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Things haven’t turned out quite like the politicians envisioned eight years ago, and that’s why next month Congress will begin the process of changing, if not eliminating, the law known as the Renewable Fuel Standard (RFS) which even the Environmental Protection Agency, which polices the law, admits has problems.
Rep. Dave McKinley is ideally positioned to help guide a proper solution. As a member of the House Energy and Commerce Committee, an engineer with an understanding of the energy industry in West Virginia he will be critically important to the deliberation.
The RFS requires that annually increasing amounts of biofuels be added to the nation’s transportation fuels. This year it’s 16.44 billion gallons. Next year it’s supposed to be 18.15 billion gallons. Most of that is corn-based ethanol added to gasoline to make the E10 blend.
Enter the problems of “assumptions” and the law of unintended consequences.
Washington assumed that the nation’s demand for gasoline would continue to grow. It hasn’t. In fact, it is on a downward trend, declining from 142 billion gallons in 2008 to an estimated 134 billion gallons this year. The reasons: in part the bad economy but also because the nation’s motor vehicle fleet is—by law—increasingly fuel efficient.
At the outset there was no commercial biofuels industry, so Washington saw to it that one was created by offering generous federal tax incentives (a chosen winner). Corn was the principal feedstock. Washington assumed that “cellulosic” ethanol would be a significant input, but that industry has yet to develop. So as a practical matter about 40 percent of the nation’s corn crop goes into the nation’s fuel tanks.
Among the unintended consequences, the RFS has helped drive corn prices to historic highs. Since corn comprises about 65 percent of cattle and poultry farmers’ input costs—their higher costs of business have been reflected in higher prices throughout the nation’s food chain in which corn and corn products are ubiquitous.
The ethanol blend itself has created problems for a variety of users. It contains about a third less energy than gasoline, so it reduces MPG rates. It can damage o-rings and other seals in engines. Many owners of off-road vehicles, mowers, chainsaws and boats have complained.
Because of the decline in gasoline consumption, the Washington biofuels mandate has pushed refiners and blenders to the “blend wall”—they can’t add more without exceeding the 10% level. They want to see the law changed or taken off the books.
Biofuels advocates argue that the law should require a 15% alcohol blend, but that would be potentially harmful to millions of vehicles. Even motor vehicle manufacturers say their warranties won’t cover damage caused by a higher alcohol blend (unless the vehicles are specifically designed for it, such as for E-85.
The addition of alcohol to gasoline hasn’t done much for the global warming and air pollution issues, either. The increased fuel and fertilizer consumption required for greater corn production offsets a least a portion of any gain. Keep in mind that the nation’s air is already at its cleanest in decades. And emissions of greenhouse gases are at their lowest in 20 years.
When Congress takes up the RFS issue, it will be hearing arguments, pro and con, from all the players. But the most important player in the mix is the American consumer, already beaten down by five years of economic recession with its impacts on employment and family budgets. We are the de facto “chosen losers.”
There is a place in our economy for biofuels, but it ought to be earned. They need to demonstrate value and economy without government propping up by mandate or favorable—some say discriminatory— tax policies.
The RFS has badly distorted the nation’s food and fuel sectors and driven up consumer costs. In a booming economy, many people might be willing to overlook such effects. But with economists projecting that it will take years for the economy to recover adequately, now would be the time to eliminate one economic pressure point by using to clean burning, American abundant natural gas and natural gas liquids. Natural gas can be converted to liquids i.e. liquefied natural gas (LNG), converted to diesel, compressed natural gas and even use the natural gas derivative propane to power vehicles and other engines that currently operate on gasoline.