It seemed like a good idea at the time: In 2007, the federal government created fuel standards that pushed for renewable fuels as reliance on oil imports intensified.

In 2013, many of the goals set by the government’s Renewable Fuel Standard (RFS) have been met. Greenhouse emissions have been reduced. The nation’s energy supplies are increasingly secure with reliable domestic energy providing independence from crude oil imports.

But those goals weren’t achieved through ethanol or other biofuels. Rather, companies in the fields of the Eagle Ford, Bakken, Marcellus and other shale plays dug the U.S. out of an energy rut, industry officials say.

Oil Production: Eagle Ford And North Dakota (bbl/d)

Despite near-term gains, the RFS regulations persist. And a crisis is coming, oil and gas industry officials told Congress at a hearing in late July.

In 2014, new fuel standards required by the RFS could stymie jobs and hobble economic growth, they said.

Advocates for the standards say biofuels have cut or supplanted the need for oil and to move forward, the RFS should continue to reduce the need for crude.

At the forefront of the RFS discussion is the blend wall: a mismatch between the number of gallons of gasoline the U.S. market demands and the number of gallons of ethanol the RFS requires to be mixed into that gasoline.

With a 10% limit on the ethanol-to-gasoline ratio, there is a mismatch of roughly 500 million gallons in 2013. Going forward, the amount of biofuels is supposed to increase annually, despite the consumption of gasoline falling considerably.

“Put simply, the RFS, while well-intentioned, is today completely untethered from reality, and unless it is immediately halted will unnecessarily cost our economy and consumers billions of dollars,” said Jack Gerard, president and chief executive of the American Petroleum Institute.

Repeal of the RFS seems unlikely. Rep. Fred Upton (R-Mich.), chair of the House Energy Commerce Committee, said the committee should do all it can to facilitate the domestic oil and natural gas revolution but, “I also see a continued role for renewable fuels and other alternatives.”

However, Upton made it clear the current regulations aren’t practical.

“I hope we can start a discussion that considers a host of potential modifications and updates to the RFS, with the end goal being a system that works best for the American people,” he said.

Proponents of RFS said it’s worked well and that the Environmental Protection Agency (EPA) has the authority to dial back regulations.

Bob Dinneen, president and chief executive of the Renewable Fuels Association, credited biofuels for “largely eliminating the need for imported finished gasoline.”

“While increased domestic oil production from fracing has also been a factor in reducing petroleum import dependence from 2005 levels, its role has been exaggerated by oil and gas proponents,” Dinneen said, adding that oil production “was actually declining steadily until 2009.”

Dinneen said the EPA will likely provide flexibility in gasoline mandates that raise 2012 biofuel use from 15 billion gallons to more than 20 billion gallons in 2015 and 36 billion gallons in 2022.

Jeremy Martin, a senior scientist for the Union of Concerned Scientists’ Clean Vehicles Program, agreed.

“EPA has the clear authority to reduce the rate of growth between now and 2015 by more than half, and to reduce the 2022 target from 36 billion gallons to 20 billion gallons,” Martin said.

But Rep. Bill Cassidy, (R-LA), was quick to say that a legislative vehicle is needed to assure both sides that changes will be made.

“Our side doesn’t trust the EPA,” he said.

Martin testified that the motive behind the RFS’ legislation—the Energy Independence and Security Act (EISA) of 2007—was to cut U.S. oil use.

Martin said the Union’s goal is to cut by half oil use in the next two decades. RFS and other policies have replaced 10% of gasoline in the U.S. with corn-made ethanol, he said.

“Cutting oil use remains as urgent a priority now as it was then,” Martin said. “Despite increased domestic production and new unconventional oil resources, the economic, environmental, security and climate problems caused by our oil use have not decreased during the five years since the passage of the RFS.”

Martin said oil prices remain high and unstable, and international oil-producing regions remain critical security concerns while oil spills continue.

Comments