about the trade disputes, too, when we talked
about these issues because that just complicates it for these
farmers and others in the Midwest.
Instability has led to biofuels plants across the country
being idled, in at least one case closed permanently. The USDA
reported net farm income is down again over 12 percent this
year and the ag economy is suffering, and we cannot afford, I
believe, to take a step in the wrong direction.
And so respectfully, Mr. Chair, I do believe that this
draft legislation is a step in the wrong direction for rural
America and for the RFS.
It was already mentioned the EIA released a study last
month that a nationwide 95 RON fuel can be achieved through
petroleum products and would not guarantee the use of more
biofuels.
I would like you to respond to that. You already did a
little bit. Maybe expand a little bit on your answer to Mr.
Thompson on that.
The fact of the matter is we have to be very thoughtful
about this, going forward. We have to make sure that whatever
we do does not harm the biofuels market I think here in this
country.
I appreciate everyone's responses to the questions here.
But I do want to start out with Ms. Skor by just basically
answering the question would a 95 RON standard increase or
decrease the use of biofuels.
Ms. Skor. Made with a 10 percent ethanol blend it would
most assuredly increase the price of fuel for American drivers.
Mr. Loebsack. Right.
And Mr. Cooper, would you like to elaborate a little bit? I
don't know if you have more to say about your response to Mr.
Thompson about the----
Mr. Cooper. Well, you know, I think, again, some of the key
points that came out of that study for us and it was
commissioned by EIA but it was conducted by Baker & O'Brien,
which is a well-known consulting firm that does lots of work
for the oil industry. So these guys know what they're talking
about.
And a few of the key points that really rose to the surface
for us was that, you know, there wouldn't be hardly any
incremental increase in the cost of producing 95 RON at the
existing fleet of refineries to meet a 95 RON requirement in
the first year of the program, 2023, but also longer term.
You know, it just said there wouldn't really be a need to
increase ethanol blending at all to meet that requirement.
Mr. Loebsack. Did you want to respond to the Barton Bill?
Because it looked like you had some issues with that.
Mr. Cooper. Well, I mean, we supported the first Barton
Bill, right--the original RFS--and I just--you know, I don't
remember exactly all the points that he was making.
But, you know, we certainly see the RFS as a tremendous
success, both the original program, the RFS2. We see absolutely
no reason to walk away from that progress. And again, we think
a high-octane fuel standard can layer very well on top of the
RFS and those two programs could work in harmony.
Mr. Loebsack. And I do want to make sure that, you know, we
hold this administration's feet to the fire too on its promise
to have the EPA go ahead and write rules, obviously, that allow
the 15-year round.
I think it's really important. I hope it wasn't just a
campaign stop, if you will, on the part of the president at
Council Bluffs, you know, for a Republican congressional
candidate and a Republican gubernatorial candidate.
We've got to make sure that we--you know, that we do hold
their feet to the fire on that.
So thanks, everybody, for being here. I really appreciate
it, and I have lots more questions but I am sure I will have
more opportunities in the future.
Thank you, Mr. Chair.
Mr. Shimkus. The gentleman returns the time and the Chair
wants to thank the panel. You did not disappoint. Obviously,
there's much more work to do and I gladly will turn this over,
hopefully, to Mr. Tonko in the next Congress to accept the
challenge of moving forward.
I will just say certainty is better than uncertainty.
Marrying engineering technologies of engines and fuels for the
greatest efficiencies is the way to go.
So I hope that that would be at least a base by which
people would move forward.
With that, I want to dismiss this panel and sit the second
panel.
[Pause.]
Mr. Shimkus. OK, folks. Let's move out of the room so we
can get started.
We want to thank our witnesses for being here today and
taking the time to testify before the subcommittee. As you
observed, it's still a very energetic discussion, questions and
answers, and we would expect no less from this panel either.
Today's witnesses will have the opportunity to give opening
statements followed by a round of questions from Members, and I
will introduce you as I call you to testify.
And we would like to start with Mr. Brooke Coleman,
executive director at Advanced Biofuels Business Council.
Brooke, you're recognized for 5 minutes. Welcome.
STATEMENTS OF BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED
BIOFUELS BUSINESS COUNCIL; MICHAEL MCADAMS, PRESIDENT, ADVANCED
BIOFUELS ASSOCIATION; MANNING FERACI, DIRECTOR OF FEDERAL
AFFAIRS, COALITION FOR RENEWABLE NATURAL GAS; DAVID FIALKOV,
VICE PRESIDENT, GOVERNMENT RELATIONS/LEGISLATIVE AND REGULATORY
COUNSEL, NATIONAL ASSOCIATION OF TRUCKSTOP OWNERS; AND KURT
KOVARIK, VICE PRESIDENT OF FEDERAL AFFAIRS, NATIONAL BIODIESEL
BOARD
STATEMENT OF BROOKE COLEMAN
Mr. Coleman. Thank you. Thank you. Still good morning, I
think.
Chairman Shimkus, Ranking Member Tonko, members of the
subcommittee, my name is Brooke Coleman. I am the executive
director of the Advanced biofuel Business Council.
We represent worldwide leaders in the effort to develop and
commercialize cellulosic biofuel ranging from cellulosic
ethanol made from agricultural residues to advanced biofuel
made from sustainable energy crops and municipal solid waste.
Let me start by thanking the committee and staff for
deliberating what we know is a tough issue--the Renewable Fuels
Standard--and more generally, the need to curb or at least
bring competition to the pump with regard to fossil fuels.
The RFS is a political lightning rod not because it is
flawed. Rather, because it is creating competition that
incumbents do not want to see and drives the growth of now the
largest renewable energy sector in the country.
The RFS pertains to the industry I represent, the
cellulosic biofuels industry. An underpinning of the political
case against the RFS is the allegation that we have failed to
deliver on the promise of cellulosic biofuels.
What has actually happened over the last 10 years as our
industry has gone from the technological development phase to
the commercial deployment phase, as promised.
But in order to build plants and scale the RFS must be
enforced and in many recent years the RFS was not enforced at
all. In other years, billions of gallons were unlawfully waived
in reaching oil refiners large and small at the expense of
rural America.
This level of unpredictability pushes innovators outside of
the country and that's what has happened as we watch China,
Brazil, Canada, even Romania and other countries now beat us to
the punch on cellulosic biofuel development.
So what's the solution? I think it's a fair question.
While we appreciate the committee's work in trying to find one,
we cannot support this particular one as constructed.
There are two primary pieces to successful biofuels
deployment. The impetus to produce the fuel on the front end
and the ability for consumers to access it on the back end. The
RFS does both at the same time.
It encourages production by requiring blending and it
enforces a RIN system on the back that rewards those who make
investment to deliver more biofuel to the consumer. It's a very
simple system.
The discussion draft more explicitly requires market
readiness for biofuels as it relates to vehicles, fuel
dispensers, and important regulatory updates like RVP.
That's a good thing. But it offers explicit market
readiness at the expense of the upstream policy that would
allow more biofuels to flow through updated hoses and
regulations and into vehicles.
Ideally, a free market provides the impetus to produce
biofuels. But as we have seen for decades with ethanol, beating
the incumbent on price does not guarantee demand because motor
fuel markets are not free markets.
Replacing the cure for this problem in the RFS with an
octane standard is the equivalent of an open invitation for the
oil industry to use less biofuel and increase carbon emissions
in the process.
Earlier this month, the EIA on a report that we have talked
about already, confirmed what the oil industry has previously
admitted--that a 95 RON standard could be easily met with
minimal refinery upgrades.
The truth is--and we haven't talked about this--we have
done this before. The oxygen standard enacted in 1990 was a so-
called performance based fuel quality standard. It was supposed
to drive demand for ethanol based on its superior fuel
characteristics including price.
It didn't, because the oil industry prefers to control the
entire motor fuel gallon by purchasing octane from themselves.
So instead of ethanol we got MTB, a fuel additive that
polluted America's drinking water and had some small towns
trucking drinking water into local schools.
Unfortunately, the discussion draft offers a similar
dynamic as it pertains to advanced biofuels. The act would
establish a more automated system when it comes to setting and
enforcing advanced biofuels standards.
In theory, this system would provide more predictability
for innovators. That is a good thing.
But it offers predictability by tying the volume standard
to the actual production in the prior year. The problem with
setting the cellulosic biofuel standard based on prior year
production is it puts the growth trajectory of cellulosic
biofuels into the hands of our competitors in the oil industry.
This is true, because in order to secure investment to
build capacity our industry has to be able to show likelihood
of demand. In the absence of a free market and within RFS phase
out, we would have to show some sort of commitment form the oil
industry to buy cellulosic biofuel. If the oil industry knows
it can control the cellulosic biofuel to secure financing, the
oil industry knows it can control cellulosic biofuel
development by avoiding those commitments and that Federal law
now rewards that behavior with greater market control. That's
what they will do.
We continue to believe that the solution here is not
legislative. There is already an administrative effort underway
to address RVP. We can do many of the things to create
certainty from a forecasting perspective inside of existing
law.
We appreciate the opportunity to be here today.
[The prepared statement of Mr. Coleman follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Flores [presiding]. Mr. McAdams, you're recognized for
5 minutes.
STATEMENT OF MICHAEL MCADAMS
Mr. McAdams. Chairman Flores, Ranking Member Tonko,
Congressman Olson, Chairman Shimkus, I am delighted to once
again appear before you to testify on the importance of Federal
policy in furthering the development of next generation
sustainable renewable fuels.
On behalf of the membership of the Advanced Biofuels
Association, I want to personally thank Chairman Shimkus and
Congressman Flores for your courage and leadership in providing
an RFS draft reform package.
The countless hours that Members on both sides of the aisle
have spent attempting to craft a middle ground to update and
revise the focus of the delivery of second generation advanced
fuels is long overdue.
In spite of the best intentions, it is clear that the
current statute needs updating if we are to enable the
technologies to move forward and produce the volume of fuels
which were envisioned by the original authors of the law.
That renewed focus is particularly relevant, given the
recent release by the administration's warning on the impacts
of climate change and the containment of the most destructive
wildfire in California's history.
In addition to continued growth in aviation, which is
currently doubling every 15 years, along with the new global
carbon targets for international airlines, will drive the need
for these fuels, moving forward.
These advanced fuels will provide an alternative to higher
carbon fuels in our future, as noted by the Government's recent
climate report. However, as I've testified before, there are
numerous barriers to entry under the current RFS program that
specifically disadvantage advanced biofuels.
My written testimony goes into specific recommendations in
more detail. Previously, I provided you 21 of them. But I would
like to highlight a few potential reforms as well as some--
offer some comments on the recent draft bill introduced by
Congressman Shimkus and Congressman Flores.
First and foremost, if you consider making changes to the
RFS, we would urge Congress to take the politics out of the
equation as much as possible by making the RFS a rules-based
system.
Therefore, we support the provision in this bill that would
base the annual RVO on the previous year's actual production,
queuing up midyear and end-year volumes, which would set the
RVO for the future and that would thereby set a mandate for the
obligated parties.
This would reduce volatility in the RIN market, diminish
the need for cellulosic waivers for fuels which do not exist,
and encourage obligated parties to buy available produced
gallons for the RINs.
Any reform to the RFS should also expand the definition for
what constitutes renewable biomass and allow feedstocks to
comply on a mass balance basis rather than imposing burdensome
mapping restrictions on those feedstocks.
Naturally regenerative trees under sustainable forest
management practices should be available for use under this
program. Currently, they are not.
We are long past due to have a plant-a-tree pathway
promised by EPA years ago. The Shimkus-Flores bill takes an
important step in this direction by redefining renewable
biomass to include trees and tree residues, paving the way for
increased deployment of pyrolysis and other technologies.
By the way, the three current cellulosic plants being in
the United States, which we represent, are all pyrolysis
technologies.
We support the bill's efforts to pivot the focus on the
development of fuels of the future by providing some regulatory
certainty for the advanced and cellulosic biofuels and
biodiesel through 2032 or longer. We recommend you look at the
length of the average debt financing, which is 20 years, in
lieu of 2032.
This time frame is consistent with the standard of the
debt term. The steps which you have taken in your draft bill at
a minimum will send a strong signal to the financial
institutions that the Federal Government supports the
development of these fuels in the future by guaranteeing the
rent over a longer time frame.
We also suggest you encourage EPA to address the
biointermediate issue in the upcoming reset rules proposed this
year. Currently, three of our members who are building plants
would not get a rent unless this problem is resolved.
I attached a list of other specific recommendations for
your consideration, which I believe would all fall under the
title of common sense, which will require statutory changes in
order to allow EPA to make this program more economically and
administratively efficient.
Again, on behalf of all of our members, we want to thank
you for your leadership and urge the members of this committee
to seriously consider making the reform of this program a
priority in the coming year.
Thank you, and I look forward to answering your questions.
[The prepared statement of Mr. McAdams follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Flores. Thank you, Mr. McAdams. I think we can all
agree on having commonsense titles in our bills. It's a good
start.
Mr. Feraci, you're recognized for 5 minutes for your
opening comments.
STATEMENT OF MANNING FERACI
Mr. Feraci. Thank you, Mr. Chairman.
Chairman Shimkus, Ranking Member Tonko, members of the
subcommittee, I appreciate having the opportunity to testify
today on behalf of the Coalition for Renewable Natural Gas.
Renewable natural gas, or RNG, is derived from biogas
captured from organic waste streams at landfills, wastewater
treatment facilities, and from anaerobic digestion of
agricultural waste.
The captured biogas is refined to meet fuel quality
standards that make RNG indistinguishable from natural gas. The
fuel is fully fungible in our Nation's existing infrastructure
and can be readily used in natural gas vehicles.
More than 25 percent of the Nation's medium and heavy duty
natural gas vehicles are fuelled by RNG. RNG qualifies as a
cellulosic biofuel under the Renewable Fuels Standard. It
reduces life cycle greenhouse gas emissions by 80 percent or
more compared to the conventional diesel fuel.
In fact, the RNG industry provides more than 95 percent of
the fuel used to meet the program's cellulosic biofuel
requirements today.
The production and use of RNG has grown significantly since
it was included in 2014 as a cellulosic biofuel. The industry
has developed over 45 production facilities and there are over
50 projects currently under construction or consideration.
RNG production for transportation fuel grew from
approximately 33 million ethanol equivalent gallons in 2014 to
240 million gallons in 2017. That's more than a 620 percent
increase in the 3-year period.
This growth has put the industry on track to exceed EPA's
production estimate from 2018. Each RNG project averages--on
average creates 173 direct or indirect jobs and attracts
between $10 million and $70 million in capital investment.
In sum, the RFS has resulted in a growing vibrant domestic
RNG industry that is converting waste into growing volumes of
domestically produced cellulosic biofuel that is good for the
environment, and that sounds like a winning policy to us.
As I mentioned earlier, the RNG Coalition is pleased to
provide initial feedback on the discussion draft. The RFS is a
complicated multifaceted program and statutory changes should
be carefully vetted, given the impact they can have on
stakeholders who have made significant capital investments.
The RNG Coalition recognizes the subcommittee's diligence
in looking at this issue. The RNG industry supports the RFS
program as a way to increase domestic production and use of
advanced biofuels and, in turn, address the Nation's energy and
environmental policy objectives.
This methodology used to set volume obligations under the
RFS program should be consistent with this approach. Volume
targets, going forward, should be realistic and attainable.
They should also be structured in a way to encourage steady
growth of advanced biofuel production.
Under current law, the RFS program does not lapse. Beyond
2022, the EPA administrator sets the program's volumes based on
six statutory factors. The discussion draft would sunset the
RFS program for advanced biofuels after 2032.
RNG projects require significant capital investment and
deployment in new infrastructure. They often involve a 20-year
offtake agreement with feedstock providers.
A long-term RFS program provides a policy framework that
attracts that capital needed to develop new RNG projects.
Conversely, a premature sunset of the RFS program's advanced
biofuels requirements could chill investment in new RNG
projects, which could undermine the overall policy objectives
of the RFS program.
The discussion draft would also modify how the volume
targets for advanced biofuels are set. It would use the
previous year's production levels--production data to set
annual use requirements for advanced biofuels.
While the RNG Coalition recognizes the desire to provide
certainty in the volume setting process, this approach could
have the unintended consequence of causing advanced biofuel
production to stagnate or potentially contract.
The RNG Coalition wants the RFS program structured in a way
that promotes steady sustainable growth in the advanced
biofuels marketplace.
Mr. Chairman, Chairman Shimkus, Ranking Member Tonko,
again, I appreciate the opportunity to testify. The RNG
Coalition recognizes the hard work and effort that this
subcommittee had made to tackle what is admittedly a very, very
difficult issue.
There are significant benefits associated with the expanded
domestic production and use of RNG, and we remain willing to
work constructively with you going forward to achieve the RFS
program's worthwhile policy goals, and I would be happy to
answer any questions you may have.
[The prepared statement of Mr. Feraci follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Flores. Thank you.
Mr. Fialkov, you're recognized for 5 minutes for your
opening comments.
STATEMENT OF DAVID FIALKOV
Mr. Fialkov. Good morning, Mr. Chairman.
Chairman Shimkus, Ranking Member Tonko, thank you very much
for inviting me to testify today. It's really a privilege to be
here with you.
My name is David Fialkov. I am the VP of government
relations at NATSO, which is a national trade association
representing really off-highway fuel retailers from large
multibillion-dollar travel center and truckstop chains to
smaller independent single-store mom and pop type operators.
Most of our members sell gasoline. Many of them blend
ethanol. My testimony this morning, however, will focus
primarily on diesel markets and opportunities for Congress to
incentivize diesel retailers to incorporate increasing amounts
of advanced biofuels such as biodiesel into the Nation's diesel
fuel supply.
The RFS, which this bill would reform, has largely been
successful in doing this. Over the last decade, for example,
biodiesel and grown tremendously and the reason for that is
that the RFS creates a mechanism whereby diesel retailers can
offer fuel to truck drivers for less money the more biodiesel
that they incorporate into the their fuel supply and that's
really a fundamental component to understand throughout all of
this.
Retailers are not obligated to blend biofuels under the
RFS. They choose to do it, and they only choose to do it if
doing so allows them to sell fuel for less money.
So in this respect, retailers really function as surrogate
for consumers in assessing advanced biofuels' value proposition
and my views on the legislation today, which I will share, are
simply designed to help you enhance advanced biofuels value
proposition. In many ways the bill moves the RFS in the right
direction in this respect. In other areas, it could be
improved.
Taking a step back, the RFS is really an extraordinary
example of Congress and the executive branch sharing authority
to implement the program.
Mandating such a substantial shift in the composition of
motor fuel in the United States is not an insignificant
assertion of legislative authority and, obviously, to avoid
unintended consequences associated with future market
developments that Congress cannot be expected to predict or
know, EPA has to have some flexibility to make adjustments
along the way.
In my view at this time, however, EPA has too much
discretion and it has led to volatility and uncertainty that
undermines the program's objectives.
In reforming the RFS, the main lesson that you should have
learned over the last decade is that Congress needs to reassert
itself and limit the degree to which the ideological and
political preferences of the executive branch can alter the
program's trajectory.
Overall, I think that the bill threads this needle quite
nicely. A rules-based RVO process, extending the advanced
biofuels categories an extra 10 years while also allowing for
midyear adjustments will undoubtedly incentivize more fuel
retailers to buy and blend more advanced biofuels while baking
in enough flexibility with the midyear adjustments to avoid the
unintended consequences.
That being said, it was very disappointing to see that the
bill was silent on the issue of small refinery exemptions. Over
the past year, the EPA has been handing out small refinery
exemptions like Halloween candy and they have been doing it
oftentimes to some of the most successful profitable refining
companies in the country.
And the fact that those agencies are doing that in this way
is undermining the demand for advanced biofuels. That agency
officials can say with a straight face that they're doing it
consistent with the law should operate as a bright shiny red
flag to you that it's time to reexamine that provision either
by eliminating it entirely or by altering it so that waivers
are issued far less frequently and they're issued in a way that
does not so dramatically undercut demand for advanced biofuels.
I've heard Chairman Shimkus say before that in giving
advice to people who testify that you're not going to hurt
anyone's feelings if you don't use your full allotted 5
minutes.
So in that vein, I hope to hurt none of your feelings and I
am happy to answer any questions that you have.
Thank you again for inviting me.
[The prepared statement of Mr. Fialkov follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Flores. Thank you.
Mr. Kovarik, you're recognized for 5 minutes for your
opening statement.
STATEMENT OF KURT KOVARIK
Mr. Kovarik. Good morning.
Thank you, Mr. Chairman, Chairman Shimkus, Ranking Member
Tonko, and members of the committee. Thank you for inviting me
to testify today.
My name is Kurt Kovarik and I am vice president of Federal
affairs for the National Biodiesel Board. My trade association
represents 130 members with biodiesel production facilities in
nearly all 50 States.
The produce clean-burning biodiesel from a variety of
feedstocks including vegetable oils, animal fats, and recycled
oils such as used cooking oil.
I appreciate the subcommittee's inclusion of biodiesel in
today's discussion and throughout this process. I look forward
to contributing to the development of any proposals to improve
the Renewable Fuel Standard.
The discussion draft highlights one of our frustrations
with the RFS. The biodiesel industry has proven over and over
again its ability to produce higher volumes. Yet, EPA
continually sets biomass based diesel volumes in the annual RFS
rules well below our demonstrated capacity.
The agency continues, as demonstrated in November's final
rule, to limit growth for our advanced biofuel volumes.
Biodiesel achieves considerable carbon reductions, up to 86
percent compared to petroleum fuels. Higher volumes for biomass
based diesel would better achieve the environmental goals of
the original RFS program.
Biodiesel is the success story of the RFS. The program has
been the foundation for biodiesel industry's growth over the
past decade. Our industry has grown from about 400 million
gallons in 2007 at the start of the program to more than 2.6
billion gallons today.
We expect the program will continue incentivizing
investment and supporting our industry's growth over the decade
and more.
We are pleased that the discussion draft recognizes that
the biodiesel industry would not benefit from the proposed
changes to the octane standard or other regulatory changes in
the discussion draft.
We appreciate the committee's recognition that the
biodiesel market is different from the ethanol market and that
the discussion draft includes provisions to provide additional
certainty for advanced biofuels.
Unfortunately, these provisions fall short. We are
concerned that the discussion draft does not incentivize
ongoing investments and support predictable year-over-year
growth for our industry.
The discussion draft would direct EPA to set backward
looking volume requirements. While this may protect existing
assets in the near term, it would not drive further investments
or growth.
One necessary improvement to the draft would be to add
achievable predictable growth for our industry over time. With
consistent and predictable growth, the biodiesel industry would
have the necessary incentive to make capital investments,
develop additional feedstocks, and improve efficiencies.
Stagnant or decreasing volumes do not provide any of those
incentives. For the biodiesel industry there is no pressing
need to significantly reform or replace the RFS.
The program does not end or change drastically in 2022,
despite what some have said. The EPA is required to set future
volumes for all fuel categories under the same process that has
been in place for biomass-based diesel since 2013.
The RFS, therefore, has the potential to support our
industry's growth beyond 2032 to where the discussion draft's
support would end.
The biodiesel industry continues to grow and to invest
under the current RFS because the program, when stable,
promises the opportunity for additional growth.
We appreciate that the discussion draft would direct EPA to
set volumes according to our proven ability to produce, that
the draft would be significantly improved if it provided long-
term certainty and predictable growth over time.
Thank you for the opportunity to testify today on behalf of
America's biodiesel renewable diesel industry.
I am happy to answer any questions.
[The prepared statement of Mr. Kovarik follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Flores. Thank you for your opening comments. We
appreciate each of your testimony. We are now going to move
into the Q&A portion of our hearing. I want to recognize myself
for 5 minutes for my questions.
Mr. Coleman, your testimony claims that the discussion
draft will increase gasoline prices because ethanol will not be
used by refiners. That's somewhat in conflict with what we
heard in the last panel.
I think there were some folks that want to argue about the
readily available octane enhancers today versus what was
available 15 years ago.
But I am interested in developing a current solution. So
what's your proposed legislative solution for keeping gasoline
prices lower using a high-octane performance standard?
Mr. Coleman. So the reason that I made that allegation is
that here is no alternative octane to ethanol that is even
close to as cheap as ethanol is.
And so you're either creating a status quo environment or
are you putting something in the fuel that is more expensive?
You don't have to look very far. If you look at zero
percent ethanol blends in the market today they're 40 to 50
cents per gallon more expensive.
In terms of--and I am not going to dodge your question on
what the legislative proposal is--I think the RFS should be
bedrock baseline in this country because it's produced such
outstanding outcomes, particularly for the middle of the
country.
And if you want to get to a cleaner environment with--give
the auto industry what they want, which is cleaner fuel so they
can improve emissions, then you do it on top of the RFS.
Can you make tweaks to the RFS that makes sure dumping the
RFS for higher octane will just remove the incentive to use
renewability----
Mr. Flores. So how do you set those levels and in a
declining liquid fuels market how do you set them or you get
them right and you don't somehow create disturbances in the
market that harm consumers?
Mr. Coleman. I am not sure if I agree with the idea that it
harms consumers. So if you use--if you keep--maintain certainty
with the RFS and what the signal that sends to the marketplace
is that we are going to keep ethanol in the fuel, which right
now is not--Mr. Thompson said it was 4 cents cheaper. It's
closer to 20 cents cheaper.
It says don't replace ethanol with more expensive octane
enhancers and then ramp your RON the way you want to go. You
don't lose ethanol, and if the oil industry wants to alkylate
fuel or add more aromatics on top of that, then they can get
there.
They're not going to tell you they can do that, but they
can do that.
Mr. Flores. Let's continue.
I think we heard in the last panel that the consumers
ultimately are going to make the decisions as far as what the
costs are, not the refiners. Not any other party.
Mr. Kovarik, your testimony states, we appreciate that the
21st Century Fuels Act would direct the EPA to set volumes
according to our proven capacity to produce.
You went on to say you would prefer that it provided long-
term certainty and predictable growth over time.
What does that mean from a legislative language
perspective? If we wanted to incorporate your concepts in our
legislation what would that look like?
Mr. Kovarik. Thank you for the question. I appreciate the
opportunity to answer that.
One of the things that has harmed our industry and really
prohibited our industry from achieving its full potential is
the fact that all of our Federal policies that affect our
industry have been terribly uncertain since the creation of the
RFS--the original RFS in 2005.
One way to improve this legislation might be to not only
provide longer term period for advanced biofuels but also
include some degree of statutory certainty that volumes will
increase year over year to allow the industry to make the
capital investments, developing additional feedstocks, and grow
to an economy of scale where they may no longer need certain
areas of Federal policy support.
Mr. Flores. So you're in the weeds a little bit. How would
you set those volumes? How would that be done? When you don't
know what the market is going to be like, you don't know where
the technology is going, how would you set the volumes?
Mr. Kovarik. I think you could start by looking at the
domestic--the market, what is currently produced, and then
include a reasonable achievable levels of growth whether that
be--5 percent year over year might be an example. But what
would be achievable and certain for the industry so that they
could respond to it.
Mr. Flores. OK. If you have positive tax treatment for
biodiesel blending if you assume that that's assured, would you
need the RFS to compete?
Mr. Kovarik. The two policies are very complementary. The
RFS essentially guarantees producers that there will be a
market for certain volume of product.
The tax incentive works in very different way in that is
provides the incentive for our downstream partners to put in
the infrastructure, the blending facilities, and the retail
facilities to sell additional product to consumers.
The reason our downstream partners want to sell more of the
product is because of the value proposition because of the
combination of the RFS and the tax credit, and I would like to
see a time and place where we no longer need those policies.
But the fact of the matter is neither have been certain
enough with the longevity required to provide the industry with
the certainty to grown and flourish.
Mr. Flores. Thank you. My time has expired.
I recognize Mr. Tonko for 5 minutes for his questions.
Mr. Tonko. Thank you, Mr. Chair, and I think many Members
support the RFS due to its envisioned role in promoting the
development of and market for advanced biofuels.
Even the program's most ardent supporters would have to
admit that the expected growth of these fuels has not come to
fruition.
I know there are many reasons that that is the case. But I
want to use this time to look forward.
So would anyone like to comment on why or why not this
discussion draft would remedy those issues and actually result
in the growth of a domestic advanced biofuels industry?
Anyone? Mr. Coleman.
Mr. Coleman. I am sure I will have a couple people who want
to help answer this question. But we do not believe that it's
going to create growth in the advanced biofuels industry
because we have to partner with the oil industry one way or the
other to get the job done in the advanced biofuels industry.
Sometimes it's on the front end with actual strategic
investment. Valero, BP--they've been investors historically in
this industry.
But inevitably it's also on the back end. You have to be
able to show investors that an oil industry is interested in
not taking your fuel in order to build that plant and if we
have a system that automatically predicts incoming gallons
based on last year's volumes, the oil industry is simply not
going to participate in that process and you're going to have
incremental, if any, growth, basically only when the oil
industry is completely uninvolved.
And the issue that we have had with deployment over the
last 10 years--and I think this is a point of agreement for all
of the advanced biofuels advocacy--is not one of commercial
technological development.
We are there. It's an issue of scale. And when the program
is not enforced for 2 or 3 years in the wake of a 100-year
recession and then we have waivers, we have nothing to look to.
So that is where our issues are and we would ask that we
keep pushing on EPA to enforce the law.
Mr. Tonko. Anyone else? Mr. McAdams.
Mr. McAdams. I would say that the right question is, since
you guys are working with the discussion draft here, what can
you do to bring those fuels.
And what I gave you after the last hearing was 21 examples
of specific barriers to entry, definitions in other regulatory
regimes that block the future of advanced undesignated fuels
and block cellulosic fuels.
What this draft does do is it speaks specifically to the
wood piece in a way that has never been addressed before and
that is a very positive thing.
Let me give you an example. If you, under the current
biointermediate regs at EPA, if I am trying to take a pyrolysis
plant which I am either Ensign, which building a plant in
Georgia or I am Fulcrum, I am building a plant in Nevada or I
am Red Rock, I am building a plant in Oregon, and I use the
woody biomass and I make a pyrolysis oil, under the current
biointermediate standard I can't colocate that to coprocess
into a jet fuel or into a diesel.
And one of the things this hearing has done is it's focused
way too much on gasoline and not enough on the fact that we use
55 billion gallons of diesel and it's the fastest growing
commodity in terms of demand, going forward, along with jet
fuel.
So if you want to make billions of gallons of jet fuel to
fly the airplanes because they're not likely to be electric in
my lifetime, you're going to need those diesel distillate
fuels.
And all of these impediments are statutorily driven that
need to be addressed in a way. Same thing with waste oil. Same
thing with one-celled biological organisms.
There's a whole plethora of these things that just prohibit
technologies that we never knew existed when we did the spill
in '07 that blocked the entry to these volumes.
Mr. Tonko. Thank you.
Mr. Feraci.
Mr. Feraci. Thanks, Mr. Tonko.
So I think it's a great question and I want to share the
experience that we've had in the RNG industry because it's a
fairly new experience but I think that there's some lessons to
be taken from that.
So our fuel become qualified as a cellulosic biofuel in
2014 and as I said in my statement, I mean, we've seen a 620
percent growth in the use of the fuel--the cellulosic biofuel--
and what--one of the big things that has spurred that is the
RFS program and it's something at the Federal--a decision at
the Federal level that we are going to prioritize the
introduction of advanced biofuels and that reduce greenhouse
gas emissions that that's a Federal priority from an energy
policy standpoint and from an environmental standpoint.
But beyond that, the way that the RFS is structured now is
when you set volumes out into the future it's prospective so
that it allows investors to go and get private sector capital
investment to put in the projects.
And like I said, when you're doing an RNG project, you
know, it's not something you just put up overnight. I mean,
you're going to have to go into a 20-year offtake agreement
with a feedstock provider to do this.
So, you know, as it comes back to the discussion of the
discussion draft, I mean, I think that a piece of constructive
criticism would be that you really want to have a formula,
going forward, that does drive growth and you want it
prospective looking because if it's just--if you just look back
at previous production it could have--what I was careful to say
is, I think, an unintended consequence of potentially having
production be flatter or even contract.
Mr. McAdams. Mr. Chairman, could I address this RVO
production?
Mr. Shimkus [presiding]. Well, I think I am going to be
asking you that question. So----
Mr. Tonko. I will yield back.
Mr. Shimkus. This is our last time together, so we are
milking it out.
So let me just go directly to Mr. McAdams, because I want
to address this issue about how you set the RVOs.
Obviously, you're in the minority at the panel saying that
we should do it based upon--and we've had this discussion about
what are we actually producing now and then--and then you
propose a midterm review. So talk to your fellow panellists on
why you think that is successfully achieving, I think, what
their goals are.
Mr. McAdams. OK. First of all, we need to realize that the
Federal court directed EPA in 2013 that they could not put
their thumb on the scale.
So all three of these guys up on this panel are suggesting
that they want to play politics and put their thumb on the
scale instead of having a rules-based rule.
I disagree with them. So in the case of Mr. Kovarik, if you
took the approach that you have put in this bill, Mr. Kovarik
would have gotten 2.7 billion gallons of an RVO for the
biodiesel industry this year instead of 2.1. That's a 600-
million-gallon advantage.
So I don't know what we are talking about when we are
talking about taking the actual production----
Mr. Shimkus. OK. We can be nice.
Mr. McAdams. OK. Taking the actual EMTS numbers off the
system which have to be put in the system five days after the
fuels are produced and then every 6 months queue up the RVO in
line with the actual production of those numbers, OK.
Now, the second reason we should do this is because the oil
industry and the obligated parties were allowed to use the
waiver credits under the cellulosic standard and EPA, under the
existing statute, which is another reason why we have to change
the statute, EPA has taken the position since the beginning of
the program that they must issue the same number of waiver
credits each year as the RVO.
So if I am Exxon Mobil, hypothetically, and I only need 300
million waiver credits for the cellulosic pool, I wait until
the end of the year and I buy the waiver credits from EPA.
And all the gallons of cellulosic or biogas from my friend
here don't get bought and it's not bought on a rateable take.
You should consider a rateable take. That's also in my written
testimony.
Mr. Shimkus. Follow up with the midterm review and--because
I do think the intent was for us let's have achievable real
numbers.
But then I do also appreciate the signals that we send
about--for people who wanted growth. So talk about the midterm
review and does that help incentivize that.
Mr. McAdams. So the way I would see it is, if you--if
you're actually bringing these fuels into the market, what
would happen at the 6-month review, the EMT system would
already incorporate these advanced numbers. So the number would
go up.
So for Mannie, at the 6-month mark instead of having to
wait until the end of the year and argue that the next RVO
should go into a black box at EPA and the number be lifted, the
number automatically at 6 months relative to the projects he
brought in would come into the RVO.
It would be added to the RVO at 6 months. It would also be
queued up at the end of the year at 12 months.
So you would collect your numbers and, again, the NBB guys
would collect their numbers in the actual line with what they
produced and that has nothing to do with whether the oil
industry is going to buy this fuel or not, because David's
right--this fuel is going to get bought if the price is right.
Mr. Shimkus. OK. Let me give you a short chance to respond,
Mr. Coleman.
Mr. Coleman. Very quickly, two quick things.
We are not opposed to truing up. We've been asking for true
up, which is midterm review, for quite some time. So that's
point one.
Point two is----
Mr. Shimkus. So that's a good process of our bill?
Mr. Coleman. Yes, that's a good--trueing up is OK as long
as----
Mr. Shimkus. Very good. Whew, I am glad I got a good one.
Mr. Coleman. Although there's a comma. As long as----
Mr. Shimkus. OK. Keep going. Keep going, quickly.
Mr. Coleman. As long as--and this is the short second
point--that it's forward looking and EPA--the one thing that
Mr. McAdams said that wasn't true is we are not asking for a
thumb on the scale.
After they lost that case, EPA went out and did a good
forecasting methodology that's forward looking. They can do
that, have it be completely legal, and do midterm review.
Mr. Shimkus. Great. Thanks. Anyone else?
Go ahead, Mr. Feraci.
Mr. Feraci. Yes, and----
Mr. Shimkus. Quickly.
Mr. Feraci. I am going to start, Mr. Shimkus, by--I am
going to be nice. So here's my--so here's what I would say, and
I really do think that Mike is probably coming at this from a
good place and he's advocating for his members.
When we said that there could be--potentially being
unintended consequences, let's take a very real-world example.
So the EPA just came out with the RVO for cellulosic
biofuels this year. They're going to set that at 418 million
gallons.
So prospectively for this year, going forward, that's what
the biofuel requirement is going to be. If you were doing a
look back, it would be--the numbers aren't in final but it
would be around 323 million based on EPA's numbers.
So when you're talking about something of the scale that
way, when you're talking about trying to drive RNG investment,
it's a lot easier to go and get that investment forward
looking, having a volume like that, as opposed to looking back
and saying, yes, there's going to be this midterm review
process and it may work out. It may not. People may time their
buying different based on that midterm review.
So, again, it's just a constructive observation in terms of
things to think about when you----
Mr. Shimkus. Yes. I've got--my time is expiring and so I
think we are hashing this out that there is a way to get there
and that's, again, Mr. Tonko's problem next year.
[Laughter.]
But I want to end--I want to end on this statement. Then I
will go to Mr. Olson.
While the RFS does not end in 2022, as you all have
highlighted in this panel, it does evolve in a scenario where
EPA has enormous discretion to set levels based upon a bunch of
unweighted factors.
That should scare everyone and that's part of the reason
why we are trying to move to certainty versus uncertainty.
And with that, I would like to yield to the Texan, Mr.
Olson, for 5 minutes.
Mr. Olson. I thank the chair, and welcome, guys, and let's
be very friendly. OK.
I am from a big oil and gas State, Texas. You all know
that, but I want to say, Mr. Feraci, I've seen your product
firsthand back home.
Fort Bend County, right near Needville, Texas, we have a
renewable natural gas facility that's going strong for about 5
years now. It's in partnership with WCA, Morrow, Enerdyne, and
Fort Bend County.
What it does is there is a municipal dump. They stack up
their products at the dump. They are decomposing. They grab
methane. They turn that into natural gas, get a pipeline, it
goes to market.
So I believe in your product. It's working back home. I've
seen it first hand. I will invite you to come out and see if
you haven't.
I have a question for all five of you, just sort of around
the table. One thing that has bothered me over and over that's
talked about by this panel is how uncertain the RFS is.
I know DC has a role in that. There's other market factors.
So can you talk about whether this bill moves in the right
direction or the wrong direction for certainty and are there
things that we should look at?
Mr. Coleman, you're up first, sir.
Mr. Coleman. So our position on the fundamentals of the
bill, which is octane trade for RFS, is that that's not going
to work for us because we don't know what the oil industry is
going to do.
The EIA suggestion that they can do it without us we do not
feel like that is a good trade for us and could actually--we
could be rolling back from a renewable fuels perspective.
Mr. Olson. Mr. McAdams, sir.
Mr. McAdams. Any bill that starts a discussion on reform is
a good bill for us.
Mr. Olson. There we go.
Mr. Feraci.
Mr. Feraci. I would base it on current law. So right now,
admittedly, there's instability in the way that it functions
post-2022. But it is permanent law, and it's something that's
there for our industry as opposed to something that will
sunset.
Mr. Olson. I apologize. Mr. Feelakov? Feelakov, is that
close?
Mr. Fialkov. That's very close.
Mr. Olson. Thank you.
Mr. Fialkov. It's Fialkov. But I think that the bill moves
in the right direction with respect to the rules-based RVO. I
agree with everything that Mr. McAdams just said.
I would say that this notion that there's kind of a
homogenous oil industry that will, as part of a stratagem, not
buy biofuels in order to artificially lower the RVO in a given
year.
It's simply not true. I mean, to the extent it would lower
diesel prices by a cent a gallon I know people who would kill
one another to get that cent.
So that is something I am not concerned about and I don't
know where that fear comes from. But I will say that all of the
progress in terms of establishing certainty and what not
doesn't mean a lot if you don't address the small refinery
exemption issue because that is the kind of thing that will
inject uncertainty and the mere fact that it's looming out
there means that there's a level of uncertainty that you just
can't overcome no matter how you adjust the RVO process.
Mr. Olson. And Mr. Kovarik, your concerns.
Mr. Kovarik. Yes, thank you, sir.
Just very quickly. I think we view the backward-looking
setting the volumes as a small step towards certainty. That,
coupled with no guarantee or no ensure of growth--our
industry--along with the sunsetting of the program in 2032, are
the failings of the bill.
Mr. Olson. Thank you.
One final question for my good friend who controls all the
power pumps there. We have professional drivers, mostly truck
drivers, pros. We talked last panel about misfueling.
Now, that could be a concern, and one of the panellists on
the last panel pointed out a great point that hey, I can't
control a person putting diesel in a gasoline engine--that just
happens.
So my question is are your customers more likely or less
likely to make a misfueling mistake because they're pros and
how can this bill help ensure we have no misfueling issues or
as few as possible? Because that's a real big deal back home.
That's a yes or----
Mr. Fialkov. So with respect to the--if I understand your
question correctly, there's very little concern that a
professional truck driver will put gasoline in a truck, if
that's what you're asking. I think----
Mr. Olson. How about most of the people you work for--it's
not just truck drivers. You got a lot of people here at the
pump, and that's where these mistakes are made.
Mr. Fialkov. Yes. I mean, undoubtedly, when you have a
bifurcated fuels market or automobile market where some cars
can only accept certain fuels, other cars can only accept other
fuels and one of those fuels is materially less expensive than
another, there are going to be instances where people are going
to try to put the less expensive fuel in a car that can't
handle it.
So I think that all of the misfueling mitigation concerns
that were addressed in the last panel by Mr. Columbus are spot
on and the committee would be wise to take them.
Mr. Olson. Thank you. I am out of time.
Have a great holiday season. I yield back.
Mr. Shimkus. The gentleman yields back his time.
Seeing no further Members wishing to ask questions, I would
like to thank you all for being here. I think it was a very
vibrant and important part of this discussion on the draft
bill, and I would like thank you for being here today.
Before we conclude, I would like to ask for unanimous
consent to submit the following documents for the record: a
letter from the American Petroleum Institute, a letter from the
Illinois Corn Growers, a letter from Briggs & Stratton, a
letter from the National Farmers Union, and a letter from the
Union of Concerned Scientists.
Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
And pursuant to committee rules, I remind Members that they
have 10 business days to submit additional questions for the
record. I ask that witnesses submit their responses within 10
business days upon receipt of the questions.
Without objection, this subcommittee is adjourned.
[Whereupon, at 12:30 p.m., the committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Frank Pallone, Jr.
Since this is likely the last Environment Subcommittee
hearing of the 115th Congress, I want to commend Chairman
Shimkus and Ranking Member Tonko on their record of success. We
have enjoyed a level of mutual respect that I believe has
benefited both sides and produced work we can all be proud of.
I look forward to continuing this working relationship in the
116th Congress.
Today's hearing on the Renewable Fuel Standard (RFS) is the
fifth this Congress, and a culmination of Chairman Shimkus'
substantial effort to reform transportation fuel policy. I
commend the chairman for his efforts.
The RFS program is far from perfect. Unfortunately, the
``21st Century Transportation Fuels Act'' is even less perfect
than the program it supposedly is reforming.
This discussion draft does not address any of the known
problems at the Environmental Protection Agency (EPA). It does
not address EPA's substantial misuse of small refinery waivers
to exempt refineries that are neither small nor in financial
distress from biofuel blending obligations. It also does not
address EPA's failure to set volumes at levels required by the
law.
What the 21st Century Transportation Fuels Act does is to
create a high-octane fuel standard without a biofuel mandate.
It also waives misfuelling liability for vehicles manufacturers
and retailers. And, it provides fuel economy credit
``harmonization'' to automobile manufacturers in an effort to
garner their support. Ultimately, this legislation is mainly a
broad compilation of diverging changes to the RFS and other
vehicle programs.
For a reform effort to be fair and successful, any RFS
restructuring proposal should provide long term stability and
certainty for all stakeholders. It should increase transparency
and consistency in the market and promote overall environmental
benefits through the diminishing use of fossil fuels.
The discussion draft before us fails to meet any of those
goals.
Congress enacted the RFS program to diversify the fuel
supply, reduce dependence on fossil fuels, promote rural
development and deliver environmental improvements of air
quality and greenhouse gas reduction. Furthermore, the RFS
program promotes economic development for American farmers and
their families, drives long term investments in technology, and
provides a critical market for home grown fuel at a time when
our rural economy is hurting.
These are important things to consider in judging any
reform effort. But it's also critical to ask the question of
whether, in the face of intensifying climate change, a proposal
improves the environmental benefits of the RFS or if it
undermines them?
This question is vital, because the transportation sector
is the largest contributor of U.S. greenhouse gas emissions.
Let me be clear: a policy change that extends the dominance of
fossil fuel use in transportation, that slows improvement in
vehicle fuel economy standards, or keeps us on a path of
increased carbon emissions in the transportation sector is
absolutely unacceptable.
Unfortunately, I believe that will be the overall effect of
this discussion draft. It will ultimately increase the use of
liquid fossil fuels in inefficient cars, long into the future.
Looking through a climate lens, this proposal would do nothing
to address the existential problem of climate change and would
likely make it worse. And, that's something I will oppose.
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