RFA CEO Cooper Testifies on the Future Role of High Octane Fuels

December 11, 2018

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(Renewable Fuels Association) While draft legislation recently released by Reps. John Shimkus (R-Ill.) and Bill Flores (R-Texas) represents “an important first step in the debate about future fuels policy and the role of high octane fuels,” the Renewable Fuels Association (RFA) cannot support the proposal because it “does not provide the long-term certainty and growth path” that America’s ethanol producers need.

That was the message delivered by RFA President and CEO Geoff Cooper in testimony during today’s House Energy and Commerce Subcommittee on the Environment hearing on the Shimkus/Flores proposal, named “The 21st Century Transportation Fuels Act.” While the proposal would establish a higher octane fuel requirement (95 RON) in 2023, the draft also would sunset the Renewable Fuel Standard’s (RFS) conventional biofuel requirements after 2022.

By eliminating the RFS for conventional biofuels, “…the draft bill would destabilize the considerable progress our nation has made toward greater energy security, economic vitality, and environmental health,” Cooper testified. “We simply cannot support eliminating the RFS program, as the draft envisions, without a much stronger signal to the market that ethanol’s role in our fuel supply will continue to grow.”

While any move toward higher octane would seem on the surface to benefit ethanol—the lowest-cost and cleanest source of octane on the market—recent analysis shows that refiners could meet the demand for 95 RON gasoline without using more ethanol. “Even though ethanol is far superior to other octane boosters in terms of cost, greenhouse gas emissions, air quality, health effects, and other factors, a 95 RON standard—when paired with elimination of the RFS conventional renewable fuel requirements—would not result in increased market opportunities for ethanol,” Cooper said. “RFA strongly believes a high octane fuel standard can work in concert with—not in conflict with—the RFS.”

“While a good conversation starter, this discussion draft does not provide the long-term certainty and growth path that America’s renewable fuel producers, farmers, automakers, and consumers need,” Cooper testified. “With proper oversight and implementation, the RFS can work in tandem with a high- octane standard to continue to drive innovation, support rural economies, and provide cleaner and cheaper fuel choices at the pump well beyond 2022,” he added.

A copy of Cooper’s prepared testimony is here. READ MORE WATCH VIDEO

RFS OVERHAUL IN THE SPOTLIGHT: (Politico's Morning Energy)

House Hearing Delves into Future of Renewable Fuel Standard Program (NGT News)

Renewable fuels advocates defend the RFS in House hearing (RadioIowa)

Biofuels to House: Octane Idea a Dud: Fears Mount That Proposal Leaves Cellulosic Future in Oil Industry's Hands (DTN The Progressive Farmer)

Excerpt from Politico's Morning Energy: Rep. John Shimkus (R-Ill.) is using his last days as head of the Energy and Commerce Environment Subcommittee to hold a hearing on his 21st Century Transportation Fuels Act, an overhaul of renewable fuels policy. Lawmakers have filled the witness list largely with renewable fuels advocates, while only one representative of the oil industry will testify: Chet Thompson, president of the American Fuel and Petrochemical Manufacturers.

The draft bill no one loves: Despite not appearing on the panel, API sent a letter to subcommittee leadership opposing the bill for locking in a fixed amount of advanced biofuels blending and approving a waiver to allow year-round sale of 15 percent ethanol fuel. Biofuels groups oppose the draft bill for pretty much the same reasons. READ MORE

Excerpt from NGT News: Michael McAdams, president of the Advanced Biofuels Association, noted that the group “supports this committee’s efforts to reform the RFS.”

“We believe that comprehensive reform will actualize the vision for advanced renewable fuels that this committee and Congress as a whole overwhelmingly supported when it passed the RFS in 2007.”

He explained, “With the transportation sector now the greatest contributor to U.S. greenhouse-gas emissions, and with the volume of air traffic doubling every 15 years, we need to ensure that we have a sufficient supply of alternative, low-carbon fuels.”

However, he noted that there are still “numerous barriers to entry under the current RFS program that specifically disadvantage these innovative fuels of the future.”

A potential reform, according to McAdams, would be to “take politics out of the equation as much as possible by making the RFS a rules-based system.”

“For example,” he explained, “we support legislative provisions that would base the annual [renewable volume obligation] on the previous year’s actual production, queuing up mid-year and end-of-year adjustments to account for increases or decreases in production.”

Manning Feraci of the Coalition for Renewable Natural Gas (RNG Coalition) also provided testimony on behalf of the renewable natural gas (RNG) industry.

At the outset of his testimony, Feraci noted that RNG currently fuels more than 25% of the nation’s medium- and heavy-duty natural gas vehicles and represents more than 95% of the renewable fuel used to meet the RFS program’s cellulosic biofuel requirements.

“Renewable natural gas is an environmentally friendly fuel that reduces lifecycle emissions by 80 percent or more compared to conventional petroleum diesel,” he said.

Feraci’s testimony noted the importance of long-term certainty for advanced and cellulosic biofuels under the RFS program to the nation’s increased production of clean fuels, to domestic fuel and energy security, and to achieving decreased greenhouse-gas emissions over the long term.

“A long-term RFS program is a vital component of a policy framework that attracts the investment and deployment of capital needed to increase the production and use of clean advanced biofuels like RNG,” he said. “RNG projects require significant capital investment… They often involve 20-year off-take agreements with feedstock providers.”

He testified that cellulosic biofuels industry entrepreneurs, business owners, financiers and marketers have invested over a billion dollars in response to Congress’ enacting the RFS program. Feraci noted that since 2011 with the RFS framework, the RNG industry has developed over 45 production facilities capable of producing high-Btu gas that can be used for transportation applications, with over 50 projects under construction or consideration.

“As a result of the RFS, we have a growing, vibrant domestic industry that is converting waste into a domestically produced cellulosic biofuel that can be readily incorporated into our existing infrastructure and be utilized by natural gas vehicles. Further, this is being done in a way that reduces harmful emissions. This is a win-win scenario.”

A video of the hearing, along with all written testimonies, can be found here. READ MORE

Excerpt from DTN The Progressive Farmer: Biofuel interests generally support the move to 95 RON (research octane number) requirement at the pump. However, industry representatives told the committee the move wasn't bold enough. Some suggest a move to 98 RON would provide a better incentive for high-octane fuels such as ethanol.

The current proposal, Skor said, would not be much of an incentive for petroleum interests.

"In fact, 98% of all gasoline sold in the U.S. today contains 10% ethanol," she said. "Moving to a 95 RON baseline fuel would require almost no changes from refiners across the country."

NO INCENTIVE

Brooke Coleman executive director of the Advanced Biofuels Business Council, said moving to a 95 RON would do little to incentivize the oil industry to buy more ethanol.

"In theory, renewable fuels like ethanol are in the best position to succeed under an octane standard because ethanol is by far the cheapest source of octane available today," he said. "In practice, and unfortunately, it is in the oil industry's long-term financial interest to marginalize competition and buy petroleum-based octane enhancers from themselves, even if it means lower downstream profits in the immediate term."

Coleman said the proposal provides some predictability for advanced biofuels in setting volume standards and feedstock.

"Unfortunately, the volumetric predictability comes in the form of a provision long advocated by the oil industry, namely, the setting of cellulosic biofuel standards based on prior year actual production," he said. "We strongly oppose the adoption of this provision under current and any future renewable fuel regimes. The problem with setting the cellulosic biofuel standard based on prior year production is it puts the growth trajectory of cellulosic biofuels largely in the hands of the oil industry."

Kurt Kovarik, vice president of federal affairs at the National Biodiesel Board, said the NBB also is concerned that the proposal lacks incentive to use biofuels such as biodiesel.

"The proposal would direct EPA to set backward-looking volume requirements," he said. "It may protect existing assets but not drive investment and further growth. And it would not address several of the causes of instability in the program, such as retroactive small refinery exemptions." READ MORE