EPA slow-walks unpopular mandate – again

It may not have been such a bad idea at the time, but the thought of adding corn-based ethanol to automotive fuel to stretch the oil supply seems rather silly in retrospect given our recent prowess in finding new supplies of black gold. In 2005, under the George W. Bush administration and a Republican Congress, the EPA was given the first Renewable Fuels Standard (RFS) mandate to include ethanol in motor fuel. It was at a time when many still believed in the theory of “peak oil” and determined we had to look past this resource in order to meet our growing needs.

Fast-forward to the present day and we find that, because of issues with decreased consumption of gasoline combined with increasing statutory requirements for the inclusion of ethanol in automotive fuel, the EPA took the unprecedented step of reducing its mandated amount of ethanol for this year; meanwhile, the RFS which was supposed to come out in November of last year is still on the EPA drawing board.

In reading a summary of energy news I receive daily from the American Petroleum Institute, it was revealed that retailers and other petroleum marketers have their own concerns about the prospect of E15 fuel being approved for use in order to achieve the mandated amount of ethanol required for these increasing RFS numbers.

Naturally, this is from the perspective of what’s derided as Big Oil – on the other side, you have officials in corn-producing states beseeching Barack Obama to stand firm on these standards, while desperately attempting to secure infrastructure to provide the even higher E85 blend for flexfuel vehicles, such as the “I-75 Green Corridor” which has a lot of gaps.

The whole flexfuel idea was popularized a few years ago by a group I gave some pixels to during the $4 a gallon price surge called NozzleRage, which was the brainchild of another group called the Center for Security Policy – their goal in creating yet a third group called Citizens for Energy Freedom was to mandate cars be equipped as flexfuel vehicles. Even though it’s essentially a free option, there are few takers for flexfuel cars as they occupy a tiny proportion of the market – about 1 in 20 cars sold are flexfuel cars (although that number is higher for government vehicles.)

Obviously the hope for ethanol proponents is to expand the number of facilities where E85 can be purchased in order to eliminate the need to go to an unpopular E15 blend while simultaneously being able to ratchet up the RFS figures. If even 15 percent of the cars can run on E85 and the price is competitive, then corn growers would be happy. (Never mind the folly of using food for fuel.)

Personally, though, I’m hoping they scrap the RFS altogether. It was an idea which may have had merit (and a lot of Congressional backing from farm states) a half-decade ago, but we can do better because our oil supplies are much more plentiful thanks to new technology. That’s not to say that technology can’t eventually be in place to use another source for ethanol (like the sugar cane Brazil uses for its much more prevalent ethanol market) but how about letting the market decide?

And while it’s unrelated to ethanol, I thought it was worth devoting a paragraph or two to note that North Carolina – hardly a conservative state – is getting closer to finishing the rulemaking process for fracking in the state. Most noteworthy to me in my cursory reading of the rules is that North Carolina is looking at a fairly sane setback distance from various impediments – nothing more than 650 feet. They also seem to lean heavily on industry standards.

On the other hand, Maryland was looking to set rules which would require a completely arbitrary 2,000 foot setback and require plans for all wells proposed by a drilling company, rather than single wells. In short, we would do to fracking in Maryland what Barack Obama is doing to the coal industry nationwide – strangle it with unneeded and capricious regulations. That should not stand in either case.

It’s been my philosophy that an area which doesn’t grow will die. It may take a while, but killing growth will sooner or later kill the economic viability of a city, county, region, state, or nation. Putting silly regulations in place because a minority believes the debunked hype about a safe process is a surefire way to kill a vital region in the state, not to mention impede the possibility of prosperity elsewhere. We can do much better when common sense prevails.

The wrong direction

If it’s not bad enough that Maryland drivers will be suffering from the first of what now promises to be annual hikes in the state’s gasoline tax, due to a combination of adding gasoline to the palette of items subject to the state’s sales tax and eventual indexing of the existing gasoline tax to inflation, a pending federal bill may allow the addition of natural gas-based ethanol as an allowed blending agent, joining the corn-based ethanol that’s currently allowed to comprise up to 10% of most available gasoline.

H.R. 1959, the Domestic Alternative Fuels Act of 2013, was introduced as an effort to provide other options for attaining the renewable fuel standard already codified into law. But a coalition of groups, led by the Competitive Enterprise Institute, recently wrote a letter to Congress urging the bill be defeated, citing the idea that renewable fuel standards should be scrapped, not enhanced:

The undersigned organizations urge you to oppose H.R. 1959, the Domestic Alternative Fuels Act of 2013. The bill would allow ethanol derived from natural gas to count toward the mandatory blending targets established by the Renewable Fuel Standard (RFS) and the EPA’s implementing regulations.

We commend Rep. Pete Olson (R-TX) and his co-sponsors for seeking to break the corn lobby’s legal monopoly on a significant and growing share of the U.S. motor fuel market. However, the solution is not to make the RFS more inclusive, so that more special interests profit at consumer expense, but to dismantle the program.

The other eleven groups signing with CEI represent a broad spectrum of conservative and free market entities: 60 Plus, American Commitment, Americans for Prosperity, American Energy Alliance, Club for Growth, Commonwealth Foundation, Freedom Action, FreedomWorks, Frontiers of Freedom, Let Freedom Ring, and the National Taxpayers Union.

On balance, the groups are correct in wishing the ethanol mandate be eliminated. Even with the abundant supplies of natural gas which weren’t in play just a few short years ago when the original RFS was cast in place, there is no need to supplement the fuel we use in our vehicles; in fact, eliminating the mandate would probably make those who own watercraft or items with small gasoline engines ecstatic since they’ll no longer have to search for ethanol-free fuel to maintain their equipment.

The EPA’s push toward allowing E15 fuel stems from the increasing amount of ethanol required to satisfy these artificially-induced mandates for usage running into a “blend wall” where it becomes physically impossible to limit the amount of ethanol in a gallon of fuel to just 10 percent and comply with the law. Writers of the RFS miscalculated the future demand for fuel, which is increasing more slowly than predicted due to a number of factors: more fuel-efficient cars and a sputtering economy most prominent among them.

Interestingly enough, Rep. Olson is also in favor of eliminating the mandates, but he obviously feels that’s politically impossible at this time:

The RFS’ singular focus on corn ethanol translates into higher food costs for working families, as well as higher feed costs for livestock producers. To be clear, my primary goal will always be the full repeal of the market distorting RFS. However, until then, we can take care of immediate problems by providing greater participation and competition under the program. Expanding the sources for ethanol will only benefit all Americans. I’m pleased this measure enjoys bipartisan and widespread support.

But this bill promises to align two key constituencies which aren’t always in the same room. It’s a point made by CEI Senior Fellow Marlo Lewis:

Enacting this bill would align the natural gas lobby with the corn lobby. Their common interest would be to increase the overall RFS blending target beyond 36 billion gallons, mandate the sale of E20 or even higher ethanol blends, and relax environmental criteria so that corn- and gas-based ethanol can fill the void created by non-existent advanced biofuels.

All this would do is create yet another group of hogs lining up at the federal cronyism trough, trying to grow their business at the expense of competition despite having an inferior product. You may not remember the gasoline price shock of 2008, but one outgrowth of it that I noted at the time was a video campaign dubbed Nozzlerage and the formation of a group called Citizens for Energy Freedom, a subgroup of another entity called the Center for Security Policy (CSP). Their solution was to give ethanol a permanent market by mandating cars sold in the United States be flexfuel vehicles. As I said back then:

Regardless of how little it supposedly costs to convert cars to flexfuel, the truth is that the option has been available for some time and the market has proven it to be a slow seller. Thus, the soon-to-be-created CSP subgroup (Citizens for Energy Freedom – ed.) is looking to lobby for the bill’s passage and force automakers into another mandate, just like CAFE standards, air bags, catalytic converters, and many other features that were foisted upon automakers by big government. Certainly the idea has some merit but by placing the initial meeting in Des Moines, Iowa, it’s a safe bet that ethanol created from corn will take center stage and we’ve already seen the impact ethanol mandates and subsidies have had on our food prices.

Taking food out of our mouths and dumping it into our gas tanks has always been a bad idea, particularly when there is a cost-effective and inedible solution already in place. CEI and its allies make a sound point, but it will be up to someone in Congress to introduce the bill to eliminate RFS mandates. Of course, we need a President who would sign such a common sense bill and right now common sense is in short supply around the Oval Office and probably will be until at least January, 2017.

Newt answered that question…

I love it when I’m ahead of the curve.

A few days ago I pondered the following as part of this post:

It’s going to be interesting to see what kind of push there is for something along the line of the ”drill here, drill now, pay less” campaign that got Newt Gingrich’s American Solutions group on the map.

Lo and behold, in my weekly update on everything Newt I read this:

As we see gas prices inching higher again, we think it is time for the return of Drill Here, Drill Now, Pay Less to fight the Obama administration’s war against American energy.

That’s why we’re re-launching Drill Here. Drill Now. Pay Less with a brand new website.

Please visit americansolutions.com/drill, sign the petition, and tell your friends, family, and co-workers about our effort.

The new website also has a number of tools to help our nation to drill here and drill now. You will be able to use the website to get key facts and information about the importance of domestic drilling, contact your Congressman and Senators, write a letter to your local paper, and get a “Drill Here. Drill Now. Pay Less.” bumper sticker for your car.

It’s just a slight variation of domain name from the 2008 effort, but the idea is the same. (It even leads to the same site.) Even after Congress allowed an offshore drilling ban to expire later in 2008 we haven’t made much progress in the last three years thanks to the occupant of the Oval Office.

As many recall in the 2008 campaign, the conventional wisdom six months out was that high gas prices could become an issue in that November’s election. Instead, we ended up pretty much with Tweedledum vs. Tweedledee as the Presidential race insofar as energy policy was concerned (Sarah Palin did the most to keep the drilling issue alive, but she was only a vice-presidential candidate) and the steep decline of the economy in September of that year actually make a difference in the respect that oil and gas prices returned to a more affordable level – therefore, the issue went by the wayside in discussions about TARP and bailouts.

At the moment, we stand even further away from the 2012 elections – needless to say, a lot can change in the course of a week, let alone 20 months. A week ago when I wrote the NozzleRage post, the Fukushima nuclear plants were intact and the Japanese were living life as normal – in the Japan disaster’s wake the price of oil plummeted sharply.

Even so, it doesn’t mean we should abandon efforts to secure our own supplies. While some say we have but a tiny percentage of oil reserves, they conveniently forget that much more is locked away by shortsighted federal restrictions on land use. American Petroleum Institute President and CEO Jack Gerard recently opined:

The administration is well on its way toward creating higher gasoline prices for Americans.

To get more oil and gas, we need more access.  Placing more government lands and waters off-limits and forcing companies to focus on areas that may show little promise even if already under lease will not solve our energy challenges.

The best thing the administration can do on gasoline prices is to encourage greater oil production and greater fuel efficiency here at home.

While I’d personally prefer the market set fuel efficiency standards, I agree with Gerard on the idea of encouraging more drilling. For example, the Bakken Formation in North Dakota has an estimated 4.3 billion barrels of recoverable oil – ramping up production there could easily make a dent in the 616 million barrels of oil we imported from the Persian Gulf in 2009. Even better, oil shale in Western states could hold up to 1.5 trillion barrels of oil. With that, we could fill up our Ford Explorers on the cheap for years to come and break OPEC’s back.

All it takes is some people with the stones to tell the environmentalist wackos to pound (oil) sand. Unfortunately, we don’t currently have that leadership in Washington and it may be ten years or more before this bears fruit – remember, we have to get rid of activist liberal judges who place the interest of critters over creators.

So we may be stuck with high pump prices for now – but the groundwork needs to be done for future prosperity. What we said three years ago still holds true – drill here, drill now, and pay less.

Will ‘NozzleRage’ return this summer?

I was talking to a friend of mine yesterday about gas prices and something in the conversation reminded me to look and see what I posted during the gas price crisis of 2008.

One of those posts was on a group called NozzleRage, which debuted with the humorous Zucker brothers video featured therein. (I’ve also learned a little about HTML since then so I turned off the ‘autoplay’ feature that the post originally had.) Later, I found out that NozzleRage was a front of sorts for the Center for Security Policy, a group seeking to have the government mandate flexfuel vehicles – but the group fizzled out anyway as prices retreated from their high point.

(It’s also when I gained a valuable acquaintance and go-to person on energy policy, my friend Jane Van Ryan of API.)

I like to look forward on my site, but there is value in having a historical archive of over 2,400 posts as I do. It’s going to be interesting to see what kind of push there is for something along the line of the “drill here, drill now, pay less” campaign that got Newt Gingrich’s American Solutions group on the map.

And while local tourism didn’t bottom out as feared in 2008, it’s worth recalling that unemployment wasn’t as high as it is today and many people who still had assets like home equity loans and lines of credit to fall on no longer have that luxury. Sure, when you consider that even at $4 a gallon that a round trip from New York City to Ocean City would take up only $64 in gasoline (16 gallons at 30 miles per gallon) it may not seem like a lot compared to $2.50 per gallon – the real difference comes in the inflation caused by increased transportation costs, and people may not be as able to weather those shocks financially as they were three years ago.

Considering that much less is being said about the pain at the pump this time around, Americans may be learning to adjust. But they shouldn’t have to.