Lawmakers Pitch Plan to Trash Ethanol Mandate Amid Industry Clashes

by Brian Dabbs (National Journal) ... Now, though, two retiring Republican House members want to carve out a new future for U.S. liquid transportation fuel policy. Rep. John Shimkus of Illinois, who represents some of the most prolific corn-producing counties in the U.S., and Rep. Bill Flores, a petroleum-backing Texan, are introducing a bill this week to overhaul the RFS in favor of an octane standard.

No stakeholders really love the legislation. But all of them, from agricultural producers to gas-station retailers, point to some things they like. That in itself sets the bill apart.

“I think that’s a compliment to the product. It shows that we just didn’t get marching orders from one side or the other,” Shimkus, who spent years putting together the legislation as a high-ranking member of the Energy and Commerce Committee, told National Journal. “We took the time to craft language to address a problem that everyone knows is coming.”

Shimkus and Flores, meanwhile, think the near-wholesale switch to an octane standard could bring the epic fight to a close.

The legislation, which National Journal is exclusively reporting will be introduced this week, would require vehicles produced in manufacturing year 2023 to be designed to use gasoline with a 95 research octane number, similar to premium gas sold today. The bill also phases out the conventional corn-ethanol blending mandate in 2023 but statutorily affirms a year-round waiver for sales of gasoline containing 15 percent ethanol. Trump approved that waiver in May after years of ethanol-industry lobbying. Nearly all gasoline sold in the U.S. today contains at least 10 percent ethanol.

Petroleum groups oppose the portion of the legislation that authorizes blending mandates for “advanced” and cellulosic biofuels, as well as biomass-based diesel, through 2032. But industry representatives argue that the octane standard generally would relieve refiners of a costly regulatory burden while also ensuring market demand for ethanol.

Ethanol is widely regarded as the cheapest source of octane, an additive in gasoline. Higher-octane fuel, used in cars equipped to optimize the fuel, can prevent ignition misfires and allow combustion engines to run more efficiently, which can improve fuel economy.

“This is a step toward a freer market, where you have a performance standard that everybody competes to rather than mandated fuel volumes,” said Derrick Morgan, senior vice president for federal and regulatory affairs at the American Fuel & Petrochemical Manufacturers, a group that represents petroleum producers and refiners. “The RFS is an expensive program for our companies.”

Ethanol producers denounce any legislative attempts to trash the RFS. But a date looms in the coming years that could force them to rethink their political strategy. In 2023, the EPA is given more autonomy to set blending mandates.

“I would be surprised if anyone was willing to start some serious negotiations around this issue before the [2020] election,” said Neelesh Nerurkar, vice president at the research firm ClearView Energy Partners and a former Energy Department official. “But I wouldn’t be surprised if after the election, particularly biofuel stakeholders who might be concerned about what EPA could do to the RFS in a second-term Trump administration may be more interested in trying to create legislative support for the mandate or a new requirement for the RFS.”

Shimkus is driven by the 2023 date as well. He thinks the octane-standard overhaul could ensure market demand for ethanol and petroleum in the transportation sector by eliminating that EPA flexibility.

“For those who think that [vehicle] transportation market is not going to be pushed to electric just on demand and technology, then consider an elected president who is a Green New Dealer,” Shimkus said. “I fear for both sides—the ethanol side and the crude-oil refinery folks.”

Electric-vehicle sales nearly doubled in 2018, and well more than a million electric vehicles are currently driving on U.S. roads, according to the Edison Electric Institute. Still, market share is only about 2 percent.

Some auto manufacturers say they’re moving ahead regardless with electrification. But in the meantime, according to one source in the auto industry, the octane standard could help the auto industry comply with federal fuel-economy standards.

“We want an octane standard so that we can specialize the engines and get more optimal fuel efficiency for lower costs,” the source, who requested anonymity because of ongoing stakeholder negotiations, told National Journal. “To me, this is a bridge to ultimately trying to clean up the transportation sector. But it’s not going to prolong liquid fuels.” READ MORE