[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE RENEWABLE FUEL STANDARD
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON THE INTERIOR
AND THE
SUBCOMMITTEE ON HEALTH CARE,
BENEFITS AND ADMINISTRATIVE RULES
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MARCH 16, 2016
__________
Serial No. 114-154
__________
Printed for the use of the Committee on Oversight and Government Reform
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, Jr., Tennessee CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
JUSTIN AMASH, Michigan WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee JIM COOPER, Tennessee
TREY GOWDY, South Carolina GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida TED LIEU, California
MICK MULVANEY, South Carolina BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina MARK DeSAULNIER, California
ROD BLUM, Iowa BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama
Jennifer Hemingway, Staff Director
Ryan Hambleton, Senior Professional Staff Member
William Marx, Clerk
David Rapallo, Minority Staff Director
Subcommittee on Health Care, Benefits and Administrative Rules
JIM JORDAN, Ohio, Chairman
TIM WALBERG, Michigan MATT CARTWRIGHT, Pennsylvania,
SCOTT DesJARLAIS, Tennessee Ranking Minority Member
TREY GOWDY, South Carolina ELEANOR HOLMES NORTON, District of
CYNTHIA M. LUMMIS, Wyoming Columbia
MARK MEADOWS, North Carolina BONNIE WATSON COLEMAN, New Jersey
RON DeSANTIS, Florida MARK DeSAULNIER, California
MICK MULVANEY, South Carolina, Vice BRENDAN F. BOYLE, Pennsylvania
Chair JIM COOPER, Tennessee
MARK WALKER, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
JODY B, HICE, Georgia Vacancy
EARL L. ``BUDDY'' CARTER, Georgia
------
Subcommittee on the Interior
CYNTHIA M. LUMMIS, Wyoming, Chairman
PAUL A. GOSAR, Arizona BRENDA L. LAWRENCE, Michigan,
BLAKE FARENTHOLD, Texas Ranking Minority Member
KEN BUCK, Colorado, Vice Chair MATT CARTWRIGHT, Pennsylvania
STEVE RUSSELL, Oklahoma STACEY E. PLASKETT, Virgin Islands
GARY J. PALMER, Alabama
C O N T E N T S
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Page
Hearing held on March 16, 2016................................... 1
WITNESSES
Mr. Christopher Grundler, Director, Office of Transportation and
Air Quality, U.S. Environmmental Protection Agency
Oral Statement............................................... 5
Written Statement............................................ 8
Dr. John M. DeCicco, Research Professor, University of Michigan
Energy Institute
Oral Statement............................................... 11
Written Statement............................................ 13
Ms. Kelly Stone, Policy Analyst, ActionAID USA
Oral Statement............................................... 34
Written Statement............................................ 36
Mr. Wallace E. Tyner, James and Lois Ackerman Professor,
Department of Agricultural Economics, Purdue University
Oral Statement............................................... 40
Written Statement............................................ 42
Mr. Nicolas D. Loris, Herbert and Joyce Morgan Fellow, The
Heritage Foundation
Oral Statement............................................... 50
Written Statement............................................ 52
APPENDIX
Statement for the Record of Mr. Blum of Iowa..................... 92
Questions for the Record for Mr. Christopher Grundler, submitted
by Chairman Lummis............................................. 94
EXAMINING THE RENEWABLE FUEL STANDARD
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Wednesday, March 16, 2016
House of Representatives,
Subcommittee on Interior, joint with the
Subcommittee on Health Care, Benefits, and
Administrative Rules,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittees met, pursuant to call, at 2:00 p.m., in
Room 2154, Rayburn House Office Building, Hon. Paul Gosar
[chairman of the Subcommittee on Interior] presiding.
Present from Subcommittee on Interior: Representatives
Gosar, Buck, Russell, Lawrence, and Cartwright.
Present from Subcommittee on Health Care, Benefits, and
Administrative Rules: Representatives Jordan, Walberg,
DeSantis, Walker, Carter, Cartwright.
Also Present: Representative Welch.
Mr. Gosar. The Subcommittees on Interior and on Health
Care, Benefits, and Administrative Rules will come to order.
Without objection, the chair is authorized to declare a
recess at any time.
I am going to acknowledge myself for my introductory
statement.
The Renewable Fuel Standard, or RFS, is a mandatory minimum
of biofuels that must be used in the national transportation
fuel supply. The program was first established by Congress in
2005 and was later expanded in 2007 under the Energy
Independence and Security Act to mandate that 36 billion
gallons of biofuels must be blended into the fuel supply by
2022. The original goals of the RFS were to help curb air
pollution, reduce greenhouse gas emissions, and reduce U.S.
energy dependence through the use of biofuels.
Much has changed since the first 10 years that RFS has been
in effect. When the original laws were passed, Americans had
serious concerns about the rising price of gas and about our
dependence on foreign oil. However, since almost immediately
after the law was passed, the U.S. has experienced an
extraordinary energy supply boom. Today, gasoline is selling
for historically low prices. The assumption under the RFS that
demand for oil would continue to rise has not been realized,
and we must take a hard look at how this affects the success of
the program.
Unfortunately, the way the law was written makes it
incapable of adequately adjusting to these changes. The EPA is
responsible for developing and implementing regulations for the
RFS, but due to the challenging reality the RFS operates in,
EPA has continually been late in issuing its renewable fuel
obligation levels and has often had to issue these annual
renewable fuel mandates retroactively.
This past November, EPA issued the final renewable fuel
volume levels for the year 2014, 2015, and 2016. This would
make 2016 one of the few years EPA has issued that mandate on
time.
In addition, EPA has often elected to use its waiver
authority to issue volume mandates that are below the levels
set by law further showing how the original mandates are
unsustainable in today's reality.
The current RFS mandates have caused the Nation's fuel
supply to reach the blend wall of 10 percent ethanol
incorporated into the fuel supply. This blend wall barrier is
the highest level of ethanol blended into fuel that can be
sustained in the current automobile market. If any percentage
higher than this is used in vehicles, serious engine problems
can occur in older cars or void warranties in newer models.
This creates a serious problem for consumers.
The implementation of the RFS has also created some
unintended and adverse consequences. The rapid expansion of
biofuel production using corn has caused an increase in food
prices, which in turn hurts the poorest and most vulnerable in
our society both at home and abroad.
Furthermore, some studies have shown that current ethanol
production may actually contribute to higher greenhouse gas
emissions. Accordingly, in a 2011 National Academy of Science
study, EPA's own emissions analyst found corn ethanol to have a
higher lifecycle greenhouse gas emission than that of gasoline.
This is in direct contrast with the original RFS goal of
improving air quality. These are just some of the problem that
must be addressed as we examine the effectiveness and viability
of the RFS as a program.
Today, we are joined by Mr. Christopher Grundler from the
EPA Office of Transportation and Air Quality. I hope that the
EPA can help us help you. Tell us what Congress needs to do to
make it able to do its job.
I also hope to hear about the effects of the RFS from other
members of the diverse panel that we have here today. I look
forward to having a productive discussion with our witnesses on
what we can do to best address the problems in the RFS program.
I want to thank you for all taking the time to appear today,
and I look forward to your testimony.
Mr. Gosar. And with that, seeing that the ranking member is
not here, I am going to recognize the vice ranking member, Matt
Cartwright, for his opening statement.
Mr. Cartwright. Thank you, Dr. Gosar and Chairman Jordan,
for holding today's hearing. I also want to thank our witnesses
for coming today and sharing your expertise with us.
Renewable energy and energy efficiency technology play an
instrumental role in improving America's energy independence
and in reducing carbon emissions. Certainly, renewable energy
sources are our future. Congress has to help facilitate and
expedite our inevitable transition away from fossil fuels and
the Renewable Fuel Standard, the RFS, can play an important
role in the transition.
Established in 2005 and expanded in '07, the RFS was
crafted by Congress to address our nation's dependence on
foreign oil, as well as spark clean energy innovation and job
creation. The RFS requires the EPA to issue annual standards on
four different categories of renewable fuels: total, advanced,
biomass-based diesel, and cellulosic. These standards identify
the percentage of each biofuel category that producers and
importers of gasoline and diesel must blend into transportation
fuel, heating fuel, and jet fuel.
I hope we can all agree that the goals of the RFS are
laudable and deserve all of our support. And the industry has
certainly achieved some success in meeting them. Biofuels, and
especially advanced biofuels, hold the promise of dramatically
reducing the carbon and environmental footprint of our
transportation sector. According to the biotech industry, over
its 10-year lifespan, the RFS has reduced U.S. transportation-
related carbon emissions by 589.33 million metric tons.
Moreover, the industry is creating jobs. The cellulosic
biofuel industry operates commercial biofuel plants in Kansas,
Iowa, Mississippi, and Florida. Twenty States have biofuel
facilities at different levels of development.
However, we do have to acknowledge the growing pains this
industry has faced over the past decade, and I do have my own
concerns. I have concerns about the RFS's impact on
agriculture, food prices, and a series of unintended but
potentially serious impacts on our environment. I am concerned
about the RFS's influence on the conversion of forestlands and
wetlands to corn and soy fields. And I am concerned about the
different estimates of the carbon footprint of corn ethanol.
And I want to understand better what the true current and
future climate impact of the RFS will be.
Looking forward, I hope that the progress of the biofuels
industry, which, without the RFS, never would have occurred,
can lay a foundation for a bright future for renewable fuels.
Carbon reductions and environmental benefits have thus far
fallen short of the heights we may have hoped for, and
cellulosic biofuels have not reached the production levels
predicted when the RFS was first established.
But despite this, I still see a bright and essential future
for renewable fuels, and the RFS is the most important policy
tool we have to allow this industry to continue to innovate and
expand. The biotech industry asserts that cellulosic and
advanced biorefineries have now reached commercial status and
that additional biorefineries can be built at lower capital
costs.
I hope that the recent standards announced by EPA can
provide certainty and propel us toward the advanced fuels that
will truly meet the original goals of the RFS. I hope to work
with my colleagues to get over hurdles such as the E10 blend
wall and constraints in the supply chains that have limited the
industry.
Our reliance on fossil fuels to power our transportation
sector is unwise and unsustainable, and Congress was smart to
provide a path for renewable fuels. The implementation of the
RFS has raised valid concerns from many corners, but I believe
the industry is ready to take a major step forward toward the
advanced biofuels that will have an important and positive
impact on the environment, on jobs, and on the transportation
sector.
I look forward to hearing from our witnesses today better
to understand the RFS and look forward to working with them and
my colleagues in laying out a path toward a renewable energy
future.
And I yield back, Mr. Chairman.
Mr. Gosar. I thank the gentleman. I am glad that we also
worked on potato potahto.
I would like to recognize Mr. Jordan, the chairman of the
Subcommittee on Health Care, Benefits, and Administrative Rules
for his opening statement.
Mr. Jordan. Thank you, Mr. Chairman. Let me thank you for
having this hearing.
You know, this would be laughable if it wasn't so serious.
This is a classic example of what happens when you get a bunch
of politicians together and think they are smarter than the
marketplace. A bunch of politicians got together back in 2007
and said you know what, we think we should blend it at this
rate this year and then keep increasing it.
And now all of a sudden we have hit the blend wall where
even the EPA says--Mr. Grundler, who is here to testify today,
testified even 3 years ago and said it is not feasible for the
system to absorb that much ethanol, right? So instead of
letting the hundreds of millions of consumers figure this out
and the marketplace figure this out, politicians got together
and they said we are smarter than everybody else, and we are
going to put this schedule together. We think this is the way
to go, and we are going to invest taxpayer money and skew the
system in a way--this is a classic example of why you shouldn't
do that, why you would let the marketplace work.
And I look forward to hearing from our witnesses. I hope
our witnesses will just say we never should have gone down this
road in the first place, and the best thing we can do is get
out of it as quickly as possible. And short of that, maybe
there is some other remedy, but this is, again, just a great
example of why you don't let a bunch of people in Washington
who think they are smarter than everybody else start some
program that winds up creating all kinds of problems.
With that, I yield back.
Mr. Gosar. I thank the gentleman.
I now recognize Mrs. Lawrence, ranking member of the
Subcommittee on Interior, for her opening statement.
Mrs. Lawrence. Thank you, Chairman Gosar and Chairman
Jordan, for holding this hearing today. I also want to thank
our witnesses for your time and testimony today.
A Republican Congress passed and a Republican President
signed into law the Energy Policy Act, which established the
Renewable Fuel Standard. The RFS seeks to decrease our nation's
dependency on foreign oil, as well as to promote clean energy
innovation and job creation. The need for RFS remains as true
today as it was in 2005.
I am proud to say that the innovation by Ford Motor Company
headquartered in my home State of Michigan has sparked
tremendous progress due to the RFS. For instance, since 2013,
vehicles sold by Ford Motor Company in the U.S. are capable of
running on gasoline as well as E15 blended ethanol fuel. To
date, Ford has manufactured more than 6.4 million flexible fuel
vehicles globally. Ford Motor Company's efforts demonstrate
tremendous strides in advancing and promoting the use of
renewable fuels, creating jobs and expanding our national
economy.
In addition, according to the biotechnology industry, the
RFS has displaced nearly 1.9 billion barrels of foreign oil
over the past decade by replacing petroleum fuel with homegrown
biofuels.
Although the RFS has experienced challenges, it is not the
time to abandon the RFS. We owe it to our constituents, the
future generations to keep the RFS on track as a means to
reduce our carbon emissions and dependence on fossil fuels, and
to create jobs building a cleaner energy future.
I look forward to working with my colleagues to keeping
this important piece of legislation intact.
Thank you, and I yield back.
Mr. Gosar. I thank the gentlewoman.
I will also hold the record open for 5 legislative days for
any members who would like to submit a written statement.
We will now recognize our panel of witnesses. First, I am
pleased to welcome Mr. Christopher Grundler, director of the
Office of Transportation and Air Quality at the U.S.
Environmental Protection Agency. Our second guest is Mr. John
DeCicco, Ph.D., research professor at the University of
Michigan Energy Institute. Did I say it right?
[Nonverbal response.]
Mr. Gosar. Ms. Kelly Stone, policy analyst at ActionAid
USA; Mr. Wallace Tyner, Ph.D., the James and Lois Ackerman
professor at the Department of Agricultural Economics at Purdue
University; and our final witness is Mr. Nicolas Loris, the
Herbert and Joyce Morgan fellow at the Heritage Foundation.
Thank you all. Welcome to you all.
Pursuant to committee rules, witnesses will be sworn before
they testify. Will you please rise and raise your right hand?
[Witnesses sworn.]
Mr. Gosar. Let the record reflect that the witnesses
answered in the affirmative.
Thank you and please be seated.
In order to allow for discussion, please limit your oral
testimony to 5 minutes. Your entire written statement will be
made part of the record.
With that, I would like to recognize Mr. Grundler for 5
minutes.
WITNESS STATEMENTS
STATEMENT OF CHRISTOPHER GRUNDLER
Mr. Grundler. Chairman Gosar, Ranking Member Lawrence,
Chairman Jordan, Ranking Member Cartwright, and other members
of the committee, I appreciate the opportunity today to testify
on the Renewable Fuel Standard program and the EPA's recent
final rule setting the annual volume standard for 2014, 2015,
and 2016, as well as the biomass-based diesel volume
requirement for 2017.
As has been noted, the program began in 2006 under the
Energy Policy Act of 2005 and modified by the Energy
Independence and Security Act of 2007, or EISA, which
established new annual volume targets for renewable fuel that
increase every year to reach a total of 36 billion gallons by
2022. It included 21 billion gallons of advanced biofuels.
Congress also included waiver provisions for EPA to use to
adjust these statutory targets in specified circumstances,
including where the statutorily prescribed volumes could not be
met.
After an extensive notice and comment process, including
working closely with our Federal partners at the U.S.
Department of Agriculture and the U.S. Department of Energy,
EPA finalized regulations to implement the EISA requirements,
and those regulations went into effect in July 2010.
The law requires EPA to issue annual standards for four
different categories of renewable fuels, and the chairman
already described these. We also established the applicable
volume of biomass-based diesel, commonly referred to as
biodiesel, that will be required in 2017. With this final
action, we believe the RFS program is back on schedule and
we're determined to keep it on schedule.
Biofuel use over the past decade has increased
significantly, especially for ethanol and biodiesel, and
recently, we've seen important developments in the production
of advanced renewable fuels, including cellulosic biofuel
production. Most of this growth in EISA's renewable fuel
targets for 2015 and beyond comes from these advanced
cellulosic biofuels. We are committed to doing what we can to
encourage and support production and blending of such fuels to
maximize reductions in greenhouse gases.
The final standards will increase the amount of biofuel in
the market beyond historic levels, which is consistent with
Congress's intent. The final standards provide for ambitious
yet achievable growth and incentivize growth in advanced fuels
that achieve substantial reductions in greenhouse gas emissions
compared to the transportation fuels they replace. The rule
uses the law's waiver authorities to adjust the annual volume
targets but does so in a judicious way.
The final rule addresses 3 years' worth of standards and
sets the volume requirement for biomass-based diesel for a
fourth year. For '14 and '15, we finalized standards at levels
intended to reflect the actual amount of biofuel used
domestically. For 2016 and for 2017 for biomass-based diesel,
the standards we have finalized provide for increases over past
levels. The final 2016 volumes for total and advanced renewable
fuels reflect our consideration of two essential factors:
first, that the market can respond to ambitious volume targets;
and second, that today there are limits to the volumes that can
be supplied to consumers.
The final rule goes into considerable detail why some of
the volume targets established in the statute cannot be
reached. There are several reasons why, and some of them have
already been mentioned: slower-than-expected development of the
cellulosic biofuel industry and the resulting shortfall in
cellulosic biofuel supply; a decline in gasoline consumption
rather than the growth originally projected in 2007; and
constraints in supplying certain biofuels to consumers, ethanol
in greater than 10 percent of gasoline in particular.
Our final rulemaking includes a discussion of this last
constraint, known as the E10 blend wall. If gasoline demand is
flat or trends downward, increasing the amount of ethanol used
in the fuel pool will require a significantly greater use of
fuels with higher ethanol content such as E15 and E85, which
can be used in flexible fuel vehicles.
However, EPA recognizes that there are real limitations in
today's market to the increased use of these higher-ethanol-
content fuels, including current and near-term limits on
fueling infrastructure. USDA is working to expand this ethanol
fueling infrastructure.
Overall, the final rule requires that total renewable
standards grow by more than 1.8 billion gallons from 2014 to
2016, which is an 11 percent increase over 2014. The final
cellulosic standard is nearly 200 million gallons, or seven
times more than the market produced in 2014, and for an
advanced biofuel, the 2016 standard is nearly 1 billion gallons
or 35 percent higher than the actual 2014.
In addition, the biodiesel standard also grows steadily
over the next several years, reaching 2 billion gallons by
2017, a 23 percent higher level than the actual 2014 volumes.
We believe that these volumes are achievable and consistent
with Congress's clear intent to drive renewable fuel up even as
we use the authorities that Congress provided EPA to manage the
program responsibly.
We've taken other steps to improve the administration of
the RFS program. We've improved the petition review process for
new pathways under the program, and they're already making a
difference. Since launching this new process, we've approved
over 50 petitions for more efficient corn ethanol plants with
an average review time of less than 2 months. This is an 80
percent improvement over our prior performance. We've also
proposed new--six new pathways for second-generation--I'm
sorry, finalized six new pathways for second-generation
biofuels and proposed five more.
Having finalized these standards as we look towards 2017,
it's important to remember that the RFS program is only one
part of the overall picture. Both USDA and DOE have programs
supporting development of--and infrastructure, and we work
closely with them in our work to implement this program.
Thank you for the opportunity to appear before you today.
[Prepared statement of Mr. Grundler follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gosar. Thank you very much. And in the spirit of the
NCAA tournament, -losic is 4, -losic is 0.
[Laughter.]
I would like to now introduce Mr. DeCicco from the
University of Michigan.
STATEMENT OF JOHN M. DECICCO
Mr. DeCicco. Thank you. I wish to thank the chairs,
Representatives Gosar, ranking members Representatives Lawrence
and Cartwright, as well as the other members of your
subcommittees and the overall committee who are here today. My
name is John DeCicco, and I'm a research professor at the
University of Michigan's Energy Institute. My main focus is
transportation fuel use and its environmental impact. I have a
doctorate in engineering from Princeton University and I've
worked on America's energy challenges for nearly 40 years,
including 21 years at environmental organizations before
returning to academia in 2009. My research has included
scientifically rigorous evaluations of the RFS and other
policies that promote biofuels such as ethanol and biodiesel.
RFS proponents claim that the policy reduces CO2 emissions.
I have found that it does not. In fact, from its inception, the
RFS has increased rather than decreased CO2 emissions compared
to petroleum fuels such as gasoline. My findings contradict the
conventional wisdom about biofuels. They reveal errors in the
computer modeling on which the environmental rationale for the
RFS was based. It's no surprise that some biofuel researchers
and advocates have criticized these findings and those of other
scientists who also have found flaws in the modeling that backs
the RFS.
The claims that biofuels reduce CO2 emissions rely on a
method known as lifecycle analysis. It's a way to compare fuels
according to their carbon footprint. When it expanded the RFS
through EISA in 2007, Congress required EPA to evaluate the
lifecycle emissions of advanced biofuels. The Agency also
adapted the method for its RFS impact assessments.
EPA did not originate fuel lifecycle analysis. Rather, the
method was largely developed at the Department of Energy and by
academic proponents of renewable energy, and its use was
advocated by the green groups who backed the RFS.
Unfortunately, lifecycle analysis makes a mistake by assuming
that biofuels are automatically carbon neutral. Only under
certain conditions does replacing a fossil fuel with a biofuel
neutralize the CO2 that leaves tailpipes. For that to occur,
harvesting the corn or other feedstock must greatly speed up
how quickly cropland pulls CO2 from the air. That doesn't
happen for the corn and soybean harvests diverted to produce
renewable fuels as mandated by the RFS.
My analysis looks directly at farm data, and those data
show that in practice the carbon neutrality assumption is not
met. My research team evaluated corn ethanol for which a
lifecycle analysis study claims a 40 percent reduction in
greenhouse gas emissions compared to gasoline. We found no
significant reduction of emissions. Moreover, under typical
crop rotations, net emissions could be as much as 70 percent
higher than those of gasoline. These results do not even
include indirect land-use change, which would increase biofuels
emissions' impact even more.
So here we are 10 years after the 2005 energy bill first
established the RFS, 8 years after it was expanded by EISA, and
the policy has worsened CO2 emissions. It turns out that the
studies used to justify it are flawed. Environmentally
speaking, it would be best to repeal the Renewable Fuel
Standard. Short of that, helpful reforms would include scaling
the mandate back to well below the blend wall and striking
lifecycle analysis from the policy.
Thank you for letting me share my findings, and I'll look
forward to your questions.
[Prepared statement of Mr. DeCicco follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gosar. I thank the gentleman.
I now recognize the gentlewoman, Ms. Stone, for her 5
minutes.
STATEMENT OF KELLY STONE
Ms. Stone. Thank you, Chairman Gosar, Chairman Jordan,
Ranking Members Lawrence and Cartwright, and members of the
committee. Thank you for inviting me to testify on the
Renewable Fuel Standard. I greatly appreciate the opportunity
to share ActionAid USA's perspective on the RFS and the need
for reform.
ActionAid is an international organization committed to
countering extreme poverty and social injustice. We make long-
term commitments to empower the communities that we work with
helping them to identify and address the challenges they face
in realizing their human rights and overcoming extreme poverty.
ActionAid USA advocates for reform of the RFS because of
its impact on food security, land tenure, and water. Mandates
for food-based biofuels such as the RFS increase hunger around
the world, drive land grabs in developing countries, and divert
resources such as water to fuel.
First, on food, I want to emphasize to the subcommittee how
fundamentally important food security is. Hunger impacts every
aspect of development, from health to education and the
workforce. Without food security, real development is not
possible.
One of the primary ways biofuel mandates impact hunger is
by increasing food prices. Of course, many factors go into
determining the price of food. However, it is widely recognized
that food-based biofuels create an upward pressure on food
prices. And while prices have dropped from 2012, they are still
high compared to historical levels and present real challenges
to poor families.
Mandates for food-based biofuels impact prices by driving
up demand for a particular feedstock. This increase in demand
impacts the price not only of that feedstock but any food that
requires that feedstock for production or feedstocks that can
be a substitute. For example, significantly increased demand
for corn creates upward pressure on food prices for corn, dairy
because cows eat corn as feed, and for other grain like wheat.
If people find corn prices have gone up, they may try to
substitute for corn with wheat, but that means demand and
prices for wheat have gone up as well.
Access to safe and nutritious food often comes down to the
ability to pay, so food price is a critical part of food
security. Poor families in developing countries often spend a
significant amount of their income on food, sometimes as much
as 80 percent. What looks like a small increase to us can be
devastating to poor people trying to feed their families.
On land, demand for biofuels also drives up demand for land
on which to produce those biofuels. This results in small
family farmers being forced off their land in developing
countries to make way for large biofuel plantations. Instead of
producing food for the local community, that land is used to
produce fuel for a developed country. ActionAid has worked with
communities in Central America, Africa, and Asia who've had
their land threatened or taken in this way.
I want to emphasize what a loss of land means to these
farmers. This is not simply a loss of property for which they
can be easily compensated. For small-holder farmers, secure
land tenure is crucial to their ability to feed themselves,
their families, and their communities. Land is their
livelihood, their investment in the future, and in some cases,
a part of their cultural identity. That security is not easily
replaced.
Last May, I met with some family farmers in Mato Grosso,
Brazil. They were struggling to grow food because of the
biofuel production next door, including the aerially sprayed
chemicals involved in a production were hurting their crops.
One man's voice in particular stays with me because he did not
just talk about the loss of food but a loss of identity. He had
been a farmer his whole life but now he cannot grow food for
his family. It was as if he felt that his identity had been
taken from him, as well as his crops.
Finally, water, like land, is a finite resource. There is
only so much available to a community at any given time for
growing and preparing food, drinking, and hygiene needs. Water,
as you know, is profoundly important for human survival, as
well as development. ActionAid USA's research has found that in
most cases expanding biofuel production in countries that the
U.S. imports these fuels from results in an increase in water
consumption. Even when biofuel crops are rain-fed, that
resource is being used to produce fuel for export instead of
being used to meet the community's fundamental needs.
The RFS is a broken policy that is badly in need of reform.
Many in Congress supported the RFS in 2005 and again in 2007
with the best of intentions. However, the evidence is now clear
that this is a policy that is not helping the environment and
it is doing real harm to people. We need a fundamental shift in
our approach to biofuels, and we must end mandates for food-
based biofuels such as corn ethanol.
Thank you.
[Prepared statement of Ms. Stone follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gosar. I thank the gentlelady.
I now recognize Dr. Tyner for his 5 minutes.
STATEMENT OF WALLACE E. TYNER
Mr. Tyner. Thank you for the opportunity to be here today
and to share my observations on the Renewable Fuel Standard and
its possible impacts.
In general, biofuel policies have--in the RFS have had
three major objectives. One is to enhance rural incomes, two is
to reduce oil imports, three is to reduce greenhouse gas
emissions. My assessment is that the RFS has been successful in
achieving all three of these objectives. And as was indicated
earlier, the final numbers for the 2014-2016 RFS were released
by EPA in November of 2015. Let me review briefly what they
said in each of the three major categories.
For cellulosic biofuels, basically the decision that EPA
made is that they cannot mandate something be blended which
doesn't exist. So they've taken a ``build it and we will come''
attitude. That is, they estimate the amount of cellulosic
biofuel that will be available in the following year, and that
becomes the RFS level.
For biodiesel, EPA believes the system can absorb much more
than the original RFS level, so they set the 2016 level at 1.9
billion gallons, almost twice the original RFS level.
For corn ethanol, EPA took into account the blend wall but
also the fact that the original congressional intent of the RFS
was to pull into the market more biofuels than would have come
into the market by market forces alone. My sense is that they
made a reasonable compromise between conflicting issues and
objectives.
Next, I want to comment on greenhouse gas emission
estimations. When biofuels are produced and consumed,
greenhouse gases are released, and these must be measured and
compared with fossil fuel emissions to determine the extent of
emission reductions for each biofuel pathway. Agencies use some
combination of attributional and consequential lifecycle
analysis to estimate these emissions.
Economic models are used to estimate the market-mediated
responses to the higher demand for the agricultural
commodities. Possible responses include--to the higher
commodity prices include reduced consumption, crop-switching
from one crop to another, converting forest or pasture to
cropland, more intensive use of cropland, and changes in
international trade and production.
Consequential lifecycle analysis is driven by market
forces. Some have argued for an approach called additional
carbon. The basic argument is crops grown for biofuels would
have been grown anyway so there is no additional carbon
sequestered in producing the biofuel crops. Any crop used for
biofuels just reduces use elsewhere in the economy.
The empirical evidence in my view does not support this
argument. For example, harvested corn area of the United States
has increased to roughly 10 million acres over the last two
decades. Global harvested area of grains, cotton, and oilseeds
has increased over 200 million acres between 2003 and 2012. In
other words, there has been additional carbon taken from the
atmosphere in producing these additional crops.
The U.S. Environmental Protection Agency, the California
Air Resources Board, and the European Union all use some
combination of attributional and consequential lifecycle
analysis to measure the greenhouse gas reductions of biofuels.
None accept the additional carbon argument.
Next, I want to comment on biofuel impacts on developing
countries. The reasons for commodity price increases in 2008
and again in 2011 have been extensively researched. Most
studies have concluded that biofuels did play a role but not a
predominant role in the price increases. To the extent that
biofuels played a role in commodity price increases, it's clear
that urban consumers in developing countries are adversely
affected.
But there's another side to the story, and that is that
rural areas and farmers in developing countries can be made
better off by those higher prices. The World Bank says 70
percent of the world's poor live in rural areas in developing
countries and derive their primary livelihood from agriculture.
To the extent that these higher prices are transmitted to rural
areas, farmers and other rural residents can be made better off
as their incomes increase.
Last, some comments on the road to the future. The
scientific community has concluded that climate change is real
and is caused by human intervention. Most economists believe
that the most efficient way to deal with the adverse impacts of
climate change is through pricing emissions, through a market
mechanism with a carbon tax. But Washington so far prefers a
regulatory approach, so we have CAFE standards for fuel
economy, the Clean Power Plan for electricity, and the
Renewable Fuel Standard for reducing automotive emissions.
Absent a market-based approach, I think the Renewable Fuel
Standard and the other regulations are an appropriate and
effective means to move our economy towards lower greenhouse
gas emissions.
[Prepared statement of Mr. Tyner follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gosar. I thank the gentleman.
And now our last witness, Mr. Loris, you are recognized for
5 minutes.
STATEMENT OF NICOLAS D. LORIS
Mr. Loris. Thank you. Chairman Gosar, Chairman Jordan,
Ranking Member Lawrence, Ranking Member Cartwright, and
distinguished members of the subcommittees, thank you for this
opportunity to discuss the Renewable Fuel Standard. The views I
express in this testimony are my own and should not be
construed as representing any official position of the Heritage
Foundation.
Austrian economist Friedrich Hayek famously wrote that
``The curious task of economics is to demonstrate to men how
little they know about what they imagine they can design.''
Truer words could not be spoken about the Renewable Fuel
Standard. The policy reveals the inability of the Federal
Government to centrally plan energy markets and the unintended
consequences it creates when doing so. The quota concentrates
benefits to a select few and disperses the costs amongst the
rest of us.
Even within the agricultural community, the RFS rewards
special interests connected to the policy and adversely impacts
much of rural America. No matter how brilliant or well-
informed, politicians cannot predict the future of energy
markets, and even though the EPA can adjust the biofuel
targets, the blend wall concerns, and Congress grossly over
predicting the commercial viability of cellulosic ethanol
demonstrates why the government shouldn't set production quotas
in the first place.
And the RFS is far from the only mechanism the government
has used to prop up the biofuels market. We've spent billions
on targeted tax credits, imposed tariffs on imported ethanol,
provided loan guarantees to cellulosic ethanol plants, and
continue to spend taxpayer dollars on biofuel infrastructure in
attempting to commercialize advanced biofuels.
The RFS and these complementarity subsidies have not
contributed to meaningful reductions in oil supply or oil
consumption. However, the mandate's cost to Americans is a
substantial, as we pay tens of billions of dollars more in
higher food and gas prices each year. These higher prices hurt
low-income families both here and abroad the most. These are
the citizens that spend a disproportionately higher percentage
of their budget on these goods.
The mandate distorts commodity production and prices and
takes land away from competing crops. About 40 percent of
America's corn crop goes to ethanol for fuel. In 2012 the
amount of corn used to produce ethanol in the U.S. exceeded the
consumption of the entire continent of Africa and every single
country with the exception of China.
Biodiesel generated from soybeans presents the same food-
for-fuel problem. In 2004, the year before Congress first
created RFS, less than 1 percent of the soybean crop was used
for biodiesel. By 2014 that figure jumped to 23 percent.
Consequently, the diversion of crops to fuel raises the input
prices for livestock producers. In total, the Congressional
Budget Office estimates that Americans spend $3.5 billion more
per year at the grocery store because of this mandate. Research
from several universities finds the cost to be significantly
higher. Whatever the most accurate estimate is, the direction
is always the same: We pay more.
The RFS drives up prices at the pump as well. Americans are
paying $10 billion more annually to blend ethanol into our
gasoline. According to DOE and EPA's own website, a motorist
could spend an additional $450 per year to run a flex fuel
vehicle on E85 compared to a regular gasoline blended with E10.
And the RFS has unintended environmental impacts. Even the
EPA acknowledges that increases in soybean production as a
result of the mandate can cause adverse effects to water
quality, ecosystems, and habitat while increasing criterion
pollutants like sulfur dioxide and nitrous oxide.
Furthermore, the alleged climate benefit from the RFS is
dubious at best. Even under the assumption that switching from
oil to biofuels significantly reduces greenhouse gas emissions,
which is a very generous assumption, the impact on global
temperatures would be negligible.
But the real problem with RFS is not the use of biofuels
themselves. Rather, it is Washington deciding what goes in our
gas tanks. Ethanol would likely exist in a world without the
mandate, though clearly not in as great of quantity. But that
should be for the market to determine.
Collectively, Americans spent hundreds of billions of
dollars on gasoline each year. Globally, the transportation
fuels market is a multi-trillion dollar opportunity. Any
alternative energy source won't need a government program
mandating its production and consumption. The profit incentive
rewards cost-competitive fuels.
Broadly speaking, the RFS provides valuable lessons about
the problems when the Federal Government intervenes in energy
markets. Bad policies that award preferential treatment remain
in place or expanded because of the supposed political
importance trumps economic viability. Even former Vice
President Al Gore admitted that he supported the corn ethanol
mandate because he had a strong incentive to please his
constituents in Tennessee and the farmers in Iowa. It was only
until after he stopped running for office that he could call
first-generation biofuels a mistake.
The RFS, and all other energy subsidies for that matter,
create a vicious loop of politicians, lobbyists, and special
interests protecting these policies and determining who
produces what. The most effective solution to this problem is
to eliminate the preferential treatment altogether.
In conclusion, Congress should recognize the entire mandate
is a failure and the government has no legitimate role in
propping up one energy source over another. The only viable
reform is to repeal RFS in its entirety, and Congress should do
so as part of fundamental reform that eliminates subsidies for
all energy sources. Such reforms will empower the private
sector and innovative companies to drive fuel competition and
choice.
Thank you, and I look forward to your questions.
[Prepared statement of Mr. Loris follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Gosar. I thank the gentleman.
The chair notes the presence today of our fellow OGR member
Mr. Welch. We appreciate your interest in this topic and
welcome your full participation in the hearing.
Without objection, so ordered.
I would like to first recognize the gentleman from
Colorado, Mr. Buck, for his questions.
Mr. Buck. Thank you, Mr. Chairman.
Mr. Grundler, I have three different ethanol producers in
my district. One of them tells me that the RFS is a ceiling,
and the other one tells me the RFS is a floor. And I have
received so much conflicting information on this. I have a few,
I think, fairly straightforward questions for you.
When does the RFS expire? You mentioned 2022. Is that the
date that people agree on that the RFS expires?
Mr. Grundler. The RFS does not expire.
Mr. Buck. Okay. Well, when you mentioned 2022, what happens
in 2022?
Mr. Grundler. In 2022, the statutory mandates, the
specified volumes that Congress put in the law and EPA is
required to, after 2022, establish what the appropriate volumes
should be.
Mr. Buck. When does the market kick in? When does the
consumer get the chance to say I want E85, I want E10, I want
to E0?
Mr. Grundler. The consumer has that choice today, sir.
Mr. Buck. We don't have to have E10 in our car?
Mr. Grundler. I'm sorry, the consumer has a choice of using
all of those fuels with respect to E10. The refining industry
and the transportation fuels of this industry have been using
ethanol as an octane enhancer, as a volume extender for many,
many years.
Mr. Buck. So many of us believe the RFS is a failure
because we have standards that are arbitrarily set and somehow
the marketplace is supposed to react. Why is EPA in any better
position in 2022 to do something that Congress failed to do
properly up until 2022?
Mr. Grundler. Well, the Congress did give the administrator
a long list of factors to consider for what those future
standards or volumes should be comprised of, including
environmental impacts, the impacts on energy security, impacts
on cost to consumers, the impacts on agriculture, the impacts
on transportation ----
Mr. Buck. Let me ask you this. There are blender pumps
going in all across America right now, and blender pumps give
individual consumers the ability to make choices between
whatever level--actually, whatever level the law allows but
hopefully someday whatever level they choose. Isn't that a
better way to determine ethanol consumption in this country
than to have either Congress or the EPA make that decision for
consumers?
Mr. Grundler. Well, sir, you know, our job that you
directed us to do is to implement this law as ----
Mr. Buck. I actually asked you for an opinion and not what
the law was this time. Wouldn't that be a better way, given our
marketplace in America, to allow consumers to make those
choices?
Mr. Grundler. Sir, I'm not here to provide an opinion or
advice on how to change the law. I'm representing the Agency,
and we do not have a position on that.
Mr. Buck. Under the system as it is currently set up, does
a refiner pay an ethanol producer if the refiner doesn't use a
certain amount of ethanol each year?
Mr. Grundler. No, the refiner buys--the refiner actually
has a choice to either buy the ethanol, and along with that
comes a credit, which is used to measure compliance, or the
refiner can go to the marketplace and buy a credit. It's called
a renewable--a RIN to ----
Mr. Buck. Who gets the money from that RIN?
Mr. Grundler. Who gets the money from that RIN? Whoever the
refiner is buying it. He could be buying it from another
refiner, it could be--they're--it's a marketplace. These are
private transactions.
Mr. Buck. Ms. Stone, I have a question for you. Just sort
of summarize your testimony. You indicated that the ethanol
production raises food prices. And I understand that there are
other factors. There's water use and chemical use and other
things, but is that a fair summary?
Ms. Stone. Yes, that ----
Mr. Buck. Okay.
Ms. Stone. Yes.
Mr. Buck. And that demand for ethanol drives up food
prices?
Ms. Stone. Yes.
Mr. Buck. Is there any other demand out there that you
would like to manipulate to drive down prices? And I paid a lot
for my iPhone. I am just wondering if you could help me. Could
we drive down demand for iPhones? And my car was really
expensive also. Are there things that we could do to reduce the
price of other things and perhaps not just blame farmers who
are making more money as a result of ethanol being used, but we
could blame high-tech companies, we could blame all kinds of
producers in this country for the cost and the benefit that
they receive.
Ms. Stone. I appreciate the Congressman's question because
I do want to be very clear that I in no way hold American
farmers responsible for the impacts of the RFS. They are quite
rightfully responding to a market that Congress has created.
But what I am saying is that this energy policy is having
detrimental impacts on the most vulnerable and poorest in the
world and that I--and that it's also not achieving the goals
that Congress set out for it initially. And so that is time to
move away from food-based biofuels.
Mr. Buck. I thank the chairman. I yield back.
Mr. Gosar. I thank the gentleman, and I now recognize the
gentlewoman from Michigan, Mrs. Lawrence.
Mrs. Lawrence. Thank you, Mr. Chair.
Supporters of the RFS point to its success. For instance,
according to the biotechnology industry that RFS displaced
nearly 1.9 billion barrels of fuel. Mr.--is it Grunder?
Mr. Grundler. Grundler.
Mrs. Lawrence. Grundler. I understand that the EPA
recognizes that currently, market limitations are limitations
to the increased use of higher-ethanol-content fuels, including
current market, its near-terms limits on fueling
infrastructure. What assurances can you provide to this
committee that the new rules, as well as the future rules, will
not cripple the RFS program's ability to encourage
infrastructure investments?
Mr. Grundler. Thank you, ma'am. The final stats we put in
place by no means cripple this industry or its future. I'm not
in a position to speculate what 2017 or 2018 or 2019 standards
will be. That will be up to the administrator. We're doing the
analysis right now for the 2017 volumes. But the trends are
going up. We foresee steady growth in these fuels as
competition increases and as more facilities come online to
produce these advanced fuels.
Mrs. Lawrence. Ms. Stone, you urge the committee to support
reforming RFS, is that correct?
Ms. Stone. That's correct.
Mrs. Lawrence. So give us some suggestions. What would you
like to offer to reform it?
Ms. Stone. So what ActionAid USA would like to see moving
forward with the RFS is an end to food-based biofuel mandates
because of the reasons I outlined in my statement. They aren't
working for the environment, but they are harming people.
We would also like to see sustainability measures in place,
both social and environmental, to ensure that land use, it does
not compete with food production globally.
Mrs. Lawrence. Okay.
Ms. Stone. And that's also part of the reason that we have
supported removing, at least at first, the corn ethanol mandate
as a good first step.
Mrs. Lawrence. Thank you.
Dr. Tyner, in your prepared statement, you stated that the
RFS has achieved its stated objectives. Do you believe that the
RFS rules announced in 2015 will help to restore confidence
within the biotechnology industry to make sure new
infrastructure investments in the renewable fuel industry?
Mr. Tyner. Frankly, yes, I--in general, I think that's
correct. We have to recognize that the corn ethanol industry is
a mature industry. It's already reached the capacity to produce
RFS level. It's not going to grow beyond where it is very much
at least. The framework that EPA is using for cellulosic
biofuels, basically ``build it and we will come,'' does create
the incentive structure for new companies to enter and come
into the business. And the same is true with biodiesel.
Mrs. Lawrence. My last question to Dr. Grundler, right, I
understand that both the U.S. Departments of Agriculture and
Energy have programs supporting biofuels and biofuels
infrastructure and that you work closely with these agencies to
implement these statutes. Can you elaborate on what specific
programs you collaborated with with the Department of
Agriculture and Energy to support the biofuels and the biofuel
infrastructure?
Mr. Grundler. Yes. The primary cooperation is in setting
these annual fuel volumes. We rely on expert advice with
respect to future gasoline demand and what the potential is for
the market to respond to different scenarios of volumes.
We also work very closely with experts across these two
agencies with respect to new biofuel pathways, what are the
right assumptions we should be making about ag inputs into our
modeling and so on, so it's a very close relationship. The
Energy Department also sponsors quite a bit of research into
advanced second-generation biofuels.
Mrs. Lawrence. Thank you. I yield back.
Mr. Gosar. I thank the gentlewoman and now recognize the
gentleman from Ohio, Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman.
Okay, Mr. Lawrence, tell me what part of the story I got
wrong. A few years ago, politicians get together and they
decide they are going to determine what levels of ethanol
should be put into the market and should be mandated usage by
the American consumer. They do this for a number of energy
sources. We have the Department of Energy Loan Guarantee
Program where they gave all kinds of money, billions of dollars
to 28 different companies. Twenty-two had a credit rating of BB
minus. A bunch of them went bankrupt, companies like Beacon
Power and Solyndra.
This year in the ethanol program, the mandated schedule
that all these smart politicians decided on a few years ago,
that they were smarter than the market, is now going to hit the
blend wall, which means it can't really work. That is not your
conclusion or even Dr. DeCicco's conclusion. That is the EPA's
conclusion, as evidenced by the testimony Mr. Grundler gave
just a few years ago.
Now, the EPA can change, they can waive the level. They
have to set--actually, there is a notice time, right? They have
to notice each year what level it is going to be. And in the 8
years this law has been in place, they have only had that
date--they have only complied with the law three times out of 8
years, right? So even though they can change--they couldn't
figure it out. They could even tell us at the appropriate time
schedule what the law lays out.
And this year, when they did tell us what level they were
going to use, they said, well, we are also going to tell you
what level we were going to use in 2013 and 2014. So they went
back retroactively. It is hard to tell you what you are going
to use when you have already used it, right? You can't change
the past, but that is what they did in November of 2015.
And then to add insult to injury, as Dr. DeCicco pointed
out, all this actually increases greenhouse gases. Now, I mean,
this would be like a comedy, right? You couldn't make a movie--
sometimes fact is actually stranger than fiction. And the
clincher is this, because Mr. Grundler in answering Mr. Buck's
question, in 2022 EPA is completely in control, right? Only
three times in 8 years could they actually tell us what the
level is. Now, the level is going to be too much for the market
to even--it won't work. But now in 2022 they are completely in
charge. Now, what part of that story do I have wrong?
Mr. Loris. None of it. In fact, after your opening
statement I was just going to say ditto and forgo my opening
remarks because you're spot on. And again, this speaks to the
government trying to force technologies into the market. Even
when gas prices were high, were $4 a gallon, these fuels
couldn't compete with oil. When gas prices are consistently
high in Europe, you don't see biofuels overtaking those
markets.
So as much as the Federal Government wants to try and force
alternative technologies into the market, they're just not
cost-competitive, and it's cost us as taxpayers, as energy
consumers, and with this policy, as food consumers.
Mr. Jordan. Yes, so what is going to happen in 2022 when
the EPA is totally running the show? They can decide the
number? They can decide when they are going to tell us? What is
going to happen?
Mr. Loris. That is a great question, and ostensibly,
whoever is in control of the administration at that point is
going to continue to tell the EPA to ramp up those targets,
which makes the opportunities to repeal the failed program now
all that much more important.
Mr. Jordan. Dr. DeCicco, do you want to add anything?
Mr. DeCicco. I very much agree. Clearly, Dr. Tyner and
myself have a difference of perspective on the success of this
policy. You know, I wouldn't call it a comedy as much as I'd
call it a tragedy.
You know, I think in many ways there were some good
intentions. I mean, after all, when EISA was passed--I don't
remember the vote in this chamber, but it went through the
Senate 86 to 8. A lot of people felt that that policy was going
to be beneficial for a variety of reasons.
But this particular part of the policy, you know, as Dr.
Tyner said, there's kind of a three-legged stool here, rural
economic interests--or I would be more specific--certain rural
economic interests, I think, is as well-known. Not everybody in
the agricultural sector is at all pleased with this policy.
Certain parts of the sector do benefit from it, clearly,
though. So you have a partial leg of that first leg on certain
parts of the agricultural community.
I think in energy security the cost of this policy,
enormous costs, both monetary and environmental, make it an
extremely cost-effective way. Sure, it's displaced some oil,
but just in the last 2 years the expansion we've had, the
market-driven expansion in domestic oil production due to
technology advances that the oil and gas industry itself put
into place have put in more than three times the volume of fuel
into the market than was forced and over the last 10 years by
the RFS. So sure, it has displaced some oil, but the market has
done a much better job of supplying our energy needs.
When it comes to the environment, something like greenhouse
gas emissions, that's an externality. Government intervention
is required. The market is not going to fix that problem on its
own. But that intervention needs to be very judicious. Much
more thought needs to be given about how to address the part of
emissions associated with petroleum fuel use.
As I said, the types of analyses on which, as Dr. Tyner
points out, everyone has relied, I don't disagree that all the
agencies here and abroad have been using lifecycle analysis for
this. My academic work shows that that method is inherently
flawed, and I think we need to go back to the drawing board on
that score because the--not--one of the things I want to take
issue with, you know, Wally said that this measure--this
analysis is used to measure. It doesn't measure. It models.
These are computer simulations, computer scenarios. They're not
like taking a gallon of fuel, you can measure how much sulfur
or lead are in that fuel for chemical analysis. That's not
what's going on here. It's not measurement. It's computer
modeling. And unfortunately, in spite of good intentions, the
models are just plain wrong.
Mr. Jordan. Thank you.
Mr. Gosar. I thank the gentleman.
I now acknowledge our colleague, Mr. Cartwright, from
Pennsylvania. By the way, the current score is 5-0 law over
low.
Mr. Cartwright. Cellulosic is the correct pronunciation.
Mr. Gosar. So we have got zero.
[Laughter.]
Mr. Cartwright. Well, thank you, Mr. Chairman. And you know
what, Dr. DeCicco, I want to open up with you. I said in my
opening statement, and I kind of parroted something that I got
from the biotechnology innovation organization, and that was
this: Over its 10-year lifespan, the Renewable Fuel Standard
has reduced U.S. transportation-related carbon emissions by
589.33 million metric tons, and that really just begs the
question that you are raising because I see that that was done
using a GREET 1 2013 model, which is a form of lifecycle
analysis that you are criticizing. Have I stated that
correctly?
Mr. DeCicco. That's correct.
Mr. Cartwright. Okay. And you have also gone so far as to
say just now that the lifecycle analysis is the one generally
employed by the Department of Energy, by the EPA, et cetera,
correct?
Mr. DeCicco. That's right.
Mr. Cartwright. That is sort of the conventional wisdom?
Mr. DeCicco. It is.
Mr. Cartwright. And you are bucking that ----
Mr. DeCicco. Yes.
Mr. Cartwright.--and you are doing that based on your own
research over how many years?
Mr. DeCicco. Well, you know, true confession here, over --
--
Mr. Cartwright. We are looking for the truth generally.
Mr. DeCicco. Right. That's right. Over 20 years ago at an
earlier stage of my looking at transportation energy use and
emissions, I wrote the first paper coauthored with a professor
at Dartmouth that called for the use of lifecycle analysis to
assess the emissions from transportation fuels, including
biofuels. We were taken with the technique at the time. It was
developed in the late '80s.
Mr. Cartwright. So it is not completely crazy.
Mr. DeCicco. So it's--it seemed to make sense at a certain
level, and I went along with that. About 10 years ago, actually
before EISA was passed ----
Mr. Cartwright. Dr. DeCicco ----
Mr. DeCicco.--I began questioning that ----
Mr. Cartwright.--unfortunately, I only have 5 minutes ----
Mr. DeCicco. Okay.
Mr. Cartwright.--so we can't make short stories long around
here.
Mr. DeCicco. Okay. Well, the basic point is I've been
thinking and analyzing these issues very deeply for 25 years.
Mr. Cartwright. And please forgive me for asking this
question, but it is something that we do around here. May I ask
who has been funding your research?
Mr. DeCicco. Sure. I do have currently a 1-year grant from
the American Petroleum Institute on this. They're not the only
funder. The work--the core work ----
Mr. Cartwright. And let me interrupt you for a moment
there.
Mr. DeCicco. Sure.
Mr. Cartwright. Is it a matter of complete indifference to
you whether the American Petroleum Institute continues to fund
your research into the future?
Mr. DeCicco. Yes, it is.
Mr. Cartwright. Okay.
Mr. DeCicco. And my position on this issue, in fact, my,
you know, position against the RFS predates by a good number of
years funding from the American Petroleum Institute.
Mr. Cartwright. Thank you, sir.
Now, Mr. Grundler, on behalf of the EPA, can you address
from an environmental perspective why EPA encourages the
production and use of ethanol in biomass-based diesel by
including them in the RFS?
Mr. Grundler. Thank you, sir. Our job is to administer the
statute that Congress has written. And it is the Congress who
has established the goals in the law and set these very
ambitious levels of advanced and total renewable fuel. Congress
did not establish an ethanol standard. Congress established a
total and an advanced standard and a cellulosic standard and a
biomass-based diesel standard.
I'd also just like to point out that Congress also directed
EPA to utilize lifecycle analysis to understand land-use
impacts both direct and indirect from the increased use of
biofuels.
Mr. Cartwright. Very good. Thank you for that, Mr.
Grundler.
And, Dr. Tyner, I wanted to give you a chance to weigh in
on this. Using the GREET 1 2013 lifecycle analysis, in your
view, is that appropriate?
Mr. Tyner. GREET is a model that it--it's called an
attributional analysis. It measures the direct emissions. It
does not take into account the land-use change emissions. So it
is the state-of-the-art for measuring direct emissions.
Mr. Cartwright. Well, I thank you for that. And again,
thank you to all of our witnesses for appearing today.
And I yield back, Mr. Chairman.
Mr. Gosar. I thank the gentleman. We are still 5-0.
I would like to acknowledge my colleague from Oklahoma, Mr.
Russell.
Mr. Russell. Thank you, Mr. Chairman, and thank you to all
of the witnesses here today. My questions would be directed
initially to Dr. Tyner.
We have heard today that 1.9 billion barrels of equivalent
fuel has been produced over the last 10 years with these
biofuels, cellulosic or -losic, whatever it might be. When we
look at the annual consumption of fuel and barrel production,
we consume about 7 billion barrels a year. So in other words,
1.9 billion, while that sounds like an extraordinarily large
number, is actually 13 weeks over a decade. So that will be
kind of the frame up after a decade we have produced 13 weeks
of fuel.
My question, sir, is can you make plastic out of corn?
Mr. Tyner. I'm not a plastic corn scientist, but I have
read that it can be done, yes.
Mr. Russell. Okay. Can you make asphalt out of corn?
Mr. Tyner. I do not know.
Mr. Russell. Can you make rubber out of corn?
Mr. Tyner. I do not know.
Mr. Russell. Can you make frames for computer chips out of
corn?
Mr. Tyner. I do not know.
Mr. Russell. Okay. How much ethanol-based fuel is used for
jet fuel?
Mr. Tyner. None.
Mr. Russell. Oh, I see. Did you know that there is 25
percent less BTUs in ethanol as opposed to petroleum-based
fuel?
Mr. Tyner. It's actually 33, sir.
Mr. Russell. Okay. I will take your word on that. But do
you also acknowledge that there is a higher smog effect also on
the production of ethanol?
Mr. Tyner. My understanding of the analyses that have been
done on that is that it depends on the study that was done and
time of year it was done, so it's still uncertain, I think.
Mr. Russell. Well, it wasn't uncertain in the 1995 Third
Circuit Court of Appeals in the ATI v. the EPA. It might be
worth noting that.
Did you know that it takes 50 acres of corn for a gallon of
ethanol to be produced?
Mr. Tyner. That's not true.
Mr. Russell. It is not true? Oh, I see. Or 75 gallons of
water per gallon of ethanol?
Mr. Tyner. I don't know the water metric.
Mr. Russell. So I guess, you know, for all of that and all
of our lifestyle that we enjoy as Americans and, you know, the
not taking into account the farm implements, the labor, the
water, the use of food supply, the impact on our defense, the
fact that we wouldn't have water bottles, cell phones,
computers, computer chips, synthetic clothing, roads. I mean I
could go on. We could look around this room and identify
practically everything that has some basis to our quality of
life. Are you still of the firm belief that we need to
eliminate petroleum with biofuel?
Mr. Tyner. I never said that we should eliminate petroleum
with biofuel, and in fact, it's impossible to eliminate
petroleum with biofuel.
Mr. Russell. So now it gets back to one of efficiency and
what is best for the environment. Do you think consuming the
world's food supply and putting it in a gas tank is good for
human beings?
Mr. Tyner. I think that we have an obligation to our
children and our grandchildren to reduce greenhouse gases. We
have a few ----
Mr. Russell. I have an obligation to feed them as well.
Mr. Tyner. And we're doing a good job of it.
Mr. Russell. Yes.
Mr. Tyner. The United States has the most productive
agricultural system in the world. American consumers eat for
less than 10 percent of their disposable income, the lowest in
the world. We're doing a very effective job of reducing both
food and fuel.
Mr. Russell. And wouldn't it be great if we could send
those corn sacks, a gift from the United States of America,
maybe to people who aren't as productive as we are?
Now, you made a bold statement at the beginning of your
testimony where you said that all of these biofuels have
reduced imports on petroleum. I mean, what basis do you mount
that on, 13 weeks of production?
Mr. Tyner. I didn't say how large the increase was, sir. I
said that there was a reduction in imports.
Mr. Russell. I see. So shale energy revolution had nothing
to do with the reduction in imports?
Mr. Tyner. We've studied shale oil and gas and we've
estimated the economic benefit for the country, and it is huge.
Mr. Russell. It is a huge impact ----
Mr. Tyner. Yes, it made--that it's ----
Mr. Russell.--to have shale oil revolution, and it also
bolstered our economy. I would suggest to you, sir, that the
American way of life, the material good that we do to the
entire world, the ability to fight disease, the ability to make
pharmaceuticals from petroleum, there are so many good things.
And I just, Mr. Chairman, appreciate, you know, us having
this committee hearing today. I think we need to take a
realistic look at all of the good that we provide the world,
and we are not doing a bad job with the oil and gas industry.
And with that, I yield back.
Mr. Gosar. I thank the gentleman.
I would like to acknowledge Mr. DeSaulnier from California.
You are next.
Mr. DeSaulnier. Thank you, Mr. Chairman.
Dr. Tyner, I am struggling with coming from California and
many years ago when I was a Republican I was actually appointed
by Governor Wilson to the California Air Resources Board, and
as we developed the low-carbon fuel standard, along with our
renewable standards, and having four refineries in my district,
I have a good relationship with the petroleum industry.
So I am trying to figure out--and having been in many
meetings about the low-carbon fuel standard--in California,
although we have had issues, particularly with the refining
process, we are getting huge investment. We have had lots of
venture capitalists come and say they are coming to Berkeley
Laboratory. I have been down a few times to look at these
synthetic biofuels that they are developing, which they tell me
they are for the DOE interventions and support. They are really
on the cusp of being able to do some really significant things.
This would help to cause some of the criticisms about both this
program but low-carbon fuel standards.
So from my perspective, although there have been challenges
to this kind of process, both the carrot and the stick, that it
is worth continuing to work on, knowing that it is not perfect
in the first place.
So, first of all, are you familiar with some of our
struggles in California? And by the way, the low-carbon fuel
standard was signed into law by a Republican Governor, Governor
Schwarzenegger. So all of our hearings anticipated much of the
conversation here today. It is different because we were
looking at carbon reductions, which I think at the Air
Resources Board when we did our best work, irrespective of
whether it was a Republican administration, it was driven on
what you got reductions either in traditional pollutants. This
is a different approach, but it is sort of the same thing.
So maybe you can help me with trying to understand--we are
being pretty successful in California, and this is a process
that is not dissimilar, and I am trying to struggle with what
are the things we have already lived through that we could sort
of apply to the renewable standard nationally?
Mr. Tyner. Well, the California low-carbon fuel standard
gives credit for every reduction ----
Mr. DeSaulnier. Right.
Mr. Tyner.--and that's different from the U.S. Renewable
Fuel Standard. The Renewable Fuel Standard sets thresholds, 20
percent for corn ethanol, 50 percent for biodiesels, 60 percent
for cellulosic biofuels. So if you get 80 percent, you get no
more credit. If you get 30 percent for corn, you get no more
credit. In California, you get credit for every percentage
reduction that your fuel achieves.
So it's, again, a market--more market-oriented system
that--and we've worked with the California Air Resources Board.
We've worked with them in getting the induced land use change
estimates that go into their standard. It's a standard that's
being considered by other States around the country, as you
probably know. And its advantage is that it does give credit
for all the reductions achieved and not just surmounting a
threshold.
Mr. DeSaulnier. But it is more market-based ----
Mr. Tyner. It's market-based.
Mr. DeSaulnier.--than doing so ----
Mr. Tyner. Right.
Mr. DeSaulnier. In the context of that it was an evolution,
and I am, like all of us, parochial in my own experience, but
we did learn from going through these, including the
drivability index when we talk to the car manufacturers. We
want to be able to pass the standards so that the fuel doesn't
constrain or inhibit the sale of automobiles and their
drivability.
So it strikes me in the context of this hearing, and again,
from my perspective, this is an iterative process, and why
wouldn't we continue? And maybe, Mr. Grundler, you could put
your two cents' worth in. Probably this law needs to be
modified, but how can we learn from other experiences both in
States and around the world to make it work better, including
for the marketplace?
Mr. Grundler. My office works very, very closely with the
California Air Resources Board across a wide variety of
different work, trucks, cars, lawnmowers, fuels. We're very
familiar with the California low-carbon fuel standard. It is a
very different approach in that it is a performance standard-
based approach, whereas the Congress chose to decide very
specific volume targets every year, which change over time and,
as Dr. Tyner mentioned, as these thresholds.
I think we are learning a lot from the California
experience, and there have been some bumps along the road, but
I think by and large it's been successful for some of the
reasons that Dr. Tyner suggested. But it is very different from
the law as Congress wrote it, and I'll just leave it at that.
Mr. DeSaulnier. And I will just leave it at this as well.
It is not--and I apologize for showing my prejudice over
California, not if anybody is watching at home, but it seems to
me that this is a process, and I agree with my Republican
colleagues that we should probably look at it and revisit it to
make it work better, including for the marketplace. But there
are other iterations around the country and the world that seem
to be working through, so maybe less prescriptive and more
market-based but with the ultimate goal being the same.
Thank you, Mr. Chairman.
Mr. Gosar. I thank the gentleman.
I would like to acknowledge now the gentleman from Florida,
Mr. DeSantis.
Mr. DeSantis. Thank you, Mr. Chairman.
Mr. Grundler, why have the EPA's estimates of cellulosic
ethanol production been so poor? I mean, if you go from 2010,
2011, just is way off the base. So why is that?
Mr. Grundler. Thank you for that question. We work very
closely with individual producers, individual plants to--having
made those estimates over the past few years, and we relied on
estimates that we got directly from the producers and what
their schedules were and what their production volumes were.
And it turned out that those producers and that information
that they provided us was too optimistic. We've changed ----
Mr. DeSantis. Yes. Well, I mean, I think it is difficult to
centrally plan this stuff. Now, you revised the definition, and
now in 2014 there was 140 million cellulosic biofuel RINs
generated. However, Congress had mandated 3 billion gallons, so
is there any way that--does EPA believe there is any way that
they will be able to generate the billions that are called for?
Mr. Grundler. Not between now and the end of 2016.
Mr. DeSantis. Yes. No, I think that that is right. Dr.
DeCicco, when this was created, environment was one of the main
things, and so, you know, it causes problems with food, energy
price, all that, but it is, okay, you are going to get
environmental benefit. But I think you make an effective case.
I mean, it is actually not good for the environment, is it?
Mr. DeCicco. That's correct. The environmental premises of
this have turned out to be incorrect.
Mr. DeSantis. And, Ms. Stone, you point out, I think very
correctly, that when you are raising food prices artificially,
you know, that has an effect. You know, someone, a blue-collar
person in America, they are going to have to stretch their
family budget, but you point out some of these people around
the world, you know, if food prices go up, I don't know, 5, 10
percent, what does that mean for someone in a really destitute
part of the world?
Ms. Stone. It's a significant impact. In sub-Saharan Africa
and Asia, people spend, as I said, between 60 and 80 percent of
their income on food, and so even small increases can mean that
they don't have enough to feed their families.
And I also want to emphasize what not--what that really
means. Children who do not receive food--enough nutritious food
before their second birthday can be permanently physically and
mentally stunted.
Mr. DeSantis. And it ----
Ms. Stone. Food is ----
Mr. DeSantis. Well, Dr. Tyner pointed out, hey, you know,
in some of these poor areas, you know, you may have people who
are in agriculture and they may benefit from this. And let's
just assume that is true. In your experience, what is the
number of people that would benefit from producing versus the
number of consumers who would be harmed? I mean, it seems like
you are harming way, way, way more poor people than you are
helping poor farmers, correct?
Ms. Stone. Yes. And in our experience, if prices of inputs
go up for these small-holder farmers, then that outweighs any
cost benefits they may receive. But also, many of these farmers
are sustenance farmers. They eat most of what they grow.
Mr. DeSantis. Mr. Loris, the price that people pay at the
pump is higher as a result of the ethanol mandate, correct?
Mr. Loris. Yes, that's correct.
Mr. DeSantis. And so, you know, you are getting hit
environmentally, you are getting hit at the grocery store, you
are getting hit there. The quality of the gasoline, though, is
also, I think, something interesting. What is your opinion on
whether the fuel with the ethanol in it is better for car and
boat engines than the purer blend?
Mr. Loris. Well, we've seen obvious failures with some of
these smaller engines with boats. You know, if they can bear
higher ethanol contents, then that's fine, but we shouldn't try
to rush and increase the allowable content of ethanol because
of this blend wall or because we're trying to force more
biofuels on the market. That's another unintended consequence
of this mandate.
Mr. DeSantis. Yes, I mean as somebody that represents a
coastline, you know, our boaters, our fishermen, it hurts their
engines. I mean, there is just no doubt about it, so that
imposes costs on them if they have to replace it or do repairs.
Look, I think the proper solution is just recognize that
this policy was a mistake. Let's repeal the mandate. But here
is the thing. Let's repeal all of these energy mandates. We
will do solar, oil/gas, ethanol, everything, and let's actually
let people compete in the marketplace. Let's give relief to
consumers. Let's get out of this business of where people in
Washington are picking winners and losers, dictating from on
high. We don't do a good job of it. And let's let people make
the decisions. But I would be fine getting rid of all of this
in the energy market and let's just return to a free market. I
think, ultimately, that will be better for consumers. I think
it will be ultimately be better for the environment because I
think it will allow innovation to really take hold.
And with that, I yield back.
Mr. Gosar. I thank the gentleman.
I now acknowledge Mr. Walker from North Carolina.
Mr. Walker. I want to pick up from where Congressman
DeSantis left off. I want to come back to you, Mr. Loris, a
two-part question. With RFS, it did not lower the fuel prices
from 2010 to 2012. I would like for you to explain why you
believe that is, and then after 2013 why it has been
ineffective as far as reducing oil prices there. Would you mind
addressing both of those?
Mr. Loris. Sure. Well, the fact that ethanol is less
energy-dense contributes to higher prices. You have to pay more
to drive the same amount effectively, so that's contributing to
the higher fuel prices that we pay at the pump.
And, again, this ripples throughout the economy. You know,
this is something that, when you pay more at the pump, you
can't have disposable income into other parts of the economy.
So this has tremendous ripple effects that hits consumers again
and again.
Mr. Walker. Sure. Ms. Stone, again, what we were just
talking about as far as poverty and some of the needs, I have
worked in some of the refugee camps in Europe and have seen it
firsthand. In your testimony you describe some of the more
unfamiliar effects of RFS. Could you explain the effects on the
efforts to combat hunger? I know you just mentioned that, but
could you get a little bit more background?
Ms. Stone. I'm sorry. On the effects to combat--how the RFS
is impacting hunger broadly?
Mr. Walker. Correct.
Ms. Stone. So one of the things that--in addition to food
price, as I mentioned earlier, many people--many poor people in
the developing world are sustenance farmers, and they rely on
land and having secure ownership of that land to grow that
food. Biofuels mandates for food-based biofuels incentivize
large plantations of one crop of biofuels. And so what happens
is these small family farmers are forced off of their land to
make way for these large plantations. And so that directly
impacts their ability to grow food for themselves and their
family but also the community at large.
Mr. Walker. Would you say that is the same or could you
expand a little bit when it comes to clean drinking water?
Ms. Stone. Yes. When it comes to drinking water, it does
depend on the type of biofuel feedstock, but what we have found
is that expanding biofuel production requires more water, and
so less water is available to the community to grow their own
food. It also means that there's less available for them to use
for other basic needs such as drinking and hygiene.
Mr. Walker. Mr. DeCicco, I have got a lengthy question
here, about four or five lines, but I want to get it out to you
before my time expires. In your testimony you state that corn
ethanol lifecycle analysis claiming a 40 percent reduction in
greenhouse gas emissions compared to gasoline was not accurate.
Rather, your research found that corn ethanol results in no
significant reduction of emissions. Can you take a minute and
elaborate on that? Is that correct?
Mr. DeCicco. That's correct.
Mr. Walker. Okay.
Mr. DeCicco. Yes, that's correct. The basic principle to
look about this correctly is to realize that when biofuels are
burned in a car, that has very little effect on how much carbon
dioxide comes out of the tailpipe. It's a--that's just basic
chemistry. You burn a liquid fuel, you get about the same
amount of CO2 from the tailpipe for unit of useful energy.
My shorthand way to, you know, have people remember that is
that if biofuels have a benefit for climate, it's not when
they're burned. So you can set that aside, say, okay, the
action isn't happening at the car. In oil industry parlance,
any potential benefit is not happening downstream.
So you have to ask the question, okay, if there is a net
reduction of carbon in the atmosphere, where might that happen?
And the only place that can happen is on the land where
feedstocks are grown. If a cornfield this year is growing corn
that's being used for the food and feed market, it's removing a
certain amount of carbon from the air. Now, if you take that
corn harvest and next year shift it to make ethanol, other
things being equal, that cornfield hasn't pulled more carbon
out of the air. So you say where's the benefit?
Mr. Walker. Yes.
Mr. DeCicco. If there is a benefit, you can only find it
with Mr. Tyner's models that try to look at these commodity
shifts all around the world that introduces very large
uncertainties, but at the other end of that chain, there's also
some deforestation.
Mr. Walker. Sure.
Mr. DeCicco. So the bottom line is there is no direct
emissions benefit ----
Mr. Walker. Okay.
Mr. DeCicco.--within the United States.
Mr. Walker. Well, it is amazing when common sense and
science kind of fuses together like that.
I have one question. Dr. Tyner, do you refute the testimony
of Dr. DeCicco, Ms. Stone, Mr. Loris? Do you disagree with
that? And I guess if you want to expand on that as my time
expires here, even with the right intentions, do you believe
these programs are now flawed?
Mr. Tyner. I do disagree with them. I think that there are
greenhouse gas emissions savings. I think the land grab and
things like that have not been largely attributable to
biofuels. I've worked in 15 different developing countries and
I've never seen that kind of action in the 15 countries that
I've worked in. So I think there are greenhouse gas emissions
savings. I think it's about greenhouse gas emissions.
I think there have been food price increases, and that has
adversely affected urban consumers, as I said, but there've
also been positive implications. We've seen substantial supply
response in the developing world, in sub-Saharan Africa and in
South America, where poor farmers in those regions are growing
more crops and getting higher incomes. There's two sides to
that story. There's the urban side and the rural side, and we
have to look at both sides.
Mr. Gosar. I thank the gentleman.
I now acknowledge the gentleman from Georgia, Mr. Carter.
Mr. Carter. Thank you, Mr. Chairman, and thank all of you
for being here today.
I want to change the subject for just a second, or not the
subject but kind of the focus. We have been focused on
automobiles and we have been focused on the agriculture part of
it, but I represent the coast of Georgia. I represent over 100
miles of coastal area in Georgia. Therefore, as you can
imagine, boating is very popular in my district. And as one who
grew up in the district, I have spent a lot of my life on the
water.
And let me start with you, Mr. Loris, and ask you, you are
aware, Mr. Loris, of the unique challenges that ethanol-blended
fuels can present to marine engines, particularly overheating
and engine failure, correct?
Mr. Loris. Absolutely.
Mr. Carter. So you are also aware that while some of the
marine engines can--that are on the market today, they can
utilize the E10 fuel, but if you get above that, I am not aware
of any that would be able to utilize a blend more than E10.
Mr. Loris. None that I know of.
Mr. Carter. So there is a risk that is associated, and I
hope you all understand where I am coming from. There is really
a very serious risk that is associated with using fuels with
ethanol in marine engines and particularly outboard engines,
which a lot of people have outboard engines even up here, but
particularly on the coast of Georgia, particularly when you are
talking about being out in the ocean.
And, you know, when you are in a boat and you have engine
trouble, it is different than when you are in a car and you
have engine trouble. I mean, when you are stranded out on the
water and you have engine trouble that, you know, the weather
can change suddenly, a number of things could happen. It is a
serious, serious problem.
And this is what we are running into here. So this is where
my focus is at right now is the impact this--the real impact
that this is having on marine engines, and it is having that
impact now. We are having overheating. We are having engine
failure as a result of having to use this fuel.
Mr. Grundler, would you agree that the EPA is bound by the
Renewable Fuel Standards to keep increasing the amount of
ethanol that is in our fuel stocks?
Mr. Grundler. I would disagree with that, sir.
Mr. Carter. You would disagree that the EPA is bound to--do
you think that the EPA is going to be attempting to increase
the amount?
Mr. Grundler. The job that Congress gave us was to increase
the total amount of renewable fuels. The marketplace will
choose ----
Mr. Carter. That is not what I asked you. What I asked you
was specifically do you think that EPA is going to continue to
attempt to increase the amount of ethanol in our fuels?
Mr. Grundler. It is not a question of ethanol. We do not
set an ethanol entered, sir.
Mr. Carter. Then, what is the--that is what we talked about
all day is the fact that the Renewable Fuel Standards, that you
are going to continually try to increase that. Now, I want you
to understand what a dire strait this is going to put marine
engines in and particularly people who utilize outboard engines
and the impact that this is going to have.
Mr. Grundler. No, I ----
Mr. Carter. If we continue to breach the blend wall and it
is no longer economically feasible for producers to use the
RINs that you referred to earlier today, earlier in this
testimony, then we are not going to have any more ethanol-free
fuel, and boaters are just going to simply be out of luck here.
They are not going to be able to use their outboard engines,
and if they do, they are going to be in danger of being broke
down out on the water. This is a serious, serious threat.
So this is more than just the economic impact. Obviously,
we all understand the economic impact this is going to have it.
But this is putting people's safety at risk here.
Mr. Grundler. I'm very sensitive to those concerns, sir. I
come from Michigan. We do a lot of boating. I'm a boater. I'm
aware of the risks of using high ethanol blends in outboard
motors. That's not permitted. All boat engines today are
designed and calibrated to use E10. And as we consider these
standards, we do look at what the marine environment needs and
what the marine market needs for lower ethanol blends.
Mr. Carter. Well, you know, as you move forward, I hope
that you will keep in mind that you have an impact. When you
increase this, you impact the marketplace. I mean, the
producers are not going to continue to produce the ethanol-free
fuels if there is not a market for it, if they are being
required to produce the blended fuels. And this is going to
have a big impact on boaters all across the country, whether it
be in Michigan or especially whether it be on the coast of
Georgia.
And this is of concern to me because, again, I reiterate,
it is different when you get broke down in a boat than when you
get broke down in a car.
Mr. Grundler. I ----
Mr. Carter. It is a big, big difference.
Mr. Grundler. I completely get that. I've been stuck out in
the middle of Lake Michigan.
Mr. Carter. Well, and you ought to be stuck out in the
middle of the Atlantic Ocean.
Mr. Grundler. I've been there, too, sir, but not stuck
fortunately. But I want to ----
Mr. Carter. Well, I have been, and I can tell you, it is
not a good feeling.
Mr. Grundler. Thank goodness for the Coast Guard.
But what I'd like to just point out is that the marketplace
does have choices, and obligated parties can choose to ----
Mr. Carter. But ----
Mr. Grundler.--blend biodiesel rather than ----
Mr. Carter.--with all due respect, Mr. Grundler, you have
an impact on it. The EPA and your rules and your regulations
have a big impact on it, and I hope you keep that in
consideration.
And, Mr. Chairman, I appreciate your indulgence and I yield
back.
Mr. Gosar. I think it would only benefit you if you ----
Mr. Grundler. Thank you for your comments.
Mr. Gosar.--if you worked in the Bermuda Triangle. That
might be trouble for you.
I would like to acknowledge the gentleman from Georgia, Mr.
Hice.
Mr. Hice. Thank you, Mr. Chairman, and I appreciate this
hearing.
Mr. Grundler, I would like to continue with you in a
similar train of thought dealing with the likely breach of the
blend wall. As you know, the EPA has approved E15 for vehicle
manufacturers from 2001 to the present. However, most of the
manufacturers are clear that they do not recommend E15 for the
vast majority of vehicles. In fact, I have got a chart that I
wanted to see if we could put up here that indicates just the
number of vehicles that cannot use E15 versus those that can.
[Slide.]
Mr. Hice. And as you can see, it is just a handful,
literally a handful of vehicles that could utilize E15.
Certainly no vehicle that I have according to this chart could
utilize E15.
You also testified in front of the Senate Environment and
Public Works Committee in 2013 that the blend wall had been
reached and that, according to your testimony, ``It is not
feasible for the system to absorb that much ethanol.'' Well,
this fear certainly has become true now with the 2016 rule
breaching that blend wall. And of course that raises concern.
But here is the thing that I want to ask you specifically.
The 2007 Energy Independence and Security does allow the EPA to
have authority to waive the RFS requirements if--and this is a
direct quote from the statute--``if implementation of a
requirement would severely harm the economy or environment of a
State, region, or the United States.''
Now, based on the chart that we just looked at and all
these other things that have been discussed, how can it not be
recognized that the 2016 rule is going to have a negative
impact on the economy?
Mr. Grundler. We have exercised the tools that Congress
provided to adjust the numbers in the law substantially
downward but only to the extent that we thought was necessary.
We put a lot of effort in--which is all described in the final
rule. So while the final standards we believe do go above this
blend wall, the marketplace will have choices on how to achieve
those standards. We think they are achievable. We think we've
done it in a responsible way.
Mr. Hice. Well, according to the chart that we put up, you
are going to create an enormous economic problem for the vast
majority of vehicle owners in this country.
Let me just ask you, Mr. Loris, a similar question just to
get your input. What would you consider would be the economic
impact of breaching the blend wall?
Mr. Loris. It'll be significant. As we've seen in the past
when we have a drought, too, you know, if these RIN prices are
driven up, that just exacerbates all of the cost we talked
about throughout this hearing in terms of higher prices. So not
only will gas prices be more expensive, but you'll be paying
more as these RIN prices increase, which we've seen in the
past. And it speaks to the need to revise these standards and
mandates down to zero.
Getting rid of just the corn part of the mandate is a bad
idea, too, because you're getting rid of the most economically
competitive part of the mandate. As Dr. Tyner pointed out, this
is the most mature part of the industry. So if we just leave it
up to the mandate for cellulosic ethanol, that's the stuff that
has difficulty becoming commercially viable and is going to be
very prohibitive in terms of costs to meet any potential
targets that the EPA sets.
Mr. Hice. So say on a scale of 1 to 10, 10 being extremely
severe, what kind of impact would you rate the breaching of the
blend wall?
Mr. Loris. I would say it was as high as a 10. You know,
you never know what the market will bear. You know, and
fortunately, we've been blessed with the shale revolution to
have lower gas prices, so that's tampered some of the effects
of this--the adverse effects of this mandate.
That said, if we continue to breach the blend wall, if
refiners are fined for not meeting any type of cellulosic
requirements, it gets worse and worse as the targets go higher
and higher.
Mr. Hice. Back to you, Mr. Grundler. You testified last
month at the Senate Environment and Public Works Committee that
you indicated that there may be a shift of the point of
obligation from the refiner to the blender. Do you intended to
address this as part of the 2017 rule?
Mr. Grundler. I believe you're referring to my boss's
testimony in front of the Senate. We have received that as part
of our comments to our--the rule we just finalized. People--a
number of people have come in and suggested that we consider
that. We decided that that is outside the scope of these annual
rulemakings. We're considering it, but we believe such a major
change in the regulation and the law should not be part of this
annual rulemaking process.
Mr. Hice. So you have no intention of addressing that
question at all?
Mr. Grundler. We are talking to people. We are analyzing
the question. If we were to address it, it would be not through
an annual RBO standard-setting process.
Mr. Hice. Thank you, Mr. Chairman.
Mr. Gosar. I thank the gentleman.
I now recognize the gentleman from Vermont, Mr. Welch.
Mr. Welch. Thank you very much, Mr. Chairman.
I am delighted that you are having this hearing, and I
really appreciate you waving me on. I have listened to the
testimony that I was here for, which is quite a bit, read your
comments, and I want to thank the witnesses for focusing on
this. I just want to make a couple of comments.
You know, I think that the ethanol situation has been good
for the corn farmers who produce ethanol, and I like farmers. I
come from a dairy State. But it is an astonishing development
where you had this market that was created by A) a tax subsidy,
54 cents a gallon. That has since been repealed; B)
essentially, a tariff barrier that kept out competition from
Brazil worth 45 cents a gallon; and then finally, a very
unusual thing, a requirement by government that consumers
purchase this product, the mandate.
And it is a bit of a head-scratcher for me and developed
with the best of intentions to try to use our agricultural
sector presumably to cut down on greenhouse gas emissions. My
view is that after we have seen this operate as long as we
have, it is time to acknowledge it is a well-intended flop.
Environmentally, I think the evidence is pretty compelling
that at least with respect to the U.S.--I don't know about
world markets, Dr. Tyner, and all the modeling that you are
talking about. It is really complicated, so it makes it tough
to be compelling. But there is a lot of water inputs that go
into it, there is a lot of energy inputs that go into it, and
at the end of the day, the best evidence I have seen it that
there is more greenhouse gas that is created rather than saved.
And then, secondly, this is good if you are a corn farmer.
It is not good if you are a dairy farmer. You are paying higher
feed costs. And one of the things that brought my attention to
this was when I was traveling around northern Vermont where we
have a lot of dairy farmers, and they were getting hammered a
few years ago with low dairy prices and high grain prices. And
it is just beyond, I think, comprehension to argue that with 40
percent of the corn product is going into ethanol that the
mandate doesn't have an impact on prices, whatever the price of
corn is, and that fluctuates. It was up to $8. It is down quite
a bit from that now.
And then the next thing--so you have got the environmental
issue that has not been achieved, the goal, you have got the
impact on farmers. You have anybody who buys food, whether it
is going to a grocery store or going to a chain restaurant,
those food costs are a good deal higher, and studies I have
seen say that our chains spend about $18,000 to $28,000 more
per unit. And that is real money for the consumers.
And then finally, Mr. Carter was talking about the small
engines, and it is wrecking our chainsaws, and I am kind of
upset about that because I had a pretty good chainsaw until
ethanol wrecked it.
And so, you know, I was hearing from my farmers and it got
me concerned, I was hearing from our consumers, it got me
concerned, and when they wrecked my chainsaw, I had to get
involved.
[Laughter.]
Mr. Welch. And here I am. So my hope is that we will be
able to build on the foundation of the work of this committee,
and I think Congress should have a debate on this. You know,
there is the Goodlatte-Womack-Welch-Costa bill that would
repeal the corn-based ethanol mandate. And let's have a debate
and see what the will of the House is.
So I thank all the witnesses. This was tremendous
testimony. And those consequences on food-insecure countries, I
am so glad you are bringing attention to that. It is a couple
of billion dollars in Guatemala. They don't have money to throw
around. So that is a tough aspect here, too.
So would this be one of those strange convergences of
Democrats and Republicans, Mr. Gosar, it takes you to bring us
together on?
Mr. Gosar. You know what, whatever harmonics it takes.
I have just got one question for you. And what kind of
chainsaw do you have?
Mr. Welch. I have a Jonsered.
Mr. Gosar. I was just going to say that. Okay.
Mr. Welch. Yes.
Mr. Gosar. Well, I am going to go last.
So, Mr. Grundler, after 2022 the RFS mandates set by
Congress and the EISA stop increasing and discretion of the
program with few limitations is handed over to EPA. We are only
now a few years away from this. What plans does the Agency have
to deal with this, and what has EPA come up with to manage
this?
Mr. Grundler. Sir, 2022 is quite a ways off.
Mr. Gosar. Whoa, not really.
Mr. Grundler. We've had a hard enough time setting
standards, you know, one year in the future. Setting them in--
figuring out what the world is going to look like in 2022 is
pretty challenging. So the honest answer is we have no plans on
what the standard should look like post-2022.
I would quibble with your characterization, though, that
the Congress didn't provide us any direction on how to do so.
You did. There's a long list of factors, as well as deadlines
associated with when we need to set those standards.
Mr. Gosar. Well, I find it interesting that, you know, in
other committee hearings we hear about this forecasting 5, 10
years out, and I am a businessman, I am a dentist impersonating
a politician, so, you know, I hear this forecasting, and yet I
turned to your testimony and yet we are not forecasting. So
that is kind of odd to me.
Dr. DeCicco, you are not the average person, are you?
Mr. DeCicco. I'll leave that to others to judge.
Mr. Gosar. No, no, no, no, no. Can you tell me a little
bit--you were a senior fellow for what?
Mr. DeCicco. Well, I was a senior fellow for automotive
strategies at the Environmental Defense Fund from 2001 through
2009.
Mr. Gosar. So you are an actual scientist?
Mr. DeCicco. I am, yes.
Mr. Gosar. Dr. Tyner, are you a scientist?
Mr. Tyner. I'm an economist.
Mr. Gosar. So we are refereeing a match here on science
that you are not the referee, he is, right?
Mr. Tyner. It's not a referee on science, sir, it's a
referee on market-mediated changes ----
Mr. Gosar. No, no, no, no, no, no, no, because you are
talking about models, and in the science world we take models
and we compare them against facts to see--I mean, this is in my
ballpark now, too. So we actually look at these modeling for
outcomes, but then we come back to correct them based upon
factual bases. Is that not true?
Mr. Tyner. That's correct, and we do that all the time.
Mr. Gosar. Well, I think economics--and I want to come back
to the actual facts about what is happening on the ground, Dr.
DeCicco.
So when you come to this point, you have seen it from the
very infancy of standards all the way to today, so you are very
well-rounded. You don't have a bias one way or another. You
have actually pinpointed this based on the facts, right?
Mr. DeCicco. That's correct.
Mr. Gosar. So let me ask you another question. You know, I
have seen some rumors. I mean, we have kind of hedged it here.
When we have combustion of these alternative fuels, is there
anything that occurs that is alarming, that there is something
else that it goes into combination that is a byproduct?
Mr. DeCicco. Well, combustion produces a variety of
pollutants that we need to clean up. There is traditional
pollutants or ones that cause smog, create fine particles, and
EPA has done really an outstanding job over the years of
tightening the standards, you know, down so that those
pollutants are with the best vehicles now running on
reformulated gasoline, have standards many orders of magnitude
of what cars were, you know, when we were kids.
Mr. Gosar. Well, I understand, but, you know, when we look
at the combustion of these alternative fuels, some of the
chemistry is not exactly good, is it?
Mr. DeCicco. Well, it's--let me put it this way. It's more
challenging. You take a fuel like ethanol, it has some
combustion benefits. It is a very high octane fuel, but it
doesn't--it has less energy per gallon ----
Mr. Gosar. Right.
Mr. DeCicco.--so that's another issue. Environmentally
speaking, there's no compelling reason, no reason to force an
alternative fuel such as ethanol into the market to burn
instead of gasoline. Reformulated gasoline today is an
extremely clean fuel at the tailpipe. So, yes, different fuels
have different properties, but I think the main point is that
there's no compelling environmental reason to put ethanol at
the point of combustion. And again, there's no CO2 benefit at
the point of combustion. So I'll leave it at that.
Mr. Gosar. Sounds good. Well, I am going to summarize. It
is important for Congress and the administration to use a
commonsense approach when dealing with these biofuels. Congress
shouldn't be in the business of helping some industries at the
expense of others. Causing unnecessary harm to domestic
shipping, agriculture, food production, and other industries
that are affected by these regulations defies common sense. The
RFS ultimately hurts American consumers by increasing prices
and decreasing the quality of fuel used by American consumers
and by the majority of gas-powered equipment across America.
Ultimately, I am an adamant supporter of free market
principles, and I am philosophically opposed to picking winners
and losers in the American energy sectors. I will continue to
fight for the repeal of RFS and for the production of market-
based solutions in relation to biofuels.
I also have biofuels from algae in my world in Yuma,
believe it or not.
Mr. Grundler, one last question. You understand why so many
people have a negative image of the EPA, and I am going to
leave you with this. Trust is a series of promises kept. Tell
me why we should trust the EPA when we look at Flint, when we
look at Durango, Colorado? Over and over again we see distrust
because we see an overreaching and overbearing agency. So go
back and look in the mirror, and I hope that you will come up
with a whole different attitude because I am looking forward to
seeing your boss tomorrow.
With that, with no further conversation or questions, I
would like to thank the witnesses for taking time today to
appear before us. If there is no further business, without
objection, the subcommittee stands adjourned.
[Whereupon, at 3:48 p.m., the subcommittees were
adjourned.]
APPENDIX
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