[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
PROTECTING THE RFS: THE TRUMP
ADMINISTRATION'S ABUSE OF SECRET WAIVERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENVIRONMENT AND CLIMATE CHANGE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 29, 2019
__________
Serial No. 116-74
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
43-775 PDF WASHINGTON : 2021
-----------------------------------------------------------------------------------
COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, Jr., New Jersey
Chairman
BOBBY L. RUSH, Illinois GREG WALDEN, Oregon
ANNA G. ESHOO, California Ranking Member
ELIOT L. ENGEL, New York FRED UPTON, Michigan
DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland PETE OLSON, Texas
JERRY McNERNEY, California DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice BILL JOHNSON, Ohio
Chair 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 TIM WALBERG, Michigan
SCOTT H. PETERS, California EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
------
Professional Staff
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
MIKE BLOOMQUIST, Minority Staff Director
Subcommittee on Environment and Climate Change
PAUL TONKO, New York
Chairman
YVETTE D. CLARKE, New York JOHN SHIMKUS, Illinois
SCOTT H. PETERS, California Ranking Member
NANETTE DIAZ BARRAGAN, California CATHY McMORRIS RODGERS, Washington
A. DONALD McEACHIN, Virginia DAVID B. McKINLEY, West Virginia
LISA BLUNT ROCHESTER, Delaware BILL JOHNSON, Ohio
DARREN SOTO, Florida BILLY LONG, Missouri
DIANA DeGETTE, Colorado BILL FLORES, Texas
JAN SCHAKOWSKY, Illinois MARKWAYNE MULLIN, Oklahoma
DORIS O. MATSUI, California EARL L. ``BUDDY'' CARTER, Georgia
JERRY McNERNEY, California JEFF DUNCAN, South Carolina
RAUL RUIZ, California, Vice Chair GREG WALDEN, Oregon (ex officio)
DEBBIE DINGELL, Michigan
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
----------
Page
Hon. Paul Tonko, a Representative in Congress from the State of
New York, opening statement.................................... 1
Prepared statement........................................... 3
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 4
Prepared statement........................................... 6
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 7
Prepared statement........................................... 9
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 10
Prepared statement........................................... 11
Witnesses
Geoff Cooper, President and Chief Executive Officer, Renewable
Fuels Association.............................................. 13
Prepared statement........................................... 15
Gene Gebolys, President and Chief Executive Officer, World
Energy, on behalf of the National Biodiesel Board.............. 32
Prepared statement........................................... 34
Chet Thompson, President and Chief Executive Officer, American
Fuel & Petrochemical Manufacturers............................. 44
Table, ``U.S. Consumption of Ethanol and Biodiesel is at/near
Record Levels,'' Energy Information Administration......... 45
Prepared statement........................................... 48
Answers to submitted questions............................... 139
Kelly Nieuwenhuis, President, Siouxland Energy Cooperative....... 58
Prepared statement........................................... 60
Submitted Material
H.R. 3006, the Renewable Fuel Standard Integrity Act of 2019..... 95
Letter of October 29, 2019, from Biotechnology Innovation
Organization to Mr. Tonko, et al., submitted by Mr. Tonko...... 98
Letter of October 28, 2019, from United Steelworkers to Mr. Tonko
and Mr. Shimkus, submitted by Mr. Tonko........................ 106
Letter of October 28, 2019, from Mike Carr, Executive Director,
New Energy America, to Mr. Tonko, et al., submitted by Mr.
Tonko.......................................................... 111
Letter of September 20, 2019, from Rep. Collin C. Peterson, et
al., to Andrew Wheeler, Administrator, Environmental Protection
Agency, submitted by Mr. Loebsack.............................. 113
Letter of September 6, 2019, from the Labor Coalition for
Biofuels to Andrew Wheeler, Administrator, Environmental
Protection Agency, submitted by Mr. Tonko...................... 116
Letters from labor unions to Environmental Protection Agency
Administrators and President Donald J. Trump,\1\ submitted by
Mr. McKinley
Article of November 20, 2018, ``Palm Oil Was Supposed to Help
Save the Planet. Instead It Unleashed a Catastrophe,'' by Abram
Lustgarten, New York Times Magazine, submitted by Ms. Barragan. 121
----------
\1\ Labor union letters submitted by Mr. McKinley have been retained in
committee files and also are available at https://docs.house.gov/
meetings/IF/IF18/20191029/110175/HHRG-116-IF18-20191029-SD003.pdf.
Testimony of Anne L. Idsal, Acting Assistant Administrator,
Office of Air and Radiation, Environmental Protection Agency,
October 29, 2019, submitted by Mr. Tonko....................... 133
Letter of September 10, 2019, from American Energy Coalition, et
al., to U.S. Senator Deb Fischer, et al., submitted by Mr.
Tonko.......................................................... 136
PROTECTING THE RFS: THE TRUMP ADMINISTRATION'S ABUSE OF SECRET WAIVERS
----------
TUESDAY, OCTOBER 29, 2019
House of Representatives,
Subcommittee on Environment and Climate Change,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:33 a.m., in
the John D. Dingell Room 2123, Rayburn House Office Building,
Hon. Paul Tonko (chairman of the subcommittee) presiding.
Members present: Representatives Tonko, Barragan, Blunt
Rochester, Soto, DeGette, Schakowsky, Matsui, McNerney, Ruiz,
Pallone (ex officio), Shimkus (subcommittee ranking member),
Rodgers, McKinley, Johnson, Flores, Mullin, Carter, Duncan, and
Walden (ex officio).
Also present: Representatives Welch and Loebsack.
Staff present: Adam Fischer, Policy Analyst; Jean Fruci,
Energy and Environment Policy Advisor; Waverly Gordon, Deputy
Chief Counsel; Rick Kessler, Senior Advisor and Staff Director,
Energy and Environment; Brendan Larkin, Policy Coordinator;
Nikki Roy, Policy Coordinator; Mike Bloomquist, Minority Staff
Director; Jerry Couri, Minority Deputy Chief Counsel,
Environment and Climate Change; Mary Martin, Minority Chief
CStaff Assistantounsel, Energy, and Environment and Climate
Change; Brannon Rains, Minority Legislative Clerk; and Peter
Spencer, Minority Senior Professional Staff Member, Environment
and Climate Change.
Mr. Tonko. The Subcommittee on Environment and Climate
Change will now come to order. I recognize myself for 5 minutes
for the purposes of an opening statement.
OPENING STATEMENT OF HON. PAUL TONKO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK
This morning the subcommittee will examine H.R. 3006, the
Renewable Fuel Standard Integrity Act of 2019, a bipartisan
bill sponsored by Congressman Collin Peterson of Minnesota.
Last Congress, Mr. Shimkus led a series of hearings and
roundtables taking a deep dive into EPA's Renewable Fuel
Standard program. While the subcommittee covered many aspects
of the RFS, the growing use of small refinery exemptions was an
area we did not fully explore.
Today is an opportunity to provide oversight regarding the
recent rise of these waivers and the administration's overall
implementation of the program.
Based on our previous hearings, nearly everyone seems to
agree that there have been challenges in the past with
implementation, including setting an appropriate and timely
annual Renewable Volume Obligation, or an RVO.
I also believe most would agree that small refinery
exemptions are a legitimate part of the program. Refineries
processing less than 75,000 barrels per day that believe they
are experiencing disproportionate hardship due to the program
can petition for these waivers.
During the Obama administration, EPA followed the
Department of Energy's advice on which waivers to grant. This
resulted in numerous years with fewer than 10 exemptions
granted annually. Often, half of the petitions or more were
rejected.
It is also indisputable that we have seen a change in how
petitions are being evaluated and granted. That change
coincides with the beginning of the Trump administration.
For 2016, some 19 waivers were granted. Just 1 was denied.
For 2017, 35 waivers were granted and one denied, and for 2018,
there were 31 granted and 6 denied.
As more information has come out about these exemptions, it
has become clear that EPA's actions are no longer aligned with
DOE's recommendations.
H.R. 3006 seeks to bring needed transparency into the
process. The bill would set an annual deadline of June 1st for
small refineries to petition for exemptions for that following
year.
Setting this deadline will mean granting waivers before the
RVO is set, which would end the current retroactive process
that has generated uncertainty in the RIN market.
In order for the RIN market to function and properly
incentivize investment, particularly in advanced biofuel
production, it is critical that all market participants are
receiving the same information and signals.
The bill would also require public disclosure of any
information included in exemption petitions.
While I understand there are legitimate issues around
confidential business information in these applications, surely
there is some information that we can all agree would be
appropriate to release.
This includes details as innocuous as petitioners' names
and locations of facilities receiving those exemptions. There
is no good reason this very basic info should be treated as a
trade secret.
Currently, we do not know which, or even how many,
facilities are receiving exemptions until long after they do.
For a program that relies on trading to enable compliance, it
is unbelievable that the program's regulator would give some
participants market-driving information that can be traded on
while everyone else is left in the dark.
I do not think that it is a good or fair way for the RIN
market to operate, and it certainly leads to greater volatility
in RIN prices.
The original goals of the RFS are still needed today, from
supporting economic development in rural communities to
developing domestic biofuel production, especially for advanced
and cellulosic biofuels.
The recent use of small refinery exemptions is failing to
advance these goals. The administration is undermining market
signals and certainty, which ultimately hurts rural
communities.
Adding greater certainty and transparency to the RIN
market, and the RFS more broadly, is a necessary and valuable
improvement.
I look forward to hearing the perspectives of our witnesses
on whether H.R. 3006 can help achieve those objectives.
And so I do thank our witnesses for joining us today. I do
want to also speak to the fact that we may be joined by many
other Members of the House on different committees.
I want to recognize the presence of those as they join us,
the colleagues from our committee who will be joining us for
our hearing this morning. We are happy to have them here and
welcome them to the committee.
This is an important hearing, and it's always good to see
Members so motivated on an issue of importance to their
constituents and to our Nation.
I do want to remind our guests if they do choose to come,
and our committee members, that while the rules of the House
allow for our colleagues to join us, those rules also prohibit
them from speaking or otherwise actively participating in our
hearing.
I also want to remind our committee members that it is also
not in order to yield time to any of our colleagues who are not
also members of this committee, and again, we will welcome them
if they join us today. We appreciate the participation.
[The prepared statement of Mr. Tonko follows:]
Prepared Statement of Hon. Paul Tonko
The Subcommittee on Environment and Climate Change will now
come to order. I recognize myself for five minutes for the
purposes of an opening statement.
This morning the subcommittee will examine H.R. 3006, the
Renewable Fuel Standard Integrity Act of 2019, a bipartisan
bill sponsored by Congressman Collin Peterson of Minnesota.
Last Congress, Mr. Shimkus led a series of hearings and
roundtables taking a deep dive into EPA's Renewable Fuel
Standard program. While the subcommittee covered many aspects
of the RFS, the growing use of small refinery exemptions was an
area we did not fully explore.
Today is an opportunity to provide oversight regarding the
recent rise of these waivers and the administration's overall
implementation of the program.
Based on our previous hearings, nearly everyone seems to
agree that there have been challenges in the past with
implementation, including setting an appropriate and timely
annual Renewable Volume Obligation or RVO.
I also believe most would agree that small refinery
exemptions are a legitimate part of the program. Refineries
processing less than 75,000 barrels per day that believe they
are experiencing disproportionate hardship due to the program
can petition for these waivers.
During the Obama administration, EPA followed the
Department of Energy's advice on which waivers to grant.
This resulted in numerous years with fewer than 10
exemptions granted annually. Often half of the petitions or
more were rejected.
It is also indisputable that we have seen a change in how
petitions are being evaluated and granted. That change
coincides with the beginning of the Trump administration.
For 2016, 19 waivers were granted. Just 1 was denied.
For 2017, 35 waivers were granted and 1 denied.
And for 2018, there were 31 granted and 6 denied.
As more information has come out about these exemptions, it
has become clear that EPA's actions are no longer aligned with
DOE's recommendations.
H.R. 3006 seeks to bring needed transparency into the
process.
The bill would set an annual deadline of June 1st for small
refineries to petition for exemptions for the following year.
Setting this deadline will mean granting waivers before the
RVO is set, which would end the current retroactive process
that has generated uncertainty in the RIN market.
n order for the RIN market to function and properly
incentivize investment, particularly in advanced biofuel
production, it is critical that all market participants are
receiving the same information and signals.
The bill would also require public disclosure of any
information included in exemption petitions.
While I understand there are legitimate issues around
confidential business information in these applications, surely
there is some information that we can all agree would be
appropriate to release.
This includes details as innocuous as petitioners' names
and locations of facilities receiving exemptions. There is no
good reason this very basic info should be treated as a trade
secret.
Currently, we do not know which, or even how many,
facilities are receiving exemptions until long after they do.
For a program that relies on trading to enable compliance,
it is unbelievable that the program's regulator would give some
participants market-driving information that can be traded on
while everyone else is left in the dark.
I do not think that is a good or fair way for the RIN
market to operate, and it certainly leads to greater volatility
in RIN prices.
The original goals of the RFS are still needed today, from
supporting economic development in rural communities to
developing domestic biofuel production, especially for advanced
and cellulosic biofuels.
The recent use of small refinery exemptions is failing to
advance these goals. The administration is undermining market
signals and certainty, which ultimately hurts rural
communities.
Adding greater certainty and transparency to the RIN
market, and the RFS more broadly, is a necessary and valuable
improvement. I look forward to hearing the perspectives of our
witnesses on whether H.R. 3006 can help achieve those
objectives.
Mr. Tonko. With that, I will now recognize Mr. Shimkus, our
ranking member of the Subcommittee on Environment and Climate
Change, for 5 minutes for his opening statement, and welcome,
Mr. Ranking Member.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman. Good morning.
I want to welcome you back, all of you all back, to the
Renewable Fuel Standard debate and extend a hearty welcome to
all the new members of the subcommittee that haven't had the
pleasure of trying to sort through the complexities of this
issue prior to today.
Quite frankly, I am surprised we are having any hearing at
all whose title speaks to protecting the Renewable Fuel
Standard when last fall it was suggested that the Federal
Government should be advancing policies to reduce demand and
reliance on liquid fuels--the thrust of the RFS--because the
transportation sector is now the greatest source of greenhouse
gas emissions in the United States, and climate policy must
address it.
So I want to set the stage. Last year, my friends said we
ought to get out of the liquid fuel debate, period, because of
climate.
Now we are here talking about protecting it. It's dystopia
that I am experiencing right now. Moreover, while I think it is
fair to have an oversight hearing about the RFS, I would
caution folks, like our hearing title suggests, making comments
about the uniqueness of the situation.
I want to associate myself with Mr. Tonko's comments from
last fall, that for several years we have heard about issues
with implementing the Renewable Fuel Standard program under
administrations from both parties.
For this reason, simply ``saving'' the RFS is not only a
misnomer, it does a disservice to the many stakeholders
impacted by this program.
I would like to take this opportunity to renew my plea for
this committee and the affected stakeholders to take a very
serious look at the high-octane proposal that Congressman
Flores and I have recently reintroduced.
Even though we are both not seeking reelection, we think
status quo with this program is not sustainable. Given the
Energy Department's Energy Information Administration
projections of declining liquid transportation and fuel demand,
it's difficult to envision a post-2022 scenario in which
biofuel volumes would not actually be lower than they are
today.
In addition, while it is true that the Renewable Fuel
Standard does not disappear in 2023, the rules for allocation
change quite a bit depending upon who is in office and what
that administrator considers appropriate for the disparate
interest involved in this issue.
If you are looking for certainty, this is not a recipe for
it. On top of that, just as Congress guessed wrong in 2007 on
the levels and types of fuels that would be in the marketplace
a decade or more later, we cannot predict market forces or
trade impacts, or other political pressures on allocations, nor
should Congress repeat the error of making fuel choices during
any major change in auto technology, fuel efficiency
regulation, and a push for removing liquid and higher carbon-
based fuels from the marketplace.
Rather than looking at individual Federal transportation
fuel policies on their own, I urge my colleagues, as we have
done in a high-octane proposal, to take a wider view of those
policies and consider how they might--using rather than
manipulating the marketplace--work together to bring more value
to consumers and more certainty to stakeholders.
Our bill would transition from blend-specific mandates to
performance-based standards for future fuels and vehicles,
remove longstanding 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.
It's time that Congress pursue this type of comprehensive
reform. Stakeholders on all sides of this debate have been
whipsawed for months by rumored and actual administration
actions.
Media reports and legal actions and the uncertainty will
only increase after 2022 when EPA receives even broader
discretion to set biofuel blending requirements.
I welcome the witnesses today and their organizations back
to the committee. I hope you will provide us with a
constructive and, hopefully, objective and productive dialogue.
[The prepared statement of Mr. Shimkus follows:]
Prepared Statement of Hon. John Shimkus
Good morning, Mr. Chairman, and thank you for this time.
I want to welcome you back to the renewable fuel standard
debate and extend a hearty welcome to all the new members of
the subcommittee that haven't had the pleasure of trying to
sort through the complexities of this issue prior to today.
Quite frankly, I am surprised we are having any hearing
whose title speaks to protecting the Renewable Fuel Standard
when last fall, Mr. Chairman, you suggested your belief that
the Federal Government should be advancing policies that reduce
demand and reliance on liquid fuels--the thrust of the RFS--
because the transportation sector is now the greatest source of
greenhouse gas emissions in the United States and climate
policy must address it.
Moreover, while I think it is fair to have an oversight
hearing about the RFS, I would caution folks from--like our
hearing title suggests--making gratuitously political comments
about the uniqueness of this situation. I want to associate
myself with Mr. Tonko's comments from last fall that for
several years we have heard about issues with implementing the
Renewable Fuel Standard program under administrations from both
parties. For this reason, simply ``saving'' the RFS is not only
a misnomer, it does a disservice to the many stakeholders
impacted by this program.
I would like to take this opportunity to renew my plea for
this committee and the affected stakeholders to take a very
serious look at the high-octane proposal that Congressman
Flores and I have recently reintroduced. Even though we are
both not seeking re-election, we think the status quo with this
program is not sustainable.
Given the Energy Department's Energy Information
Administration 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.
In addition, while it is true that the Renewable Fuel
Standard does not disappear in 2023, the rules for allocation
change quite a bit depending on who is in office and what that
Administration considers appropriate for the disparate
interests involved in this issue. If you are looking for
certainty, this is not a recipe for it.
On top of that, just as Congress guessed wrong in 2007 on
the levels and types of fuels that would be in the marketplace
a decade or more later, we cannot predict market forces or
trade impacts or other political pressures on allocations; nor
should Congress repeat the error of making fuel choices during
ANY major change in auto technology, fuel efficiency
regulation, and a push for removing liquid and higher carbon-
based fuels from the marketplace.
Rather than looking at individual Federal transportation
fuel policies on their own, I urge my colleagues, as we have
done in the high-octane proposal, to take a wider view of those
policies and consider how they might--using, rather than
manipulating, the marketplace--work together to bring more
value to consumers and more certainty to stakeholders. Our bill
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.
It's time that Congress pursue this type of comprehensive
reform. Stakeholders on all sides of this debate have been
whipsawed for months by rumored and actual administrative
actions, media reports, and legal actions, and that uncertainty
will only increase after 2022 when EPA receives even broader
discretion to set biofuel blending requirements.
I welcome the witnesses and their organizations back to the
committee. I hope you will provide us a constructive--and
hopefully objective and productive--dialogue.
And with that I yield the remainder of my time to Mr.
Flores.
Mr. Shimkus. And with that, I'd like to yield the remainder
of my time to Mr. Flores, my colleague and friend from Texas.
Mr. Flores. I thank the gentleman for yielding.
At a hearing last December on the 21st Century
Transportation Fuels Act, I outlined some basic concerns with
respect to the status quo of America's current fuel policies.
Number one, biofuel producers consistently raise concerns
about the annual implementation on the RFS.
Number two, refiners face increased cost of complying with
the RFS, and those costs are borne by consumers.
Number three, automakers face challenges in complying with
the efficiency programs under two different agencies inside the
EPA and the DOT.
And four, some environmental communities believe that
first-generation ethanol creates environmental problems.
Almost 11 months since that hearing, we are back in the
same room fighting over the same RFS. The 21st Century
Transportation Fuels Act developed after several bipartisan
roundtables and hearings addressed many of these concerns by
taking a holistic view over transportation fuel policies.
For consumers, higher octane fuels can bring increased
efficiency and performance for the next generation of engines.
For stakeholders, transitioning the RFS to a national
octane standard creates new market opportunity for biofuel
producers and gives compliance certainty to refiners and
automakers.
Mr. Shimkus and I have reintroduced this bill on October
the 16th and, as I've said before, we need to go with the
status quo, which almost everybody has said is broken.
If we can have compromised solution like the 21st Century
Fuels Act, I can guarantee all of you in this room and that are
listening that we are not going to find a perfect solution that
gives everybody 100 percent of what they want.
With that, I look forward to questioning our witnesses, and
I yield back the balance of my time.
Mr. Tonko. And Mr. Shimkus yields back.
The Chair now recognizes Mr. Pallone, chairman of the full
committee, for 5 minutes for his opening statement.
Chairman Pallone?
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Tonko.
Today, this committee is continuing its oversight of the
Trump administration by examining the EPA's abuse of secret
waivers to undermine the Renewable Fuels Standard program, or
RFS.
Right now, President Trump is pitting farmers and refiners
against each other to the detriment of all stakeholders and
consumers. As a result, the RFS does not appear to be working
the way it should for anyone involved.
Last Congress, then-Chairman Shimkus held a series of
roundtables and hearings on the RFS in a quest to try to
determine a new course for the program going forward.
And while I disagreed with the proposal he developed, his
efforts were sincere and the hearings illuminated many
important issues that we must deal with as we approach 2022 and
the sunsetting of the current phase of the program.
Unfortunately, President Trump does not seem interested in
making the program work. In fact, the Trump administration has
done its best to undermine the program at a time when American
farmers are already struggling to deal with the collapse of
markets for many of the products they grow here at home.
The idea that EPA Administrator Andrew Wheeler is somehow
acting without the President's knowledge or approval defies
logic. As we have seen throughout the last 3 years, anyone in
the administration who acts against President Trump's stated
desires is either subject to a public browbeating or they are
dismissed from the administration.
So it's clear that Administrator Wheeler is acting on the
President's orders--orders that, once again, show President
Trump is captive to the oil industry.
Nowhere is this more evident than the President's huge
expansion of small refinery waivers. Before President Trump had
taken office, EPA normally approved around seven or eight
petitions for these waivers each year.
But that changed dramatically when Trump came to office.
Former Administrator Pruitt retroactively approved 19
exemptions for 2016, and then 35 were approved for 2017,
followed by 31 in 2018.
Now, I think it's fair to say that some exemptions to the
law's renewable fuel blending requirements are necessary and
that there are refineries that would be harmed without an
exemption.
In New Jersey, we have a number of small refineries, and
these waivers can be important for a struggling facility. But,
unfortunately, today we have no way of knowing whether any of
the refineries granted these exemptions are actually
experiencing the hardship envisioned by Congress when we
created the RFS, and it is a frustration shared by both
Democrats and Republicans.
Senator Chuck Grassley has said, and I quote, he is ``very
skeptical that every company receiving waivers truly needs
them.''
And this skepticism is completely understandable
considering these hardship exemptions are granted in secret,
with EPA not even revealing the name of the companies that
receive them.
Not even our committee, which created the RFS, receives
that information, and there is simply no transparency in the
process, and these decisions are far too consequential to be
made in a dark back room without any sunlight.
So that's why today we are holding a hearing on these
exemptions and, specifically, on Representative Peterson's
bipartisan legislation to bring at least part of this process
out into the open.
H.R. 3006, the Renewable Fuel Standard Integrity Act of
2019, requires public disclosure of any information included in
petitions for exemption from the annual blending requirements.
The bill also sets an annual deadline of June 1st for small
refineries to petition for exemption from the upcoming year's
blending requirements in order to make the process more
predictable and rational.
Now, some of the information contained in the small
refinery exemption petitions is likely to be confidential
business information that shouldn't be divulged to the general
public.
But there is, clearly, a logical middle ground between
releasing every bit of information on a petition and the
complete blackout we are all subject to today.
So we should be able to find a middle ground and move a
version of this bill through the committee with bipartisan
support, and that is what we are hoping to achieve today.
And I thank you again, Chairman Tonko. This, I think, is a
very important hearing. Thank you.
I yield back.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
Today, this committee is continuing its oversight of the
Trump administration by examining the EPA's abuse of secret
waivers to undermine the Renewable Fuels Standards program or
RFS. Right now, President Trump is pitting farmers and refiners
against each other to the detriment of all stakeholders and
consumers. As a result, the RFS does not appear to be working
the way it should for anyone involved.
Last Congress, then-Chairman Shimkus held a series of
roundtables and hearings on the RFS in a quest to try to
determine a new course for the program going forward. While I
disagreed with the proposal he developed, his efforts were
sincere, and the hearings illuminated many important issues
that we must deal with as we approach 2022 and the sunsetting
of the current phase of the program.
Unfortunately, President Trump does not seem interested in
making the program work. In fact, the Trump administration has
done its best to undermine the program at a time when American
farmers are already struggling to deal with the collapse of
markets for many of the products they grow here at home.
The idea that EPA Administrator Andrew Wheeler is somehow
acting without the President's knowledge or approval defies
logic. As we have seen throughout the last three years, anyone
in the administration who acts against President Trump's stated
desires is either subject to a public browbeating or they are
dismissed from the administration. It's clear that
Administrator Wheeler is acting on the President's orders--
orders that once again show President Trump is captive to the
oil industry.
Nowhere is this more evident than the President's huge
expansion of small refinery waivers. Before President Trump had
taken office, EPA normally approved around seven or eight
petitions for these waivers each year. But that changed
dramatically when Trump came to office. Former Administrator
Pruitt retroactively approved 19 exemptions for 2016, and then
35 were approved for 2017, followed by 31 in 2018.
Now, I think it's fair to say that some exemptions to the
law's renewable fuel blending requirements are necessary and
that there are refineries that would be harmed without an
exemption. In New Jersey, we have a number of small refineries
and these waivers can be important for a struggling facility.
Unfortunately, today we have no way of knowing whether any of
the refineries granted these exemptions are actually
experiencing the hardship envisioned by Congress when we
created the RFS. This is a frustration shared by both Democrats
and Republicans. Senator Chuck Grassley has said he's (quote)
``very skeptical that every company receiving waivers truly
needs them.''
And this skepticism is completely understandable
considering these hardship exemptions are granted in secret,
with EPA not even revealing the name of the companies that
receive them. Not even our committee, which created the RFS,
receives that information. There is simply no transparency in
this process, and these decisions are far too consequential to
be made in a dark, back room without any sunlight.
That's why today, we are holding a hearing on these
exemptions and, specifically, on Representative Peterson's
bipartisan legislation to bring at least part of this process
out into the open. H.R. 3006, the Renewable Fuel Standard
Integrity Act of 2019, requires public disclosure of any
information included in petitions for exemption from the annual
blending requirements. The bill also sets an annual deadline of
June 1 for small refineries to petition for exemption from the
upcoming year's blending requirements in order to make the
process more predictable and rational.
Now, some of the information contained in the small
refinery exemption petitions is likely to be confidential
business information that shouldn't be divulged to the general
public. But there is clearly a logical middle ground between
releasing every bit of information on a petition and the
complete blackout we are all subject to today.
We should be able to find a middle ground and move a
version of this bill through the committee with bipartisan
support. I yield back.
Mr. Tonko. You are welcome. The gentleman yields back.
The Chair now recognizes Mr. Walden, ranking member of the
full committee, for 5 minutes for his opening statement.
Congressman Walden?
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Thank you very much, Mr. Chairman, and to our
witnesses, thank you for being here.
I understand today's hearing has multiple objectives. It's
a legislative hearing on H.R. 3006, the Renewable Fuels
Standard Integrity Act. It's an oversight hearing of both small
refinery exemptions and the recent supplemental proposed rule
on required production of certain renewable fuels.
I am sure H.R. 3006 is a well-meaning attempt to address
concerns that biofuel feedstock producers have about the
issuance of waivers. But I have questions about the
legislation.
From my reading, I am confused about the timing between the
deadline for requesting a waiver and the rules establishing
required volumes.
I am also troubled by the broadness of the precedent the
bill sets for removing protections for any legitimate trade
sector intellectual property submitted to EPA as part of a
waiver.
I hope our witnesses can help us understand whether this
bill needs changes to be workable and whether they would
consider this a good policy if it applied to them.
As the EPA's recent supplemental proposal on the required
production amounts for certain biofuels in 2020 and 2021 and
its administration of the small refinery waiver, I wish we had
a witness from the EPA here to explain its logic for proposing
the change calculations of renewable fuel percentages, how that
will ensure industry blends what is intended, and required
volumes are not reduced by future hardship waivers.
Now, I understand the EPA offered alternate dates to appear
before our committee. But considering the EPA is holding a
public hearing on this subject tomorrow and it will be taking
comment for another 30 days, it seems it would have been
prudent for the committee to postpone long enough for us to
engage in meaningful oversight.
But this is hardly the only issue of the RFS. A broader
hearing on the entire program seems like it would have been a
more appropriate way to tackle this.
Take renewable fuel source of woody biomass, something I've
talked about for years and actually is occurring in my
district, or will soon.
Not only can woody biomass produce the most desired yet
least produced fuel under the RFS, it also helps thin our
forests and reduce the risk of catastrophic fire that pumps
carbon emissions into the atmosphere.
Despite these advantages, RFS treats wood from private and
Federal land differently, even though there is no scientific
difference. This is a missed opportunity.
If we are serious about expanding renewable fuels and
further lowering carbon emissions, we cannot establish
arbitrary conditions and be so narrowly focused on who owns the
wood.
We need innovation, preparation, and conservation-based
solutions. Let me be clear, though. The RFS is important to
many people, particularly in a time of uncertainty and
commodity markets.
If we are going to look at this program seriously, we
should do it in a way that's broader and improves the program
for consumers and not just incumbent producers.
Finally, let me say something about the most obvious part
of this hearing. We are holding a hearing on the need for more
biobased liquid transportation fuels when every other
indication from the majority, whether talking points, its ill-
defined 100 by 50 proposal of which we have many questions,
Green New Deal, or the LIFT Act, each revolve around doing away
with liquid fuels to power light-duty and heavy-duty vehicles'
fuel mix.
Based on this policy desire, Department of Energy data
showing decline in the use of liquid fuels, it's perplexing
that we have this hearing to promote the use of liquid fuels
and the Renewable Fuel Standard at the same time--that it's
promoting policies against continued use of these fuels.
Now, in the last Congress, I tasked Mr. Shimkus and Mr.
Flores with the tough duty of coming together to see if we
could figure a way through this for a modern RFS system and
if--well, you know what happened.
First, Mr. Shimkus announced he's not running again. Then
Mr. Flores announced he's not running again, and then I
announced I am not running again.
So it's a hell of a mess, but it's one that I would caution
anybody who wants to get close to--and you dropped out too.
So----
Mr. Loebsack. I am running again.
[Laughter.]
Mr. Walden. Yes. I mean, it's--I am just warning anybody on
the committee stay away. Stay away from RFS.
But it's a tough one. We all know that. Lots of competing
interests, and I think we all want to get it right, Mr.
Chairman.
So, as always, we look forward to working with you, sir,
and as this moves forward.
And I yield back.
[The prepared statement of Mr. Walden follows:]
Prepared Statement of Hon. Greg Walden
Thank you, Mr. Chairman.
I understand that today's hearing has multiple objectives:
it's a legislative hearing on H.R. 3006, the Renewable Fuel
Standard Integrity Act, an oversight hearing of both small
refinery exemptions and the recent supplemental proposed rule
on required production of certain renewable fuels, and,
frankly, score political points with a specific group of
voters.
I am sure H.R. 3006 is a well-meaning attempt to address
concerns biofuel producers and feedstock producers have about
the issuance of waivers, but I have questions about this
legislation. From my reading, I am confused about the timing
between the deadline for a requesting waiver and the rules
establishing required volumes. I am also troubled by the
broadness of the precedent the bill sets in removing
protections for any legitimate trade secret or intellectual
property submitted to EPA as part of a waiver. I hope our
witnesses can help us understand whether this bill needs
changes to be workable and whether they would consider this a
good policy if it were applied to them.
As to the EPA's recent supplemental proposal on the
required production amounts for certain biofuels in 2020 and
2021 and its administration of the small refinery waiver; I
wish we had a witness from the EPA here to explain its logic
for proposing the changed calculations of renewable fuel
percentages, how that will ensure industry blends what's
intended, and required volumes are not reduced by future
hardship waivers. I understand the EPA offered alternate dates
to appear before our committee; but considering that the EPA is
holding a public hearing on this subject tomorrow and then will
be taking comment for another 30 days, it seems it would have
been prudent to postpone long enough for our committee to
engage in meaningful oversight.
This is hardly the only issue with the RFS; a broader
hearing on the entire program seems like it would have been
more appropriate.
Take renewable fuels sourced from woody biomass. Not only
can wody biomass produce the most desired, yet least produced
fuel under the RFS, it also helps thin our forests and reduce
the risk of catastrophic fires that pump carbon emissions into
the atmosphere. Despite these advantages, RFS treats wood from
private and Federal land differently, even though there is no
scientific difference. This is a missed opportunity. If we are
serious about expanding renewable fuels, and further lowering
carbon emissions, we cannot establish arbitrary conditions and
be so narrowly focused on who owns the wood. We need
innovation, preparation, and conservation-based solutions.
Let me be clear though, the RFS is important to many
people, particularly in a time of uncertainty in commodity
markets. If we are going to look at this program seriously, we
should do it in a way that is broader and improves the program
for consumers and not just incumbent producers.
Finally, let me say something about the most obvious part
about this hearing:
We are holding a hearing on the need for more bio-based
liquid transportation fuels when every other indication from
the majority--whether talking points, its ill-defined 100 by 50
proposal, of which we have many questions, the Green New Deal,
or the LIFT Act--each revolve around doing away with liquid
fuels to power light-duty and heavy-duty vehicles fuel mix.
Based on this policy desire and Department of Energy data
showing a decline in the use of liquid fuels, it is perplexing
that the majority called this hearing to promote the use of
liquid fuels and the Renewable Fuels Standard at the same time
that it's promoting policies against continued use of these
fuels.
I know the House Majority Leader has signaled to the press
that Democrats are for farmers because they oppose the
administration's latest proposal, but folks in farm country,
while frustrated with the situation, can see right through this
to what it is.
We should be about solutions, not duplicitous, one-off
political pandering. This committee is better than that.
As Mr. Shimkus and Flores showed us last year, we know
farmers, biofuels producers, and refiners have concerns about
the RFS, but union workers and others have major concerns about
the RFS, too. If we're sincere about a future that includes
liquid transportation fuels, let's bring all the people
affected into this discussion and let's try to work through
some of these problems.
Mr. Chairman let's do some real bipartisan work we can be
proud of. I yield back.
Mr. Tonko. Well, we appreciate those comments and the
warnings.
Mr. Walden. Good luck.
Mr. Tonko. And the warnings. The gentleman yields back.
The Chair would like to remind Members that, pursuant to
committee rules, all Members' written opening statements shall
be made part of the record.
Now we will introduce our witnesses, and we welcome them
all for joining us on what is a very important discussion.
We will begin with Mr. Geoff Cooper, president and CEO of
Renewable Fuels Association. Seated next to him is Mr. Gene
Gebolys, president and CEO of World Energy.
Next to him, Mr. Chet Thompson, president and CEO of
American Fuel & Petrochemical Manufacturers, and then finally,
Mr. Kelly Nieuwenhuis, president of Siouxland Energy
Cooperative.
Before we begin, gentlemen, I would like to explain the
lighting system. In front of you are a series of lights. The
light will initially be green at the start of your opening
statement. The light will turn yellow when you have 1 minute
remaining. Please begin to wrap up your testimony at that
point. The light will turn red when your time has expired.
At this time, the Chair will now recognize Mr. Cooper for 5
minutes to provide his opening statement, and again, welcome,
Mr. Cooper.
STATEMENTS OF GEOFF COOPER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, RENEWABLE FUELS ASSOCIATION; GENE GEBOLYS, PRESIDENT
AND CHIEF EXECUTIVE OFFICER, WORLD ENERGY, ON BEHALF OF THE
NATIONAL BIODIESEL BOARD; CHET THOMPSON, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS;
AND KELLY NIEUWENHUIS, PRESIDENT, SIOUXLAND ENERGY COOPERATIVE
STATEMENT OF GEOFF COOPER
Mr. Cooper. Well, thank you, Mr. Chairman, and good
morning, Chairman Tonko, Ranking Member Shimkus, Ranking Member
Walden, and members of the subcommittee.
My name is Geoff Cooper, and I am the president and CEO of
the Renewable Fuels Association, a trade association
representing the U.S. ethanol industry.
I appreciate the opportunity to share our industry's
concerns regarding EPA's rampant abuse of RFS Small Refinery
Exemptions, or SREs.
When properly implemented, the Renewable Fuel Standard is
an extraordinary program. It decreases reliance on imported
petroleum, reduces greenhouse gas emissions, lowers gas prices,
and boosts the economy.
The RFS achieves these goals by ensuring that biofuels are
afforded access to a fuel market that is otherwise closed to
competition.
Unfortunately, the current administration's approach to
implementation has destabilized the RFS and created significant
uncertainty in the marketplace.
Specifically, EPA's flagrant abuse of SREs has resulted in
lower production and use of ethanol, increased emissions,
higher gas prices, and lost jobs.
In recent years, EPA has granted an unprecedented number of
SREs and disregarded the established requirements for
eligibility. SREs were intended to be temporary, meaning there
should be fewer exemptions granted each year as more small
refineries come into compliance.
Further, exemptions were meant to be available only to
refineries that demonstrate compliance with the RFS itself
would cause them disproportionate economic hardship, something
that would be incredibly difficult for any refinery to show
today, given historically low RIN prices and the fact that
compliance costs are fully passed through to the refiner's
customers.
Under the current administration, EPA has granted an
average of 28 SREs per year, eroding renewable fuel blending
requirements by an average of 1.35 billion gallons annually.
That compares to just seven SREs per year on average and a
reduction in the RFS requirements of just 230 million gallons
under the previous administration.
So we have seen a fourfold increase in the number of
exemptions granted and a sixfold increase in the volume of
exemptions granted. The dramatic increase in SREs has resulted
in demand destruction and some of the worst market conditions
in the industry's history.
The RFS was intended to continually grow the volume of
domestic ethanol consumption. But, unfortunately, the demand
increase promised by the RFS has not materialized due to the
SREs.
After 22 straight years of successive increases, U.S.
ethanol demand in 2018 fell from 2017 levels, and before the
massive increase in SREs, U.S. ethanol consumption for this
year--2019--was expected by EIA to top out at above 14.8
billion gallons.
EIA now expects 2019 consumption will be closer to 14.3
billion gallons. So a loss of 500 million gallons of demand.
Ethanol consumption would have fallen even further if not
for the dramatic downward adjustment in ethanol prices. Ethanol
had to maintain competitiveness, and so prices fell, and as
prices fell net returns at ethanol plants deteriorated to the
lowest levels since at least 2007.
Facing weaker negative margins, ethanol plants have been
forced to idle or permanently shutter. We have seen 19 ethanol
plants--at least 19 plants--idle or close since spring of 2018
when this issue really began.
When an ethanol plant goes down, the local community
suffers. We are talking about lost jobs. We are talking about a
reduction of 20 to 25 cents per bushel in corn prices.
We estimate that, you know, with these 19 plants that have
recently idled or closed, we are talking about 700 direct jobs
that have been lost and about 2,800 jobs indirectly that have
been affected in related sectors.
Unfortunately, EPA's recent supplemental proposal, which
was intended to implement a relief package promised by
President Trump, fails to correct these problems.
The bait-and-switch employed by EPA in this latest proposal
does not ensure that the statutory volume for conventional
biofuels will be enforced in 2020 or beyond, and we think it is
likely the 2020 requirement for conventional biofuels could,
again, be eroded to less than 15 billion gallons.
In short, EPA's proposal will not bring idle plants back
online, and it won't put furloughed workers back to work.
I want to close by expressing RFA's strong support for H.R.
3006--where I come from, we'd call that 30 aught 6--which
begins to resolve some of the problems we are discussing today.
The bill would ensure EPA's final RVOs are actually
enforced and not eroded by SREs. The bill also contains
important provisions that would greatly enhance transparency.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Cooper follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Tonko. You're most welcome, and thank you for your
presentation.
Now we'll recognize Mr. Gebolys for 5 minutes for your
opening statement, please.
STATEMENT OF GENE GEBOLYS
Mr. Gebolys. Good morning, Chairman Tonko, Ranking Member
Shimkus, and members of the committee.
I am Gene Gebolys, president and CEO of World Energy, one
of the largest and longest-standing advanced biofuels suppliers
on North America.
Thank you for the opportunity to be here today on behalf of
the National Biodiesel Board and the 65,000 workers associated
with America's biomass-based diesel industry who, collectively,
generate $17 billion in economic activity, dramatically reduce
our Nation's reliance on fossil fuels, and substantially
lighten the national carbon footprint.
On August 9th, the Environmental Protection Agency
announced that it had waived Renewable Fuel Standard
requirements for another 31 refineries, bringing the total
issued in just the last 2 years alone to 85.
The move ensured that over 4 billion gallons of biofuels
would be replaced by fossil fuels in the national fuel tank,
adding more than 20 million tons of carbon back into the
atmosphere.
For an agency whose namesake mission is environmental
protection, these moves are not only alarming but fully
perplexing. For years, the EPA had routinely issued seven or
eight waivers a year, totalling a couple hundred million
gallons in total impact.
But now, the most recent waiver deluge set off a wave of
plant closures, impacting thousands of workers in biofuels,
agriculture, and related industries.
On August 16th, one week after the EPA announcement, I had
to tell our employees, suppliers, and the communities where we
work that we were shutting down production at our plants in
Rome, Georgia, Natchez, Mississippi, and Harrisburg,
Pennsylvania, as a direct result of the EPA's misuse of its
Small Refinery Exemption authority.
Our closures alone impacted more than a hundred workers
directly and many hundreds more indirectly. An analysis
conducted at the University of Illinois found that Small
Refinery Exemptions issued over just the last 2 years have
slashed demand for biomass-based diesel by over 2 billion
gallons, with the economic damage expected to reach $7.7
billion.
The blowback to the latest round of waivers has been swift
and widespread, and by the end of August President Trump
promised a giant package to address the problems stemming from
the EPA's excessive use of waivers.
On October 4th, the White House announced that a deal had
been reached to use an average of the gallons exempted over the
previous 3 years to estimate expected 2020 waivers in
establishing the renewable fuel volume obligations for the
coming year.
While the deal would not make up for the billions of
gallons of advanced biofuels demand already lost, if
implemented correctly it promised to soften the blow of
exemptions in the future.
Now the EPA has offered its proposed solution in the form
of a supplemental rulemaking and, regrettably, it falls
woefully short of the President's advanced billing.
Again, the EPA had gone astray. Now, instead of taking the
average of the waivers the EPA actually granted over the last 3
years, the agency is proposing to offset in 2020 the average
volume that the Department of Energy originally recommended
that the EPA grant.
Why? Because what DOE advised is dramatically lower than
what EPA has actually done. Now we know what we suspected all
along, that EPA ignored DOE recommendations and handed out
nearly twice as much waiver volume as DOE had recommended.
As hard as that is to fathom, it's harder still to
understand why it would make sense for EPA to now go back to
the very same DOE recommendations it blatantly ignored to
account for next year's proposed waivers.
The Agency is doing nothing to assure that they will
discontinue the practice of promoting compliance avoidance over
compliance and is doing little to establish RFS stakeholder
confidence that the Agency intends to chart a new course based
on the plain intent of Congress to grow the Nation's use of
advanced biofuels.
EPA's job is to administer the law Congress enacted, not to
rewrite it. EPA must be held to account to do the public's
bidding in public.
There should be nothing secretive about who gets waivers,
why they get them, and for how many gallons the relief is
provided. There is absolutely nothing confidential about the
damage our industry is experiencing.
How can it be reasonable that those seeking noncompliance
can be allowed to continue to lurk in EPA's shadows when those
of us impacted by their actions have nowhere to hide?
When EPA finalizes its 2020 renewable fuel obligations rule
by the end of this year, it must fully account for Small
Refinery Exemptions--those actually given, not those
recommended but ignored.
The agency must recognize and support the biodiesel
industry's ability to grow under the RFS in 2020 and beyond, as
Congress intended. The war on biofuels in agriculture must end.
It's time for the secret waiver program to be brought into
the light and for EPA to reestablish public trust.
[The prepared statement of Mr. Gebolys follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Tonko. Thank you, Mr. Gebolys.
And next, we will move to Mr. Thompson. You are recognized
for 5 minutes with your opening statement, please.
STATEMENT OF CHET THOMPSON
Mr. Thompson. Good morning.
Good morning, Chairman Tonko, Ranking Member Shimkus, and
the rest of the subcommittee. I appreciate the opportunity to
testify today and to share the views of AFPM on the topics of
today's latest RFS hearing.
My members produce the gasoline, the diesel, the jet fuel,
and other products that make modern life possible, as well as
20 percent of U.S. ethanol and a substantial amount of
renewable diesel.
My members are obligated parties under the RFS and, hence,
are directly impacted by this program, SREs, H.R. 3006, and
EPA's recent supplemental proposal.
This morning I would like to highlight just a few of the
points made in my written testimony.
First, our Nation's more than 50 small refiners are
national security assets. They are critical sources of our fuel
supply. They employ tens of thousands of women and men across
the country, and they are the lifebloods of communities, again,
all across the country. This very body--Congress--recognized
the importance of these refineries and the threat posed to them
by the RFS.
Thus, Congress first exempted small refineries from the
program outright and then allowed small refineries to seek
waivers, quote, ``at any time'' and instructed EPA to grant
them upon a showing of a disproportionate economic hardship.
As predicted by DOE as far back as 2011, the RFS's rising
mandates and the emergence of the blend wall has created
hardships for the entire refining industry but, particularly,
small refineries. Rising RIN and compliance costs of the RFS is
what explains the rise in SREs in recent years.
[Slide follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Mr. Thompson. Second, as the graphs on the chart and the
screen show, the notion that SREs are hurting biofuel market
share is false. EIA data, the Government's own data,
demonstrate that biofuel consumption and blending are at or
near all-time highs.
Third, H.R. 3006 would be bad for small refineries, bad for
their workforce, and bad for consumers all across the country.
Requiring facilities to apply for waivers months before EPA
has even finalized and, in some cases, probably even proposed
the RVO and requiring that all supporting financial data be
publicly disclosed would effectively eliminate this very
critical important safety net, again, one established by
Congress.
It would be challenging to make the requisite showing of
disproportionate hardship without knowing some pretty key
information such as the volume of the mandate in the particular
year and the price of RINs.
Having one fixed application date as well, as proposed on
June 1st, would deprive facilities of the ability to seek
waivers in response to the many unforeseen circumstances that
can arise in a given year.
And, as you know, waiver applications require very
sensitive financial data such as profitability, cash flow and
balances, refining margins, debt, loan covenants, and business
plans.
Mandating that the public--that all this information be
publicly released, which is exactly what H.R. 3006 would do,
would create a Hobson's choice for small refiners: forego the
waiver and experience the disproportionate hardship calls by
the RFS, or apply for the waiver and grant your competition
into an ability to exploit your financial weaknesses.
It is clear that the real purpose of H.R. 3006 is certainly
not to reform the waiver process but to eliminate it. For this
reason, we cannot and do not support it.
AFPM similarly opposes EPA's supplemental proposal. This
supplemental proposal is unfair to nonexempt refineries and
unnecessary to maintain the robust demand for domestic
biofuels, as the chart on the screen shows.
Its only beneficiary would be foreign biofuel producers.
Finally, we continue to support smarter fuel policies that
can really help all stakeholders. That is why we testified
twice before this very committee last year about the great
potential of transitioning away from the RFS to a 95 RON octane
standard.
By better optimizing fuels and engines, we can increase
vehicle efficiency at a lower cost, increase market-driven
potential for biofuels, and reduce compliance costs for
refineries.
As refiners and as producers--as I said, 20 percent of the
U.S. ethanol--we believe 95 RON would be a win for all
stakeholders and for the environment.
So, to that end, we appreciate the efforts of Congressmen
Shimkus and Flores to advance that discussion, and they will be
missed.
We also support near-term bipartisan legislation by
Congressmen Flores and Welch that recognizes the blend wall and
sets volumes based on the market we have today rather than the
one that was incorrectly projected more than a decade ago.
With that, I thank you again for being here, and I look
forward to answering any of your questions.
[The prepared statement of Mr. Thompson follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Tonko. Thank you, Mr. Thompson, and welcome again.
And finally, Mr. Nieuwenhuis, you are recognized for 5
minutes, and appreciate your testimony.
STATEMENT OF KELLY NIEUWENHUIS
Mr. Nieuwenhuis. Chairman Tonko, Ranking Member Shimkus,
and members of the subcommittee, my name is Kelly Nieuwenhuis.
I've been farming for 37 years with my brothers and father near
Primghar, Iowa.
We grow corn and soybeans on our family farming operation,
and roughly 95 percent of the corn we produce goes to ethanol.
I also serve as president of Siouxland Energy Cooperative.
I am taking time away from harvest because today's topic is
critically important.
Plain and simple, the EPA's abuse of Small Refinery
Exemptions under the RFS is crippling rural America. I've seen
this firsthand as president of Siouxland Energy, a farmer-owned
ethanol plant in Sioux Center, Iowa.
Each year our plant produces up to 80 million gallons of
clean, renewable biofuel, including up to 2 million gallons a
year of cellulosic ethanol.
Because of the EPA's actions to help the oil industry's
bottom line at the expense of farmers and the biofuels
producers, we had to make a hard decision to idle our plant and
shut off a key market for hundreds of local farmers, including
myself.
The morning we announced that we were idling our plant, I
was tasked with delivering the bad news to our 42 employees.
The team sat quietly, wondering about their future in the event
we would have to permanently close our facility. This is one of
the toughest things I have ever had to do.
Even 8 years ago during a 50-year drought, our plant had
significantly more debt than we do today and yet we had no
problem accessing capital. This time around, our local bank
increased the scrutiny for borrowing, given the lack of
certainty with the RFS.
The reality is that they read the same news that we read,
and they understand the EPA is taking actions that have
dramatically undermined the market.
The economic crisis created by the EPA's abuse of SREs
started 3 years ago. At first we couldn't put a finger on what
it was. But the fundamentals and our markets seemed off.
It was only after the press started reporting the rapid
escalation of SREs being granted behind closed doors by the EPA
that we began to understand what was happening to our business.
I am a simple numbers guy. In 2018, if the integrity of the
RFS was upheld and we blended 15 billion gallons of ethanol,
coupled with the 1.7 billion gallons of exports, that's 16.7
billion gallons of ethanol demand.
That year, the U.S. ethanol industry set a record
production of 16.1 billion gallons. If the RFS had been upheld,
then today we'd be growing this industry.
A few weeks ago, we did get a small piece of good news for
our plant at Siouxland Energy. The State of California is using
a significant amount of ethanol to meet its requirements under
the low-carbon fuel standard, and CARB lowered our plant's
carbon score by roughly 10 percent, giving us a new market
opportunity.
As a result, now we are back online and operating at 50
percent capacity. So we are only losing slightly less money
than we would be if our whole plant was idle
This small boost came directly from California, not the
EPA. The regulatory attempts by the EPA give us little
confidence that we will see the relief we need.
That's why the agricultural and biofuels industry strongly
support H.R. 3006, the RFS Integrity Act, sponsored by
Representatives Collin Peterson and Dusty Johnson.
This bill would address the EPA's dismal record on SRE
transparencies. We have no idea of the specifics used by DOE or
EPA in making SRE decisions, and this bill takes care of these
basic transparency concerns by setting a reasonable deadline
for SRE applications and giving the public greater insight on
this murky process.
On behalf of our employees and the ethanol producers, thank
you for the opportunity to appear today, and I look forward to
your questions.
[The prepared statement of Mr. Nieuwenhuis follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Tonko. Thank you, Mr. Nieuwenhuis, and thank you again
to our panel for your contributions here this morning.
We'll now move to Member questions, and I will start by
recognizing myself for 5 minutes.
Mr. Cooper, let's begin with you. Can you briefly explain
the relationship between SRE approvals and RIN prices?
Mr. Cooper. Thank you for the question, Mr. Chairman, and I
certainly can.
I think the clearest example of the impact of Small
Refinery Exemptions on RIN prices really occurred in the first
quarter and second quarter of 2018.
Prior to that, if you looked at the late 2017, early 2018,
we had RIN prices for ethanol--D6 RINs--that were trading in
the 80-to-90-cents-per-gallon range. That was really
stimulating investment in downstream infrastructure for higher
blends. It was stimulating growth in production.
When the public and the marketplace became aware of this
first massive round of SREs from former Administrator Pruitt,
RIN prices tanked immediately and we went from 80 cents or 90
cents to about 20 cents for RIN prices virtually overnight, and
we've been at that low level--around 20 cents or below--for RIN
prices really ever since the first or second quarter of 2018.
That's had a dramatic impact on the investment signal for
downstream retailers and blenders, and it's had, you know,
obviously, a significant impact on the incentive to produce
ethanol as well. We are seeing plants close down and seeing
reduced output rates as well, and we point to the drop in RIN
prices as partly responsible for that.
Mr. Tonko. Thank you.
And what role does the RVO play in providing a signal to
market participants from the refineries all the way over to the
biofuel producers?
Mr. Cooper. Well, in the past, when the marketplace had
faith that the RVO was a real number, it sent a strong signal
and it would--you know, if the RVO was interpreted by the
marketplace as a number that was going to be hard to meet, RIN
prices reacted and you would see strong RIN prices, and they
would do their job to kind of force more biofuel into the
marketplace.
Today we have a situation where nobody in the marketplace
views the RVO--the annual number--as a real number, because
they know it's going to be eroded and undermined by these
retroactive Small Refinery Exemptions.
So when EPA last fall published a 15-billion-gallon
requirement for conventional biofuels in 2019, the market
barely blinked. The market barely reacted because nobody
believes the number is real.
Mr. Tonko. Thank you.
And, Mr. Gebolys, your company has existed and grown since
the RFS began. Is having confidence in certainty in the RVO
important for investments and business decisions that you have
made?
Mr. Gebolys. Yes, it's absolutely critical. The big
investment that we are working on right now is our renewable
aviation fuel and renewable diesel facility in Los Angeles.
We've announced a project to expand capacity there
substantially. We'll be investing hundreds of millions of
dollars. We are making that investment because of California
legislation, not because of the Federal legislation.
At our plant in Houston, Texas, where we have been working
on a substantial expansion, we've had to put that project on
hold because that project only serves the non-California
market.
So, just by looking at those two facilities alone, we are
spending money in California because California policy works.
We are not spending money in Texas because Federal policy
doesn't work.
Mr. Tonko. Thank you.
And Mr. Nieuwenhuis, in regards to that RVO impact, what
are your thoughts?
Mr. Nieuwenhuis. It's definitely part of the certainty of
the industry. You know, I talked about our financing at our
local plant, and 8 years ago when we had a lot more debt we had
no problem with capital.
Now, with the fear of the RFS being undermined by these
SREs and the RVO numbers not being where they're supposed to
be, that's the uncertainty in the industry, and it's fearful.
Mr. Tonko. Mr. Cooper, do you believe that RIN market
manipulation is possible due to the current secrecy around the
issuance of exemptions?
Mr. Cooper. Well, Mr. Chairman, I think there's a very
clear correlation between the issuance of SREs and the reaction
of the RIN market, and it's pretty clear that--at least in my
opinion--you know, EPA is using the SRE program as a back-door
way of managing RIN prices and controlling RIN prices, which
was, clearly, not something that anyone intended EPA to be
doing.
The RIN market was intended to operate freely to help--you
know, help achieve the goals of the Renewable Fuel Standard,
which is to grow the consumption and use of biofuels.
Mr. Tonko. Thank you very much.
The Chair now recognizes Mr. Shimkus for 5 minutes to ask
questions.
Mr. Shimkus. Thank you, Mr. Chairman.
Our hearing title today suggests a desire to keep liquid
fuels powering passenger cars and light vehicles for a long
time, and I like that.
Yet, last week, Senator Schumer proposed a $454 billion
program to get all Americans out of their liquid-fuel-powered
vehicles and into electric-powered vehicles.
Mr. Cooper and Mr. Nieuwenhuis, what would be the impact of
this proposal on rural farm economies?
Mr. Cooper. Thank you, Mr. Shimkus.
You know, I think the impact of--if we are talking about
H.R. 3006----
Mr. Shimkus. No, we are talking about Senator Schumer's
proposal last week to move all passenger vehicles to electric.
Mr. Cooper. OK. I think there's a broad understanding that,
even if that proposal were to be enacted, it would be very
long-term transition. I think we all agree that we are going to
be using liquid fuels for a very, very long time.
Mr. Shimkus. OK. All right. I am disappointed in that
answer, because it's a simple answer and a simple question. If
we moved to all-electric vehicles, that's less liquid
transportation fuels.
Mr. Nieuwenhuis?
Mr. Nieuwenhuis. I guess I don't know a whole lot about the
electric vehicle industry, but I do know the ethanol industry
has been working for 40 years and we are still working on
infrastructure, and I can't see how the electric industry can
change that infrastructure that fast. So I don't have----
Mr. Shimkus. What would it do, basically, on your ability
to sell a commodity product like ethanol if all our vehicle
transportation fleet moves to electric? Do you have a market?
Mr. Nieuwenhuis. I don't know. I don't know that answer
because I've seen a lot of----
Mr. Shimkus. Well, let me--let me go to----
Mr. Nieuwenhuis. I've seen a lot of information from----
Mr. Shimkus. Let me go to Mr. Thompson.
What would be the impact of such a proposal on unionized
workers at your members' facilities?
Mr. Thompson. It would, obviously, be very bad. Right now,
we produce approximately 143 billion gallons of gasoline to
supply today's transportation fleet. If it all went electric,
that would go away. There is no ethanol used in an electric
vehicle.
Mr. Shimkus. Would this be a good policy for consumers and
taxpayers?
Mr. Thompson. No, it would be a very bad policy. One only
needs to look at the data out there of how much more expensive
electric vehicles are, and certainly there's lots of research
that show they're not better for the environment. I do not
think it's better for consumers----
Mr. Shimkus. Let me go to Mr. Gebolys because, you know, as
we move in this debate on electric vehicles for passengers--and
we've already had this in the heavy-transportation hearing we
had last week--there will be a movement to eventually go to
electrify heavy-duty vehicles. What would do--what would that
do to your market?
Mr. Gebolys. It would be a very long transition. The
average----
Mr. Shimkus. OK. But all right, I got the answer.
Mr. Gebolys. The average diesel vehicle is on the road,
sir, for up to 15 years.
Mr. Shimkus. I know. We had a hearing last week, and the
Port of Los Angeles is exploring electric heavy-duty vehicles
that would get recharged halfway to the distribution center.
Can you sell biodiesel to an electric vehicle?
Mr. Gebolys. We cannot.
Mr. Shimkus. OK. Thank you.
Ten months ago, I asked many of your groups about the
future of RFS. I stated, absent legislative action, the EPA
will retain its waiver authority--now, we are talking about
certainty here--including the authority to exempt certain
refiners from their obligations under the RFS, especially after
2022, when all agency loses its statutory biofuel targets in
2022.
So if you can, give me a higher, lower, the same. Given the
Energy Information Agency projects 31 percent decrease in motor
fuel consumption by 2017 to 2025, do you expect RVOs to be
higher or lower post-2022 than they are today?
Higher, lower, or the same, if the Energy Information
Agency predicts less liquid fuel use?
Mr. Cooper?
Mr. Cooper. Well, thank you. And the RFS is not a
percentage-based program. It's a----
Mr. Shimkus. Higher, lower, or the same?
Mr. Cooper. The same.
Mr. Shimkus. OK. Mr. Gebolys?
Mr. Gebolys. The same.
Mr. Shimkus. OK. Mr. Thompson?
Mr. Thompson. Substantially lower.
Mr. Shimkus. OK. And Mr. Nieuwenhuis?
Mr. Nieuwenhuis. The same.
Mr. Shimkus. Given that ethanol is such an overwhelming
cheap octane enhancer in addition to environmental benefits,
wouldn't some refiners be more competitive if they were to opt
for this lower cost of octane?
Mr. Cooper?
Mr. Cooper. Yes, I believe they would.
Mr. Shimkus. Mr. Thompson, seeing as your members are in
competition against one another for the client business, to
what extent do you think refiners would be influenced by market
forces to use the cheapest source of octane, which is ethanol,
in order to keep their product prices competitive?
Mr. Thompson. Very influenced by that, which is why data
shows that lend rates are as high as they've ever been today
even with the SREs.
All the testimony that we've heard today is contradicted by
EIA data that I put on the screen. Every--this is the highest
ethanol blend rates as a country we've ever had, and the reason
for that is because my members make blends stocks that cannot
be sold until the octane is added, and the cheapest source of
octane is ethanol. That's why the data is not consistent with
the testimony today.
Mr. Shimkus. Thank you, Mr. Chairman. My time has expired.
Mr. Tonko. The gentleman yields back.
Before we go to our next Member, I want to recognize the
presence of Congressman Dusty Johnson of South Dakota, who is
cosponsor of H.R. 3006, and we welcome him here today. You are
welcome.
And next, the Chair will recognize Congressmember Barragan
for 5 minutes for questions.
Ms. Barragan. Thank you.
I want to start off by being the Member who represents the
Port of Los Angeles and applauding them for their efforts to go
electric.
The district is one where we have high air pollution, and
from everything I have seen indicates that electric will help
the environment. And so I wanted to take my opportunity to
applaud them in their efforts.
There's a lot of conversation about ``Oh, well, it doesn't
go very far.'' When you take a look at distribution from the
Port and to the Port, it's coming from the Inland Empire.
That's not more than 150 miles. And so I just wanted to put
that on the record, given this is a continuing issue I keep
hearing about in the reference to the Port.
I want to start off by saying that I share the goal of many
on this committee and on this panel to reduce America's
dependence on oil. I also think it's reasonable to want
predictability on EPA regulatory decisions such as exemptions
that alter the intent of our laws.
However, I think we need a much broader conversation on the
future of the Renewable Fuel Standards. My district, as I
mentioned, is 90 percent African American and Latino. It bears
a great part of the burden of our dependence on fossil fuels.
We have had to live with urban oil wells, liquefied
petroleum gas facilities, Superfund sites, and underregulated
heavy industry.
Consequently, we have had some of the highest asthma rates
in the country, and it is one of the most heavily polluted
district in this country.
No one wants America to move off of oil more than I do.
However, we have to be mindful of the unintended consequences
of the policies we are putting in place to bring us to a
fossil-fuel-free economy.
The Renewable Fuel Standards was well intentioned. But we
have since then learned from the EPA's own 2018 report titled
``Biofuels and the Environment'' second triennial report to
Congress that the increased demand for biofuels has driven land
conversion here and abroad to biofuels to produce corn and
soybeans and palm oil. This has led to the national and
international land use changes that have replaced carbon
sequestering and biodiverse natural landscapes with large corn
and soybean farms.
Further, efforts to meet the advanced biofuel mandate has
led to the importation of biofuels from palm oil in countries
such as Indonesia, causing widespread deforestation.
I hope that in the future this committee can take up the
work of crafting a comprehensive, evidence-base policy approach
to reforming the Renewable Fuel Standards.
Building off that statement, I have a joint Pro Publica
investigative report and New York Times article titled ``Palm
Oil Was Supposed to Save the Planet. Instead It Unleashed a
Catastrophe.'' It's dated November 20th, 2018. I would like to
request unanimous consent to enter it into the record.
Mr. Tonko. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Ms. Barragan. My question for the biofuel representatives
on the panel is, what steps are you taking to make sure that
you're not sourcing biofuels from land at home or abroad that
has been converted from forest land or natural wilderness to
farmland?
Mr. Cooper. Thank you for the question.
On the ethanol side, which I can comment on, the RFS law
itself, the statute--the 2007 statute--includes a provision
that specifically prohibits our member companies from using
feedstock that was cultivated on land that wasn't already in
cultivation at the date of enactment in 2007.
If they were to do that--and EPA annually conducts an
analysis to see if land has expanded--and if they find that it
has as a consequence of the RFS, that triggers all sorts of new
onerous requirements--reporting and record keeping requirements
for the industry.
What EPA has found every single year when they do that
analysis is that crop land is shrinking and that the amount of
crop land under cultivation today is lower than it was in 2007
when the act was passed and far lower than it was 40, 50, 70,
100 years ago.
So this narrative that we hear that the RFS is somehow
driving expansion of crop land is not borne out in the data. It
is not--there is no evidence of that.
Now, you know, the EPA triennial report, there's modeling
studies and economic, you know, modeling exercises, scenario
analysis, and when you plug the right numbers in, yes, it'll
give you a scenario where crop land expands.
The real-world evidence shows that it is not occurring,
however, certainly in terms of U.S. crop land and, frankly,
globally crop land expansion has not accelerated in the era of
biofuels. You know, the trend of crop land expansion globally
is today what it was prior to passage of the RFS.
Mr. Gebolys. If I might just quickly add, the RFS
specifically excludes the use of palm oil. Soybeans are not
grown for their oil. They're grown for their meal, and we use
feedstocks that come from used cooking oil, animal fats, and
oil that exist because we use protein from soy to feed animals
and people.
Ms. Barragan. And my time has expired. The issue is, I
believe, not how much crop land there is. The issue is how much
conversion has happened. I am interested in that.
Thank you, and I yield back.
Mr. Tonko. OK. The gentlelady yields back. The Chair now
recognizes Representative Rodgers from Washington State for 5
minutes for questions, please.
Mrs. Rodgers. Thank you, Mr. Chairman.
And I, too, want to thank the panel for joining us today as
we discuss the RFS and its future. I think it's important to be
conscious of consumer demand and advances in vehicle technology
and how that affects the fuel market.
So I wanted to ask the panel, as automobiles and truck
fleets turn over to more efficient vehicles, what will this do
for demand for fuels? Do the statutory blending goals of the
RFS program still make sense when looking at the future of the
transportation fleet?
Maybe I will just start right here and ask each one of you.
Mr. Cooper. Happy to answer that question, and yes, I think
as we look at the evolution of the light-duty vehicle fleet
into more efficient internal combustion engines, those engines
want and need and the automakers are demanding higher octane,
which Congressman Shimkus and Mr. Flores, of course, have been
very much focused on.
Ethanol is the highest, cleanest source of octane
available, you know, on the market, and so we think when you
pair those two things and RFS and a high-octane fuel standard,
the RFS requirements do make sense long term.
They guarantee that the octane source for more fuel-
efficient vehicles, higher octane, high-compression-ratio
engines comes from biofuels and not from, you know, dirty
hydrocarbons, which lead to the asthma problems that we just
heard about in California.
Mrs. Rodgers. Thank you. Very good.
Mr. Gebolys. So my business works primarily in the diesel
side of the equation. On the diesel side, the equipment tends
to exist for a very long time. So the transition on the diesel
side will be slow in coming.
Progress will come, and that's a good thing. Vehicles
should get more efficient. We should move to cleaner and better
technologies over time.
But we shouldn't make the perfect the enemy of the good.
While we are transitioning to cleaner and better technologies,
we have cleaner and better technologies today.
Advanced biofuels are called advanced because they reduce
carbon footprint by 50 percent or more, and it's important that
we continue to do what the RFS was put in place to do, which is
to continue to use more of them while we continue to use
vehicle diesel equipment.
Thank you.
Mrs. Rodgers. Very good. Thank you.
Mr. Thompson. Certainly, the more efficient car on the road
today is part of what explains why gasoline demand is much
lower today than it was when this program was created.
When the program was created, it was premised on the
estimate of today about 160 billion gallons of gasoline use,
which is why there was no concern of the blend wall back then.
Today, we are about 142 or 143 billion gallons, which is
what is causing the root cause of the problem, is there's no
place for the ethanol to go once the blend wall is reached,
right around 14.2 or .3 billion gallons of ethanol.
That's the root cause of the problem. That's why,
fundamentally, this program needs to be reformed.
Mrs. Rodgers. OK.
Mr. Nieuwenhuis. I guess I would just like to say that I
realize in the future higher octane fuels are going to be used
for the engines designed for better efficiencies.
And I think the one advantage to the ethanol industry is to
grow the blend rate to a higher blend, and mainly because of
the Clean Air Act and benefits of ethanol and the less
greenhouse gas emissions created from ethanol.
So I think it would be down the road the higher blends of
ethanol will help with the higher octane engines and also the
environment.
Mrs. Rodgers. I would be interested in hearing what you
believe should be done to address the implementation of the
statute while protecting the interests of small refiners from
disproportionate harm, as Congress had envisioned.
Anybody want to start that? Yes, Mr. Thompson?
Mr. Thompson. We would say that, again, last year and,
frankly, for the last couple years we have been working with
Congressman Shimkus about such an alternative, which is why we
supported the concept of moving away from the RFS--the command
and control approach--into a 95 RON approach, which we believe
would be better for all stakeholders, for the biofuel industry,
for the auto industry--it makes for a more efficient
automobile, for consumers and, certainly, refiners.
We believe if we transitioned away to a performance-based
standard, that would be better for small refiners because it's
the compliance costs of the program that is causing the
hardship, not the use of ethanol in and of itself.
Mrs. Rodgers. OK. Anyone else?
Yes?
Mr. Gebolys. This really isn't very complicated on the
existing RFS side. The law is extremely straightforward. At
this point in the program, advanced biofuels are supposed to be
making up the vast majority of the program's growth.
The SREs are by--have, clearly, caused that not only to
stop but to start to retrench. We don't have to look any
farther than the data that AFPM has put up there earlier and
keeps pointing to. That data, clearly, makes my point.
The expansion should be happening in the advanced biofuels
sector. Now it's not because of the SREs. We need to have a
light shined on what's happening in the SRE program.
Mrs. Rodgers. OK. Thank you.
My time has expired.
Mr. Tonko. The gentlelady yields back.
The Chair now recognizes the gentlelady from Delaware,
Representative Lisa Blunt Rochester, for 5 minutes for
questions.
Ms. Blunt Rochester. Thank you, Chairman Tonko and Ranking
Member Shimkus, and I want to thank the panel for your
testimony today.
All of the panelists have raised concerns about how the RIN
market is functioning, and so I have one two-part question to
each member of the panel, and in the interests of time you will
each get about a minute to answer this one two-part question.
Do you think the RIN market has functioned properly
throughout the lifetime of the RFS program, and if you do think
there is a problem with the RIN market, how has it affected
your business or industry?
And we'll start with Mr. Cooper.
Mr. Cooper. Well, thank you for the question, and I will
try to answer briefly.
I think the answer to whether the RIN market has functioned
properly relies upon was EPA enforcing the RVOs, and when they
were enforcing the RVOs that were finalized annually, yes, the
RIN market was doing its job. It was helping to expand and grow
the market and provide the incentive to do that.
When EPA is not enforcing or implementing the program
properly, the RIN market does not function properly.
And then, secondly, you know, I think the lack of
transparency in the RIN market, which has been brought up a few
times today, is absolutely an impediment to the effective
operation of that market, and that's something that I know that
the legislation we are discussing here today would help
address.
Ms. Blunt Rochester. Thank you.
Sir?
Mr. Gebolys. Yes, the fundamental logic of the RIN
component of the RFS makes perfect sense and, theoretically, it
should work perfectly fine and, largely, does when there's open
access to information.
But when some participants in a market have more
information than others, markets don't function properly. The
fundamental structure of the RIN market makes sense. The
fundamental logic of the RFS makes sense.
But it all is dependent on EPA administering the program
such that all market participants have the same amount of
information at the same time.
Ms. Blunt Rochester. Mr. Thompson?
Mr. Thompson. We certainly don't believe the RIN market has
operated as envisioned. At the time the program was enacted,
RINs were supposed to be a minor transactional cost.
As we all know, that is not the case today. It's created
great hardship for not only small refineries but all
refineries.
Now, as far as to some of the testimony that the biofuel
industry believes there needs to be higher RINs to drive
demand, simply not true.
Analysis after analysis shows zero correlation between RIN
prices and--D6 RIN prices--and ethanol consumption. Zero
correlation, and only a weak correlation as it relates to
biodiesel.
So the assertion that you need high RIN prices, there's
only one thing that--high RIN prices do two things: It creates
hardship for the refining industry and more expensive fuel for
consumers.
Ms. Blunt Rochester. Thank you.
Mr. Nieuwenhuis?
Mr. Nieuwenhuis. I believe the RIN market has worked
successfully with the RFS. You know, it's a pass-through cost
to the refineries. If they meet their obligations, they recoup
the price.
But also in our situation at Siouxland Energy, we produce
about 2 million gallons a year of cellulosic ethanol through
cell-based or fiber-based ethanol, and the D3 RIN values help
promote that project to create some cellulosic ethanol with our
corn fiber.
So I do think it's been a successful part of the RFS.
Ms. Blunt Rochester. Thank you so much, and I would also
agree with Mr. Walden. This is one of the complex issues that
this committee has to deal with. So thank you for your
testimony, and thank you for your leadership.
Mr. Tonko. The gentlelady yields back.
The Chair now recognizes the gentleman from West Virginia,
Representative McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman, and thank Mr. Walden
for giving up his slot so that I could ask this question.
The biofuel industry argues that granting hardship
exemptions to small refineries--boutique refineries like Ergon
in Newell, West Virginia, which produces 23,000 barrels a day--
and they say if we grant that exemption it will be, quote,
``demand destruction'' is what I am hearing from the biofuels.
Now, let's put this in context. That may sound like a lot
of production--23,000 barrels. But Marathon produces over 3
million barrels a day, 130 times what Ergon is producing.
So there's a reason for these exemptions for small
refineries that were put in the Clean Air Act, and it's been
upheld by the courts. It was for facilities just like Ergon.
I would like to ask unanimous consent to enter letters of
record from the labor organizations which support these small
refinery exceptions and oppose the RFS from the steelworkers,
the plumbers and pipefitters, the boilermakers, the IBEW,
Northwest Building Trades, the National Building Trades, and
the AFPM--organizations that say we should do this.
Now, EIA data that, Mr. Thompson, you brought up shows that
the ethanol production and blending has gone up to record
highs, so even when these exemptions have been granted that
they say were so sinister in the last 2 years plus.
When do you think biofuels will be able to compete in an
open market without a mandate?
Mr. Thompson. That's a difficult question. I will say when
they become, you know, more--at least from the biodiesel side,
when they become more cost competitive, frankly, right.
It's 75 cents to a dollar more expensive on a gallon basis
of biodiesel than the diesel that my members produce. Ethanol
is cost effective right now and, like I said, you know, ethanol
is being used. Back to the data--it's being used.
So this isn't a fight. We are not anti-ethanol. We are
anti-mandates, and we are anti-programs that are trying to
smother our small refineries.
Mr. McKinley. Let me follow up with a second question with
you. The legislation we are talking about today would require
the release of proprietary business information. Is the intent
of the bill, in effect, to keep small refineries from filing
these hardship petitions, and is that workable?
Mr. Thompson. Well, it sure seems that way, as I talked
about in my opening remarks, because you create this Hobson's
choice, as I said, for refiners who are going to be asked to
put their most sensitive information into the public.
There is no more competitive market in this country than it
is for motor gasoline. Asking a small refinery to put all their
financial data and then make it publicly available certainly
plays right into that competition.
It's not something that most small refineries would
welcome, and I think what it would do it would chill refineries
from seeking such relief.
Mr. McKinley. Thank you.
Mr. Chairman, did you--did I get unanimous consent?
Mr. Tonko. You certainly did.
[The letters appear at the conclusion of the hearing.]
Mr. McKinley. Thank you, and I appreciate that.
Back to Mr. Cooper, as we close out on my time for
questioning, let me just clarify. You said several times when
you didn't answer Congressman Shimkus's question that it was
going to take a long time.
The Green New Deal says by 2030. Nine years, 10 years--is
that a long time?
Mr. Cooper. I think everyone who has looked at how this
transition to electric vehicles could play out from a very
analytical standpoint knows it's going to take more than 10
years. We are talking 40, 50----
Mr. McKinley. But that's what they're--that's what they're
pushing on it is the 10-year window, and the presidential
candidates have all been embracing that. They think that's a
great idea, and I think that Congressman Pallone's offer is
another alternative--to change that to 2050.
Again, we've heard from some other folks from the
Department of Energy in a previous administration, with Moniz
and others have said that's not workable to be able to think
about. Even 2050 can't work.
So I just want to make sure that you understand. I am aware
of the time frame, and I don't think even by 2050 we are going
to be ready. The devastation it's going to do to our country is
incredible.
And, Mr. Chairman, I yield back my time.
Mr. Tonko. The gentleman yields back.
The Chair now recognizes Mr. Pallone, full committee chair,
for 5 minutes to ask questions, please.
Mr. Pallone. Thank you, Chairman Tonko.
Let me just ask Mr. Gebolys--if I am pronouncing it right--
your company has been in business for about 20 years, a little
longer than the RFS program has existed, and the original RFS
granted a blanket exemption for small refineries for several
years in the beginning of the program.
And when the blanket exemption in the law expired, EPA
continued to approve some Small Refinery Exemptions virtually
every year.
In your testimony, you say that recently you have had to
close three facilities. So my question is, has this type of
setback happened in past years when there were fewer Small
Refinery Exemption?
Mr. Gebolys. Thank you for the question.
As you point out, in the early days of the RFS there were
waivers given as of right and then subsequently extensions of
those.
Starting around 2012, companies had to apply for the
waivers, and there were only a few given--seven, right--
totaling about 200 million gallons annually.
Those were relatively modest. They didn't substantially
change the markets. In the early going, they didn't change
markets at all because they were--the waived gallons were
picked up by other obligated parties.
Only starting 15, 18 months ago with the very significant
expansion of the waiver program did it show up in decreased RIN
values, which go directly to our economics and our ability to
produce.
Mr. Pallone. Right. But in your testimony, you said that
one of your products is sustainable aviation fuel, and last
week we had a hearing on the transportation sector with a
representative of Neste who talked about the need to increase
demand for this fuel if we are to lower climate pollution from
the aviation sector.
So let me just ask a couple questions. Are we going to get
new investment in alternative fuels without the RFS?
Mr. Gebolys. It makes it very difficult. As I was pointing
out earlier, we are investing in California because California
is investing in California.
With the signals that we are getting out of the EPA, it
makes it very difficult to invest.
Mr. Pallone. What is the----
Mr. Gebolys. Not only does it chill demand in the moment,
it makes it very hard to project forward an environment in
which we can justify investments today that we'll have to pay
out over time.
Mr. Pallone. And this is because the EPA continues to grant
a large number of exemptions, or what is it?
Mr. Gebolys. For us, directly so. I think there's been a
lot of quoting of studies one way or the other. There's
absolutely zero question that the Small Refinery Exemptions are
killing demand in biodiesel and advanced biofuels.
Mr. Pallone. And so the--I mean, what kind of signals does
this, you know, implementation of the RFS send to the
investment community with respect to advanced biofuels,
essentially?
Mr. Gebolys. Well, it's not a positive one.
Mr. Pallone. OK.
Can I ask Mr. Cooper and Mr. Nieuwenhuis, you know, about
the same topic, if you want to express your views?
Mr. Cooper?
Mr. Cooper. Thank you for the question, and I guess I would
respond by really challenging what you have heard from Mr.
Thompson regarding demand destruction in the ethanol industry.
We absolutely have experienced demand loss in the ethanol
industry as a consequence of these Small Refinery Exemptions,
and the signal that sends to the industry is, hey, stop
investing. If there's not going to be a market for larger
volumes of renewable fuels, we are not going to invest in
expanding capacity.
You know, as I said in my testimony, 2018 consumption was
about 150 to 200 million gallons lower than it was in 2017.
That's the first time in more than 20 years that we saw a
year-over-year loss in ethanol consumption, and now this year
EIA is saying actual consumption is likely to be about 500
million gallons lower than they initially projected.
So there absolutely has been demand destruction in the
ethanol side as well, and we expect that to accelerate now that
we have another 31 exemptions that came out in August.
Mr. Thompson's slide showed everything going through July.
Well, you know, what about the impact of these 31 waivers that
were announced after----
Mr. Pallone. I think I have 20 seconds left for Mr.
Nieuwenhuis, if you want to say something.
Mr. Nieuwenhuis. The August 9th 31 Small Refinery
Exemptions really crushed the ethanol market and crushed the
prices, and that's when the bottom fell out of our industry.
In our local plant that I am president of the board, like I
talked about, our capital projects--we are actually doing a
capital call to our initial shareholders right now and to raise
some cash to keep the plant running.
So those Small Refinery Exemptions have done a lot of
damage not only to the ethanol demand but also to the
investment side of things and the fear of not having the
certainty of an RFS that's being upheld.
Mr. Pallone. All right. Thank you. Thank you all.
Mr. Tonko. The gentleman yields back.
The Chair now recognizes Mr. Walden, full committee ranking
member, for 5 minutes to ask questions, please.
Mr. Walden. Thank you, Mr. Chairman. Again, thanks to the
panel, and as you have heard, some of us have a hearing
upstairs and this one as well. But we appreciate your
information.
So I just have one question to start with for everybody on
the panel. I think businesses generally would have a problem
with a blanket statement that anything submitted to the
government that was unique to their operation's competitive
position should be given to the general public, right.
So my question, does that seem reasonable to each of you,
and kind of a yes or no, if you can.
Mr. Cooper?
Mr. Cooper. Yes. You know, I think--we are not suggesting
that refineries should turn over private financial operational
data to the public. Nobody's asking for that.
Names of the refineries and their locations--even EPA has
said that's not confidential business information and should be
publicly available.
Mr. Walden. All right. Let me work down the panel here.
Mr. Gebolys. So a company chooses to seek an exemption, I
cannot fathom why it doesn't make sense for that company to
reveal who they are, where they are, and why they are seeking
the exemption.
Mr. Walden. Mr. Thompson?
Mr. Thompson. Again, I've made it clear we certainly don't
support that.
Something Mr. Cooper said, that no one's asking for that to
be the case. Unfortunately, that's what H.R. 3006 says
directly, that any information submitted as a part of the
waiver application shall be deemed to be, you know, available
for public disclosure.
Mr. Walden. Right.
Mr. Thompson. Now, even the name of a company can hurt you,
given that all fuel markets are regional and very competitive;
even people knowing you have got one and that your distress
could put you at even further distress.
Mr. Walden. All right.
Mr. Nieuwenhuis. I realize the SREs are part of the RFS,
and they're--it's designed for the small refineries, and, you
know, and they're supposed to show a hardship.
So, unless you know who they are, how are they going to
show that they are actually suffering a hardship from the RFS?
So I think the SREs or the H.R. 3006 is very important, going
forward, for transparency.
Mr. Walden. All right. Thank you all.
Mr. Gebolys and Mr. Cooper, for many years I've been
promoting policies to increase the use of woody biomass in our
environmental policies, given the great forest stocks we have
and the need to thin out our forests and trying to figure out
markets to pay for all that.
So I recently visited an innovative project in Lake View,
Oregon, where Red Rock Biofuels is constructing a gasification
facility. Now, that will turn woody biomass into jet and diesel
fuel, and they already have contracts.
This is the first gasification project in the world to use
woody biomass from forest-thinning-related activities. It may
serve as a blueprint for producing advanced renewable biodiesel
and at the same time help keep forests healthy and more
resilient to these awful wildfires we've been having.
So I understand it already has contracts with Southwest
Airlines, Fed Ex, and DoD. One problem is, due to RFS and tax
credit prohibitions, the project cannot take biomass from
Federal lands or wood chips from a local mill. Yet, there's no
way to determine whether chips are from Federal or private
land, since it sources from both.
So, from your perspective, what are the prospects that
innovative projects like this can provide additional fuel
sources for biodiesel and transportation fuels, and what would
be the impact on greenhouse gas emissions?
Do either of you want to comment?
Mr. Gebolys. I can't speak to that particular project. But,
in general, the way innovation happens is that there are market
signals set and then companies compete to respond to those.
And so, whether it's the project that you referred to or
the project that we are doing in Los Angeles or projects that
are happening throughout the country, that is what the RFS was
meant to do.
It was meant to drive innovation. It was meant to push
forward. And so I think we are all--I can't speak to the
particular----
Mr. Walden. Well, you could come out and visit, and then
you could. We'd be happy to----
[Laughter.]
Mr. Walden [continuing]. Anybody wants to come out to Lake
View, we'll take you.
Mr. Cooper?
Mr. Cooper. I would say that, you know, the issue we are
talking about today--Small Refinery Exemptions--have
absolutely, you know, dampened the incentive to invest in the
type of innovation that you're talking about as well.
We've talked a lot about the impacts on first-generation
biofuels--corn ethanol, soybean-based biodiesel. But, when EPA
issues an SRE, it affects every category of the RFS. We've seen
lower cellulosic RIN prices and, therefore, lower investment in
those technologies as well.
Mr. Walden. All right.
Again, thank you all for helping us better understand the
issues today and those that lie ahead in this big issue set.
So with that, Mr. Chairman, I will yield back.
Mr. Tonko. The gentleman yields back.
The Chair now recognizes the gentleman from Florida,
Representative Soto, for 5 minutes, please.
Mr. Soto. Thank you, Mr. Chairman.
This hearing is part of our historic set of hearings to try
to get to net-zero carbon emissions by 2050, to have a Clean
Climate Act for the 21st century.
So, when I hear that we can't get to clean energy by 2050,
I worry that our Nation's in deep trouble and our world is in
deep trouble if we can't do that.
I just got a announcement the other day by the Union of
Concerned Scientists about the rise in extreme heat in my
district in central Florida from four days a year to 141 by the
end of the century if we don't do anything.
Coupled with extreme weather and rising seas, obviously,
this is something that we are concerned about. For this
particular hearing, how many of you all--and we'll go down the
list--agree that the RFS lowers greenhouse gas emissions
overall?
We'll start from left to right. Do you agree or disagree?
Mr. Cooper. I agree 100 percent.
Mr. Gebolys. There's no question about it.
Mr. Thompson. I agree there's reductions in greenhouse gas
emissions.
Mr. Nieuwenhuis. I agree 100 percent.
Mr. Soto. Thanks. We want to at least establish basic facts
as we are going forward on these issues.
Overall, how many of you agree that these applications
should remain secret, or be in the sunshine? I come from a
State where everything is a public record unless you get an
exemption--the State of Florida.
So let's go down the list, and then I had some particular
questions for Mr. Thompson to try to get at what may be common
ground.
But, from left to right, how many of you agree that these
should still be totally secret or not?
Mr. Cooper. I believe that basic information about the
petitioner should be revealed to the public. The name,
identity, location of the refinery should absolutely be
available to the public.
Mr. Gebolys. The SEC requires that companies report
material financial information, and because of that we know
some of who has pursued these, including Chevron, Exxon, and
others.
Mr. Soto. Now, is that comprehensive, or we just know--we
get sort of a glimmer of some companies that are doing it, but
not all of them?
Mr. Gebolys. We get what they deem to be material and what
they share under SEC rules. At least the name, the location,
and the volume has got to be the bare minimum.
Mr. Soto. Sure.
Mr. Thompson, I know you had mentioned just merely
disclosing the hardship is an adverse consequence. We have,
obviously, SEC where you have disclose earnings and other
things that companies have to do all the time.
What could be disclosed? Or is your position that nothing
should be disclosed because you're admitting a hardship?
Mr. Thompson. Well, let me just start by answering your
first question, which is I think the application should be--
remain confidential. Let's use the correct words.
Mr. Soto. Sure.
Mr. Thompson. Not secret. Confidential, as long as the
applicant desires them to remain confidential. By the way, this
is the exact same policies under the Trump administration--I
mean, the Obama administration. Exact same.
And they were kept confidential pursuant to CBI regulations
that EPA must adhere to.
Mr. Soto. But we have a lot of new----
Mr. Thompson. This information can jeopardize the
competitive standing of organizations. It's always been treated
as confidential.
Mr. Soto. Well, we are here today because it's the opinion
of the committee that it could be abused right now--that we are
seeing a bunch of new applications being sent forward, and we
have no way to determine whether or not they should have it.
Mr. Thompson. Well----
Mr. Soto. Just this--your identification of it, you are
opposed to because you think it'll be a hardship?
Mr. Thompson. I would say that what EPA did recently with
their website in which they announced the applications--how
many are granted, how many volumes, how many RINs--I think
that's a step in the right direction.
And by the way, one last thing: there's no shortage of
lawsuits filed by folks around me related to SREs. Obviously,
this information is getting out in some quarters.
Mr. Soto. Thank you, Mr. Thompson.
Mr. Nieuwenhuis?
Mr. Nieuwenhuis. Yes, I would like to say I think these
SREs need to be 100 percent transparent. But, speaking from a
farmer's perspective who--over the last 37 years, we've had
farm subsidies, and everybody knows that.
But everybody sitting in this room can go online and find
out how much my family has received from farm subsidies. And so
I don't see where the Small Refinery Exemptions should be
different than what agriculture has to deal with.
Mr. Soto. Sure. So you all----
Mr. Nieuwenhuis. And so I think 100 percent transparency in
SREs is necessary.
Mr. Soto. So you all, in effect, are admitting as farmers
to having a hardship and needing that help, and we want you to
have that help. Those programs are in place.
So there's other industries that have to admit when they
may need a little help from the Government, and that hasn't put
you under, has it?
Mr. Nieuwenhuis. But one thing I will say is the farming
industry--we want to move away from subsidies. We want markets.
We've been working on this for years. The biofuels industry has
been the best thing that ever happened to my farming career,
and I want to see it continue to grow and give us markets so we
don't need farm subsidies.
Mr. Soto. Well, that's actually happening in actual trade
policy on China and getting USMCA in for a landing. But that's
for the Ways and Means Committee.
So thanks for being here.
Mr. Tonko. The gentleman yields back.
The Chair now recognizes Representative Flores for 5
minutes.
Mr. Flores. Thanks, Mr. Chair.
To our witnesses, I want to--I've asked this question
before, particularly last December when Chairman Shimkus and I
had a hearing on this. Which of these two options would you
prefer: Option A, keep the status quo and let the regulatory
agencies decide what annual RFS compliance is, or option B,
come up with a legislative solution to fix these concerns?
Mr. Cooper, option A or option B?
Mr. Cooper. We would prefer that EPA enforce the law that
Congress gave it.
Mr. Flores. Mr. Gebolys?
Mr. Gebolys. The same answer.
Mr. Flores. OK. Mr. Thompson?
Mr. Thompson. B.
Mr. Flores. OK. Mr. Nieuwenhuis?
Mr. Nieuwenhuis. I would prefer that the RFS stay intact
and we do it the way it's been done.
Mr. Flores. Is that option A?
Mr. Nieuwenhuis. No.
[Laughter.]
Mr. Flores. It's not option A. So that's an option C then,
I guess.
Mr. Cooper, you seemed to hedge when I asked you that
question last December. You did state, however, that there are
things that could be improved with the current program, and the
EPA does have the administrative authority to make those fixes.
Since that hearing last December, does your organization
still prefer constant litigation of these RFS battles in the
administration of courts, or would you prefer a legislative
solution?
Mr. Cooper. We still believe that the administration can
resolve these issues with EPA's administrative authority. It
just requires the will to do so, and that's what we are focused
on currently.
Mr. Flores. To my next question, I imagine that liquid-
fuel-powered vehicles will face increased competition from
electric and hybrid vehicles in the years ahead.
So the questions are this. Do you agree that liquid-fuel
vehicles will have to find ways to improve fuel economy and
lower emissions, and B, do you believe that high-powered--
excuse me--that a high-octane standard is the most effective
way to improve the fuel economy of liquid-fuel-powered
vehicles?
Mr. Cooper?
Mr. Cooper. Yes, I do believe there's a tremendous role for
high-octane fuel vehicles to improve efficiency and reduce
emissions moving forward.
Mr. Flores. OK. Yes to both questions.
Mr. Cooper. Yes, sir.
Mr. Flores. And Mr. Gebolys?
Mr. Gebolys. Oh. Yes. Obviously, the world's changing and
we are going to get to greater and greater efficiency, and the
liquid fuels market is going to have to change with it.
Mr. Flores. Do you feel that high-octane standards are a
way to achieve that?
Mr. Gebolys. I don't have an opinion on that one way or the
other.
Mr. Flores. OK. Mr. Thompson?
Mr. Thompson. Certainly, we believe there's a lot of
potential and, as you know, when transitioning away from the
RFS to a 95 RON standard, we believe that would be in the best
interest of all stakeholders.
Mr. Flores. OK. Mr. Nieuwenhuis, do you agree that liquid-
fuel vehicles are going to have to find ways to improve fuel
economy and lower emissions?
Mr. Nieuwenhuis. Yes, absolutely.
Mr. Flores. OK.
Mr. Nieuwenhuis. And I feel the best way is through high-
octane fuels with ethanol blends.
Mr. Flores. OK. Well, I think you all support the approach
that Mr. Shimkus and I are trying to take versus the constant
litigation and arguing with the EPA.
Thank you. I yield back the balance of my time.
Mr. Tonko. The gentleman yields back.
The Chair now recognizes the gentlelady from California,
Representative Matsui, for 5 minutes, please.
Ms. Matsui. Thank you very much, Mr. Chairman, for bringing
attention to one out of the many issues that come out of this
administration's handling of the Renewable Fuel Standard.
While many of us were excited about the promise of the RFS
and the opportunity to reduce greenhouse gas emissions from our
Nation's transportation sector, it's been clear for the past
two and a half years that it's not an interest of this
administration to execute the programs Congress intended and
abundantly obvious that the ultimate goal of the RFS to combat
climate change is not one shared by the President or his
political appointees.
A critical issue that has been gaining attention lately is
the liberal use of the small refinery exceptions--SREs--and how
they are not only undercutting the program but hurting
industries across the country, including Pacific Ethanol, which
is headquartered in my district of Sacramento.
I met with Pacific Ethanol's CEO, who has communicated to
me firsthand how SREs are hurting his company and threatening
good-paying jobs in my district.
Now, I want to now turn to the subject of advanced
biofuels. We have not seen the level of deployment of advanced
fuels that was originally envisioned under the RFS. We can
point to issues that have come up over the years.
It is also clear that difference in emissions between this
administration and the last is having an impact here.
For example, the EPA under President Trump has put a freeze
on all new cellulosic biofuel registrations and pathways.
Mr. Cooper or Mr. Gebolys, how has this freeze impacted the
ability to deploy a higher percentage of advanced biofuels,
specifically cellulosic biofuels, into our fuel mix, and if you
could be--make it quickly.
Mr. Cooper. Yes, thank you for the question.
Pacific Ethanol is actually one of the leaders in adopting
cellulosic ethanol technology, and they are today producing
cellulosic ethanol right alongside starch-based ethanol.
We have 200 corn-based ethanol plants across the country.
Every one of them was in a position to quickly adopt the same
technology to produce cellulosic biofuels that would reduce
carbon emissions 70 to 80 percent relative to gasoline.
But, as you mentioned, the EPA put a freeze on those
registrations, put a freeze on those pathway petitions. And so
today we have maybe half a dozen facilities that are using that
technology.
So EPA's, you know, mismanagement of the RFS goes far
beyond the Small Refinery Exemptions and also deals with these
pathway approvals and registrations.
Ms. Matsui. Well, has the increase in approval of SREs
impacted development of cellulosic biofuels' inability to
penetrate the market? Either one of you.
Mr. Gebolys. Yes, I can't speak to cellulosic, although it
has. But more directly, by far the largest advanced biofuel in
the country is biodiesel and biomass-based diesel, and the
impact on biomass-based diesel has been severe and immediate.
All of the expansion in the RFS is supposed to be in the
advanced biofuels sector as of 2016, and we have flatlined
despite the fact that the basic concept of the RFS was that the
program would be emphasizing advanced biofuels, all of which
have a 50 percent greater reduction in carbon impact.
Ms. Matsui. OK. So an issue that's come up as this year's
rulemaking has unfolded is whether or not and in what volume
the waived gallons of renewable fuel might be incorporated back
into the market by requiring refineries that did not receive a
waiver to blend additional gallons.
Mr. Cooper, would H.R. 3006's June 1st deadline for Small
Refinery Exemption petitions address this issue?
Mr. Cooper. Yes, it would, on a prospective basis, moving
forward. I think the 4 billion gallons that we've lost already
as a consequence of these exemptions would not be addressed by
the legislation.
But it would stop the bleeding and ensure that, moving
forward, those exemptions--which we are saying, you know, if a
small refiner deserves one, go ahead and give it to him. Just
make sure that lost blending volume is made up and accounted
for by larger nonexempt refineries. The bill would do that.
Ms. Matsui. All right. Well, should there be additional
public transparency milestones such as deadline for EPA to
report to the public how many petitions they have received? Is
that helpful?
Mr. Cooper. Yes, that would be helpful.
Ms. Matsui. OK. What other information could be made public
that is not currently available?
Mr. Cooper. I think, as we've discussed, we think the
identity of the refineries submitting a petition, the volume,
you know, that is seeking an exemption, and the location of the
refinery.
Those are three basic things that are not confidential
business information and don't involve financial or operational
factors.
Ms. Matsui. How about the criteria EPA uses to evaluate
these petitions?
Mr. Cooper. It would be very helpful to know exactly what
criteria EPA is using and how that's changed, absolutely.
Ms. Matsui. So you want more transparency all the way
around?
Mr. Cooper. Certainly.
Ms. Matsui. OK. Fine. Well, I've run out of time. So thank
you very much. I yield back.
Mr. Cooper. Thank you.
Mr. Tonko. The gentlelady yields back.
The Chair now recognizes the gentleman from Oklahoma, Mr.
Mullin, for 5 minutes.
Mr. Mullin. Thank you, Mr. Chairman.
I've just got a couple questions.
Mr. Thompson, under the RFS, are waivers allowed?
Mr. Thompson. Yes.
Mr. Mullin. They are allowed?
Mr. Thompson. Waivers? Yes.
Mr. Mullin. Yes. OK. Are there court cases to back this up?
Mr. Thompson. Yes, there are lots of court cases, including
several that deal specifically with Small Refinery Exemptions.
Mr. Mullin. So the President is within his authority to be
able to do this, right?
Mr. Thompson. Absolutely.
Mr. Mullin. OK. That's pretty much all my questions with
that. I will yield to the gentleman from Georgia, Buddy Carter.
Mr. Carter. I thank the gentleman for yielding.
Gentlemen, can you clear something up for me? Mr. Thompson,
you said in your testimony that the data--the EIA data--says
that both volume and blend rates for ethanol are at a near all-
time high.
But I've heard you, Mr. Cooper, and you, Mr. Nieuwenhuis,
say that they're--they've decreased. I am confused. Who's right
here? Who's wrong?
Mr. Cooper, do you want to take a shot at it?
Mr. Cooper. Absolutely. I am not sure what EIA data Mr.
Thompson is looking at. The data we look at shows clear
evidence of demand loss. We are consuming less ethanol last
year than we have in 2017. That's the first year-over-year loss
we've seen----
Mr. Carter. And are you saying that the SREs are the reason
for that?
Mr. Cooper. They are certainly part of the reason for that,
yes.
Mr. Carter. How much of the reason for that, and why?
Mr. Cooper. We would suggest that SREs are primarily
responsible for that demand loss because you have reduced----
Mr. Carter. OK. Because----
Mr. Cooper. You're reduced the requirement--you know, the
RFS requirement. You have lowered that below the so-called E10
blend wall and taken the pressure off the marketplace to expand
ethanol blending.
Mr. Carter. OK. Mr. Thompson, what----
Mr. Thompson. The only data that I have is from the EIA,
and the EIA data which, again, was on display is pulled right
from their website. It's the latest data available publicly.
It's only available up through July of this year, and it
shows that ethanol blend rates are at 10.17 percent, which is
the highest of all time. It shows that bioconsumption is
certainly slightly down by it looks like 4,000 or so gallons.
And so, you know, as far as they're--I have proof for my data
points. It's the EIA data.
Mr. Carter. OK. Well, and I am not--I am not doubting you.
I am just a little bit confused.
Mr. Thompson. No, I am not suggesting you're doubting me. I
am suggesting I have no way to refute the data that just
happens to fall in their testimony.
Mr. Carter. OK.
Mr. Thompson. You know--right, this is the ethanol that
speaks for itself.
Mr. Carter. Fair enough. Fair enough.
Well, let me ask you this. Would the SREs impact the
ethanol more so than biofuels, or would it be the same for
both, Mr. Thompson?
Mr. Thompson. Well, I would say that there's probably more
of an impact on biodiesel than ethanol because, as we say, my
members make blends--you know, BOBs--that have to be blended
with octane before they can be sold, and that octane source is
ethanol.
So, regardless of SREs, remember, SREs only give relief
from compliance of, you know, handing over RINs to the
Government. It does not give them relief from, you know, making
sure that they're selling to consumers a compliant product.
Mr. Carter. OK. Gotcha.
Mr. Cooper?
Mr. Cooper. Well, you know, again, we could--and we have
been, are arguing for quite some time about what the EIA data
show.
When you look at the facts on the ground, though, we have
19 ethanol plants that have shut down. You can't tell me that
that hasn't happened because there hasn't been some loss of
demand, and that's absolutely what has occurred. Our production
is down. That's a response to the lower demand that we've seen
as well.
Mr. Carter. OK. All right. Fine. Enough.
Let me ask you this. I am going to shift gears and, Mr.
Thompson, I am going to ask you this. You said in your
testimony that the RFS is explicit in providing small
refineries the ability to apply for a petition at any point in
the year.
How important is that to be flexible? I know that we've had
a number of floods in the Midwest, and certainly that had to
have had some impact on it as well.
Mr. Thompson. Well, you have hit it on its head. There's
lots of circumstances that can arise.
Again, it was Congress--if you go back and look at the
legislative history around SREs, it goes back to the early
2000s. It was bipartisan. These small refineries are the
lifebloods of communities. You want to protect them and make
sure they remain viable.
And so there are things that can crop up at any time in the
year that could impact the ability to comply, and refineries
should have the ability and the flexibility to seek relief when
they need relief.
Mr. Carter. Very good, and I am going to yield to Ranking
Member Shimkus.
Mr. Shimkus. I thank my colleague.
And the point I--the point I want to stress is, and whether
you want to dispute this or not, is that the volume of the
liquid transportation fleet, based upon the Energy Information
Agency, is going to decline.
Well, how fast? How slow? If we move to a Green New Deal,
it's going to be rapid and it's going to be based upon in
intervention by us, regulations, and rules.
So we are trying to protect the liquid transportation
market and we have to rewrite the law, and that's what I was
trying to do and I need your help.
I will yield back to my colleague.
Mr. Carter. And I yield the remainder of my time. Thank
you, Mr. Chairman.
Mr. Tonko. The gentleman yields back.
And now the Chair recognizes the gentleman from California,
Mr. McNerney, for 5 minutes, please.
Mr. McNerney. I thank the Chair and I thank the witnesses.
I apologize for missing your testimony.
But this is a complicated issue, and I appreciate there's a
lot of different sides to it. My district has Pacific Ethanol,
which produces 60 million gallons a year. So it is important to
me.
Mr. Cooper, in your testimony you mentioned how the
response to sustained or weak, negative margins trends that
coincide with the Trump administration's expansion of the SRE
program--that ethanol plants have been forced to idle or shut
down permanently.
Can you speak to the impact that this has had on the
biofuel producers, specifically with regard to both the direct
and indirect jobs associated with those losses?
Mr. Cooper. Certainly, and thank you for the question.
Yes, as I mentioned, we've seen 19 ethanol plants either
temporarily idle or permanently close. There's four or five of
those facilities that have shut their doors and will never come
back online.
The jobs--each of those ethanol plants employs 45 to 50
workers directly at the plant. Those are great jobs in rural
areas, typically. But the impact goes far beyond that. There's
lots of indirect and induced jobs.
We have estimated the impact of these 19 plant closures as
700 lost direct jobs and 2,800 indirect and induced jobs.
That's about 3,500 jobs that we believe have been affected
because of these Small Refinery Exemptions. It's a serious
issue.
We are also experiencing the worst margins, you know, for a
sustained period of time that this industry has probably ever
seen.
Mr. McNerney. Thank you.
Mr. Gebolys, one of the biggest complaint surrounding how
the EPA has managed the SRE program is there's been a lack of
transparency--that's come up several times this morning--and
with these waivers that's being granted, who's receiving them.
Would you say that all the secretive and capricious nature
of the SREs can have a destabilizing effect on the renewable
energy sector, specifically with regard to ethanol production
and job loss?
Mr. Gebolys. Yes. There's no question that the secretive
nature destabilizes markets. Some market participants have
information. Others don't. You can't have a functioning market
like that.
If I might just quickly add to your previous question, Mr.
Cooper. Look, we can quote all the studies we want. I had to
make a decision to close three plants.
I couldn't personally be in three places at the same time,
so I had to do those by video. One after another after another,
even through video, I made eye contact with the folks that were
going to be furloughed later that same day. There is zero
question that these SREs are crushing small refineries. They're
just idle refiners.
Mr. McNerney. Thank you.
Mr. Nieuwenhuis, can you speak to the impact of the EPA's
decision to not fully reallocate the negotiated amount of 1.3
billion gallons of SREs in 2020----
Mr. Nieuwenhuis. Yes, absolutely.
The deal that we were approached with on October 4th from
the Trump administration was to head back our 3-year rolling
average of the waived--gallons that were actually waived of the
4.04 billion gallons. So that would be, like, 1.4 billion
gallons per year in a 3-year thing.
Now, there was some certainty in that proposal. But the
proposal that the EPA came out with 11 days later cut that in
half just in--and that didn't even assure that the waivers that
they granted wouldn't offset that to keep us under 15 billion
gallons.
So, as president of a board of a plant, when we heard the
first proposal we were excited, and then when we heard the
actual proposal from the EPA we were disappointed and saw that
that wasn't going to be the answer to the situation.
Mr. McNerney. Yes, businesses thrive on certainty and the
predictability, and this is, in my opinion and many people's
opinion, a real problem.
Mr. Cooper, you noted in your testimony that, while the
practice of issuing retroactive exemptions has continued since
2013, they only emerged as a significant concern under the
Trump administration's massive expansion.
Can you speak to the importance of closing this loophole?
Mr. Cooper. Absolutely, and again, this program--you know,
the Small Refinery Exemption program has been around since the
beginning of the RFS.
It hasn't really been an issue for us until the recent--
until the last few years when the refining industry did find
numerous loopholes available in this program and exploited
those loopholes and had a willing partner in EPA.
So we do think there are a number of ways to close those
loopholes. We believe H.R. 3006 begins to close some of those,
the biggest loopholes, you know, being the deadline for
submitting these petitions and ensuring that we know before
that RVO is finalized every year what volume of gasoline and
diesel is going to be exempted from an obligation.
That allows that volume to be restored or redistributed to
nonexempt parties. That's the big issue here.
Mr. McNerney. Well, I mean, the EPA has the flexibility to
deal with this. It's just using it in a bad way, in my opinion.
Mr. Cooper. Absolutely.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Tonko. The gentleman yields back.
The Chair now recognizes the gentlelady from Illinois,
Representative Schakowsky, for 5 minutes, please.
Ms. Schakowsky. Thank you, Mr. Chairman and Ranking Member.
So the current issue surrounding the Renewable Fuel
Standard perfectly, in my mind, sums up the priorities of the
Trump administration.
President Trump and his cronies, they get theirs while
ordinary Americans get hurt. We saw this in 2014 when the Trump
Taj Mahal Casino filed for bankruptcy only to be bailed out by
billionaire Carl Icahn, who bought it, and when casino workers
went on strike two years later, Icahn did everything he could
to try to strip them of their pensions and bankrupt the casino
to his benefit, and he is definitely an--he is the definition
of a vulture capitalist.
Well, President Trump then rewarded Icahn with an advisory
role in the White House. Icahn used his position to line his
own pocket by pursuing the--pushing the EPA to overhaul the
Renewable Fuel Standard in order to benefit his own energy
interests.
And this administration is working overtime to promote big
oil at the expense of farmers and rural communities and average
Americans everywhere.
What's worse is that they're afraid to admit it, resulting
in a shameful lack of transparency.
Mr. Cooper, would you say that anything that I said just
now--this characterization--is incorrect?
Mr. Cooper. Well, I would say the President on numerous
occasions has voiced strong support for the ethanol industry
and the RFS specifically. But the actions of his EPA and the
actions of this administration are inconsistent with those
commitments and promises.
Ms. Schakowsky. Thank you.
Mr. Nieuwenhuis, has the Trump administration given small
refinery waivers to big companies like those Icahn has invested
in and put farmers' interests--or has it put farmers' interests
first?
Mr. Nieuwenhuis. Well, from my perspective, it's put the
oil industry's perspective first, and the rural communities
have taken a lot of abuse through these Small Refinery
Exemptions.
And, you know, part of the Small Refinery Exemptions when
they started that discussion was because of the cost of RINs
was the reason they were asking for the hardships.
Well, August 9th, when they granted the last 31 Small
Refinery Exemptions, RIN prices were at an all-time record low.
So we were shocked when those were granted because we thought,
with record-low RIN prices, why should anybody qualify for a
hardship?
Ms. Schakowsky. Thank you.
So climate change has worsened disasters, such as floods
across the Midwest, where I live. This endangers the food
security of Americans and the livelihood of our farmers.
Illinois has the third-highest ethanol production capacity
in the United States. Again, I want to ask Mr. Nieuwenhuis, as
a farmer, is there any evidence that Carl Icahn, when he was at
the White House--in the White House--has the best interests of
Illinois farmers at heart?
Mr. Nieuwenhuis. Oh, absolutely not. He has the best
interests in his own pocketbook in that situation. You know, he
was calling for the change of point of obligation to start with
and just--he's been trying to destroy the RFS since the Trump
administration got into office.
Ms. Schakowsky. Thank you.
Mr. Cooper, what would the administration--what the
administration has proposed--the changes that it's proposed to
the Renewable Fuel Standard mean to Illinois farmers, in your
view?
Mr. Cooper. Well, as Kelly pointed out earlier, you know,
the deal or the agreement that was promised to the biofuels
industry was, we are going to make whole the Renewable Fuel
Standard. We are going to make sure that in 2020 15 billion
gallons of required blending actually means 15 billion.
And there's a methodology for doing that that involved the
3-year rolling average of actual exemptions that Mr.
Nieuwenhuis referred to.
What we've seen in the proposal is that EPA has gone back
on that agreement and is proposing to use a surrogate for
projecting those exemptions that would result in a 15 billion
gallon number again eroding to something less than 15 billion
gallons and being inconsistent with what appears in the
statute.
Ms. Schakowsky. Mr. Cooper, I saw you shake your head when
it was suggested that--on the question of transparency, et
cetera--that essentially that the Obama administration has just
been exactly like the Trump administration. Could you speak to
that?
Mr. Cooper. I would be happy to. In 2016, under the
previous administration, EPA actually proposed in a proposed
rule that went out for public comment to kind of lift the veil
on the Small Refinery Exemption program, and they actually
said, you know, and I quote, that ``small refineries are not
entitled to CBI protection for certain information,'' including
the name and location of the refineries, the nature of the
relief that was being sought, and the volumes affected.
EPA tried to float that proposal out again recently, and it
got withdrawn and pulled back. So it is inconsistent to say
that the Obama administration had the exact same approach to
transparency on this issue. They understood there was a
problem, and they were trying to resolve it.
Ms. Schakowsky. Thank you.
I yield back.
Mr. Tonko. The gentlelady yields back.
The Chair now recognizes the gentleman from Vermont, Mr.
Welch, for 5 minutes, please.
Mr. Welch. Thank you very much. I appreciate the witnesses
and the information provided. I am a little disappointed at the
narrow scope of this hearing.
The whole issue of the ethanol mandate has raised a lot of
policy questions--environmental, cost of food, impact on
farmers who use grain.
But I certainly appreciate the advocacy of friends like Mr.
Loebsack, who are really concerned about the well-being of the
farmers that grow grain that goes in--corn that goes into
ethanol.
And I come from a dairy State where grain is feed, and
there is a lot of evidence that the higher the ethanol mandate,
there used to be a tax benefit and there used to be, as you
know, a tariff. All of that added to the cost of the dairy
farmers who were paying more for the corn.
So there's a dilemma here, OK. We like farmers, but if
you're a corn producer you like the ethanol mandate. If you're
a corn consumer for your dairy cows, it's a lot tougher.
And I've been working with Mr. Flores and others to try to
deal with some of these problems and get some stability, and I
want to just ask--so I just needed to say that, that there's an
immense amount of evidence that, as a result of the ethanol
policy--in fact, I disagree with you're all raising your hand--
we are using more--we are creating more greenhouse gases net
than without it.
There's an enormous amount of evidence about overproduction
of row to row--a lot more planting, millions of acres and the
loss of habitat life, and then higher costs for consumers if
they're buying their food and a higher cost for farmers that
are using grain, whether it's dairy, chicken, or hogs.
So, in full disclosure here, I love farmers. But I don't
necessarily love ethanol. Let me ask just a couple of questions
to get this moving.
With the status of this confusion between EPA and
everything you're talking about, what specifically, Mr.
Nieuwenhuis, do you think has to be done to address this?
Mr. Nieuwenhuis. I think the RFS needs to be upheld on this
situation and on the Small Refinery Exemptions. You know, it's
been excessive during the Trump administration--the 4 billion
gallons that have been granted waivers--and now it's a lot of
demand that----
Mr. Welch. So transparency and a limitation on waivers?
Mr. Nieuwenhuis. Transparency and limitation would be huge.
Mr. Welch. OK. All right.
And Mr. Gebolys--did I pronounce your name right?
The Greener Fuels Act, which I support, supports advanced
biofuels, and that, as I understand it, is what the RFS was
originally intended for.
Can the RFS as it is now get us to a broader demand and use
of advanced biofuels, and what are the major reforms to the
program needed to achieve this goal?
Mr. Gebolys. Thanks very much for the question.
The response is absolutely, the RFS, as it is currently
constructed, is not an ethanol mandate. It is a broad biofuels-
pushing structure that was designed to start with conventional
biofuels, get to a maximum of 15 billion gallons of ethanol by
2016, and then all of the growth after that was--is designed to
be in the advanced category.
Mr. Welch. But it's not there.
Mr. Gebolys. I am sorry?
Mr. Welch. We are not getting it.
Mr. Gebolys. We are not getting it because we are getting
SREs instead. I see Mr. Thompson react to the--to my comment.
But that is absolutely what is happening.
There's an economist at the University of Illinois named
Scott Irwin. He's written a paper in March of this most recent
year that lays it out in three very easily read pages on
exactly how that is impacting us.
Mr. Welch. And without having an argument about the net
carbon impact of ethanol, there's no question that advanced
biofuels have a much more significant carbon reduction impact.
Would you speak to that, Mr. Gebolys?
Mr. Gebolys. Yes. You can't be an advanced biofuel unless
you demonstrate without any question that your fuel reduces
carbon by no less than 50 percent. In the biodiesel world, many
of ours, depending on what you're using for feedstock, reduce
the carbon impact by upwards of 85 percent.
The other thing that I wanted to address is the issue about
food versus fuel. The reason that soybeans, which are the main
source of feedstock for biodiesel--the reason those are grown
is for the protein, not the oil, and when you get a higher net
back to the oil, the protein actually becomes less expensive.
You get more value in the bean from the oil contribution,
and the protein, which is the good stuff, actually becomes less
expensive.
So the growth of advanced biofuels actually goes hand in
hand with the growth of protein.
Mr. Welch. OK. I yield back. Thank you.
Thank you, Mr. Chairman.
Mr. Tonko. The gentleman yields back. The Chair now
recognizes the gentleman from Iowa, Representative Loebsack,
for 5 minutes, please.
Mr. Loebsack. Thank you, Chairman Tonko and Ranking Member
Shimkus, for allowing me to waive on to this subcommittee, and
thank you to the witnesses for being here as well.
The RFS does support, as we know, thousands of jobs across
the country. It's an economic driver in many rural and farming
communities in Iowa and across the Midwest.
Unfortunately, over the past 3 years, this administration
has undermined this program at every turn without providing a
shred of transparency along the way, and today, dozens of these
plants have shut down or halted production.
Our farmers are feeling real pain watching their local
economies disappear right along with their jobs. I am proud to
have championed the legislation we are discussing today, the
RFS Integrity Act, introduced by my colleague and fellow
cochair on the Biofuels Caucus, Collin Peterson, and
cosponsored by a number of Republicans as well.
This much-needed legislation would increase transparency
around these waivers and allow EPA to account for waived
gallons when setting the RVO for the coming year.
And I've got a bunch of questions. I am going to go through
them a little bit quickly, if I may.
Mr. Cooper, why is it important that we know who is
receiving these waivers and also exactly how many gallons are
being exempted before the RVO is set?
Mr. Cooper. Well, thank you for the question, and it really
comes down to accountability and fairness. I mean, transparency
is necessary if we are going to have an accountable program.
Again, we are not suggesting that private, financial, or
operational or sensitive data should be disclosed. But,
certainly, the name and location of the facility, you know,
that is asking for an exemption should be publicly available.
Mr. Loebsack. How many gallons are being exempted before
the RVO is set then?
Mr. Cooper. So, I mean, the last few years it's been an
average of 1.35 billion gallons.
Mr. Loebsack. OK.
Mr. Cooper. We are simply asking EPA to add that into their
RVO moving forward, to make sure it's accounted for----
Mr. Loebsack. So does the current proposed rule guarantee
15 billion gallons?
Mr. Cooper. It doesn't, because EPA is proposing to only
project 770 million gallons of exemptions when the actual total
has been 1.35 billion gallons. So about----
Mr. Loebsack. Can you address how the market has responded
to the supplemental rule and whether the current proposal will
circumvent the closure of more ethanol plants?
Mr. Cooper. The market has barely blinked at the
supplemental proposal from EPA. RIN prices have remained low.
Corn prices, ethanol prices, did not react, you know, and I
think that's a pretty strong signal that the market doesn't see
this as a proposal that's really going to put the RFS back on
the right track.
Mr. Loebsack. Thanks, Mr. Cooper.
Mr. Nieuwenhuis, thank you for being here. It's good to see
you again. I see you in Iowa from time to time. Too bad we
don't have the Corn Indy 300 any longer.
But at any rate, thank you for being here. I think it's
just so important that we hear directly from an Iowa farmer
about the consequences of these waivers.
How did the most recent batch of SREs play into your
decision to close down your ethanol plant? And I am happy that
at least some--it's going at least some capacity now.
Mr. Nieuwenhuis. Thank you for the question, Mr. Loebsack.
You know, that August 9th announcement of the 31 last SREs
being granted, ethanol prices dropped 18 to 20 cents a gallon
in a couple days. That's a huge move in the ethanol market, and
it just took the--knocked the wind out of our sails in our
plant at Sioux Center at that point.
The month of August we lost millions of dollars. You know,
if we would have had a crystal ball and knew this was going to
happen, we probably would have idled our plant sooner. Did not
drive it off a cliff----
Mr. Loebsack. And so what was--and if I might, what was the
local impact of this?
Mr. Nieuwenhuis. You know, when we idled our plant it's a
trickle-down effect. We not only weren't producing ethanol, but
we weren't producing--we produce 350,000 tons of wet
distiller's grain in our plant alone every year, and we got--
it's all fed within a three-county area with two cattle
producers. It's a huge market for our coproduct there.
We weren't producing any corn oil, which we either used for
livestock feed as a high-energy product or it can go into
biodiesel.
Mr. Loebsack. Right.
Mr. Nieuwenhuis. And then also the trucking industry--our
plant alone trucks in 24 million bushels of corn a year and it
trucks out 75 million gallons of ethanol a year.
Mr. Loebsack. And I think that those effects--those sort of
forward and backward linkages, the economists call them,
right--I think that we often forget about those as well and
that effect.
Mr. Nieuwenhuis. And our plant is unique also. We usually
crack and pack 4 to 5 million bushels of corn during harvest,
and we are not doing that this year.
Mr. Loebsack. So what about the effect on prices that
farmers receive for their grain--their ability to deliver
during the harvest?
Mr. Nieuwenhuis. You know what? It is huge. You know, our
local location with our farmers--and we have 385 members to our
plant, which are pretty much majority farmers--them not being
able to deliver corn there and for us to take our bid off the
tables is about a 15 to 20 cents a bushel drop in bases because
of the----
Mr. Loebsack. If Mr. Wheeler were here today, what would
you say to him about the proposal?
Mr. Nieuwenhuis. Well, the latest proposal is woefully
inadequate to give the certainty to our industry so we can move
forward and grow the use of biofuels.
Mr. Loebsack. Thank you.
And thank you, Mr. Chairman. I would like to ask unanimous
consent to enter the following item into the record. It's a
letter from the Biofuels Caucus, including my Iowa colleagues
Representatives Axne and Finkenauer, to EPA Administrator
Wheeler. I request unanimous consent that I enter that into the
record, if I could--the letter to Mr. Wheeler.
Mr. Tonko. So granted.
[The information appears at the conclusion of the hearing.]
Mr. Loebsack. OK. Thank you, and I yield back.
Mr. Tonko. The gentleman yields back.
I believe that concludes all Members that were choosing----
Mr. Shimkus. Mr. Chairman? Mr. Chairman?
Can I just ask a point of personal privilege for 1 second?
To all my friends here, I just want to go over a little
history. My first legislative success was enacting biodiesel in
the fleets in 1998 with Karen McCarthy, and Clinton signed that
bill.
MTBE got excluded. Ethanol found a market. I was in this
room when we passed the RFS, thanks to the then-Speaker. I
voted for the Democratic 2007 RFS revision and expansion.
I just want that on the record, as I've been trying to deal
in this very contentious debate. I think we are trying to find
a solution, and I really would encourage my friends and my
colleagues. I think we are threatened by a changing world, and
we better get united.
Thank you, Mr. Chairman. I yield back.
Mr. Tonko. The gentleman yields back.
I request unanimous consent to enter the following into the
record: a letter from BIO, the Biotechnology Innovation
Organization, a letter from the United States Steelworkers, a
letter from New Energy America, a letter from 25 Members of
Congress to EPA Administrator Andrew Wheeler, a labor coalition
letter to EPA Administrator Andrew Wheeler--Labor Coalition for
Biofuels--a set of letters from the labor community to the
administration submitted by Representative McKinley, an article
published in the New York Times Magazine entitled ``Palm Oil
Was Supposed to Help Save the Planet. Instead It Unleashed a
Catastrophe,'' testimony from EPA Acting Assistant
Administrator for the Office of Air and Radiation, Anne L.
Idsal, a post from EIA's website, and finally, a letter, I
believe, from the Biofuel Caucus and a letter from a coalition
of many organizations that was received on September--dated
September 10.
Without objection----
[Side comments.]
Mr. Tonko. Without objection, so ordered.
[The information appears at the conclusion of the
hearing.]\1\
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\1\ The EIA post appears during Mr. Thompson's oral testimony.
Labor community letters submitted by Mr. McKinley have been retained in
committee files and also are available at https://docs.house.gov/
meetings/IF/IF18/20191029/110175/HHRG-116-IF18-20191029-SD003.pdf.
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Mr. Tonko. And finally, that concludes our business here. I
would like to thank all of our witnesses for joining us at
today's hearing.
I remind Members that, pursuant to committee rules, they
have 10 business days by which to submit additional questions
for the record to be answered by our witnesses.
I ask each witness to respond promptly to any such
questions that they may receive.
And with that, we again thank them for appearing before the
subcommittee, and at this time the subcommittee is adjourned.
[Whereupon, at 12:44 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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