Earlier this month, the oil lobby filed a petition asking U.S. EPA to reconsider its 2013 renewable fuel targets, saying the agency had used the wrong data to reach the final volumes. What is the significance of cases challenging the 2013 renewable fuel standard, and what impact could these challenges have on next year's targets? During today's OnPoint, Bob Greco, director of downstream activities at the American Petroleum Institute, discusses the future of the RFS debate in Congress and EPA's plans to roll out its volume targets for 2014.
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, nice to have you here.
Bob Greco: Good morning.
Monica Trauzzi: Bob, API filed a petition earlier this month asking EPA to reconsider its 2013 renewable-fuel targets. You said the agency used the wrong data. What evidence is there to that effect?
Bob Greco: Well, EPA used information that was submitted after the comment period and information that we didn't have a chance to address, so in effect they raised the compliance hurdle, made it harder for us to comply as a result of information that we didn't have an opportunity to comment on. So, we're asking them to revisit that as part of the rulemaking process and basically prevent that from happening going forward.
Monica Trauzzi: And you've also filed a petition with the D.C. Circuit Court. Following your filing, Monroe Energy filed a petition for an expedited review of their petition. What is the significance of challenging the 2013 RFS to sort of the broader debate over the policy?
Bob Greco: We're concerned that EPA still isn't getting it right in using the methodology to properly set what these renewable-fuel standard targets are. Again, it's a fundamental problem with renewable-fuel standard, and unfortunately EPA is making it worse by not properly using their authority. So, we've had to go back and challenge the 2013, how EPA did that, as well as keeping the pressure on them to get 2014 out as quickly as possible.
Monica Trauzzi: And so you're challenging 2013 because of the precedent that it sets for the following years?
Bob Greco: That's correct. Again, it's EPA's methodology. We feel they're using an incorrect methodology for determining particularly ... .Once again, we're at a number that we feel is unrealistic in its continuing pattern of EPA's.
Monica Trauzzi: How quickly do you expect the D.C. Circuit Court to move forward on the Monroe Energy emergency petition?
Bob Greco: We hope it's very quickly. Obviously 2013 is almost over. We need EPA to act as quickly as possible on that.
Monica Trauzzi: Should RINs be considered by the court as part of supply, and how does the debate over RINs play into or influence the court's final decision and then moving forward into 2014?
Bob Greco: Well, RINs are a symptom of the problem. The high price in RINs and the volatility of the RINs are indicative of a market that says these are going to be short. They're going to be scarce going forward. And why're they going to be scarce? Because of the blend wall. So, EPA needs to quickly address the impending blend wall. It sounds like they might, but we need that certainty. We need the regulatory certainty for EPA to move forward quickly and restore some certainty to the markets and to our members.
Monica Trauzzi: So, what is your forecast, then, of the RFS debate as we move towards 2014?
Bob Greco: Well, we're seeing continuing bipartisan interest in Congress to address this long-term. Clearly this statute is fundamentally broken and needs to be repealed, in our view. Members of Congress are looking to both repeal and also fixing and reforming it. We're happy to see both of those efforts progressing, and we're encouraging those efforts to move forward so that we can get this resolved once and for all.
Monica Trauzzi: So, talk a bit about what's happening in Congress, because Washington's been very distracted lately with CR talks, debt-ceiling discussions, obviously the government being shut down for two weeks. So how much of an appetite is there to pick this debate back up and for Congress to actually move forward on it?
Bob Greco: Well, clearly Congress has a lot on its plate; however, we feel that energy policy, energy security ought to be a top priority as the other issues are that they're grappling. These are important issues that affect every American, so we feel it should be a top priority. It's also a bipartisan issue. It's one that both parties feel, there's common concern about this, so hopefully that takes that obstacle off the table to some degree going forward. It will be a challenge certainly, but it's one that Congress really needs to address.
Monica Trauzzi: Congressman Steve King from Iowa recently talked about the federal petroleum mandate because of the subsidies in infrastructure assistance that your industry continues to receive from the government. Why shouldn't another industry receive similar treatment?
Bob Greco: First off, the oil and gas industry does not receive any subsidies. We have tax incentives like other industries that're applied to other industries. There is no mandate to use petroleum or petroleum products. They're widespread because we had 100 years of demonstrated effectiveness of these fuels. They provide the most bang for the buck. They're affordable. They provide the energy that Americans need to go forward to live their lives, and as such, they meet that need. So we feel markets are, that was, the market determined that, and we feel markets are the best driver as to what fuels customers should use.
Monica Trauzzi: How do alternative fuels, then, get market access without a tool like the RFS? I mean, you just described the strength of your industry, so how do alternative fuels break through that without the RFS?
Bob Greco: Well, you already have ethanol being blended in nearly 10 percent of the fuel. Ethanol, even without a mandate, has desirable blending properties. It adds to octane. It helps with environmental compliance, so ethanol in gasoline would be used without a mandate. Similarly, other fuels such as biodiesel are being used. Others are still being researched, because our members want to supply the fuels that their customers want to use this decade and in future decades. So we're some of the leading investors in that, but the problem with mandates is you're picking winners and losers, and as we've seen already with the RFS, we've seen unrealistic mandates driving us into an ethanol blend wall. We've seen unrealistic mandates for cellulosic, penalizing refiners for selling phantom fuels that don't exist or being penalized for not selling these fuels. So, clearly the mandates aren't working.
Monica Trauzzi: How would removing the RFS affect gas prices?
Bob Greco: I can't comment. I don't know. Markets act as they will. Again, ethanol has ...
Monica Trauzzi: But could we see gas prices go up?
Bob Greco: You can't predict that. I don't think it's fair to predict that, 'cause the price of gas is driven by so many factors, geopolitical affecting the price of crude oil, as well as the price of ethanol and other ... it's difficult to predict and it's going to be driven by a number of factors, not just an RFS.
Monica Trauzzi: On timing, what have you heard from EPA in terms of any delays we might see with the release of the 2014 targets as a result of the government shutdown?
Bob Greco: We are hopeful that we'll see a 2014 proposal the next week or two and then hopefully finalize this as quickly as possible. This needs to be finalized by the end of November as EPA was mandated by Congress, and we are going to be working, and we're urging EPA to quickly do that.
Monica Trauzzi: We'll end it right there. Thank you for coming on the show.
Bob Greco: Thank you, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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