[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
.
EXAMINING EPA'S MANAGEMENT OF THE
RENEWABLE FUEL STANDARD PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY POLICY,
HEALTH CARE & ENTITLEMENTS,
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 10, 2014
__________
Serial No. 113-158
__________
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia TONY CARDENAS, California
THOMAS MASSIE, Kentucky STEVEN A. HORSFORD, Nevada
DOUG COLLINS, Georgia MICHELLE LUJAN GRISHAM, New Mexico
MARK MEADOWS, North Carolina Vacancy
KERRY L. BENTIVOLIO, Michigan
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Energy Policy, Health Care and Entitlements
JAMES LANKFORD, Oklahoma, Chairman
PATRICK T. McHENRY, North Carolina JACKIE SPEIER, California, Ranking
JIM JORDAN, Ohio Minority Member
JASON CHAFFETZ, Utah ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
PATRICK MEEHAN, Pennsylvania JIM COOPER, Tennessee
SCOTT DesJARLAIS, Tennessee MATTHEW CARTWRIGHT, Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia TONY CARDENAS, California
THOMAS MASSIE, Kentucky STEVEN A. HORSFORD, Nevada
MICHELLE LUJAN GRISHAM, New Mexico
C O N T E N T S
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Page
Hearing held on December 10, 2014................................ 1
WITNESSES
Statement of Ms. Janet G. McCabe, Acting Assistant Administrator
for Air and Radiation, U.S. Environmental Protection Agency 6
APPENDIX
Questions and Responses for the record........................... 30
EXAMINING EPA'S MANAGEMENT OF THE RENEWABLE FUEL STANDARD PROGRAM
----------
Wednesday, December 10, 2014,
House of Representatives,
Subcommittee on Energy Policy, Health Care &
Entitlements,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:38 a.m., in
room 2154, Rayburn House Office Building, Hon. James Lankford
(chairman of the subcommittee) presiding.
Present: Representatives Lankford, Meehan, Farenthold, and
Speier.
Also present: Representative Collins.
Staff present: Will L. Boyington, Majority Deputy Press
Secretary; Molly Boyl, Majority Deputy General Counsel and
Parliamentarian; Joseph A. Brazauskas, Majority Counsel; John
Cuaderes, Majority Deputy Staff Director; Adam P. Fromm,
Majority Director of Member Services and Committee Operations;
Ryan M. Hambleton, Majority Senior Professional Staff Member;
Erin Haas, Majority Senior Professional Staff Member; Laura L.
Rush, Majority Deputy Chief Clerk; Sarah Vance, Majority
Assistant Clerk; Jaron Bourke, Minority Administrative
Director; Kelly Christl, Minority Counsel; Chris Knauer,
Minority Senior Investigator; and Katie Teleky, Minority Staff
Assistant.
Mr. Lankford. The committee will come to order.
Without objection, the chair is authorized to declare a
recess of the committee at any time.
Let me give a quick update just on schedule, then I am
going to slip into an opening Statement as well.
As many of you may know, we have quite a few things
happening on the Hill this morning, including a lot of
discussion about the omnibus package that went online last
night. Both of our conferences are actually very engaged in
going back and forth on that, so we will have fewer people on
the dais. So Ms. McCabe, you will have to do this 9 hour
hearing with just the two of us. Sorry. We will walk through
the questions, and we are both well prepared to be able to walk
through this together on it, so that is what you will see on
the dais, is we are coming in and out.
I would like to begin by stating the Oversight Committee
mission Statement. We exist to secure two fundamental
principles: first, that Americans have the right to know that
the money Washington takes from them is well spent; second,
Americans deserve an efficient, effective Government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights.
Our solemn responsibility is to hold Government accountable
to taxpayers, because taxpayers have the right to know what
they get from their Government. We will work tirelessly in
partnership with citizen watchdogs to deliver the facts to the
American people and bring genuine reform to the Federal
bureaucracy. This is the mission of the Oversight and
Government Reform Committee.
This particular hearing deals with the renewable fuel
standards. Creation of the RFS in 2005 and substantial
expansion in 2007 together represent what the U.S. Government
has done to take an enormous step to regulate gasoline usage.
However, when this law was written we were living in a
different time: the United States had yet to undergo its
current energy boom, which is spurred by advanced drilling
practices. This was also before the recession and the reduced
gas usage across the Country and increased CAFE standards,
which pushed down the demand for gasoline.
Much has changed since 2007, when then problems in the law
had become acute and need to addressed. This is why I held a
hearing on this issue in June 2013 in the same committee.
According to the market observers, the U.S. fuel supply is
right at what is called the blend wall. This is the level where
added ethanol will make up more than 10 percent of the domestic
fuel supply.
This is not sustainable under current conditions in the
American automobile market. Many auto makers will void
warranties if motorists use this mixture, known as E15, in
their cars because of the engine damage that it can cause. It
can especially damage older cars, boat engines, and small non-
vehicle motors.
In my home State of Oklahoma, consumers are worried about
using gasoline containing ethanol. In fact, gas stations in my
district will advertise the sale of zero percent ethanol
gasoline, or will say 100 percent gas, to keep consumers at
ease. It is a very in-demand product.
The lack of consumer demand, if not outright hostility, to
high ethanol blends makes it more and more difficult for fuel
makers to deliver a product that will actually sell. This
constriction of the markets makes fuel prices increase, causing
economic damage.
At the gas station down the street from my house, there is
a gas pump there that has E85 marked on the tank, on the pump
itself in a big logo and a big sign. But they don't sell E85
anymore there. For several years they tried to and the product
went stale in the gas tank underground, and eventually they
just swapped it out and now they have two E10 pumps there and
no E85, but there is still a big E85 sign left over from the
residual from the more than $200,000 dollars that this station
spent to put in that extra tank. It is a common issue that is
happening around the Country, in my neighborhood and other
places as well.
Because the creation of the RFS was such a large
undertaking and the authors of this law knew that predictions
for the future gas usage might not come true, the EPA was given
waiver authority to waive or suspend RFS requirements. This is
the waiver as written: It may waive if there is inadequate
domestic fuel supply or implementation of a requirement would
severely harm the economy or environment of a State, a region,
or the United States.
We are all aware what EPA can do to help with this problem,
and we went over that in depth in 2013 in that June hearing.
Starting with our hearing, Christopher Grundler, Director of
EPA's Office of Transportation Air Quality, subsequently
appeared several times before Congress. Based on these
appearances, I felt like we were making real progress. At his
last appearance before Congress on this matter representing the
agency, Mr. Grundler Stated, the truth is we have hit the
ethanol blend wall. This appears to be a clear acknowledgment
of the problem to me.
Shortly before this Statement was made, in November 2013,
the EPA announced, in its proposal for 2014, it would use its
available authority to ratchet down the ever-increasing amount
of renewable additives to our Nation's gasoline and pull us
away from the blend wall. The 2014 quandary for ethanol, the
final one, was scheduled to be released November the 30th of
2013. We are now more than a year past that deadline. We have
waited and we have waited to move from past proposed to final.
Finally, about 3 weeks ago, in late November 2014, we
received word on what EPA would do next on determining the RFS
obligation numbers for 2014, a year that is almost gone. Mind
you, we received this announcement with roughly 6 weeks left in
the year of 2014. What did this announcement say? It said EPA
would not issue its 2014 blending requirements until some time
in 2015. We are now over 370 days late and climbing, and the
year will be entirely gone before we get the requirements for
the year that is already past.
In addition to the problems with the 2014 numbers, this
announcement means the 2015 numbers are already late as well.
The statute requires that they are to be released by November
the 30th of 2014.
In addition to such an egregious delay being a violation of
law that created the RFS program, the notion of receiving
blending requirements for a fuel produced in 2014 in the year
2015 is a little surreal.
Clearly, we have a problem. Also, unfortunately, we are
moving backward, not forwards. Ethanol mandates were created in
the mid-2000's to help us produce energy domestically because
it was assumed we were running out of oil. The decreased
exports; now we are talking about increased exports from us. We
also wanted to be able to have the RFS to have a cleaner
environment.
But, as Sierra Club and multiple other organizations have
Stated, water usage has become a major problem in dealing with
ethanol. There are also reports of increased ozone from ethanol
use. It is not good for motorcycles and for boats, many cars,
trucks, lawnmowers. This has become an issue that does need to
be resolved not only in law at some point, but definitely in
waivers in the meantime.
That is why we are here to be able to talk about this. Glad
Ms. McCabe is joining us today. General McCabe is the Acting
Chief of EPA's Office of Air and Radiation. She also signed the
order pushing the decision to 2015. I look forward to hearing
about the EPA process. I know you are in process; we have had a
long conversation about this. I look forward to sharing the
process, knowing what the facts are, and knowing what we can do
from Congress to make this better, and what we can do as a
cooperative agreement between the executive branch and the
legislative branch to be able to resolve this issue.
With that, I recognize the very distinguished member from
California, Ms. Speier, for her opening Statement.
Ms. Speier. Mr. Chairman, thank you. Let me also say at the
outset of this hearing to Senator-Elect Lankford how much I am
going to miss him. He is really reflective of the kind of
leadership I would love to see more of among my colleagues on
the other side of the aisle. I have enjoyed working with you, I
have enjoyed collaborating with you, and I am hopeful that this
model will be one that we can see replicated among our
colleagues in the future, because working together we can get
so much more done. So I wish you great Godspeed as you move
into the Senate and know that you are going to do very
distinguished work there, as you have here in the House.
Mr. Lankford. Would the gentlelady yield?
Ms. Speier. I certainly will.
Mr. Lankford. It has absolutely been my honor. And I hope
the process that we have had together in our committee, which
apparently today has run off our other members, but I hope the
process that we have had on this committee sets an example. We
can find a lot of things to be able to work on together, and I
have really appreciated working on it and I appreciate you
making those kind words, because my wife is in the audience
today as well.
Ms. Speier. Let's have her recognized.
Mr. Lankford. So always nice to be able to have nice words
while my wife is here. My wife Cindy is right over there.
[Laughter.]
Mr. Lankford. Thank you for those kind words. I yield back.
Ms. Speier. So before we get further into the details of
this hearing on renewable fuel standards, I want to take a step
back and look at the big picture. There is a broad consensus
among scientists that fossil fuel pollution has warmed the
earth by more than a full degree over the past century, which
has resulted in the sea rising by eight inches.
This is not an abstract problem to my constituents on the
San Francisco Bay Peninsula, with more than 110,000 people and
$24 billion in property, and a major international airport at
risk from rising seas.
This is also not an abstract problem for people around the
world, where 2014 is on track to be the hottest year on record.
And climate change is not an abstract problem to the Pentagon,
which has linked climate change to the potential for increased
terrorist activity and other forms of violence.
The Intergovernmental Panel on Climate Change confirms that
the best way to limit the damage is to reduce greenhouse gas
emissions and to start proactively planning for the impacts. In
its latest report on mitigating the effects of climate change,
which was released last week, the IPCC says that it is not too
late to limit warming to tolerable levels, but that, to do so,
the world must act now.
The renewable fuel standard expanded by the Energy
Independence and Security Act in 2007 is a bipartisan approach
to confronting that problem. President George W. Bush said, on
the day that he signed this act, ``Today we make a major step
with the Energy Independence and Security Act. We make a major
step toward reducing our dependence on oil, confronting global
climate change, expanding the production of renewable fuels,
and giving future generations of our Country a Nation that is
stronger, cleaner, and more secure.''
The RFS created a market for the advanced biofuel and
cellulosic biofuel industry to innovate a better fuel for our
cars. More than $5.7 billion has been invested in advanced
biofuels. Unlike traditional corn ethanol, this industry is
still in its infancy and it is relying on the RFS mandates to
propel it to the next level.
Along with this relatively new industry comes jobs. The
ethanol industry has directly and indirectly created close to
400,000 jobs. In my district, we have significant investment in
the types of biotechnology that can drive a clean energy
revolution. From new types of grasses to make cellulosic
biofuel to genetically engineered algae that can grow diesel
gasoline in vats, Bay Area companies are showing that advanced
biofuels can be one of the ways to a cleaner future.
Now, all this innovation is jeopardized by the EPA's
failure to issue the 2014 renewable fuel standards. The EPA is
required under statute to release these standards by November
of the previous year, but has missed its deadline for each of
the last 3 years.
Today we are having this hearing because the EPA is not
issuing 2014 standards at all. They are essentially telling
biofuel manufacturers and gasoline refiners that they will just
have to guess how much biofuel they should have made for 2014.
Since there is no sign of a 2015 standard yet, the EPA is
telling industry that they will just have to keep on guessing
into the next year. This is no way to run a business and,
frankly, no way to run an agency.
I am glad the chairman called this hearing today, because
these delays in setting RFS standards are creating market
instability across the board, in the agriculture, renewable
fuel, and gasoline industries.
Today is an opportunity to find ways to move forward in a
more productive manner on the RFS. I do not believe the answer
is to throw away all the progress that the renewable fuel
industry has made in reducing carbon emissions and driving
technological innovation. But EPA has to do a better job if the
RFS is to accomplish its goals.
It is my hope today to impress upon the EPA the need to act
swiftly and set the RFS for 2014, 2015, and 2016, and to
consider exercising its authority in executing multi-year
rulemakings for the RFS. EPA must acknowledge that it cannot
continue with ever-increasing delays in RFS rulemaking and find
solutions that will provide more certainty to the businesses
that depend on them doing their jobs.
I also think that Congress has to share some of the blame.
In every case I can think of, Congress passes laws that require
agencies to promulgate a rule just once. But the law
establishing renewable fuel standards required EPA to issue a
new rule every single year. And since the RFS came into effect
in 2007, the EPA's budget has been stagnant and they have lost
over 2,000 full-time equivalent employees.
But I also do not want to lose sight of the larger picture.
The United States is undergoing an unprecedented energy
revolution. We have recently overtaken Saudi Arabia as the
world's No. 1 oil producer. Energy security is important, but
so is climate security. You can't drive on a road that is three
feet underwater, no matter how cheap gas prices are.
Fossil fuels might be more inexpensive and more accessible
than ever, but burning ever-more oil and gas will burn us out
of a livable planet. That is why the RFS, while flawed, is
important. The development of advanced biofuels is one of the
most important tools we have to achieving a safe climate for
future generations.
I look forward to hearing from EPA and Ms. McCabe about the
barriers they face in implementing the RFS and how they plan to
move forward and how we can be helpful to make sure you can do
just that.
With that, I yield back.
Mr. Lankford. The members will have 7 days to submit
opening Statements for the record.
We will now recognize our first and only panel. Ms. Janet
McCabe is Acting Assistant Administrator for the Office of Air
and Radiation at the U.S. Environmental Protection Agency.
Pursuant to committee rules, all witnesses are sworn in
before they testify.
Ms. McCabe, if you would please rise, raise your right
hand.
Do you solemnly swear or affirm the testimony you are about
to give will be the truth, the whole truth, and nothing but the
truth, so help you, God?
[Witness responds in the affirmative.]
Mr. Lankford. Thank you. You may be seated.
Let the record reflect that the witness has answered in the
affirmative.
You have been through this before in this conversation. You
know full well we would be glad to be able to receive your
testimony. Your written testimony will be a part of the
permanent record as well. If you would like to make any
additional Statements, you are welcome to do that. You are
recognized, Ms. McCabe.
STATEMENT OF JANET G. MCCABE, ACTING ASSISTANT ADMINISTRATOR
FOR AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY
Ms. McCabe. Thank you. Thank you, Chairman Lankford and
Ranking Member Speier. I was going to say other members of the
subcommittee, so I will in the right spirit.
I very much appreciate the opportunity to testify on the
renewable fuel standard program and the EPA's efforts to issue
the most recent annual rule under the program that Congress
established.
Annual RFS rules for the past years have generally
reflected the Energy Independence and Security Act targets.
Since 2010, however, it has been necessary for us to lower the
volume for cellulosic biofuel based on our projections for
production in the coming year.
In developing the proposed 2014 RFS volume requirements, we
took market realities into account, including the lower
production volume for cellulosic biofuels and a recent
sustained decline in gasoline consumption as a result of
improved vehicle fuel economy and other factors. We proposed to
use authorities granted under the Clean Air Act to adjust the
required cellulosic advanced and total volumes for 2014 below
the target specified in the statute. We also proposed to
maintain the biomass-based diesel volume requirement at 1.28
billion gallons, 280 million gallons more than the Act
specifies as a minimum.
Our proposed rulemaking explained the need to reduce the
cellulosic volume for 2014 and also considered the need to
reduce the advanced and total volumes to account for the
projected shortfall in cellulosic volumes. In that context, the
proposal included a detailed discussion of what is known as the
ethanol blend wall, which limits, at least in the short term,
how much ethanol can be blended into gasoline given the
existing vehicle mix and distribution infrastructure.
In proposing the 2014 RFS standards, EPA sought to advance
the broader goal of the RFS program to spur long-term growth in
renewable fuels while taking account of the need to overcome
the constraints that exist in the market and the fuel system
today.
The proposal generated significant comment and diverging
views, particularly about how volumes should be set in light of
lower gasoline consumption and whether and on what basis the
statutory volumes for renewable fuels should be lowered. Most
notably, commenters expressed concerns regarding the ability of
the proposed approach to provide continued progress toward
achieving the volumes of renewable fuel targeted by the
statute.
These issues are both very challenging and very, very
important to the future of the RFS program, and we recognize
that our consideration of them has delayed the issuance of the
2014 standards. Accordingly, and as is Stated in the
announcement we made on November 21st, EPA intends to take
action on the 2014 standards in 2015, in the same timeframe we
plan to take action on RFS standards for both 2015 and 2016.
Issuing the rules every year has proven to be a significant
implementation challenge, particularly in the last several
years. Resolving the fundamental issues that we are facing as
part of the 2014 standards, rulemaking should go a long way to
enabling EPA to complete additional annual rulemakings on time.
This Administration strongly supports the statutory goal of
the RFS program to increase the production and the use of
renewable fuels, particularly advanced biofuels, over time. We
have paved the way for increased use of higher level ethanol
blends, including by granting partial waivers for the use of
E15 in 2001 in newer light duty cars and trucks. We have
improved the quality, transparency, and efficiency of our
petition review process for new biofuel pathways that can count
under the RFS program.
In September we updated our website to include new tools
and resources that provide basic information quickly and easily
for our stakeholders and to provide for a more user-friendly
interface for petitioners to guide them through the process of
getting approval for new biofuel pathways. We also developed a
new efficient producer petition process that expedites the
processing of certain types of petitions. Since September, we
have approved nine of these efficient producer petitions, and
these are examples of the type of work that continues under
this program.
EPA will continue to engage with our stakeholders and work
in close consultation with the Departments of Agriculture and
Energy as we move forward with completing the annual standards
for 2014 and setting standards for 2015 and 2016. I want to
emphasize that our intention is to put the annual standard
setting process back on schedule.
Again, I thank you for the opportunity to appear as a
witness at this hearing, and I look forward to your questions
and our discussion.
Mr. Lankford. Thank you, Ms. McCabe. We are going to have
just open dialog on the conversation here.
Let me ask a quick question, or multiple questions, I
guess, as you go through on this. When do you start actually
preparing for the proposed new target? So if it is to be
released for the 2014 by November the 30th of 2013, when do you
start working on that?
Ms. McCabe. Well, as has been noted here, in the past few
years it has been more and more challenging for us to meet that
deadline.
Mr. Lankford. But when do you start working on that?
Ms. McCabe. Well, we have staff who are working pretty
continually on this program and paying attention to the
information and the data that we are required to gather. That
includes working with the EIA and getting projections on
gasoline consumption from that agency. So there is no precise
moment when people start working on a particular standard.
Because this is an annual rulemaking, we are in pretty
continual work.
Mr. Lankford. So how many people work on that continually?
What would be your guess? Is this three people, is this 10
people? What is your best guess on the staff that work on that?
Ms. McCabe. There are people who work on it full-time and
there are people who work on it part-time.
Mr. Lankford. So give us a ballpark.
Ms. McCabe. There is a goodly number of people. Perhaps my
colleague can help me here.
Mr. Lankford. Take a good shot at it.
Ms. McCabe. So within our Office of Transportation and Air
Quality, there are about three or four people who work on the
program full-time and an equal number who work on the program
half-time. But I will note that there are staff in our Office
of General Counsel also who work on this program and others who
help.
Mr. Lankford. And Office of Information and Energy
Information? There are other people in other agencies also
working.
Ms. McCabe. Absolutely. And the Department of Agriculture
and Energy as well.
Ms. Speier. So it is not a lack of employees working on
this in terms of not meeting the deadline?
Ms. McCabe. No.
Ms. Speier. So we can't say that it is because you have had
a loss of staff?
Ms. McCabe. No.
Ms. Speier. All right. So you have enough staff.
Ms. McCabe. Yes.
Mr. Lankford. So what is the key issue there? When you say
this is difficult, situations change. Obviously, we have
approached a new time with the corn-based ethanol, that we have
hit the limits there. With the biodiesels and everything else,
that is a different story. Obviously, there are some new things
happening with cellulosic advanced fuels. We get that.
Ms. McCabe. Yes.
Mr. Lankford. So we are trying to figure out the delay of
over a year, why we are passing an entire year, and then we are
going to set the totals for this year after this year is
actually over. What would cause that if we had enough staff and
this was predictable on what was happening, we could all see
the trends that were occurring?
Ms. McCabe. Well, in 2014 we faced two issues that we had
not faced before, which have proven to be extremely
challenging, and they are related, and you mentioned them both,
Chairman Lankford, in your opening, and that is, as you know,
in recent years we have had to address shortfalls in the
production of cellulosic biofuels. We have done that through
the waiver process.
But in 2014, for the first time, we were facing the ethanol
blend wall in a way that required us to find a way to address
that. And, as you noted, we have several authorities in the Act
for us to do that, and, as you know, we proposed to use the
inadequate domestic supply waiver authority. Not everybody
agrees with us that that is an appropriate interpretation of
the statute or that that is the appropriate policy place for
the agency to land in that rule.
So 2014 proved to be the year where we were facing those
quite challenging issues. We spend considerable time working
with the stakeholders, many, many encounters with the
stakeholders both at the staff level, at my level as well,
trying to make sure that we fully understand the implications,
what is going on in the market and what is the right outcome
here, and also making sure that we understand our legal
constraints and authorities and are applying those
appropriately. So those two things have really been what we
have been working on this year, and it proved to take longer
than anybody would have liked.
Mr. Lankford. Which has increased dramatically the
volatility in the RIN's market, as everyone is kind of waiting
to see what the targets are going to be, all the RIN's credits
that are out there. And the concern is that volatility only
increases. When you talk about an increase in the price of the
RINs, that is a purely manmade, Government-driven problem on
that market, which increases the cost to consumers.
So as the price of gasoline goes down, we have the
opportunity for it to go back up again not because of gasoline
out there, but because of volatility created by lack of
Government decisions. So this does affect the consumer
directly, as well as just the predictability of the process and
where we go from here.
Go ahead.
Ms. McCabe. We understand the importance of certainty. We
also understand that there are a number of factors that go into
the price of RINs, including the price for feedstocks and that
sort of thing. But absolutely we understand the importance of
certainty.
Ms. Speier. So let's talk about the stakeholders. You have
some very powerful stakeholders that are trying to pursue this
in a manner that benefits them in particular, and then you have
the threat of lawsuits. In fact, there is one, I believe, that
has been already filed.
Ms. McCabe. Yes.
Ms. Speier. So how does that impact your rulemaking
process? Is it the fear of litigation that is somehow impacting
your ability to get this rule out?
Ms. McCabe. No, it isn't the fear of litigation. We
understood and understand that we have missed the statutory
deadline and that subjects us to a legal action, so it was not
that. The issues are the substantive issues that I have
mentioned, and, as with any challenging and important
rulemaking, we want to make sure we are fully working through
the various issues that are brought to our attention, the legal
arguments. We certainly want to make sure that we are confident
in our legal authority and when we render a rule, because if we
are challenged on it, as we expected we would be, and it is
overturned, that is further uncertainty for the market. So we
work very hard to make sure that all of our rules are on very
sound legal basis.
Ms. Speier. So we have to get this fixed. And while I
understand that you are working very diligently at it, that you
have enough staff to do it, it is still not giving me the
confidence that we are fixing it. Would we be better served if
it was a rule that was put in place for three to 5 years,
versus one that you have to contemplate each and every year?
Ms. McCabe. Well, Congresswoman, I really can't speak to
the statute; that is not my job, to decide that.
Ms. Speier. Well, it is your job to help us figure out how
to make this work better.
Ms. McCabe. Well, and we would certainly be happy to
provide technical assistance to you as you start thinking about
that. An annual rulemaking is a challenging thing to
accomplish, but I will just emphasize that this year in
particular, because of these sort of watershed issues of the
blend wall and the waiver, this year has been particularly
challenging. We do think that, in 2015, we will be able to
resolve 2014, 2015, and 2016, as our notice Stated that we
intended to do, in order to get the program back on track and
get us over the hump of dealing with these fundamental issues.
Mr. Lankford. So can I ask our obvious question? We were
scheduled to get the 2014 numbers sometimes in 2014. That is
not occurring. Now you are saying we are going to get the 2014,
2015 sometime in 2015. Can you give us a date certain when this
will be settled in 2015? Because we are talking about 2014
settled in 2015; 2015, which is already late; and then trying
to resolve 2016 to get that one on time, which would be
terrific. And we will talk about the dynamics of 2016 and the
waiver authorities and all those things in just a moment.
But can you give us a date certain? And then I want to
recognize we have some other members that have joined us as
well for some questioning. But can you give us a date certain
when this is going to be resolved?
Ms. McCabe. I can't give you a date certain, Congressman,
because rulemakings are not ones that I can----
Mr. Lankford. So give me a month.
Ms. McCabe. We will move as expeditiously as we can. We
certainly----
Mr. Lankford. So this could be 2016 before this comes out,
and we will miss 2 years.
Ms. McCabe. We are committed to getting these rules out in
2015 and meeting our deadline for the 2016 volumes.
Mr. Lankford. Well, let me just say my concern on it. My
concern is that this is going to come out in time for November
the 30th of 2015 to try to announce the 2016 time, and we are
going to literally have 2 years in a row that we will not have
anything sitting out there. Because to just say we will get it
out in 2015 and be ready to go for 2016, that is November the
30th of 2015. That is even more problematic and even more
volatility. It cannot take that long to promulgate a rule when
the proposed rule is already done. I don't understand how the
proposed rule can be done for a year and it takes a year to
work through the comment period.
Ms. McCabe. We understand the importance of moving just as
expeditiously as we can.
Ms. Speier. All right, then why don't you give us a date?
Ms. McCabe. I am not in a position----
Ms. Speier. Well, I understand that, but you could have a
goal that your employees can work toward. I mean, to just have
this kind of ephemeral ``we will have it done some time in
2015'' doesn't give the industry any confidence moving forward.
Ms. McCabe. We are working on the steps that we will need
to take, the time that that will take.
Ms. Speier. That is gibberish, Ms. McCabe, I am sorry. Just
be clear. What is your goal? Is it April, is it May? You have
to have a goal that we can hang our hats on.
Ms. McCabe. My goal is to have these programs done as
quickly as we can in 2015. And when we have a schedule that we
can let people know about, we will do that.
Ms. Speier. Well, maybe, then, Members of Congress should
introduce a bill to repeal it unless you have a rule out by a
date certain. Will that be enough to encourage the actual
issuing of that rule? I mean, I don't think we are asking for a
lot here.
Mr. Lankford. No, we are not.
Ms. McCabe. We will certainly keep the committee informed.
Mr. Lankford. Well, you have kept the committee informed
for the past year, telling us it is coming, and that is the
problem. We have heard for a year it is coming. It is coming is
not enough.
Let me recognize some other members here. Mr. Farenthold is
here from Texas.
Mr. Farenthold. Thank you, Mr. Chairman. Before I go on
with my questions, I want to point out, in response to when are
we going to get this information, my mother always taught me
and I always grew up believing a promise isn't a promise unless
there is a deadline, and I would really encourage you, even if
you are not willing to share that deadline with the committee,
at least share it with some employees and hold them
accountable.
We had a rather long and involved Republican conference, so
I apologize for being late, and if I ask something that has
already been answered, please bear with me.
I did want to ask how does the EPA see the growing supply
of domestic oil and gas, along with lower domestic
transportation fuel prices, affecting the RFS?
Ms. McCabe. One of the key issues in the RFS, as we look to
try to implement rules that implement Congress's intent, is
looking at the expectations of Congress and the expectations of
fuel consumption that we get on a year-to-year basis from the
EIA, and that has been a major factor in trying to determine
how we set the volumes for the RFS. As we have noted, the
consumption of gasoline is going down in the Country, and that
has implications for how we implement the statute.
Mr. Farenthold. Is the EPA taking into account any other
diversions from traditional petrochemical products to corn or
other biomass-based products? For instance, the water bottles
we all drink from now, you are seeing a trend toward those
being created, rather than traditional petrochemical-based
plastics, being created from bioplastics, which is decreasing
the demand for fossil fuels, increasing the demand for the
biomass part. Is any of that taken into account and is there a
possibility for perhaps getting RIN's credits for plastics
manufacturing, for example, or other new technologies, moving
away from petrochemical-based feedstock or raw materials and
moving to biomass?
Ms. McCabe. Well, Congressman, we are focusing on
implementing what the statute requires us to do, which is to
look at the expected production of specific kinds of
transportation fuels and the development of new advanced
biofuels that meet the requirements of the statute. So that is
what we look at, looking forward, what is the expected
production of cellulosic biofuel and advanced biofuel, and
those sort of things.
Mr. Farenthold. And can you tell me to what degree, if any,
it is being taken into account the effect on food prices,
particularly in developing countries, as agricultural acreage
that could be devoted to producing corn fit for human
consumption is diverted to creating corn--I use corn as an
example, it could be any biofuel--is being diverted for biofuel
away from food and, again, what effect that is having and how
you all are considering it?
Ms. McCabe. In the initial rulemaking that established the
RFS program, there was an extensive study and there have been
studies by other agencies on those sorts of issues, and that is
all available and we would be happy to provide you more
information if you would like it.
Mr. Farenthold. I guess my concern, both with the food
prices and the diversion into plastics and other manufacturing,
we don't want to get caught in a hard rulemaking or hard law
decisions, not taking into account new technologies and new
development in the marketplaces, and I would be particularly
interested in knowing what, if anything, Congress needs to do
to take those into account or make sure that you guys are
taking those into account. So if you could include that in what
you are providing us, I would appreciate it.
Ms. McCabe. Sure.
Mr. Farenthold. Finally, I have two other quick questions,
if you are OK, Mr. Chairman.
So does the EPA still recognize the blend wall and some of
the technology issues, as it did in the proposed rules in
multiple hearings last year?
Ms. McCabe. We do.
Mr. Farenthold. And you testified last year before the
Energy and Commerce Commission about liability concerns being
one of the biggest hurdles with the penetration of E15. Has
anything changed, technologically or otherwise, that would
alleviate these concerns?
Ms. McCabe. I am not aware of any new information on that.
There is a range of opinions about the concerns with E15, and
with respect to motor vehicles 2001 and newer, our information
shows that there are not problems with using that fuel in those
vehicles.
Mr. Farenthold. All right, thank you very much.
Mr. Chairman, thank you.
Mr. Lankford. Mr. Meehan.
Mr. Meehan. I thank the chairman and I thank the ranking
member, an opportunity to sit again on a panel together.
And I thank you, Ms. McCabe, for being with you here today.
This is an important issue, and let me tell you a little bit
about my district and the refineries that closed in my district
until there were innovative companies who found a new and
better way to take advantage of the fuel supply, including
utilization of Bakken, among other kinds of things.
Important to their retaining this significant job-producing
piece in my district, they were also critical on numerous
occasions, but when there were challenges like the storm, it
was their presence which assured a fuel supply that kept New
York City functioning. So the ability for these refineries to
be operable has very real and genuine national security
impacts.
They are also facing, as all in the industry are, real
economic pressures, but included among those pressures is the
remarkable uncertainty which this particular policy impacts.
And I know you appreciate that, but my problem is not only is
the uncertainty that is associated with it, it is the fact
that, in addition, we have speculation in this market. You are
creating markets by your activity or your failure to act, and
they don't care about the jobs in my district and they don't
care about the availability of fuel; they care about the
ability to make money on a hedge. And that does not serve our
national interests, so what you do has a lot at stake.
So let me ask you, if I may, a number of questions.
When you are now setting the 2014 mandate, how are you
going to be doing this when you still have variables that are
somewhat uncertain with both the transportation fuel consumed
and the renewable fuel consumed? I mean, all this speculation
is around things that you are trying to predict with some
degree of uncertainty. How are you going to do that and give us
some degree of certainty?
Ms. McCabe. Well, Congressman, with respect to 2014 and
moving forward with 2014, we recognize the calendar and that we
are significantly through the calendar year 2014 and that, as
we have said, we intend to finalize this rule in 2015. So we
will be all the way through the calendar 2014 year, and we will
clearly take the fact of the calendar and the history that has
occurred in 2014 in making a determination about final 2014
volumes.
Mr. Meehan. So I mean, to a certain extent, then, you will
be able to use actual numbers with regard to 2014.
Ms. McCabe. That is correct.
Mr. Meehan. But the problem is every time we delay, and I
know this is some of what my colleagues are getting to, you are
into the next year's obligation. So is it your intention to
rely on 2014 or are we going to blend 2014, 2015? How do you
handle the uncertainty about looking at future predictions as
being part of it? Do you expect that you will include parts of
both not only what past history has shown, but what you expect
in the future? And what authority do you have to do both?
Ms. McCabe. We expect to set annual volumes for the
individual years based on appropriate data for each of those,
and that will be different. And we intend, as I have said, by
issuing the 2016 rule in 2015, to get the program back on track
so that refines and all other stakeholders will have the
certainty that the statute calls for.
Mr. Meehan. So you do expect that there will be some degree
of certainty.
Ms. McCabe. Yes.
Mr. Meehan. How do you respond to the concern I raised
about speculation in the market and should you be involved in
allowing that kind of, you know, these RINs and other kinds of
things, you appreciate the dramatic escalation in the cost of a
RINs. And because you have this on the refiner, and not a
blender, because it is unique to the refiner and it starts to
create remarkable spikes in the cost, it has a genuine impact
on the bottom line. So my concern, then, is, with respect to
that impact, how do you address that and the speculation?
Ms. McCabe. Well, as I have said, there are a number of
factors that affect RIN prices, and that is a tradeable
commodity and not a market that is controlled by EPA.
Mr. Meehan. No, it is not controlled, but it is almost
uniquely influenced.
Ms. McCabe. Our actions, I agree, have impact on the
market, as do other things as well. Our information actually,
Congressman, is that the vast majority of trading that is going
on in the system is between the refiners and the blenders and
reflects their anticipation and the cost that they are
experiencing.
Mr. Meehan. Mr. Chairman, I have other questions, but I
don't want to monopolize, so I would be glad to come back to
some other questions.
Mr. Lankford. No, be glad to, Mr. Meehan. We are opening
up, this is a free-flowing conversation based on our panel and
the topic, and a conversation that all of us want to be able to
have on the same issue.
Mr. Lankford. Can I ask a question?
Mr. Meehan, feel free to be able to jump in at any time as
well.
The issue is you have mentioned a couple times and alluded
to that EPA is looking to see what they can do to spur growth
in this. I would assume that means increased usage of ethanol.
Is that what you mean, to use more ethanol in our system?
Ms. McCabe. The key objective of the statute was to focus
on the increased development and use of advanced biofuels which
have the most benefit for energy, security for the greenhouse
gas reduction. So a focus of the statute, as you can see
looking at the volumes, is to increase the volumes of advanced
and cellulosic biofuels, and a lot of our focus----
Mr. Lankford. But the uncertainty right now is based on
corn-based ethanol, though, am I correct? Right now, because
you have hit this unique year, not based on those. Those, you
already know how to deal with. This delay is based on the other
area, am I correct?
Ms. McCabe. Right. When you hit that blend wall and you
have saturated the 10 percent market there are ways to use
additional ethanol in the system.
Mr. Lankford. Correct. OK, so give me an example.
Ms. McCabe. E15 and E85 are two ways to do that, and, as I
said, we are in touch with the stakeholders significantly to
understand how those fuels are moving, and we are seeing some
gradual increases in it.
Mr. Lankford. So I guess my question is we have this number
that was an arbitrary number set by Congress, now almost 10
years ago, anticipating increased gasoline usage across the
Country that now we don't have increased gasoline usage across
the Country, have a decline of that based on CAFE standards and
the economy and everything else. So we all know that fact.
But EPA is committed to try to figure out how we can just
use more ethanol anyway, rather than try to hit the waiver and
say the intent of Congress was that we would match up ethanol
with gasoline usage. We have less gasoline usage, but we want
to continue to use more ethanol anyway. Is that what you are
saying? When you talk about spurring usage, I am trying to
figure out why.
Ms. McCabe. We are trying to implement the statute as best
we can.
Mr. Lankford. But you want back to the intent, though. The
intent of it wasn't to increase ethanol usage, it was energy
independence. If we are using less energy as a Country, why is
the intent to try to continue to use more and more ethanol
anyway?
Ms. McCabe. The intent is to do our best to meet Congress's
statutory----
Mr. Lankford. So you need clarity from Congress in a piece
of legislation on what this would be to be able to help you in
this decision.
Ms. McCabe. We need to look at the information; we need to
keep in mind the purposes of the statute; we need to look at
our legal authorities and apply those appropriately.
Mr. Lankford. Well, let me ask one more question. I don't
want to hog this conversation as well, but you mentioned
earlier about past 2001 vehicles. EPA has Stated that past 2001
vehicles can use the E15.
Can I have a slide come up there dealing with just the gas
cap? I want to be able to show.
[Slide.]
Mr. Lankford. This is something Mr. Grundler and I had a
long conversation on as well. Most vehicle warranties will be
void if they use the E15. This is a picture of a gas cap from a
2013 Toyota. Now, this same gas cap is used for Toyota and for
Lexus vehicles. It clearly States do not use the E15. It is not
just E85; don't use the E15. Most manufacturers will State they
will void your warranty if you use it.
I also have another chart here that shows the manufacturers
that can use the E15.
[Slide.]
Mr. Lankford. This shows a list of all manufacturers, those
that have said they would recommend usage of E15. And you will
see the years, beginning with 2001 all the way to 2014. The
greens or the yellows note that they would be OK with it, that
they have at least some models that are OK with using E15. Now,
this is a real point of contention with EPA we have bumped into
several times. EPA continues to say we have checked; 2001 and
on is fine. But the actual owner of that vehicle, if they use
it, lose their warranty in that area.
Now, I don't think EPA is willing to go ahead and cover any
costs of repairs, and the American taxpayer most definitely is
not willing to cover those repairs for vehicles because their
warranty was voided. This is a big issue for us. So when we
talk about pushing more E15, the manufacturers of the vehicles
are saying, don't do it to the consumer and EPA is telling the
consumer, you are going to have to do it because we have this
arbitrary goal we are not willing to do a waiver on that we
have the statutory to do the waiver on, but we are choosing not
to, so you are going to use more E15 whether your car wants it
or not, but whether you want to buy it or not. That is a
problem.
Ms. McCabe. If I can respond, Congressman.
Mr. Lankford. Sure.
Ms. McCabe. We have proposed to use the waiver. We are not
requiring, through this rule, for any consumer to use any
particular type of gasoline. In fact, our job in estimating and
predicting the volumes and setting the volumes, takes into
account what is happening in the market. And you reflected, I
think, the limited number of E15 stations.
Mr. Lankford. Right. E85.
Can you go two slides forward, there, I think? Let me show
you this, too.
[Slide.]
Mr. Lankford. This is the station down the street from my
house. You can see the pump is clearly marked this is an E85
pump, but you can look on the actual handle there, there is no
E85 sold there anymore. And when I talked to the owner of that
station, he said we couldn't sell the E85 gas; we spent
$200,000 putting in tanks and the gas would go stale because
there wasn't enough demand for it. So now they have just
shifted to two E10's and he is very concerned that he is going
to be pushed to have an E15 as a requirement to be there as
well.
If you go back one slide there as well.
[Slide.]
Mr. Lankford. This is what they sell now, and that is
frequent; that was taken last weekend down the street from my
house. By the way, I want to brag at $2.21 gasoline prices in
my neighborhood as well.
Ms. Speier. Just add another one and that is what it is in
my neighborhood, $3.21.
Mr. Lankford. It is $20.21 in San Francisco?
[Laughter.]
Mr. Lankford. So this unique challenge that not only the
consumer is facing, that the blenders are facing and the
refiners are facing, but also every single small gas station
around the Country is also facing, what are we about to be
required to do to hit a target that, yes, is a statutory
target, but EPA was given waiver authority for just an occasion
just like this so it doesn't cause every station to spend
$200,000 on new tanks to hit an arbitrary total to help us hit
energy independence when it is not needed.
Ms. McCabe. That is exactly why we proposed the waiver. It
is why we have been working----
Mr. Lankford. But not finalized it.
Ms. McCabe. But not finalized it yet.
Ms. Speier. Let me just point out that the high performance
cars at NASCAR use E15 gas, for what it is worth, so there is
some value in encouraging the auto manufacturers to make
vehicles that can accommodate E15 gas.
But I would like to go back to something you said earlier,
Ms. McCabe, and ask unanimous consent that we put into the
record Statements by the Advanced Biofuels Association, the
Algae Biofuel Organization, Biotechnology Industry
Organization, and the National Biodiesel Board into the record.
Mr. Lankford. Without objection.
Ms. Speier. I am going to read from a Statement from the
Advanced Biofuels Association. ``At this point, we suggest
that, at a minimum, the EPA should move expeditiously to post a
new cellulosic RIN value for the 2015 calendar year, which we
have been waiting for for nearly 2 years. It is absurd that the
current corn RIN is valued above the cost of RINs for the
cellulosic pool. The way this program is being run today, we
are effectively regressing, providing price supports only to
those fuels that are already at full scale production at the
expense of the advanced fuels that Congress intended to develop
when it enacted the RFS2 program.''
So you said earlier that you wanted to, indeed, expand the
use of advanced biofuels, and that is part of the charge of the
legislation. And yet you have this pent-up demand from all of
these companies and, as I understand it, there are some 30 new
biofuel pathways that have been awaiting agency review and
approval for over 2 years, and they still can't get an answer.
I mean, this is no way to run an agency, and certainty is one
of the hallmarks of businesses being able to succeed. I mean,
we are going to kill off the goose that could lay the golden
egg if we don't start acting more expeditiously.
Would you please respond to that?
Ms. McCabe. Yes, certainly. We agree that encouraging and
providing a path forward for innovative and new renewable fuels
is absolutely an intent of the statute and----
Ms. Speier. OK, I understand that. I believe you, but what
are you doing about it? They have been waiting for 2 years.
Ms. McCabe. Yes.
Ms. Speier. What is it going to take?
Ms. McCabe. We undertook, over the course of the summer, a
total re-look at our process for reviewing applications for
pathways approvals, which we finalized in September, so we have
completely redone the information that we lay out so that
people can bring us applications that are ready to be
processed. So we have created a streamlined approach for what
we call these efficient producers.
And as I mentioned in my opening Statement, since we
finished that re-look at the process, we have signed off on
nine of those pending applications. So we agree with you that
moving these things through promptly is important; that is why
we undertook a re-look of our process, and we have seen the
results of being able to move things through quickly.
Ms. Speier. So why are all of these Statements, then,
suggesting that there is no action?
Ms. McCabe. I am not familiar with the Statements,
Congresswoman, so I don't know, but this is a relatively new
adjustment and changes to our process. They may not be aware of
the changes that we have made, but we are now able to process
things more quickly and to help people who want to come to us
with applications know better what they need to put in their
applications so that we will be able to process it promptly
when it comes in.
Ms. Speier. So for the 30 applications that have been
pending, or pathways, I should say--I don't know how many
applications are pending--should they resubmit under this new
streamlined program that you have created?
Ms. McCabe. Well, each one would be in a different
situation, and our staff is certainly available to work with
anybody who has a pending application to help them know whether
there is additional information that should be submitted. I
don't think we are asking people to start all over again, but
these changes is speeding up and freeing up the entire system
for us to be able to take a look at all the ones that we have
and the ones that continue to come in.
Ms. Speier. All right, thank you.
Mr. Lankford. Before I recognize Mr. Meehan, can you define
quickly for me? You said this is moving more quickly. What does
that mean for someone that is in this process? How many weeks,
how many months will it take for them to go start to finish?
Ms. McCabe. You know, I don't have that information,
Congressman. I would be happy to----
Mr. Lankford. Give us a guess. Is this a 2-year process, is
this a 90-day process?
Ms. McCabe. It really depends on the particular
application. There is a whole range of pathways that people
bring to us. Some of them are very complex, some of them are
much more straightforward in terms of being similar to other
things that we have seen. So there is not a standard.
Mr. Lankford. So the struggle that we would have here is to
define quickly, then, and to say this process has changed. How
much faster is it now than what it used to be?
Ms. McCabe. We can provide those numbers for you,
Congressman.
Mr. Lankford. Please do.
Ms. McCabe. But I can tell you that we have approved nine
here in the last 2 months, and that is certainly more than in
the months that I have been----
Mr. Lankford. But those nine that have been approved, when
did they start in the process?
Ms. McCabe. I don't know that.
Mr. Lankford. The definition of quickly is when you are on
the other side of the desk waiting to get an answer, rather
than this hit my desk, but it was actually on someone else's
desk before and was on someone else's desk before. So the
challenge is trying to figure out, start to finish, when they
start the process, when are they getting approval.
Ms. McCabe. We would be happy to provide you with more
information on that.
Mr. Lankford. Please do.
Mr. Meehan.
Mr. Meehan. Thank you, Mr. Chairman. I want to sort of
followup, and it may not be exactly the same issue, but I think
it is the same genuine general concern, and it is trying to
understand how you make some of these decisions and then what
we can do to assist you, if we need to, in expedited activity.
I articulated the concern about having small refiners. How
do you deal with those who are petitioning for some kind of
relief under what may be rulemaking that you do? Do you use
criteria to determine whether a small refiner may have a reason
why they would be enabled to not have to abide by the same
standards as perhaps a much larger refiner?
Ms. McCabe. You are referring to the petition process for
small refiners to get waivers.
Mr. Meehan. Yes.
Ms. McCabe. We work with the Department of Energy, as we
are required to, on evaluating any of those and, yes, there is
a set of criteria that relate to that particular refiner's
situation that we would look at.
Mr. Meehan. What are those criteria?
Ms. McCabe. If you give me a minute, I will find them.
Mr. Meehan. If you are able to get it real quickly.
Ms. McCabe. I have them here.
Mr. Meehan. OK, thank you.
Ms. McCabe. So these are the kinds of things, and the
Department of Energy developed these metrics back in 2011 for
this purpose, so they are things like access to capital and
credit, other business lines besides refining and marketing,
local market acceptance of renewable fuels, the percent of
diesel----
Mr. Meehan. OK, so you look at those other kinds of
factors, but, in effect, you are tying it back to some sort of
parent company responsibility that influences that kind of a
determination?
Ms. McCabe. Well, the Department of Energy and we,
together, look at these factors, but we look at the particular
company that is asking for the petition. They are asking for
the waiver in light of their particular circumstance.
Mr. Meehan. And that is the question, and I should be
careful, because I am not, but I am looking at a bottom line
problem in which I have an industry which really isn't in the
refining business, but they have made a particular effort to
see if they can help control the greatest driver of their
costs, which is fuel.
And the unique circumstance they face is, after having
found a way to deliver a product to market for them and the
rest of the aviation fuel industry, that has saved the jobs,
because they found a way to produce this product at a
competitive price, until you introduce RINs, and then,
suddenly, I have this artificial market that is completely
influencing the bottom line of this refinery, and the thing is,
well, we will just get out of that line of work. It is not a
vertical organization; this is a product which has been
utilized to support something in an industry.
So when you are looking at the larger industry, why should
the activities in a completely different area be influencing
the decisions that are made about a unique part of the issue,
which is refining unto itself, as opposed to what the rest of
the capital of an organization is?
Ms. McCabe. Well, Congressman, I wasn't involved in the
development of these criteria, so I can't speak to them
specifically, but we would certainly be happy to followup with
you with any questions related to----
Mr. Meehan. Well, I am particularly interested in, as we
are looking through the concept of hardship petitions and
meaningful response to the petitions. And I appreciate, then,
if you are working with the Department of Energy.
Let me ask one other question about this area, because,
again, it goes back to the supply of RINs, and you have within
your authority the issue to look at inadequate domestic
supplies of certain things. How do you make those calculations?
How are you moving along on that process and how do you
calculate whether there is an adequate supply of RINs?
Ms. McCabe. That really goes to the heart of the matter and
the responsibility that we have in setting the volumes for a
given year, in particular now that we are experiencing the
blend wall issues that we are experiencing. So we look hard and
try to gather the best information that we can from EIA and
other agencies and the industry, as well, to get as good a
sense as we can get about what reasonable expectations are,
what growth expectations are, and then try to make sure that we
are doing the best job that we can to balance and make good
assessments about those judgments. As the history of the
program has shown, the development and production has not moved
along as quickly as Congress anticipated, so that particular
inquiry is quite a challenging one.
Mr. Meehan. Well, some of it is because of the nature of
the market itself. I mean, some of this is counterproductive.
They are not moving because they said the market doesn't exist
for the fuel that people are being required to generate. And
what is frustrating to me is somebody who cares about our
environment, in the end, in order to produce these, the overall
carbon impact is even larger. It is counterintuitive that we
are driving forward with this for a variety of different
reasons, including the carbon footprint of the overall impact
of what we are doing.
Ms. McCabe. Well, I think one encouraging thing,
Congressman, is that we do see growth in advanced fuels and in
cellulosic fuels. And as the Congressman noted, there are
companies out there coming up with processes, coming up with
innovative processes, and we do very much want to encourage all
of that.
Mr. Meehan. Is it growth? I mean, is it growth that is
being shoe-horned in by virtue, because I know it is Hobbesian
choice. I would love to see the continuing development of some
of that, but at what point in time? Is it growing because it is
being supported and pushed into something, as opposed to being
able to actually be accepted in the market?
Ms. McCabe. Well, I think that there are smart and
innovative companies out there that, for a variety of reasons,
are motivated to move forward with these exciting businesses
and new processes, and there is a lot of ingenuity out there
that results in all the petitions that we have for the requests
for pathway approvals that we have pending.
Mr. Meehan. Well, there is, and I actually have visited
very similar things and am impressed by them and want to see
them, but, again, I want to make sure that the carbon
footprint, again, is one aspect of things and the competitive
nature to make sure----
Ms. McCabe. Yes.
Mr. Meehan. All right. Well, I want to thank you. I would
like to see if we can, on the staff side, followup on some of
the more particular questions with respect to the hardship
petitions and things of that nature.
Ms. McCabe. Absolutely.
Mr. Meehan. So I thank you for your work in this area.
Ms. McCabe. We would be glad to do that.
Mr. Lankford. Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman.
I am sitting here listening, and one of the frustrating
things of being in this committee, and I appreciate the
chairman's question actually coming from yesterday, what is
quickly. I never thought we would have to define quickly.
Yesterday we were in this room describing is it glacial pace,
biblical pace.
Quickly, to most people, means relatively short time; few
weeks, maybe month. And to continue this process to keep
looking reminds me of the story that was told just the other
day by another member about four frogs on a log, three decided
to jump off, how many were left on the log? Four, because only
three decided to; they didn't do anything.
And that is exactly your answer just a moment ago described
that perfectly: well, we are looking at it, we are looking to
see what is the best bet, we are going to try, we are looking
again, we will make a decision. But we never seem to get to the
decision. And I think that is the concern for this hearing and
looking at it.
Then what was really interesting was is your discussion
right then discussed the new technologies coming out in spite
of the inactivity and in spite of everything, or maybe because
of. So maybe it is a backward twisted mentality to say, if we
don't do anything, all these folks are going to go out there,
be so frustrated they are going to come up with something else.
And we can talk about fuels and the footprints that were
discussed, but there is also another aspect to this, and this
is a question from my area dealing especially with poultry and
dealing with others, is the cost aspect. We have not talked
about numbers and, again, I have really not heard a good reason
why. It was amazing to me you said that this past summer we
completely reworked how we were looking at this. Well, this is
not like it has been working. It has not been working for a
long time, so we stopped to figure out how we can get more
processed.
The brokenness of this system is just amazing. But when you
look at the brokenness and why it is broken, and the effects it
has on other industries, not just this side, you know, from
just my area, Georgia, there are 102 counties in Georgia which
produce more than $1 million of poultry at the farm level, at
the absolute farm level, 47 percent. It is the largest segment
of Georgia's agriculture. Thirty-eight billion is poultry's
annual contribution to Georgia's economy from farms,
processing, further processing, and satellite businesses. A
hundred and thirty-eight thousand jobs depend on the poultry
industry, whether indirectly or directly. And then there comes
this: $44 billion is the higher actual feed cost producers have
incurred due to RFS.
The problem that we are seeing here and the problem that I
would like to understand is maybe the question is is there
other impact decisions when dealing with RFS besides the very
narrow tube of RIN and other things on that we produce? The
impacts in other areas of the economy, is that even thought
about? And especially your inactivity in being able to come
forward with a standard.
Ms. McCabe. Yes, Congressman, we absolutely understand that
there are implications for this program to a variety of
industries, and the poultry industry is certainly one, and
other agricultural industries. That is one reason why there is
such a divergence of views among the industry stakeholders on
how EPA should proceed with this program. We are very mindful
of those implications.
Mr. Collins. Well, then at a certain point in time, at this
point, the paralysis that is going on here through analysis and
other decisions, and all the conflicting reports and Members of
Congress--and I am not denying that--and interest groups, at a
certain point in time there needs to be decisions made on when
you sort of weights and balances, and I think that was
discussed by Mr. Meehan as well, the carbon footprint is
actually larger, there are other issues here.
Why are we continuing down a path in which we are charging
more to put in our mouth and trying to fix what we are putting
in our car? That is the problem that I am having a hard time
understanding. We want to help average Americans who are
struggling when their food costs are going up, and we are
trying different ways that actually are struggling in their gas
tank. The only thing that I have frankly seen that RFS standard
actually does is help small engine repair. Because you want to
screw up a small engine? Put the ethanol in it and let it sit.
So small engines are flourishing.
But past that you are hurting agriculture, you are hurting
poultry, you are hurting livestock, you are hurting those who
want to get into this industry maybe to investments who say we
want to find cleaner energies, we want to find cleaner
alternatives. But going through this process it would be hard
for an investor to sit there and look at maybe these newer
technologies that are developing when they look at this process
and say it is so broken.
What do you say to those who may side on the fact we need
to focus more on the environmental protection side of it and
maybe not the economic impact? What do you even say to them to
say, well, don't worry, we will get our act together so that we
can actually give you some help?
Ms. McCabe. Well, our job, Congressman, is to implement the
statute that Congress passed using the authorities that are in
it, and that is what we are trying to do to the best of our
ability, balancing all of these factors. Congress set certain
volumes that the agency is supposed to implement unless we find
that one of the reasons is present that we can exercise the
waiver authority. And that is what we propose to do and those
are the issues that have been discussed over the last year, and
those are the issues that need to be resolved, and we intend to
do that.
Mr. Collins. Well, I think that is the other issue in 2008
and 2012 as well, also, was the supposed off-ramps during the
economic crisis, things like that, that would help some of
these producers and, again, just basically got passed over due
to other concerns. I think that is the part for the workers,
for the agriculture community, for the others. We can have the
conversation about the standards. I think the interesting point
of what you just said, though, is you are tasked to make a
decision. There is nowhere probably in that law that says task
if you can come up with a consensus; task if you can think
about it; task if you.
That is the problem that people have with this city. They
don't get it. They view bills like this as job creation for
people inside the Beltway. It is job creation. We will farm
this out; we will council this; we will get a consultant here;
we will get another economic report.
And it all works great inside the Beltway, but to the
farmer paying and to poultry farms, and for full disclosure, my
wife and her sister still run their daddy's chicken farm, and I
have other folks in the 9th District who run a lot more
poultry. When you get to them and their costs are going up,
their costs are rising and their pay is not going up, that is
the problem. The inactivity costs you more than a hearing; it
costs people jobs, it costs people's lives, and it changes
their input. That is what is broken about the system.
Inactivity is no excuse any longer. It is time to make a
decision.
Mr. Chairman, I yield back.
Mr. Lankford. Ms. McCabe, can I ask about 2016? This is a
big issue for us. Obviously, the reset is coming, 2016. You
know in the statute full well if there are 2 years prior to
that where there is a reduction of 20 percent or more, 50
percent or greater, there is a reset that is built into this.
How is that factoring into your decisions for 2014 and 2015 and
the delay? Is that in the back of your mind at this point,
saying 2016 is almost here, we have to make sure 2014 and 2015
are right because there is an impact on that?
Ms. McCabe. Well, Congressman, I believe, and I will
confirm with my colleague here, so the statute says that the
first year we could effectuate a reset is after 2016, so that
would be 2017.
Mr. Lankford. Right.
Ms. McCabe. So as we are looking at 2016 and as we are
looking at 2014 and 2015, of course, we are very mindful of
those triggers, and thinking about--really, I said before that
we have sort of a continual effort to be thinking about this
program and trying to think far ahead. So, yes, we are thinking
about the implications for our obligations under a reset
scenario.
Mr. Lankford. Quick clarification, then I am going to yield
to the ranking member. When you are talking about 2015, 2016,
is that calendar year or the RFS year? How are you defining
that? Or fiscal year? So when you look at that, as far as
determining we have the reset time coming based on the two
previous years, how are you defining previous years?
Ms. McCabe. The RFS year is the calendar year.
Mr. Lankford. OK. But what I am trying to figure out is you
are looking at it right now setting the 2015 number. Before you
set the 2017, you are actually doing that in 2016, 2015.
Ms. McCabe. Right.
Mr. Lankford. How are you evaluating that for when that
decision has to be made?
Ms. McCabe. In 2015, we intend to set the volumes for the
years 2014, 2015, and 2016. So we would not be doing a reset in
any of those 3 years.
Mr. Lankford. But then would assume that would occur, then,
in 2016 you would the following year.
Ms. McCabe. For the 2017 year.
Mr. Lankford. So by November the 30th, 2016, you would set
and the reset would be complete for 2017 and on.
Ms. McCabe. That is my understanding of the schedule that
would be required.
Mr. Lankford. Thank you.
Let me yield to the ranking member.
Ms. Speier. Mr. Chairman, thank you.
Ms. McCabe, I know you are a person of goodwill, and this
hearing was an effort to try and illuminate where some of the
problems areas are and to get us focused on fixing them. I,
frankly, don't think we have achieved that goal. I would really
encourage you to provide us with some kind of a document that
spells out what you need in order to do your job, because it is
not getting done.
And there is a lot of frustration by those who are trying
to play by the rules of this law. We want this law to work,
and, if it doesn't work, the 20 or so bills that have already
been introduced to repeal it or modify it are going to gain a
lot more traction. So help us help you do your job.
With that, I yield back, Mr. Chairman.
Unfortunately, I have to leave, and I thank you very much
for being here.
Ms. McCabe. Thank you.
Mr. Lankford. I have a couple quick questions, then we are
going to close up in a moment as well.
I don't know of a single agency that doesn't plan and
prepare and doesn't have targeted time lines. This is the
decision that needs to be made: we are going to have a draft by
this point; we are going to have 3 months with the draft; we
are going to send it to OMB and OIRA to take a look at it; we
are going to evaluate it from there; they are going to get it
back to us by this time period. Every single one of these
decisions has time lines.
What I find unrealistic is for you to say to us we don't
have any; it will be sometime in 2015. We all know better.
There is a document that you all have worked through setting
time lines when this decision is going to be made, when
comments are going to be closed, when we are finished replying
to comments, when OIRA is going to sign off. All those things
exist. We are just asking a simple question: What is the date?
Even if it is just the date that you are sending it to OMB and
OIRA to look at, what is the date?
Ms. McCabe. In all honesty, Congressman, that document for
this rulemaking does not exist at this time because we are in
the process of figuring out what that schedule will be.
Mr. Lankford. So you are saying you have looked at this for
2 years and there is no time line of when you will make this
decision?
Ms. McCabe. We made the decision in late November that we
were not able to finalize this year. That is causing us to re-
look at our schedule and the anticipated work that we need to
do in order to finalize 2014 and also accomplish 2015 and 2016
in the next calendar year.
Mr. Lankford. So in June 2013, when Mr. Grundler was in
front of this same committee, the conversation was we are going
to have a proposed rule out for 2014 and get it out, and that
occurred.
Ms. McCabe. Yes.
Mr. Lankford. So that means at least before that was
leading up there was conversation about what that would be, and
then for an entire year of that. So you are saying there is no
time line, this is just floating out there for at least since
June 2013 on when the time line to finalize 2014 would be.
Ms. McCabe. Our intent was to finalize the rule as quickly
as we could, and we found that we were unable to do so for all
the reasons that we have discussed today.
Mr. Lankford. But that means there was never a plan to
finalize this. I don't mean to be caustic on it. If there is no
time line and there is no goal written anywhere, it is a we
will get to it when we get to it; there is really no plan. And
to say 2015 is not acceptable when we are over a year late for
2014 and we are already late for 2015. And to say we will make
sure we get 2016 on time is tough to swallow.
Ms. McCabe. I appreciate the frustration you are
expressing, Congressman. I can assure you this is not a we will
get to it when we get to it effort.
Mr. Lankford. Well, if there is no plan and there is no
deadline, other than sometime in 2015, for something that was
due a year ago, there is no sense of urgency to get this done.
Let me shift subject, because I hear where you are at. We
are not going to get a date.
There was a study that came out, Northwestern University
and the University of Singapore, studied through San Paolo,
Brazil and the shift that they made in ozone. You may be very
familiar with this. I know you are very familiar with all the
ozone issues as well. With the new ozone regulations that are
coming out and that are being proposed by the Administration, I
have some concerns; and this comes from several articles dated
from April of this year.
When they studied what happened when there was a shift to
using ethanol in San Paolo in that environment, they saw a rise
in ozone. Their hypothesis they have in great detail, the
scientific research they did on it, and how ethanol reacts
different in the environment than does traditional gasoline,
and the ethanol actually increased ground level ozone.
Now, the concern is, as we lean into E15 and E85, at the
same time the Administration is also focusing on ground level
ozone, we may have a causal effect between the two here if this
really holds to be true in the research. Are you familiar with
this and are tracking this at all?
Ms. McCabe. I am definitely familiar with the issue about
NOx emissions related to ethanol, yes.
Mr. Lankford. What is your concern on that?
Ms. McCabe. Well, I would go back to the point of the real
emphasis of the renewable fuel standard increasing volumes of
these advanced fuels that are particularly beneficial for the
environment. I think it is an issue that we need to be very
mindful of. Ozone is a complex pollutant that is affected by a
number of factors, and we spend a lot of time looking at
expected ozone levels, running models that can adjust for the
complicated chemistry in light of various expectations about
emissions that would be existing in different areas. So it is
an issue that we definitely have on our radar screen.
Mr. Lankford. So NOx-based for ground level ozone, sugar-
based, corn-based ethanol has a greater effect on ground level
ozone than does some of the advanced, is that what you are
saying?
Ms. McCabe. I don't know that I am comfortable answering
that question exactly as you have asked it, Congressman,
because I think there are a lot of factors that come into play.
Mr. Lankford. But this is an issue that some types of
ethanol do increase ground level ozone.
Ms. McCabe. There can be an increase in NOx emissions.
Mr. Lankford. Right. Which affects the ozone.
Ms. McCabe. Which can affect ozone, yes.
Mr. Lankford. OK. So somehow we have to figure out how we
have a mandate over here to increase ethanol usage and we have
a mandate over here to bring down ozone when this could help
cause some of this and at least be a factor in part of it, and
we have competing priorities here coming from the Federal
Government.
Ms. McCabe. Well, an important factor is the scale of what
we are talking about here, the contributions that might come
from ethanol compared to the pool of NOx emissions from a
variety of sources.
Mr. Lankford. Sure. But if the Federal Government plans to
tell certain manufacturers you have to manufacture different,
when at the same time encouraging NOx emissions in other ways
based on another mandate, we have a problem, because this
manufacturer is now spending more money for this and the gas
station is now spending more money to put in a certain tank to
be able to drive a certain vehicle that actually does increase
NOx. You see what I am talking about? This, at some point,
makes every person that does electricity or does any kind of
manufacturing, their head spin, to say how can the Federal
Government require both of these.
Ms. McCabe. I just point out again that what we are doing
in this program is implementing Congress's statute.
Mr. Lankford. So this is clearly an error we have to get
back to statute on. I would say to you we are not going to let
go of this. Obviously, Ms. Speier and I are very, very
passionate about this, as are a lot of folks that were not here
on the dais based on other meetings that are happening today.
This is a very big issue that we have got to get some certainty
on, and 2015 sometime I think is 2015 November 30th. I think
that is the real date that is hanging out there, and I think
that is an even bigger problem when we are 2 years late on 2014
and a full year late on 2015; 2016 comes out and then
immediately followed by a reset for 2017.
I think the Administration is holding on to this and I
think that is a problem. And what I am telling you is we are
not going to let go of this. It is the responsible thing to do
to hit the deadlines and be able to get it out and provide some
stability into the market what is required, and what has been
requested and what was considered in law at the very beginning
when this was done.
So I really thank you for being here and for answering the
questions that you could or would answer for us, and we will
continue to followup in the days ahead. Thank you, Ms. McCabe.
Ms. McCabe. Thank you.
Mr. Lankford. This hearing is adjourned.
[Whereupon, at 11 a.m., the subcommittee was adjourned.]
APPENDIX
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