As the House and Senate debate the merits of the renewable fuel standard and the impact renewable identification number prices are having on fuels markets, will Congress move to repeal the current RFS? During today's OnPoint, Brian Jennings, executive vice president at the American Coalition for Ethanol, explains why he believes there is strong support in Congress for maintaining the current RFS. He also discusses how policy uncertainty is affecting his industry's investments.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Brian Jennings, executive vice president at the American Coalition for Ethanol. Brian, thanks for joining me again.
Brian Jennings: Thanks for having me again, Monica.
Monica Trauzzi: Brian, we're seeing a bit of a cat and mouse game between your industry and the oil industry on whether the RFS is a valid energy policy tool in the United States. How would you qualify the tone in Congress right now regarding the Renewable Fuel Standard? Give me the non-PR answer, what's actually happening in the meetings that you're having with members and their staffs?
Brian Jennings: Sure. In meetings with members of Congress and their staff, I think this is consistent today from back in March when we had members here and we had our fly in, there doesn't seem to be any significant interest in repeal of the RFS, honestly. No matter what the API or opponents would say. Are there members of Congress who don't want the RFS around? Yes. Is there critical mass of those members of Congress that want to repeal the RFS? No. What we find, especially in the Senate, Monica, is strong bipartisan support for the RFS. Now, in the House we have this flashpoint, obviously, with the Energy and Commerce Committee. There indeed you have members that would like to see the RFS go away. You have members that would like to keep the RFS. You have some in the middle that say they want to modify in some way, shape or form this policy. I see what we see the House Energy and Commerce Committee sort of navigating toward is those folks in the middle probably making some effort this fall to modify it in some way, but I'm not sure that that's going to pick up traction in the full House, given the dysfunction there. They couldn't even pass a farm bill with bipartisan support. And in the Senate, we certainly are not picking up any groundswell for the opposition to repeal the RFS.
Monica Trauzzi: Let's talk about what House Energy and Commerce has been doing. They've had a series of hearings, a series of white papers, has it been a balanced approach? Because you have both Democrats and Republicans taking a look at this on that Committee.
Brian Jennings: A two-part answer, it gets a little aggravating answering all of these questions sometimes, but then when you stop feeling sorry for yourself you realize that these white papers have been on balance constructive, on balance thoughtful, and frankly it's given supporters of ethanol an opportunity to sort of galvanize, to show the breadth and depth of support that we have. And I'll give you an example. You know, a lot of the environmental groups aren't fans of corn ethanol. That's not news; that's been an issue for some time. But they understand that the integrity of the program is at stake here, and they've come out of the woodwork to express support alongside my industry, alongside the advanced biofuel industry, for the renewable fuel standard. So I think it has indeed given our side a chance to galvanize greater support. I think the members for the most part of the House Energy and Commerce Committee are taking this very seriously. We've just had one hearing, we have another hearing next week, we expect many more, and I think the approach is thoughtful as opposed to just rushing to judgment with something.
Monica Trauzzi: So you compared a bit what's happening in the house versus in the Senate. The Senate is not ignoring this issue. Energy and Natural Resources has taken it up. Senator Murkowski recently was questioning the volatility in the REN market because we're still seeing it. So do you feel in some ways that the cards are stacking up against the industry when you have still conversations about the volatility of the REN market. You have these bipartisan efforts and legislation being introduced to repeal the RFS.
Brian Jennings: It seems like every time I'm on your show REN prices go sky high.
Monica Trauzzi: It's bad timing, right?
Brian Jennings: So maybe I won't come back for a year or so. But in all candor, I think the conversations give us an opportunity to get the facts out there and to demonstrate that if an oil company wants to pay for a dollar or more for a REN, to avoid buying ethanol, which on average today is about 70 cents less than gasoline, then that's either insane or it's politically motivated. Oil companies aren't stupid, so this has got some political motivation to it. And the Energy and Natural Resources Committee in the Senate obviously has discussed this issue through some hearings, but the truth is, they don't have jurisdiction committee-wise over the Clean Air Act. That's the Environment and Public Works Committee. Chairwoman Boxer has made it really clear that she's a strong supporter of the RFS. I'm not seeing any hearings coming down the pike on the EPW side. So again, every meeting we have in the Senate, I'm not hearing what I want to hear. I'm hearing what members of the Senate and their staff are telling me. They don't see a lot of support for walking away from the RFS.
Monica Trauzzi: So you guys bill yourselves as the grassroots voice of the ethanol industry. So how then is the conversation different in Washington versus what you're hearing back at home?
Brian Jennings: Well, I'll give you a perfect example with RENs. You see a lot of gnashing of the teeth by oil companies inside the Beltway about REN prices. Our industry has to do a very good job of countering that. But outside the confines of the Beltway in the real world, what we find is that petroleum marketers are figuring out that they can acquire these RENs, they can become a blender just like an oil company can. They can buy that ethanol for 70 cents under gas, blend it with gasoline, have that REN, they either put it in their pocket or they pass the savings on down to consumers. And so what we're seeing out in the grassroots is that REN prices have helped motivate more E85 blending. We're seeing more E85 pumps being installed today as a result of the blending economics of ethanol and REN prices. We're seeing more E15 and E30 move. And so I think at the grassroots level when it comes to RENs and when it comes to our marketplace, this is moving more ethanol.
Monica Trauzzi: So let's advance this a bit. How do you predict things will progress through the summer and then into the fall on this issue?
Brian Jennings: Well, we're halfway through the calendar year and we're more than halfway through the congressional calendar. I don't anticipate any activity before the August recess that threatens us in any way, shape or form. I think House Energy and Commerce will have a few more hearings, certainly they'll revisit the issue in September, and I think that's where that committee will probably try to see if they can develop a reform package. In the Senate you have energy efficiency legislation coming up, but it's my understanding they want to keep controversial amendments like Keystone Pipeline and the RFS off that legislation if they indeed are going to move forward on it. And so focus on the House and what's going on there and continue to maintain the support in the Senate, and I think we're going to end 2013 without any damage done to the RFS.
Monica Trauzzi: And you'll be hosting an ethanol conference in Des Moines, Iowa later this summer. What percentage of the discussion at that conference do you anticipate will focus on the policy questions we're seeing here in Washington and the investments that you guys have made that are based on the policy that's currently in place?
Brian Jennings: Most of it. One day will really be devoted to policy and innovation and we're going to be talking about how plants are really innovating to qualify for the RFS or for the low carbon fuel standard. We have members that because EPA has proposed corn kernel fiber as a cellulosic biofuel pathway now, are working toward that. They're developing technology to convert that fiber into cellulosic RENs. We have members that are combining grain sorghum and cogeneration at their plant to become advanced biofuel producers. So we're going to talk to our members about how you can innovate under the RFS and the low carbon fuel standard and really set yourself up for long-term prosperity, and then we'll talk about E15 and how plants themselves can help direct sell E85, E15, E30, make money, pass savings on to consumers, and so a lot of it will focus on policy issues.
Monica Trauzzi: All right, we're going to end it right there. Thank you for coming on the show again.
Brian Jennings: Thanks for the opportunity.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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