Should the Renewable Fuel Standard (RFS) be Eliminated? (H.R. 3427)

What is H.R. 3427?

(Updated September 29, 2020)

This bill — the Eliminating the RFS and Its Destructive Outcomes Act — would eliminate the Renewable Fuel Standard (RFS) mandate. This would end current requirements that American transportation fuels contain a minimum volume of renewable fuel.

Argument in favor

The Renewable Fuel Standard (RFS) is an economy-distorting policy that has had severe unintended consequences, including higher fuel prices and decreased fuel efficiency. Rather than meddling in the transportation fuel industry, the federal government should trust the free market to choose and invest in the best fuels for American consumers.

Argument opposed

The RFS has yielded real results for American farmers, rural areas, and the American biodiesel industry. Encouraging biodiesel use has led to cleaner-burning cars, buses, and more. Repealing the RFS would serve to appease a minority of refiners’ interests at a cost to the renewable fuel industry’s overall future.

Impact

Transportation fuels; renewable fuel; American renewable fuel industry; refineries; the EPA.

Cost of H.R. 3427

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Rep. Francis Rooney (R-FL) introduced this bill to repeal the RFS mandate: 

“Since the RFS was created in 2005 there have been severe unintended consequences. Ethanol-based fuels decrease fuel efficiency by approximately 3 percent, and increase fuel prices for American consumers. The Congressional Budget Office (CBO) estimates that due to the RFS, in 2017 there was a price hike for gasoline between $.13 and $.26 per gallon. For years the RFS has wreaked havoc on boat engines and other small engines which are vital to the Florida economy. Recently, the EPA finalized a rule allowing for the year-round sale of E15 (gasoline blended with up to 15 percent ethanol), which will cause even more destruction to marine vessels across the state and the country.”

Rep. Rooney also claims that ethanol harms the environment and the RFS distorts the economy: 

“Further, ethanol-based fuels defeat the purpose of their stated environmental goals since their production and consumption release more carbon emissions than conventional petroleum fuels. Corn production overall has risen since the RFS was mandated and has led to the increased use of nitrogen-based fertilizer across the United States.  Studies are showing that the RFS is causing environmental harm and polluting waterways. Through the RFS, the government created and subsidized a false market for ethanol fuels that is hurting Americans. The free market must be returned and this mandate must be repealed.”

In May 2015, the American Energy Alliance (AEA) called the RFS “broken” and its problems “legion.” It argued that the RFS makes mistaken assumptions about domestic oil production, gives the EPA unwarranted control over Americans’ fuel supplies, and increases fuel costs. The AEA called on Congress to fully repeal the RFS and let the market take over:

“Ending the RFS… does not mean that ethanol would no longer be used in the United States. It means that EPA would have less impact on the fuel market, that the absurd and inefficient Brazilian-U.S. ethanol swaps would be reduced, and that the American people would balance the competing uses of corn instead of the federal government dictating a certain amount of ethanol and other biofuels. The RFS is bad policy. Both the corn ethanol portion of the RFS and the advanced biofuel portion of the RFS are bad policies. The best course of action is to let people figure out what fuels work best instead of being told by Congress and EPA bureaucrats what fuels to use—regardless of whether the fuels actually exist or not.”

In February 2018, the Institute for Energy Research evaluated an RFS reform proposal brought forth by Agriculture Secretary Sonny Perdue and then-EPA Administrator Scott Pruitt. It found the proposal lacking, and concluded that RFS repeal remained the best way to resolve the RFS’ problems: 

“[T]he ultimate problem with the RFS is that the government is mandating the purchase of a product that Americans don’t need and most Americans don’t want. The original justifications for the harm imposed by the RFS have long since been made obsolete by developments since the imposition of the program. [Reforms like t]he Perdue-Pruitt proposal will not save Americans from the RFS; only full repeal can achieve that.”

Former Sen. Byron Dorgan (D-ND) expressed support for the RFS in an April 2018 op-ed in . He wrote that the policy has yielded real results for Americans: 

“The RFS was passed by a bipartisan Congress and signed into law by President George W. Bush more than a decade ago, provides an avenue for domestic biofuels producers to gain access to the U.S. transportation fuels market, which has been monopolized by the petroleum industry for more than a century. The results of the program have been impressive. Americans now enjoy the benefits of increased jobs, economic growth in rural America, and more clean-burning fuels like biodiesel being used in school buses, emergency vehicles, and trucking fleets across the country. That is success worth celebrating… The Trump administration shouldn’t try to appease this small segment of refiners who oppose the RFS program at the expense of biodiesel and rural America. The RFS is not broken. It works. The president has been a supporter of the RFS, and he is in a position to make decisions that will continue to grow renewable fuels in America’s future.”

President Donald Trump has expressed his commitment to farmers and the RFS. On October 4, 2019, he negotiated an agreement between the EPA and the U.S. Dept. of Agriculture (USDA) on the RFS. Under the agreement, the EPA and USDA agreed to work together on efforts to support the U.S. biofuel and E15 industries. EPA Administrator Andrew Wheeler said: 

“President Trump’s leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our Nation’s farmers and providing greater energy security. Today’s agreement is the latest in a series of steps we have taken to expand domestic energy production and improve the RFS program that will result in sustained biofuel production to help American farmers."

This legislation has 10 Republican cosponsors.

Of Note: The RFS was created in 2005 and expanded in 2007. It requires U.S. transportation fuel to contain a minimum volume of renewable fuel. Its requirement began with four billion gallons of renewable fuel in 2006, and aims to increase the volume to 36 billion gallons in 2022. Under the RFS, the EPA has statutory authority to determine volume amounts after 2022.

The total renewable fuel statutory target consists of both conventional biofuel and advanced biofuel volumes. Since 2014, the total renewable fuel statutory target hasn’t been met; and the advanced biofuel portion has missed the statutory target by relatively large margins since 2015. The Congressional Research Service believes this trend will only continue. In a September 2019 report, the CRS wrote, “Going forward, it appears unlikely that the United States will meet the total renewable fuel target as outlined in statute.”

In early July 2019, the Environmental Protection Agency (EPA) announced that corn-based ethanol in 2020 would be maintained at the 15 billion gallon target set by Congress. The EPA also proposed an advanced biofuel volume requirement of 5.04 billion gallons (up 120 million from the 2019 requirement) and a 540 million gallon cellulosic requirement (up 122 million gallons from the 2019 requirement). Finally, the EPA proposed maintaining the biomass-based diesel (BBD) volume for 2021 at 2.43 billion gallons. 

However, despite these targets, some industry groups, such as the Renewable Fuels Association (RFA), accuse the EPA of effectively making the RFS optional through waivers. Under the RFS, an oil refinery processing up to 75,000 barrels of oil a day can qualify for a small-refinery exemption. The RFA’s president and CEO, Geoff Cooper, says this means the EPA might as well start referring to the annual RFS levels as suggestions rather than obligations. He continues: 

“It is a complete misnomer to call these blending volumes ‘obligations’ when EPA’s small-refinery bailouts have essentially transformed the RFS into a voluntary program for nearly one-third of the nation’s oil refineries.”

Media:

• Sponsoring Rep. Francis Rooney Press Release
  
• American Energy Alliance (AEA) (In Favor in Principle)
  
• Institute for Energy Research (IER) (In Favor in Principle)
  
• The Hill Op-Ed (Opposed in Principle)
  
• Congressional Research Service (CRS) Context)