Senate panel weighs economic impacts of EPA’s Renewable Fuel Standard program

A red gas pump with yellow fuel option buttons.

Both experts and lawmakers expressed concern about how EPA policies might impact fuel costs, particularly in light of American prices hitting their highest level in eight years. (Photo courtesy of Dawn McDonald/Unsplash)

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By Charlotte Varnes

WASHINGTON — Changes to the Environmental Protection Agency’s Renewable Fuel Standard program could lead to wide-ranging economic impacts like increased gas prices and shutdowns of small refineries, experts told lawmakers during a Senate Environment and Public Works Committee hearing on Wednesday.

“If we proceed with a(n) (EPA) mandate, we prohibit innovation and alternatives to come forward,” said Lucian Pugliaresi, president of the Energy Policy Research Foundation. “Everyone who wants to proceed with these exotic fuels of the future should keep in mind that I don’t believe that the American people will react very positively if we go into a period of sustained, high gasoline prices.”

Lawmakers heard from several stakeholders, including members of the biofuel industry and a lawyer who represents small oil refineries, about their experiences with the EPA’s RFS program. The RFS, first established in 2005, sets guidelines for the amount of biofuels required to be blended with fossil fuels each year. The EPA recently announced new volume requirements for 2020, 2021 and 2022 in December. 

Wednesday’s hearing marked the first time since 2016 that the committee re-examined the program — a gap that “speaks to the intricacies of the program,” according to ranking member Shelley Moore Capito, R-W.Va.

“The potential fault lines between opponents, supporters and would-be reformers don’t always align between one party or another,” Capito said. 

Both experts and lawmakers expressed concern about how EPA policies might impact fuel costs, particularly in light of American prices hitting their highest level in eight years. Emily Skor, CEO of Growth Energy, said challenges toward EPA policies have been one cause of higher fuel prices. The D.C. Circuit Court of Appeals’ July 2021 decision to vacate the EPA’s policy of year-round sale of E15, a gasoline mixed with ethanol, has been impactful as well, Skor said.

“Undermining the RFS and delaying the rollout of E15 means increasing gas prices for American consumers,” Skor said. “Gas prices are driven by the price of crude — not the cost of the RFS.”

Pugliaresi disagreed with Skor’s interpretation. While crude oil costs are contributing to overall higher fuel prices, he pointed to an analysis indicating that the EPA’s RFS policies contribute an additional 30 cents per gallon to gas prices. 

On Feb. 7, Democratic members of the House Biofuels Caucus wrote to EPA Administrator Michael Regan in support of the updated RFS guidelines proposed in December, including the new volume targets and denial of economic hardship relief for 65 small refineries. 

During Wednesday’s hearing, however, Senate Republicans said they were concerned about these changes, particularly regarding the refineries. 

“This unprecedented and drastic step to propose a blanket denial of outstanding small refinery hardship petitions is especially puzzling as we see increasing gas prices and several small refinery closures around the nation, eliminating good-paying jobs in some of our rural communities as well,” Capito said.

Some panelists said one solution could be allowing several types of biofuel to compete on the open market, giving consumers a greater number of choices. Pugliaresi called for both greater market competition and greater research into biofuels with “substantial long-term public benefits.”

Skor echoed Pugliaresi’s calls for consumer choice, saying she was disappointed with the D.C. Circuit Court of Appeals’ July 2021 decision, which will pull E15 fuel off the market in June and leave buyers with less options.

“Consumers do need choices,” Skor said. “They need options at the pump… When it comes to competition, as we all pursue lower-carbon intense energy, that’s very important. And critical to that is making sure that the modeling, the incentives, the performance standards are technology-neutral. In this country, let the best win, right?”

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