Wednesday, October 9, 2013

Biofuels Mandate: Defend, Reform, or Repeal

     Today, the National Journal Live hosted the policy summit titled, Biofuels Mandate: Defend, Reform, or Repeal.  The summit examined the current biofuels mandate and renewable fuels standard (RFS) in our country.  Representatives Steve King (R-IA) and Peter Welch (D-VT) were interviewed in the first portion while a roundtable discussion was held later.
     Biofuels have been under attack for some time now.  This issue focuses on the acceptable levels of ethanol blended into gasoline or petroleum-based fuels allowed by the Environmental Protection Agency (EPA) or blend level.  Current levels of ethanol are 10 percent but some proponents of biofuels want it increased to 15 percent.  The United States is on pace to become the number one producer of natural gas in the world.  Many are beginning to oppose oil and petroleum-based fuels citing the need for more competition and cleaner fuels.
      Rep. King is one of those individuals who supports the use of Biofuels, specifically the use of corn.  He represents corn country (Iowa) so it should be no surprise that he is a proponent of this new method.  Ethanol can be derived from the starch in corn and then used as a source of fuel.  However, many in the energy sector believe this is a costly process in terms of resources used and food produced because large amounts of water must be used in this conversion process.  Farmers are now being forced to turn their land into energy fields rather than strictly crops due to the RFS.  Rep. King states the EPA has the power to up the levels of ethanol in gasoline from 10 percent to 15 percent and he believes they should because higher ethanol content in gasoline lowers the price at the pump.  According to King, gasoline prices increase when the levels of ethanol are decreased.  He notes that if you take a supply out, prices will continue to rise due to demand. He is also calling for more flex-fuel vehicles on the market which may be able to accommodate these increased ethanol levels.
     Another major concern with Biofuels is most engines on the market today are not built to handle higher levels of ethanol and these blends can be extremely detrimental to them.  King is not opposed to the petroleum market and in fact states he wants it to be very successful.  "I want to drill everywhere," King proclaims.  As with most of his Republican colleagues and as his party's ideology suggests, King is a proponent of a free market, making his support for government mandates and intervention evermore peculiar.  He states that the government must approve these new fuels, that they cannot simply just enter the market independently.  In terms of free markets, he believes government intervention is also needed for market access because the market is currently dominated by petroleum.  He supports competition.  So for him, besides his constituency, the issue is about free market (although he was asked by moderator Amy Harder that if he was from Texas would he be more sympathetic to big oil?).
     The issue for many Biofuel opponents is that food prices are negatively affected by the RFS.  Now that crops are being incorporated into the fuel market, those commodities are directly correlated to fuel industries and trends.
     For Rep. Peter Welch, the problem is two fold:  he is concerned about the impact on the food industry and its incompatibility with engines.  Continuing on the trend of food, Welch's Vermont has a large dairy industry and residents are forced to pay higher feed prices due to the fluctuation in the fuel industry (to which crops such as corn are now tied).
     In terms of engines, namely small engines, Welch started by addressing Rep. King's parting words to his interview when he stated he would challenge Welch to a chainsaw battle of sorts because he states he has been using ethanol in his chainsaw for a long time.  Welch said that ethanol destroyed his chainsaw because again, these engines are not built to handle the large levels of ethanol.
     During the panel discussion, Kris Kiser from Outdoor Power Equipment Institute Inc. hit on this point.  He deals strictly with the small engine industry and stated that engines can be built to handle any type of fuel yet currently small engines are not built to handle 15 percent ethanol.  This returns to King's point that more flex-fuel engines need to be produced.  Welch stated that he was hearing from a lot of small engine folks and they had only negative experiences with Biofuels.
     Welch is also a proponent of free markets but indicates that King is heavily conflicted by his constituency on this issue.  Welch notes that, concerning Biofuels, specifically RFS has the trifecta: a tariff barrier, subsidies, and a mandate which all hurts taxpayers.  Farmers are now forced to pay more for feed and their farmland is converted to fuel-land.  Welch does, however, concede that ethanol has good intentions aimed at helping the environment and farmers but he also notes it is a flop.  He supports ridding the corn mandate but is not opposed to RFS.  Given the large amounts of water needed to produce ethanol from corn, he believes it is environmentally detrimental.
     What is the role of the EPA in all this?  After all, they are the body responsible for issuing the mandates and overseeing the entire enterprise.  Both King and Welch agree that the current government shutdown negatively affects the EPA because the 2014 rulemaking for RFS has yet to come out and will surely be further delayed.
     These major issues were all echoed by the panel yet many panelists believed it should not be left to Congress to take up.  The EPA is responsible for regulating and frankly, they are not as gridlocked as Congress.  This is why President Obama decided to issue an executive order for the EPA to regulate restrictions on coal and carbon pollution rather than calling on Congress to address the issue.  For the panel, the issue comes down to what is best for consumers.     
     The United States is beginning to emerge as a large scale energy producer which demands certain responsibilities.  Global warming is becoming a more alarming concern as the days go by.  Those sympathetic to Big Oil say to individuals who support renewable energy that countries such as China with over one billion people continue to use these pollutant fuels so why should the United States take on this initiative?  This is the same flawed argument used by gun activists that crime will still occur even if the government reforms the gun laws in the country.  Renewable fuels are the future but it will not be an easy path-it will be a long process marked by trial and error.  Biofuel is front and center in this trial and error process.  While it is not the best method, it is a good jumping-off point to begin to wean the country off of petroleum but a cleaner method must be perfected.  The other main issue, which may be key in gaining support for some hardliners is that newer fuels contribute to competition and free market.  For both Reps. King and Welch, this plays a big role in their positions and will be a key to the future of renewable energy.     

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