Biofuels:

API's Greco discusses Congress' latest moves to reform renewable fuels policy

As the Office of Management and Budget reviews U.S. EPA's proposal for 2014 renewable fuel volumes, Congress continues to debate a legislative fix to the policy. During today's OnPoint, Bob Greco, director of downstream activities at the American Petroleum Institute, discusses the latest efforts in Congress to reform the renewable fuel standard (RFS). He also explains why he believes recent advancements in cellulosic technology are not enough to address volume discrepancies.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint, I'm Monica Trauzzi. Joining me today is Bob Greco, director of downstream activities at the American Petroleum Institute. Bob, thanks for coming back on the show.

Bob Greco: Thank you. Happy to be here.

Monica Trauzzi: Bob, back from recess and Washington has already jumped back into the renewable fuel standard debate. EPA has sent its draft 2014 RFS volume proposal to OMB for review. And in Congress we're already hearing discussions that they may try to attach some kind of RFS proposal to debt legislation. The Obama administration though, has said that it's sticking to its guns supporting renewable fuels. What do the latest moves out of the administration indicate to you?

Bob Greco: Well, I think there's growing concern about how EPA has handled the renewable fuel standard to date. I think there is recognition in 2013 EPA had an opportunity and they missed it to address the blend for the past year. Now we're waiting on a 2014 proposal where EPA says they will propose something that makes more sense and then frankly recognizes the blend wall, which they've acknowledged is a real concern. So we feel EPA has to do that quickly, needs to get back on schedule. This is a rule that is supposed to be finalized in November here it is September and we haven't even seen the proposal yet.

Monica Trauzzi: Do you have any sense or any indication of what that draft looks like?

Bob Greco: No. EPA has said in their 2013 final rule that they were going to propose appropriate adjustments recognizing that the blend wall was, in fact, here. So we are hopeful the EPA is going to do that but we can't wait on EPA. During the recess we submitted a waiver petition to EPA requesting that they waive the volumes down to below 10 percent. So that starts a 90-day clock with the EPA for them to respond and move quickly on this. And hopefully we just need them to get back on schedule and handle what they can in the short term. This doesn't take off the long term need to repeal this because it's still fundamentally broken but EPA is not properly using the authority they have.

Monica Trauzzi: And they may very well meet that November 30 statutory deadline. But on the flip side of all of this is Congress and what they should be doing. Isn't there an argument having Congress step in right now because couldn't they confuse the situation a bit if EPA is already taking steps to address the issue?

Bob Greco: No, because again, EPA's actions are limited to year by year changes. They provide no certainty to the market and don't address the fundamental flaws with the RFS. Those need to be and can only be addressed by Congress, which is why we're still up there pushing and urging Congress to repeal this. That's the only permanent solution to what is a flawed statute.

Monica Trauzzi: Are the oil industries and renewable fuels industries kind of on the same page in some weird way when it comes to getting the 2014 numbers out quickly and then seeing those 2015 volume targets as well?

Bob Greco: I think both, all industries are served by the certainty of knowing what the 2014 rule is. It is a little ironic that the renewable fuels industry is saying that there's flexibility in the existing statute to address the blend wall and those concerns but they're already on record opposing EPA from addressing our waiver request, which would have lowered it to below 10 percent. So I think it's a very narrow area that we're in agreement on. That we need agreement in 2014. I think we would disagree as to what the solution is to 2014.

Monica Trauzzi: Agriculture secretary, Tom Vilsack, recently said that oil companies were not doing their best to distribute ethanol into the market place and that's kind of contributed to the lack of success or some of the lack of success that we've seen in the RFS. Is your industry purposefully trying to sabotage the success of biofuels?

Bob Greco: No, that's just not true. That's a distraction from the fundamental problems with the RFS. The fact is the oil and gas companies own or control less than five percent of the retail gasoline stations in the country. The vast majority of these gas stations are owned by individual, local businessman, mom and pop operators and these are people who have to make business decisions about what fuels they sell. And if they look at the fuel market they are not seeing demand for E85. They're not seeing demand for E15. But they do see demand for regular, midgrade, and premium gasoline. And right now that gasoline is an E10 blend and that's the blend that works in every car in the country. It's a blend that works in other engines. And it's a blend that doesn't void warranties and doesn't damage engines as some of our research has shown when you go to an E15 blend.

Monica Trauzzi: So is the Obama administration then misguided on its thought process here?

Bob Greco: Yeah, we think the administration is unfortunately defending a program that can no longer be defended. They have not used the authority they've had properly in which just speaks to why Congress needs to step in and revisit this. This program's bad for consumers and bad for the economy.

Monica Trauzzi: You say can no longer be defended but the industry is making steps in particular on cellulosic ethanol. We had bio Jim Greenwood on the show recently and he talked about the next generation of fuels. And he said we've arrived, we're going to continue to bring these plants online. And in fact, just this summer we saw a commercial scale plant in development. Would you agree with that? I mean are we there? Are we at that point where we're seeing cellulosic come online?

Bob Greco: We aren't seeing the volumes that Congress and EPA are mandating. You know the oil and gas industry is not opposed to these fuels. We're some of the biggest investors in advance biofuels. The problem is these fuels are not commercially viable yet. We have always said that if you're going to set a mandate you ought to base it on actual production and the actual production isn't there in the volumes that Congress and EPA mandated. Just this summer two days after EPA announced the 2013 mandates, KiOR, a company that was a large portion of EPA's announced advanced biofuel mandate announced that they were not going to hit their targets. They're not subject to shareholder lawsuits. So this is a growing industry. It's not producing fuels in commercial quantities. I'm sure it will at some point. I'm confident it will but you can't get there by mandating it. That's proving to be ineffective.

Monica Trauzzi: So there's a whole lot happening in Washington right now outside of the biofuels issue. Do you believe that the RFS debate will continue to play or could it potentially be outshined by some of these larger topics?

Bob Greco: Well, we think energy security and energy use in general is a top priority for the American consumer. It's something we use every day. It's what gets us to our jobs. It allows us to live the life we want to live. This is an important issue and it's one the Congress can and should address this fall. It's got a lot, Congress has a lot of things on its plate but this needs to be a top priority for them to address.

Monica Trauzzi: All right, Bob, we'll end it right there. Thank you for coming on the show. Nice to see you.

Bob Greco: Thank you. Good seeing you.

Monica Trauzzi: And thanks for watching we'll see you back here tomorrow.

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