AEC Releases Edited Version of API RFS Letter

October 03, 2013

AEC Releases Edited Version of API RFS Letter

(October 3, 2013) WASHINGTON — Early Wednesday morning, the American Petroleum Institute (API) circulated yet another communication to policymakers on Capitol Hill spreading false information about the federal Renewable Fuel Standard (RFS). These arguments have been rebutted time and time again, so we are taking a different approach.

We have decided to resend the API letter with corrective edits to illustrate the degree to which API is attempting to mislead Congress on the RFS. All text of the original API letter is included below. All strikethroughs and bolded text are added.

 


 

Dear XXXX,

In 2007, Apple introduced the iPhone, Sen. Barack Obama announced his candidacy for president, and Congress passed the Energy Independence and Security Act authorizing the Renewable Fuel Standard (RFS). In 2013, we’re on the seventh iteration of the iPhone, President Obama is one year into his second term, and the RFS remains stuck in 2007 has launched a domestic renewable fuel industry that now employs almost 400,000 people, produces a fuel that is more than 50 cents cheaper than gasoline, and according to an oil analyst, saved consumers between $700 billion and $2.6 trillion in 2013 alone. Virtually every assumption for which the RFS was designed has been proven wrong right:

Assumption: United States gasoline consumption oil dependence would continue to rise come at great cost to the U.S. economy and the environment.

Fact: Demand is 424 million barrels less than the EIA projected for this year while U.S. production is 64 million barrels greater and imports are 241 million barrels fewer than 2007 projections. Unfortunately, the United States supplies just 8 percent of the world’s oil and the U.S. oil “boom” only increased U.S. output by 12 percent in 2012. This “boom” is a drop in the bucket. That’s why Americans continue to export their hard earned dollars overseas at the same or worse rate, and that’s why EIA expects expenditures on foreign oil to increase again to more than $1 billion per day in the near future. Fed Chairman Bernanke has repeatedly acknowledged that high oil prices are slowing down the economic recovery. Former oilman T. Boone Pickens says this level of expenditure on foreign oil “is killing our economy.” And the market reality is if we don’t use more renewable fuels as part of the solution to oil dependence, we will need more ecologically destructive tar sands to meet consumer demand. Canada may not be hostile, but those are not U.S. jobs.

Assumption: Flex-fuel vehicles would grow in popularity, consuming higher ethanol blends that would account for increasing portions of the total ethanol volume required by the RFS.

Fact: There are now 14-15 million Flex-fuel vehicles make up less than 7 percent of the U.S. vehicular fleet, and their owners opt for higher ethanol blends only 1 percent of the time — perhaps due to lower mileage associated with the blends on the road today with the capacity to consume roughly 7 billion gallons of ethanol per year. With normal turnover, the increasingly flex-fuel vehicle fleet will be able to use more than 30 billion gallons of ethanol by 2018, which is ahead of the pace legislated by the RFS. EIA’s fuel economy website actually says fuel costs can be more than $1,000 higher per year when consumers use an E85 blend that E85 is cheaper than gasoline, even after correcting for lower energy content (i.e. even while not taking into account the lean burn potential of high ethanol blends). E85 stations are popping up all over the country as we speak.

Assumption: Production levels of advanced cellulosic biofuels would be sufficient to support EPA’s mandate that refiners use 4 million gallons in 2013 substantial by 2013, but if delayed for  any reason (like global recession), EPA has the authority to waive the cellulosic biofuel blending requirement.

Fact: While only 142,000 gallons had been produced through July of this year, the cellulosic biofuel industry is breaking through at commercial scale just 5 years after the signing of the RFS and notwithstanding the ongoing problems in the financial markets. The first commercial plants are up and running and more are on the way. And to be truthful, EPA has effectively waived more than 99 percent of the cellulosic biofuel blending obligation to date. This is easily verified via the EPA EMTS system.

Assumption: Greater reliance on ethanol would lower costs for consumers.

Fact: According to a study that API paid for by NERA Economic Consulting, the RFS could bring about a $770 billion decrease in U.S. GDP and a $580 billion decrease in take-home pay for American workers by 2015 due to potential reductions in the U.S. fuel supply. API is hoping that you will focus on this study instead of the many others touting the economic benefits of the RFS, such as the one recently released by an oil analyst (not commissioned by an industry group) concluding that “the U.S. renewable fuels program has cut annual consumer expenditures in 2013 between $700 billion and $2.6 trillion … [t]his translates to consumers paying between $0.50 and $1.50 per gallon less for gasoline.”

Assumption: Increasing ethanol levels from 10 percent (E10) to 15 percent (E15) is safe.

Fact: Extensive testing has determined that E15 is unsafe for many vehicles, potentially leading to fuel and engine system damage, fuel pump failures, and other problems. API is hoping that you will focus on this 8-car test that API paid for and managed, instead of the 86-car test conducted by DOE showing absolutely no engine damage from E15 or E20. API is also hoping that AAA will continue to ignore the DOE 86-car test, even though AAA has never picked someone up on the side of the road because of E15. Numerous automakers have warned in past years that engine damage caused by E15 will not be covered by warranty, but to be honest, more and more auto companies are joining the chorus in support of E15 by providing explicit warranty for E15. They just need some time to catch up to certifying a fuel that was only recently approved by EPA.

Ethanol and other biofuels are an important part of America’s overall energy portfolio and will continue to be blended into the fuel supply. However, RFS mandates have become irredeemably unrealistic – requiring ever-greater volumes of ethanol to be blended into a quantity of fuel that is shrinking due to decreased demand. It’s time to repeal support the RFS. API knows that a small contingent of their members essentially control wholesale motor fuel markets, which in turn means that biofuel producers rely on an industry pitted against them for “off take” (sale) of their product. Without the RFS, this dynamic scares investment away from innovation in the sector, and ensures that the biofuels industry will not continue to innovate and grow. The bottom line is the motor fuel marketplace is broken, and the biofuels industry needs the RFS to achieve what a price-driven competitive marketplace would provide on its own: demand for a cleaner, cheaper product.

Sincerely,

Jack N. Gerard
President & CEO
API

 

Edited for accuracy by:
Brooke Coleman

Executive Director
Advanced Ethanol Council

– See more at: http://www.ethanolrfa.org/news/entry/aec-releases-edited-version-of-api-rfs-letter/#sthash.CqsFpfbw.dpuf