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86–385 2014

OVERVIEW OF THE RENEWABLE FUEL STANDARD: 

GOVERNMENT PERSPECTIVES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 26, 2013 

Serial No. 113–61 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

STEVE SCALISE, Louisiana 

Vice Chairman 

RALPH M. HALL, Texas 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LEE TERRY, Nebraska 

MICHAEL C. BURGESS, Texas 

ROBERT E. LATTA, Ohio 

BILL CASSIDY, Louisiana 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

EDWARD J. MARKEY, Massachusetts 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 3 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 4 

Prepared statement .......................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

WITNESSES

Adam Sieminski, Administrator, U.S. Energy Information Administration ...... 8 

Prepared statement .......................................................................................... 11 

Christopher Grundler, Director, Office of Transportation and Air Quality, 

Office of Air and Radiation, U.S. Environmental Protection Agency .............. 22 

Prepared statement .......................................................................................... 24 

Answers to submitted questions ...................................................................... 94 

Joseph Glauber, Chief Economist, U.S. Department of Agriculture ................... 30 

Prepared statement .......................................................................................... 32 

(1) 

OVERVIEW OF THE RENEWABLE FUEL 

STANDARD: GOVERNMENT PERSPECTIVES 

WEDNESDAY, JUNE 26, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 2:34 p.m., in room 

2123, Rayburn House Office Building, Hon. Ed Whitfield (chairman 

of the subcommittee) presiding. 

Present: Representatives Whitfield, Scalise, Hall, Shimkus, 

Terry, Burgess, Latta, Cassidy, Olson, Pompeo, Kinzinger, Griffith, 

Barton, Upton (ex officio), Rush, McNerney, Tonko, Engel, Green, 

Doyle, Barrow, Castor, Matheson, Welch, and Waxman (ex officio). 

Staff Present: Nick Abraham, Legislative Clerk; Charlotte Baker, 

Press Secretary; Sean Bonyun, Communications Director; Matt 

Bravo, Professional Staff Member; Allison Busbee, Policy Coordinator, Energy & Power; Tom Hassenboehler, Chief Counsel, Energy 

& Power; Ben Lieberman, Counsel, Energy & Power; Nick 

Magallanes, Policy Coordinator, CMT; Mary Neumayr, Senior Energy Counsel; Chris Sarley, Policy Coordinator, Environment & 

Economy; Greg Dotson, Minority Staff Director, Energy and Environment; Kristina Friedman, Minority EPA Detailee; Caitlin 

Haberman, Minority Policy Analyst; Bruce Ho, Minority Counsel; 

Elizabeth Letter, Minority Assistant Press Secretary; and Alexandra Teitz, Minority Senior Counsel, Environment and Energy. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. I would like to call the hearing to order. The 

topic of today’s hearing is an ‘‘Overview of the Renewable Fuel 

Standard: Government Perspectives.’’ As you know, this is one of 

those issues where we have a lot of different viewpoints on this important issue. And we have not really revisited the Renewable Fuel 

Standard since it was last expanded in 2007. And so we began 

these hearings, I don’t think we have any preconceived thoughts. 

We know that there are some areas of concern, and it is time for 

us to simply revisit and re-explore and look at the original expectations of this program. 

I think we would all acknowledge that the landscape has 

changed significantly since the RFS was revised in 2007. And there 

was a long list of energy policy assumptions back then that differ 

significantly from the realities of 2013. Perhaps the biggest unexVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
2 

pected development has been the decline in gasoline usage over the 

last 5 years. Certainly automobiles are more efficient. We have had 

a slow economy. And this has led to a number of issues we will address today, including the so-called blend wall and the approval of 

E15. 

We have also learned firsthand how the RFS implementation 

would be affected by drought that reduced corn yields, ha occurred 

last summer. 

So we have a unique opportunity looking back on several years 

now of practical experience with the RFS and it is time to ask what 

that experience has taught us. It is also time to project what the 

future might hold for the RFS as we continue to implement the 

stringent and increasing targets. 

We began this process, as many of you know, many of you participated in it, by issuing a series of bipartisan white papers on the 

major topics associated with the RFS—the blend wall and fuel compatibility issues, agriculture sector issues, environmental concerns, 

energy policy considerations—and we are set to release the final 

white paper that deals with implementation and enforcement 

issues. 

The wide-ranging stakeholder responses to the questions posed 

in these white papers attest to the fact that many people have been 

affected by the RFS and that we need to be mindful of all of its 

direct and indirect impacts. 

We have a distinguished panel of witnesses with us today, and 

I am going to introduce them after the opening statements. And at 

this time, I would like to yield as much time as he may consume 

the gentleman from Texas, Mr. Barton, for the purposes of an opening statement. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

As many of you know, the renewable fuel standard, or RFS, was created by Congress in 2005, and was greatly expanded in 2007. The RFS is a policy that originated in this committee, which is why I believe we now have an obligation to assess 

how it is going. That is the reason for today’s hearing, and we are pleased to be 

joined by three agencies that have a hand in implementing the RFS and in studying 

its impacts—the Environmental Protection Agency, the Energy Information Administration, and the Department of Agriculture. 

I’ve met with stakeholders on all sides of the issues, and I think it’s time to take 

a hard look at the RFS and compare our original expectations for the program with 

the actual experience. I think we’ll find that in some respects the RFS is going well, 

but in others there are emerging issues and room for improvement. 

The landscape has changed significantly since the RFS was last revised in 2007. 

Indeed, there is a long list of energy policy assumptions back then that differ greatly 

from the realities of 2013. 

Perhaps the biggest unexpected development has been the decline in gasoline 

usage over that past 5 years. As a result, we are facing the challenge of mixing the 

specified volumes of renewable fuels into a significantly smaller pool of gasoline. 

This has led to a number of issues we will address today, including the so-called 

blend wall and the approval of E–15. 

We have also learned, first hand, how the RFS implementation would be affected 

by a drought that reduced corn yields, as occurred last summer. 

In other words, we can now look back on several years of practical experience 

with the RFS, and it is time to ask what that experience has taught us. It is also 

time to project what the future might hold for the RFS as we continue to implement 

its stringent and increasing targets. 

We began this process by issuing a series of bipartisan white papers on the major 

topics associated with the RFS—the blend wall and fuel compatibility issues, agriVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
3 

cultural sector issues, environmental concerns, energy policy considerations, and we 

are set to release the final white paper that deals with implementation and enforcement issues. The wide-ranging stakeholder responses to the questions posed in 

these white papers attests to the fact that many people have been affected by the 

RFS, and that we need to be mindful of all of its direct and indirect impacts. 

And today, we are initiating our first hearing on the RFS, beginning with the 

agencies most knowledgeable about the program’s implementation. 

The end result that we want is an RFS that can work for everyone involved, be 

it farmers, renewable fuel producers, refiners, and automakers. And most importantly, we want a policy that benefits the American driving public. The first step 

is to assess where we are with the program, and I look forward to learning more 

from our witnesses. 

# # # 

Mr. BARTON. Thank you, Mr. Chairman. 

In 2005, I was chairman of the committee and chairman of the 

conference committee that passed the Energy Policy Act, and I supported the inclusion of Renewable Fuel Standard in that bill. In 

2007, I was the ranking member on the committee, and I strongly 

opposed the bill in 2007 that greatly expanded it. So I guess you 

could say I am 50–50 and I have been on that both sides of the 

issue. 

I don’t want there to be any misunderstanding today, however: 

The current law, as it is, is unworkable and unsustainable, and I 

support total and full repeal. I think it has outlived its usefulness. 

I want to quote from the first line of the Energy Information Administration’s written testimony: ‘‘The RFS program is not projected to come close to achievement of the legislated target.’’ End 

quote. 

So I welcome this hearing. I encourage the subcommittee and the 

full committee under the leadership of Chairman Upton to take a 

serious look at this. And I am hopeful that at some time this year 

we can move a repeal bill. 

And with that, I still have a minute to go, so I am happy to yield 

to whoever the chairman would like for me to yield to. 

Mr. WHITFIELD. Does anybody want the last 40 seconds? 

OK. I yield back balance of my time. At this time, recognize the 

gentleman from Illinois, Mr. Rush, for a 5-minute opening statement. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. I want to thank you, Mr. Chairman, for holding this 

important hearing on the RFS. 

Over the course of the past year my office has literally taken dozens of meetings on this critical topic, most from proponents who 

support the RFS as it is, as well as some of the opponents who 

would like to see the RFS either modified or repealed altogether. 

Mr. Chairman, for stakeholders from my home State of Illinois 

there are few energy issues as important as the matter of the RFS. 

I have always been very supportive of this policy because I believe 

since its inception it has achieved many of the goals that it was 

first enacted to do. 

During the debate on the Energy and Policy Act of 2005, when 

the RFS was first established, and subsequently in the Energy 

4 

Independence and Security Act of 2007, when the policy was significantly modified and expanded, there was always strong bipartisan support for the RFS. Members of both sides of the aisle touted the potential benefits of enacting a Renewable Fuel Standard, 

which included reducing U.S. dependence on oil, enhancing energy 

security, bolstering the agricultural economy, and addressing the 

challenges of climate change by reducing greenhouse gas emissions 

from the transportation sector. 

Today, I believe the RFS has been successful in meeting each of 

these objectives while also helping to drive job creation and economic investment. For instance, the RFS has played a key role in 

helping the American ethanol industry support 400,000 jobs nationwide, including 54,000 jobs in my State of Illinois alone, and it 

has resulted in over $40 million in economic activity. 

Mr. Chairman, the RFS has indeed helped to make us more energy secure with America’s ethanol industry now producing 10 percent of the Nation’s vehicle fuel supply, helping to reduce our independence on foreign oil by 25 percent since 2005. Additionally, the 

octane from ethanol will also be a key component in helping auto 

manufacturers meet their CAFE standards as they turn towards 

downsized, turbocharged engines with increased combustion rations that will need higher octane fuel, such as ethanol, to meet 

new mileage standards. 

Mr. Chairman, as President Obama stated yesterday, we cannot 

continue to overlook the fact that over the past year and a half 

alone all across our Nation we are seeing more frequent recordbreaking temperatures and history-making extreme weather 

events, including severe wildfires, hurricanes, tornadoes, and flooding, events that scientists tell us all are associated with manmade 

climate change. 

So today, more than ever, it is essential to move towards an energy policy that requires an even greater reliance on renewable 

sources of energy and alternative fuels, as the RFS mandates, and 

away from carbon-intense fossil fuels that emit dangerous levels of 

greenhouse gases and contribute to climate change. 

Mr. Chairman, I am glad that we are having this hearing today, 

one of several, where we can lay out all the facts, including both 

the opportunities and the challenges to implementing the RFS as 

currently drafted, and we can work to find common ground on this 

issue moving forward. 

Thank you, I yield back the balance of my time. 

Mr. WHITFIELD. The gentleman yields back. 

At this time recognize the chairman of the full committee, Mr. 

Upton, for a 5-minute opening statement. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. 

It is an exciting time for energy policy and for the possibilities 

created by our domestic energy abundance. Last week, this subcommittee held two hearings, one on the Nation’s potential for increased energy exports, and the other on the benefits of affordable 

energy to the domestic manufacturing sector. 

5 

Just a few short years ago, many would have scoffed at the suggestion that America could produce enough domestic energy to expands its exports or that low natural gas prices would induce a 

manufacturing renaissance, but it is happening, and it can continue to happen if we have the right policies in place. And while 

we strive to make good use of the Nation’s coal, oil, and natural 

gas, we also have to allow for renewable energy to be part of that 

mix. But we need to make sure that it is done right, and that is 

why we are undertaking our deliberate review of the Renewable 

Fuel Standard. 

The committee started the review process with a series of bipartisan white papers on the RFS. Each white paper highlighted a 

particular subtopic and solicited input from stakeholders. And as 

you can imagine, the response has been overwhelming, and I thank 

Ranking Member Waxman and his staff for working cooperatively 

with us and the commenters for their participation as well. And I 

can assure them that their input will, in fact, help us inform our 

process. 

And now we move on to our first hearing, which is going to be 

the committee’s first hearing specifically devoted to the RFS since 

the program was last revised in 2007. The purpose of this initial 

hearing is essentially to perform a checkup on the RFS: What has 

gone according to plan and what has not. No policy is certainly perfect, especially one that is now more than 5 years old. It is time 

to assess the RFS in light of what we now know. 

Today, we commence our effort with three Federal agencies that 

play a role in putting the RFS into action. Congress gave the reins 

of the program to EPA, and the Agency’s responsibilities are indeed 

extensive. Several of these responsibilities require input from other 

agencies, including the Energy Information Administration as well 

as the Department of Agriculture. 

This hearing is going to cover a number of issues. I am particularly mindful of the impact of the RFS on the auto industry and 

on our car owners. Fuels and vehicles operate as a system, and we 

need to make sure that provisions in the RFS are compatible with 

existing vehicles as well as the new cars and trucks that are going 

to be manufactured and sold in the years ahead. 

One of the things that Congress could not have anticipated back 

in 2007 is the very ambitious CAFE/GHG standards that are going 

to require a near doubling of the fuel economy by 2025. Harmonizing these rules with the requirements of the RFS is just one 

issue for which a constructive debate is needed. 

The white papers and having today’s hearing have gotten the discussion off to a positive start. I look forward to working with every 

one of our members on this committee in the coming weeks as we 

continue to weigh our work in oversight towards addressing the 

very real issues that implementation of the RFS presents going forward. 

And I don’t know if there are other Republican members on my 

side that wish the balance of my time. But seeing none, I yield 

back. 

[The prepared statement of Mr. Upton follows:] 

6 

PREPARED STATEMENT OF HON. FRED UPTON

This is an exciting time for energy policy and for the possibilities created by our 

growing domestic energy abundance. Last week, this subcommittee held two hearings, one on the nation’s potential for increased energy exports and the other on the 

benefits of affordable energy to the domestic manufacturing sector. Just a few short 

years ago, many would have scoffed at the suggestion that America could produce 

enough domestic energy to expand its exports, or that low natural gas prices would 

induce a manufacturing renaissance. But it is happening, and can continue to happen if we have the right policies in place. 

And while we strive to make good use of the nation’s coal, oil, and natural gas, 

we also need to allow renewable energy to be a part of the mix. But we need to 

make sure that it is done right, and that is why we are undertaking our deliberate 

review of the renewable fuel standard (RFS). 

The committee started this review process with a series of bipartisan white papers 

on the RFS. Each white paper highlighted a particular subtopic and solicited input 

from stakeholders. As you can imagine, the response has been overwhelming, and 

I thank Ranking Member Waxman and his staff for working cooperatively with us 

and the commenters for their participation—I can assure them that their input will 

help inform our process. 

And now, we move on to our first hearing, which will be this committee’s first 

hearing specifically devoted to the RFS since the program was last revised in 2007. 

The purpose of this initial hearing is essentially to perform a check-up on the RFS— 

what has gone according to plan and what has not. No policy is perfect, especially 

one that is now more than 5 years old. It’s time to assess the RFS in light of what 

we now know. 

Today we commence our effort with three federal agencies that play a role in putting the RFS into action. Congress gave the reins of this program to EPA, and the 

agency’s responsibilities are extensive. Several of these responsibilities require input 

from other agencies, including the Energy Information Administration and the Department of Agriculture. 

This hearing will cover a number of issues, but I am particularly mindful of the 

impact of the RFS on the auto industry and on car owners. Fuels and vehicles operate as a system, and we need to ensure that provisions in the RFS are compatible 

with existing vehicles as well as the new cars and trucks that will be manufactured 

and sold in the years ahead. 

One thing Congress could not have anticipated back in 2007 is the very ambitious 

new CAFE/GHG standards that will require a near doubling of fuel economy by 

2025. Harmonizing these rules with the requirements of the RFS is just one issue 

for which a constructive debate is needed. 

The white papers and having today’s hearing have gotten the discussion off to a 

positive start. I look forward to working with all of the members of this committee 

in the coming weeks as we continue our oversight and work toward addressing the 

very real issues that implementation of the RFS presents going forward. 

# # # 

Mr. WHITFIELD. The gentleman yields back. 

At this time I recognize the gentleman from California, Mr. Waxman, for a 5-minute opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. Yesterday, President 

Obama laid out a plan to cut carbon pollution, fight climate 

change, and protect the health and future of America’s children. 

The plan sets us on the path to reduce carbon pollution by 17 percent by 2020, which is what we need to do in the near term. 

In his speech, the President talked about the moral imperative 

for action on climate change. As he told the college students in the 

audience, quote, ‘‘The question now is whether we have the courage 

7 

to act before it is too late. How we answer will have a profound 

impact on the world that we leave behind, not just to you, but to 

your children and to your grandchildren,’’ end quote. 

As the President’s plan recognizes, there is no silver bullet. Success will require sustained action across multiple fronts. One of the 

most critical fronts is transportation. The transportation sector is 

our country’s largest consumer of oil and the second-largest emitter 

of carbon pollution. Thanks to President Obama, we already have 

new standards to make vehicles far more efficient and less carbon 

polluting. Those standards are saving Americans money at the 

pump, enhancing our energy security, and boosting our economy, as 

well as cutting carbon pollution. 

But as long as our transportation system relies exclusively on 

fossil fuels, we will continue to make climate change worse. Fuel 

efficiency alone will not achieve the 80 percent reduction in climate 

pollution that we need by 2050 to avoid catastrophic climate 

change. 

The shift to hybrids and electric vehicles is a big part of the solution. But low-carbon renewable fuels can also contribute significantly. And for some transportation sectors, such as aviation and 

shipping, low-carbon liquid fuels are the only option, besides efficiency. 

Today, we are examining a law, the Renewable Fuel Standard, 

or RFS, that is driving development of those new low-carbon renewable fuels. The RFS is one of the few laws adopted by Congress 

that explicitly and directly reduces carbon pollution. Under this 

law, U.S. companies last year produced 20,000 gallons of an advanced renewable fuel called cellulosic ethanol, which is made from 

materials such as crop residues and switch grass. That may sound 

like a small volume until you understand that last year was the 

first time that cellulosic ethanol has ever been produced commercially in this country. 

The Energy Information Administration estimates that production will grow to 5 million gallons this year and reach 250 million 

gallons by 2015. And the RFS requires that every gallon of cellulosic ethanol reduce carbon pollution by at least 60 percent compared to gasoline. 

American companies are also producing large volumes of biodiesel, another advanced renewable fuel, which reduces carbon pollution by at least 50 percent compared to the diesel it replaces. The 

RFS is incubating an advanced renewable fuel industry that has 

the potential to offer tremendous climate benefits and grow our 

economy. 

But the RFS is not without flaws. As our gasoline consumption 

goes down and the renewable fuel mandates increase, we could 

reach the blend wall where adding more ethanol to the fuel supply 

could damage some engines. Drop-in biofuels offers one solution, 

but they are still being developed. 

Over the last few weeks, Chairman Upton and I have released 

a series of white papers discussing the RFS and soliciting public 

comments on the law. This process has been bipartisan, and I commend the majority for working together with Democrats. Commenters highlighted both benefits of the RFS and concerns, and 

8 

they have a variety of recommendations for this committee, which 

we should consider carefully. 

This hearing gives us a further opportunity to take a careful look 

at the RFS. As we move forward the key question we need to ask 

is, what will the effects be on our climate? If we consider changes 

to the RFS, they should preserve and strengthen the law’s climate 

benefits. As the President stated so forcefully yesterday, quote, 

‘‘Someday our children and our children’s children will look at us 

in the eye and they will ask us did we do all that we could when 

we had the chance to deal with this problem and leave them a 

cleaner, safer, more stable world,’’ end quote. I encourage all members to contemplate this question. We won’t get a second chance. 

Thank you, Mr. Chairman. 

Mr. WHITFIELD. Thank you, Mr. Waxman. 

At this time we have concluded opening statements. And today 

we have only one panel of witnesses. And as I had indicated earlier, we have representatives from agencies that are responsible for 

implementing and studying the RFS. 

And so I want to welcome all of you to this hearing. We do look 

forward to your testimony and listening to your expertise and observations. 

And today we have Mr. Adam Sieminski, who is Administrator 

of the United States Energy Information Administration. We have 

Mr. Christopher Grundler, who is the Director of the Office of 

Transportation and Air Quality at the United States Environmental Protection Agency. And we have Mr. Joseph Glauber, who 

is Chief Economist at the United States Department of Agriculture. 

So welcome. And each one of you will be recognized for 5 minutes. All of you have testified here before. And there are two boxes, 

and when the red light goes on your 5 minutes is up. But we do 

look forward to your testimony. 

And, Mr. Sieminski, I will recognize you first for 5 minutes for 

your opening statement. 

STATEMENTS OF ADAM SIEMINSKI, ADMINISTRATOR, U.S. ENERGY INFORMATION ADMINISTRATION; CHRISTOPHER 

GRUNDLER, DIRECTOR, OFFICE OF TRANSPORTATION AND 

AIR QUALITY, OFFICE OF AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY; AND JOSEPH GLAUBER, 

CHIEF ECONOMIST, U.S. DEPARTMENT OF AGRICULTURE 

STATEMENT OF ADAM SIEMINSKI 

Mr. SIEMINSKI. Chairman Whitfield, thank you. Ranking Member 

Rush, members of the subcommittee, thank you all for the opportunity to appear before you today to discuss the Renewable Fuel 

Standards program. EIA, as you know, is the statistical and analytical agency within the Department of Energy. And by law, EIA’s 

data, analysis, and forecasts are independent of approval by any 

other officer, employee of the U.S. government. I would like to 

make nine points in summarizing my testimony. 

One, the RFS program is not projected to come close to achieving 

the legislated target of 36 billion gallons of renewable motor fuels 

by 2022. This is not a new finding. All of EIA’s Annual Energy 

Outlook Reference case projections since the targets were enacted 

9 

in 2007 have indicated that EPA would need to apply the law’s 

flexibility to reduce requirements for cellulosic, advanced, and total 

biofuels. In the AEO2010, EIA projected a shortfall of over 10 billion gallons of RFS credits relative to the target for 2022. And in 

our most recent AEO2013, that shortfall is now projected to be 17 

billion credits. So basically only about half of the legislated $36 billion target. 

Two, substantially increasing the use of biofuels can only occur 

in forms other than the low-percentage blends of ethanol and biodiesel that account for nearly all of their current use. Of the potential alternative pathways—one, increased use of higher ethanol 

blends; two, the advent of drop-in biofuels; or three, the development of compatible renewable fuel components such as biobutanol—of those, so far none have achieved a significant market 

role. 

Three, the implicit premise that cellulosic and other advanced 

biofuels would be available in significant quantities at reasonable 

costs within 5 to 10 years following adoption of the 2007 targets 

has not been borne out. The AEO Reference case projections do not 

assume breakthroughs in transformational technologies. 

Four, ethanol potentially has three distinct roles in motor fuels 

markets: one, as an octane source; two, as a volume enhancer; and 

three, as a provider of energy content. So an important behavioral 

question arises with the use of higher percentage blends, such as 

E15 and E85, and that is whether the shorter range provided by 

a tankful of fuel due to ethanol’s lower energy content per gallon 

will affect consumers’ buying decisions. In Brazil, where a high percentage of ethanol fuels are sold, consumers do indeed consider energy content pricing rather than simply buying the cheapest fuel. 

Five, ethanol faces some major demand and distribution system 

challenges that make it difficult to increase its use as a motor fuel 

regardless of its source. Although the use of E15 in model year 

2001 and newer light-duty vehicles is now allowed, very few gasoline retailers offer it out of concerns related to automobile warranties, potential liability for misfueling, infrastructure costs, and consumer acceptance. Ethanol blends above 15 percent, E85, are more 

widely available but can only be used in flex-fuel vehicles, which 

make up only about 5 percent of the light-duty fleet. 

Six, the projected declining trend in motor gasoline in the 

AEO2013 reflects a significant change from the growth projections 

from 2007. Since 2007, fuel economy standards, together with slower economic growth, higher gasoline prices, and possible changes in 

consumer behavior have changed the outlook. But lower gasoline 

demand is not at the root of the past or projected shortfalls in 

achieving legislated RFS targets. 

Seven, projected reliance on oil imports in the AEO2013 is significantly lower than in 2007 due primarily to lower projected petroleum demand growth, coupled with a significantly more robust 

outlook for domestic petroleum production. Incremental biofuel volumes under the RFS program play only a small part in reducing 

projected net import dependence. As a result, among other things, 

there is a likely continuing use of ethanol as an octane enhancer, 

even in the absence of a Renewable Fuel Standard. 

10 

Eight, as discussed in my written testimony, the challenges facing renewable fuels program are reflected in the value of RINs, Renewable Identification Numbers, that are used by EPA to implement the program. 

Nine, and finally, I want you to know that EIA remains actively 

engaged in monitoring and reporting on matters related to the RFS 

program. We collect monthly data on biodiesel and ethanol production, as well as weekly and monthly data on ethanol blending. 

The complexity of refined product markets, of which biofuels are 

an important part, has led to a growing number of requests for EIA 

analysis. Last fall, we published a report, ‘‘Biofuels Issues and 

Trends’’—it is attached to my testimony—to provide an overview of 

the dynamics of production, consumption, trade in ethanol, biodiesel, and cellulosic fuels. We also hold regular workshops to solicit feedback on a variety of these subjects. 

Mr. Chairman, thank you for the opportunity to testify today, 

and I look forward to answering your questions. 

Mr. WHITFIELD. Thank you, Mr. Sieminski. 

[The prepared statement of Mr. Sieminski follows:] 

11 


86385.001

STATEMENT OF ADAM SIEMINSKI 

ADMINISTRATOR 

ENERGY INFORMATION ADMINISTRATION 

U.S. DEPARTMENT OF ENERGY 

before the 

SUBCOMMITTEE ON ENERGY AND POWER COMMITTEE ON ENERGY AND COMMERCE 

U. S. HOUSE OF REPRESENTATIVES 

JUNE 26, 2013 

1 
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86385.002

Chairman Whitfield, Ranking Member Rush and Members of the Subcommittee, thank you forthe 

opportunity to appear before you today to discuss the Renewable Fuel Standard (RFS) program. 

The U.S. Energy Information Administration (EIA) is the statistical and analytical agency within the U.S. 

Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy 

information to promote sound policymaking, efficient markets, and public understanding regarding 

energy and its interaction with the economy and the environment. By law, EIA's data, analyses, and 

forecasts are independent of approval by any other officer or employee of the United States 

Government, so the views expressed herein should not be construed as representing those of the 

Department of Energy or any other Federal agency. As discussed in my testimony, EIA is active in 

providing both data and analysis that bear directly on the RFS program. 

The main points of my testimony are as follows: 

1. The RFS program is not projected to come close to achievement of the legislated target that calls 

for 36 billion gallons of renewable motor fuels use by 2022. This is not a new or surprising findingall of EIA's Annual Energy Outlook (AEO) Reference case projections since the present RFS targets 

were enacted in 2007 have indicated that the Environmental Protection Agency (EPA) would need to 

apply the flexibility provided in the law to reduce requirements for cellulosic, advanced, and total 

biofuels from their legislatively-specified targets. Figure 1 presents EIA's Reference case projections 

from AE02013, issued in late 2012, as well as those from AE02010 that were developed and 

published in late 2009. (For purposes of this figure and this testimony, RFS projections are discussed 

in terms of RFS credits, since biofuels receive credit towards the RFS targets on the basis of their 

energy content relative to ethanol rather than on a strict volumetric basis. For example, each gallon 

of biodiesel provides approximately 1.5 credits towards the overall RFS target.) AE02010 already 

2 
13 


86385.003

projected a shortfall of over 10 billion gallons of overall RFS credits relative to the legislated target 

for 2022. In AE02013, the shortfall relative to the legislated target in 2022 is projected at 17 billion 

credits, slowly improving in later years as biofuels use rises. Virtually all the projected shortfall is in 

the category of advanced biofuels. 

EIA's projections suggest that EPA will need to decide how to apply its regulatory discretion 

regarding the advanced and total RFS targets as allowed by law. Through the 2012 RFS program 

year and its proposed rulemaking for the 2013 RFS program year, EPA has acted to reduce RFS 

compliance levels for cellulosic biofuels. EIA's Short-term Energy Outlook (STEOl projections for 

2014 as well as the AE02013 assume that the EPA will exercise its statutory authority to reduce 

future RFS compliance levels for cellulosic, advanced and total biofuels. 

Figure 1. Projected availability of RFS credits in AE02012 and AE02013 

billion credits 

48 ~ AE02010 AE02013~ 

2022 RFS Target 2022 RFS Target 

36 

24 

12 

o 

2012 2015 2022 2030 2035 2012 2015 2022 2030 2035 2040 

Source: EIA, Annual Energy Outlook 2010, Annual Energy Outlook 2013. 

Advanced 

domestic 

ethanol 

Corn 

3 
14 


86385.004

2. Substantially increased use of biofuels can only occur if they can be used in forms other than the 

low-percentage blends of ethanol and biodiesel that account for nearly all of their current use. 

The RFS targets enacted in 2007 cannot be approached through the current low-percentage 

blending of ethanol and biodiesel into motor fuels. There are three potential alternative pathways 

(1) Increased use of higher ethanol blends, (2) the advent of drop-in biofuels, such as renewable 

gasoline or renewable diesel, that can be used as direct replacements for their petroleum-based 

counterparts, and (3) the development and use of new renewable fuel components, such as 

biobutanol, that might be more easily blended in increased volumes. To date, none of these 

options has achieved a significant market role. 

3. The implicit premise that cellulosic and other advanced biofuels would be available in significant 

quantities at reasonable costs within 5 to 10 years following adoption of the 2007 RFS targets has 

not been borne out. Advanced biofuels other than biodiesel (including cellulosic ethanol and 

cellulosic drop-in biofuels), which were already projected to fall well below the targeted levels for 

2022 in AE02010, arrive even more slowly in AE02013. The most important cellulosic technology in 

the AE02013 is pyrolysis to produce cellulosic drop-in fuels, although some cellulosic ethanol is also 

produced. Biofuels producer KiOR initiated operations at a facility using pyrolysis technology in 

Columbus, MiSSissippi. The AE02013 Reference case projections assume continuing technology 

progress and cost reduction, but they do not assume any breakthroughs in transformational biofuels 

technologies, such as low-cost, scalable, algae biofuels. Such breakthroughs, if they were to occur, 

could make a big difference. 

4. Ethanol potentially has three distinct roles in motor fuels markets, serving as an octane enhancer, 

as a volume source, and as a provider of energy content. Ethanol has achieved considerable 

4 
15 


86385.005

market success in the first two roles, but not in the third, where it faces a significantly higher 

economic hurdle. 

Ethanol's major ramp up during the last decade was initially tied to its role as an octane enhancer 

following the phase out of Methyl Tertiary Butyl Ether (MTBE) by several states in the early 2000s, 

and later on a national basis following enactment of the 2005 Energy Policy Act. In this role, the use 

of ethanol is not very sensitive to its price. 

The further use of ethanol as a source of fuel volume was enabled when it began to be generally 

available at a cheaper price than gasoline on a volumetric basis - see Figure 2. (Figure 2 prices do 

not reflect the availability of blender tax credits through 2011, which added to the attraction of 

ethanol blending.) With all vehicles warranted for use with blends containing up to 10 percent 

ethanol (ElO), and consumers taking little or no notice of the lower energy content of ElO relative to 

petroleum-only gasoline (EO), the attractive cost of ethanol relative to gasoline drove the market to 

blend ethanol up to the 10-percent limit. 

With the possible use of higher-percentage blends such as El5 and E85, where ethanol provides a 

larger proportion of the energy in each galion of fuel, one important behavioral question is when 

consumers start to notice the impact of ethanol's lower energy content per gallon on the range 

provided by a tankful of fuel and factor that impact into their buying decisions. Experience in Brazil, 

where high-percentage ethanol fuels are widely sold, suggests that consumers consider energycontent pricing (top line in Figure 2) rather than simply buying the cheapest gallons. In fact, the 

range penalty associated with less energy-dense fuels may require that they be sold at a discount to 

their relative energy value to be attractive to most buyers. 

5 
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86385.006

Figure 2. Ethanol is cheaper than gasoline on a volumetric basis but more expensive than gasoline 

in energy equivalent terms 

U.S. Gulf Coast spot gasoline and ethanol 

price (dollars per gallon) 

5.00 

4.50 

4.00 

3.50 

3.00 

2.50 

2.00 

1.50 

1.00 

0.50 

Ethanol (Gasoline Equivalent Gallons) 

Gasoline 

0.00 ",""""""""""""""""""""""""""""" 

2007 2008 2009 2010 2011 2012 2013 

Source: EIA, Bloomberg. Ethanol data are available from February 9. 2oo7onv.erd. 

5. Ethanol faces some major demand and distribution system challenges that make it difficult to 

increase its use as a motor fuel regardless of its source. While much of the wholesale distribution 

infrastructure is capable of handling ethanol, which to date has been moved by rail rather than 

pipelines, significant changes in the retail infrastructure would be needed to carry higher-ethanol 

blends of motor gasoline. The AE02013 Reference case anticipates some penetration of both E15 

and E85, but not nearly enough to approach the legislated RF5 target. 

Although EPA has granted waivers allowing the use of E15 in model year 2001 and newer light-duty 

vehicles, very few gasoline retailers currently offer E15 for sale to the public due to concerns related 

6 
17 


86385.007

to automobile warranties, potential liability for misfueling, infrastructure costs, and consumer 

acceptance. Also, E15 does not qualify for the one pound Reid Vapor Pressure (RVP) waiver that 

was legislated for ElO, so it would not be an environmentally compliant fuel in summer months 

when made using most current gasoline blend stocks. 

E85 is more widely available at retail fuel stations, but can only be used in designated flex-fuel 

vehicles (FFVs). Currently, there are about 11.5 million FFVs in use, about 5.1 percent of the overall 

light duty vehicle fleet. Manufacturers built flex fuel capability into these vehicles in order to 

receive credits towards compliance with fuel economy standards under provisions that are being 

phased out under the implementation offuture Corporate Average Fuel Economy (CAFE) and 

greenhouse gas emissions standards promulgated by the National Highway Traffic and Safety 

Administration (NHTSA) and the EPA. Without vehicle manufacturer incentives to produce additional 

FFVs and absent a strong consumer demand for them, which will depend on consistent E85 pricing 

that at least reflects its lower energy content, the potential for growth in the E85 will remain 

limited. 

6. The projected declining trend in motor gasoline use in AE02013 (Figure 3) reflects a significant 

change from earlier projections of growth (AE02007) or stasis (AE02010). Changes in the 

projections for gasoline use since AE02007 mainly reflect higher vehicle fuel economy standards 

adopted subsequent to its release, together with slower economic growth, higher gasoline prices, 

and possible changes in consumer behavior. EIA's current projection for gasoline demand in 2014 

(June 2013 STED) is 133.1 billion gallons, almost 14 percent lower than the 2014 projection in 

AE02007 (153.9 billion gallons). Lower levels of gasoline demand, both actual and projected, 

proportionately reduce the opportunity for use of ethanol as an octane or volume enhancer in E10 

gasoline blends. Lower gasoline demand has likely affected the timing of some current RFS 

7 
18 


86385.008

compliance challenges that are briefly discussed later in this testimony. However, in contrast to the 

issues raised in my previous points, it is not a cause of the persistent past and projected shortfall of 

the RFS program relative to its legislated targets. By 2030, the AE02013 Reference case projection 

of gasoline demand is 80 billion gallons, or 41 percent, below the AE02007 Reference case 

projection. 

Figure 3. U.S. motor gasoline and diesel consumption, 2000-2040 

Motor gasoline and diesel consumption 

million barrels per day 

14 

12 

AE02007 

10 Ga!loii~ne!!-_.....:::::::<::=::======-:-________ AE02010 

8 AE02013 

2 

o 

2000 2005 2010 2015 2020 2025 2030 2035 

Source: EIA, Annual Enef!/Y OuYook 2007. Annuel Enef!/Y OuYook 2010, Annual Enef!/Y Ou6ook 2013 

7. Projected reliance on oil imports in AE02013 (Figure 4) is Significantly below the AE02007 

2040 

Reference case projection. Recent and projected reductions in net import dependence primarily 

reflect the combined effects of the significant lowering in projected petroleum demand growth, as 

8 
19 


86385.009

discussed previously, and a more robust outlook for domestic petroleum production. Biofuels 

volumes in response to the RFS program play only a small part in reducing projected net import 

dependence given the expectation of continued use of ethanol as an octane and volume enhancer 

independent of RFS program requirements. EIA expects that net dependence on imported liquid 

fuels, which declined from 61 percent in 2005 to 41 percent in 2012, will average only 30 percent in 

2014. The recent rapid growth in tight oil production, which in 2012 represented 29 percent of total 

u.s. crude oil production, has been particularly noteworthy. Figure 4 shows actual and projected 

net import shares from three AE02013 cases as well as the AE02007 Reference case. 

Figure 4. Net import share of liquid fuels, 2005-2040 

70 

30 

20 

10 

o 

-10 

2005 2010 

AE02013 Low/No Net imports 

2015 2020 2025 

AE020 13 Reference 

2030 2035 2040 

Source: EIA, Annual Energy OuUook 2007, Annual Energy Outlook 2013, Shori Te/1l7 Energy OuUook May 2013 

8. The present challenges facing the RFS program are reflected in the value of Renewable 

Identification Numbers (RINs) that are used by EPA to implement the RFS. EPA has created several 

9 
20 


86385.010

different varieties of RINs that correspond to the nested targets for different categories of biofuels 

in the RFS. The price of RINs which can only be used to satisfy the total RFS mandate (06 RINs) 

hovered close to zero through 2012, as the use of ethanol as an octane enhancer and volume 

enhancer, as previously discussed in my testimony, was more than sufficient for obligated parties to 

comply with the RFS program. Early this year, 06 RIN prices rose dramatically as the market 

reflected on the difficulty in meeting a rising RFS target given the difficulty of accommodating 

additional ethanol volumes within ElO gasoline. Since mid-March, the price of 06 (ethanol) RINs has 

closely tracked the price of 04 (biodiesel) RINs that can be used to meet the RFS targets for 

advanced biofuels and biodiesel as well as the overall target. 

The increase in the 06 RIN price provides an economic incentive for two changes in the market. 

First, a higher 06 RIN price tends to lower the cost of E85 gasoline relative to HO gasoline. Second, a 

06 RIN price equal to or near the biodiesel RIN price may motivate blending of biodiesel that 

exceeds the biodiesel blending requirements that EPA announced in its proposed rulemaking for the 

2013 RF5 program that has yet to be finalized. 

At the retail level, EIA expects diesel fuel prices to be most affected by higher RIN prices as typical 

biodiesel blending yields only about one-third ofthe RINs required and diesel fuel refiners who are 

obligated parties under the RFS program must make up for the shortfall by purchasing the now 

higher-priced RINs. 

9. EIA remains actively engaged in monitoring and reporting on matters related to the RFS program. 

We collect monthly data on biodiesel and ethanol production, as well as weekly and monthly data 

10 
21 


86385.011

on ethanol blending. last fall, we published a report, Biofuels Issues and Trends (available at 

http://www.eia.gov/biofuels/issuestrends/pdf/bit.pdf) to provide an overview of the dynamics of 

production, consumption, and trade of ethanol, biodiesel, and cellulosic biofuels. This report 

provided a snapshot ofthe available data related to biofuels, examined significant cost drivers, 

reviewed state and federal regulatory environments, and explored select infrastructure issues. Each 

October, as required by law, EIA provides input to EPA on short-term forecasts for motor fuels use 

and cellulosic biofuels production. Recently, at EPA's request, we provided updated forecasts for 

2013. EIA includes biofuels as part of its Annual Energy Outlook, Short-Term Energy Outlook, and 

has also published several Today in Energy and This Week in Petroleum articles on the subject. 

Over the last year, EIA held two workshops to engage the professional and academic communities 

on issues relating to biofuels projections. In August 2012, EIA held a workshop on advanced 

biofuels, which brought together around 90 representatives from government, national labs, 

research institutions, commercial biofuels producers, universities, non-profit organizations, and 

investment firms, so that they could share with us some of the opportunities and challenges of 

commercializing advanced biofuels technologies. Informed by the lessons learned in the first 

workshop, EIA produced its AE02013 early release in January. In March, we hosted a second 

workshop attended by over 200 people, over half via a live internet feed, to discuss results and 

solicit feedback on a variety of biofuels-related topics in preparation for future analysis. 

Thank you for the opportunity to testify before the Subcommittee. 

11 
22 

And, Mr. Grundler, you are recognized for 5 minutes. 

STATEMENT OF CHRISTOPHER GRUNDLER 

Mr. GRUNDLER. Thank you, Chairman Whitfield, Ranking Member Rush, and other members of the committee. I appreciate the 

opportunity to testify on the renewable fuels program today. 

The RFS program began in 2006 under the Energy Policy Act of 

2005. The statute requirements for the RFS program were then 

modified by the Energy Independence and Security Act of 2007, or 

EISA. EISA established new volume standards for renewable fuel, 

reaching a total of 36 billion gallons by 2022, including 21 billion 

gallons of advanced biofuels. The revised requirements also included new greenhouse gas emission thresholds and a number of 

other provisions. 

After an extensive notice and comment process, EPA finalized 

regulations to implement EISA requirements, which went into effect on July 1, 2010. EISA requires EPA to publish annual standards for use of total, advanced, biomass-based diesel, and cellulosic 

renewable fuels. These standards apply to obligated parties, typically refiners and fuel importers. The statute directs EPA to determine the projected volume of cellulosic biofuel production for the 

following year. If that number is less than the statutory volume, 

EPA must lower the standard accordingly. 

Congress also provided EPA the discretion to lower the advanced 

biofuel and total renewable mandate up to that same amount. Before proposing annual volume standards, EPA conducts a thorough 

review of the cellulosic industry to determine the total production 

capacity. We consult with the USDA, the Energy Information Administration, and the Department of Energy. We propose the annual standards through a transparent process, allowing for public 

review and comment. 

We proposed the 2013 RFS standards in 2013, and we are proposing to maintain the statutory level for total renewable fuel of 

16.55 billion gallons. We had a public hearing on this rule on 

March 8, 2013, and we are currently in the midst of reviewing the 

public comments, which were extensive, to prepare the final rule. 

Congress also tasked the EPA with evaluating and qualifying 

new biofuels for use in the RFS program. We have already approved a significant list of advanced and cellulosic biofuels and 

pathways. We have a number of additional evaluations underway 

for new ones. 

EPA continues to expand the number of approved pathways, including the recent finalization of a rule that includes certain renewable fuels from camelina oils, ethanol from energy cane, and renewable gasoline from various feedstocks. In addition, just a few 

weeks ago, we proposed a rule that included additional new advanced biofuels, which included cellulosic fuels from landfill biogas 

and advanced biobutanol from corn. 

EPA is working with stakeholders to improve the implementation of this program. Compliance under the RFS program is demonstrated through the use of Renewable Identification Numbers. 

These document the production and distribution of renewable fuel. 

Obligated parties supported the use of this approach to provide 

them added flexibility in meeting the RFS standards. 

23 

This past February, we proposed to establish a voluntary quality 

assurance program for verifying the validity of these RINs. This 

voluntary program was proposed after receiving extensive input 

from oil and renewable fuels industries, with a goal of improving 

the liquidity of this marketplace and allowing renewable fuel producers to sell their RINs. Again, we are in the process of reviewing 

public comments on this proposal and hope to finalize it by the end 

of this year. 

Although both ethanol and non-ethanol biofuels can be used to 

meet the RFS, ethanol has and will likely continue to be the predominant renewable fuel on the market for the foreseeable future. 

As the statutory volume requirements of the RFS program increase, it becomes more likely that the volume of ethanol projected 

to meet those requirements will exceed the volume that can be consumed in the common blend of 10 percent ethanol and 90 percent 

gasoline, referred to as E10. 

Additional volume of ethanol would then need to be used at higher blend levels, such as E15 or E85, or significant volumes of nonethanol would be needed to meet the targets. As a result, to the 

extent that ethanol is likely to be used to meet RFS volume requirements, the volume of ethanol that can be legally and practically consumed is a limiting factor in meeting the statutory volumes. This is commonly known as the blend wall. 

For 2013, we expect compliance with the RFS standard through 

the use of RINs generated in 2013 as well as carryover RINs that 

were generated in 2012 by overcompliance with the standards. 

However, in 2014 the situation could be different. First, the advanced biofuel and total renewable fuel requirements rise substantially under the law to 3.75 billion gallons and 18.15 billion gallons, 

respectively. While non-ethanol biofuels are anticipated to continue 

to grow, an estimated 16 billion gallons or more of ethanol might 

still be needed to comply with the 2014 statutory target. 

Second, the number of carryover RINs from 2013 will also be a 

critical factor to consider. We will continue to look at the potential 

impacts of this blend wall over the near and longer term. We are 

currently reviewing comments submitted in response to the agency’s proposed rulemaking for the 2013 RFS volume standards and 

are carefully considering this input. EPA will also engage with 

stakeholders on this issue as we move to propose the RFS volume 

requirements for 2014. 

We are continuing to work with our partners, our stakeholders, 

and the public to implement this program, as directed by the Congress. EPA will also further evaluate and consider whether any further action under the authorities established by Congress is appropriate to help ensure an orderly implementation of this program. 

Thank you for this opportunity to be here today. 

Mr. WHITFIELD. Thank you, Mr. Grundler. 

[The prepared statement of Mr. Grundler follows:] 

24 


86385.012

Christopher Grundler 

Director 

Office of Transportation and Air Quality 

Office of Air and Radiation 

U.S. Environmental Protection Agency 

Subcommittee on Energy and Power 

Committee on Energy and Commerce 

U.S. House of Representatives 

Jnne 26, 2013 

Written Statement 

Chairman Whitfield, Ranking Member Rush and other members ofthe Committee, I 

appreciate the opportunity to testify on the subject of the renewable fuel standard program. 

Overview of the Renewable Fuel Standard Program 

The Renewable Fuel Standard (RFS) program began in 2006 pursuant to the requirements 

in Clean Air Act (CAA) section 211(0) which were amended by the Energy Policy Act of2005 

(EPAct). The statutory requirements for the RFS program were subsequently modified through 

the Energy Independence and Security Act of2007 (EISA). These provisions established new 

year-by-year volume standards for renewable fuel that generally must be used in transportation 

fuel, reaching a total of 36 billion gallons by 2022. This total includes 21 billion gallons of total 

advanced biofuels, comprised of 16 billion gallons of cellulosic biofuel, at least 1 billion gallons 

of biomass-based diesel, and the remainder consisting of "other" advanced biofuels. The revised 

statutory requirements also include new definitions and criteria for both renewable fuels and the 

1 
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86385.013

feedstocks used to produce them, including new greenhouse gas (GHG) emission thresholds. 

Advanced and cellulosic biofuel must achieve at least a 50 and 60 percent reduction, 

respectively, in lifecycle greenhouse gases compared to the 2005 baseline average gasoline or 

diesel fuel that it replaces. On March 26, 2010, in response to EISA, EPA promulgated 

regulations to implement revisions to the national renewable fuel standard program. EPA applied 

the best available science, and conducted extensive analyses to implement these complex and 

challenging statutory provisions. The regulatory requirements went into effect on July 1,2010, 

and apply to domestic and foreign production of renewable fuels used in the United States. 

EISA requires that each year EPA publish the annual standards for use of total, advanced, 

biomass-based diesel, and cellulosic renewable fuels that apply to obligated parties, which are 

typically refiners and importers of gasoline and diesel. The statute directs EPA to determine the 

projected volume of cellulosic biofuel production for the following year, and if that number is 

less than the volume specified in the statute, EPA must lower the cellulosic standard accordingly. 

EPA has the discretion to lower the advanced biofuel and total renewable mandate up to the 

same amount that the cellulosic biofuel volume is reduced. Before proposing annual volume 

standards, EPA conducts a thorough review ofthe cellulosic industry, including one-on-one 

discussions with each producer to determine its individual production capacity. EPA consults 

directly with the Department of Agriculture, the Energy Information Administration, and the 

Department of Energy's Bioenergy Technologies Office to determine the status of production 

capacity and capabilities of the cellulosic sector. Since these evaluations are based on evolving 

information about emerging segments ofthe biofuels industry, and may result in the applicable 

volumes differing from the statutory targets, we propose the annual volume standard through a 

2 
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86385.014

transparent rulemaking process, allowing for public review and comment, prior to finalizing the 

standards. 

The 2013 RFS volume standards were proposed in February 2013. The standards as 

proposed would maintain the total renewable fuel requirement under EISA for 2013 of 16.55 

billion gallons, including volumes for advanced biofuels, such as biomass-based diesel and 

cellulosic biofuel. A public hearing on the proposed rule was conducted on the 2013 standards on 

March 8, 2013. The Agency is currently in the process of reviewing the public comments in 

preparing to develop the final rule. 

Congress also tasked EPA with evaluating and qualifying new biofuels, where 

appropriate, for use in the RFS program. We have established a process to evaluate new biofuels 

for use in the RFS program and already have approved a significant list of advanced and 

cellulosic biofuels. A number of additional petitions requesting evaluation of new biofuel 

production processes and new feedstock pathways have also been received. EPA has expanded 

the number of approved fuel pathways, including the recent finalization of a rule that includes 

certain renewable fuels from camel ina, ethanol from energy cane, and renewable gasoline from 

various feedstocks. More recently the Agency proposed a rule that will expand the opportunity 

for use of additional new advanced biofuels, including cellulosic fuels from landfill biogas and 

advanced biobutanol from com. The Agency has and will continue to work on evaluating 

opportunities for additional qualifying feedstock to fuel pathways under the program to support 

attaining Congressional goals of the RFS program. 

3 
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86385.015

EPA is working with stakeholders to improve implementation ofthe RFS program. 

Compliance under the RFS program is demonstrated through the use of Renewable Identification 

Numbers (RINs), which document the production and distribution of renewable fuel. Obligated 

parties supported the use ofRINs to provide them added flexibility in meeting the RFS 

standards. In February, EPA proposed to establish a voluntary quality assurance program for 

verifYing the validity ofRINs. This voluntary program was proposed after receiving extensive 

input from the oil and renewable fuels industries and is intended to improve RIN market liquidity 

and efficiency and improve the ability of renewable fuel producers to sell their RINs. EPA 

expects that this program, when finalized, will make the RFS program more efficient and 

effective. We are currently in the process of reviewing public comments on the proposal. 

EIO Blend Wall 

Both ethanol and non-ethanol biofuels can be used to meet the RFS requirements; 

however ethanol has and will likely continue to be the predominant renewable fuel in the market 

for the near and foreseeable future. As the volume requirements of the RFS program increase, it 

becomes more likely that the volume of ethanol projected to meet those requirements will exceed 

the volume that can be consumed in the common blend ratio of 10 percent ethanol and 90 

percent gasoline, referred to as El O. Additional volumes of ethanol would then need to be used at 

higher blend levels such as E15 or E85 to meet increasing RFS levels or significant additional 

volumes of non-ethanol biofuels would be needed. As a result, to the extent that ethanol is likely 

to be used to meet RFS volume requirements, the volume of ethanol that can be legally and 

practically consumed is a limiting factor in meeting the statutory volumes. 

4 
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86385.016

For 2013, we expect compliance with the RFS standards through the use ofRINs 

generated in 2013 and those generated in 2012 that are available under the regulations for use 

(carryover RINs) in complying with 2013 standards. In 2014, the situation could be different. 

There are a number of factors that will playa role in determining how regulated parties will 

demonstrate compliance with the applicable RFS volumes. First, the advanced biofuel and total 

renewable fuel requirements rise substantially to 3.75 billion gallons and 18.15 billion gallons, 

respectively. While non-ethanol biofuels are anticipated to continue to grow to help supply the 

advanced biofue1 standard, an estimated 16 billion gallons or more of conventional and advanced 

ethanol might still be needed to comply with the RFS program in 2014. Second, the number of 

carryover RINs from 2013 will also be a critical factor in determining how obligated parties 

show compliance with the 2014 RFS volume requirements. EPA will continue to engage with 

stakeholders on this issue as we move to propose the RFS volume requirements for 2014. 

Given these facts, we will continue to look at the potential impacts of the E I 0 blend wall 

over the near and longer term. We are also reviewing comments submitted in response to the 

agency's proposed rulemaking for the 2013 RFS volume standards and we will carefully 

consider this input. 

EPA will continue to work with our partners, stakeholders, and the public to implement 

the RFS program as directed by Congress. EPA will also further evaluate and consider whether 

5 
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86385.017

any further action under the authorities established by Congress is appropriate to help ensure 

orderly implementation of the program. 

Again, I thank you for the opportunity to serve as a witness at this hearing for the 

Subcommittee. 

6 
30 

Mr. WHITFIELD. And, Mr. Glauber, you are recognized for 5 minutes. 

STATEMENT OF JOSEPH GLAUBER 

Mr. GLAUBER. Chairman Whitfield, Ranking Member Rush, and 

members of the subcommittee, thank you for the opportunity to be 

at today’s hearing to address the question of how the Renewable 

Fuel Standard has affected U.S. Agriculture. 

Corn ethanol production increased dramatically over the past 

decade from just over 2 billion gallons in 2002 to almost 14 billion 

gallons in 2011. Driven by favorable market forces and encouraged 

by government biofuel policies, including the RFS, that increase 

has spurred corn production and corn use for ethanol and has been 

a factor in the recent grain price boom and overall improvement in 

farm balance sheets, including record farm incomes over the past 

few years. 

This boom has not been shared equally by all segments of the ag 

sector, however. Livestock, dairy, and poultry producers have faced 

tighter margins due to higher feed costs. 

Rapid expansion of corn-based ethanol production has had significant impacts on U.S. Corn production and use. From 2006 to 

2011, corn use for ethanol increased by about 700 million bushels 

per year, rising to about 5 billion bushels. The sharp increase in 

the demand for corn for ethanol was a major factor behind the increase in prices over that period. From January 2000 to December 

2005, the monthly average price paid to corn producers averaged 

$2.10 per bushel. Over the period January 2006 to December 2010, 

corn prices averaged $3.61 per bushel, a 72 percent increase. 

Higher prices encourage producers to plant more corn to meet 

the increased demand. Corn-planted acreage, which had averaged 

79 million acres between 2000 and 2006, averaged over 90 million 

acres between 2007 and 2012. Increased plantings combined with 

increased yields resulted in corn production of 13.1 billion bushels 

in 2009, a record, an increase of 2.8 billion bushels over average 

production levels over the period 2000 to 2006. 

Despite the increase in corn production since 2006, other uses for 

corn have declined as more corn has been diverted to ethanol production. Corn feed and residual disappearance declined by 26 percent from the marketing year 2005/2006 to 2011/2012 while corn 

exports declined by 28 percent over the same period. 

The decline in corn use for feed has been partially offset by the 

increased availability of protein feeds, such as distillers’ dried 

grains, a co-product of the dry milling process. Nearly one-third of 

a bushel of corn used for ethanol production is returned in the form 

of DDGs. 

The decline in U.S. Corn exports have been offset in world markets by increased exports from foreign suppliers, principally Brazil. 

Over the years 2000 to 2005, the U.S. exported on average 1.9 billion bushels of corn and accounted for about 60 percent of total 

world corn exports. By 2011/2012, U.S. corn exports had fallen to 

1.5 billion bushels and accounted for 37 percent of total world exports. With drought-related reduced supplies in 2012/2013, U.S. 

corn exports are projected to fall to 700 million bushels, less than 

20 percent of total world exports. U.S. corn exports are projected 

31 

to recover to 1.3 billion bushels in 2013/2014, but they are projected to account for about a third of total world exports. 

In general, high commodity prices over the past few years have 

strengthened the farm balance sheets by raising farm receipts and 

produced record farm incomes. Over the period from 2000 to 2006, 

cash receipts for the farm sector averaged $217 billion. However, 

over the period 2007 to 2013, cash receipts are projected to average 

about $339 billion, an increase of 56 percent. Net cash income increased from an average $68.7 billion per year over 2000 to 2006. 

That increased to a projected $105 billion over 2007 to 2013, an increase of 53 percent. 

Based on analysis of farm business data, net cash income for 

grain and oilseed producers have shown significant increases since 

2006, with net cash income levels up by more than 78 percent for 

corn, wheat, and soybean producers. By contrast, livestock, dairy, 

and poultry producers have faced more uneven, in some cases declining returns since 2006. In general, higher feed grain prices 

have helped net cash income for row crop producers, but have also 

raised feed costs at lowered profit margins for livestock, dairy, and 

poultry producers. 

Feed costs make up about 51 percent of expenses for dairy, 19 

percent for beef cattle, and 42 percent for hogs, and 35 percent for 

poultry farm business. Price-feed rations for most species show a 

decline throughout most of the period since 2006. 

Looking forward, increases in demand for corn to produce ethanol are expected to slow due to constraints on domestic ethanol 

consumption—as has been mentioned previous here, the so-called 

blend wall—increases in blending efficiency, and nearing the 15 billion gallon cap on conventional ethanol in the RFS, and finally, due 

to increased supply of ethanol from other feedstocks. Those will 

mitigate pressures on corn prices. 

In addition, there are projections of potentially record corn and 

soybean harvests this fall, rising stock levels, and subsequent moderation of prices. This should support stronger profits in the livestock and dairy and poultry industries. 

The outlook over the next 10 years calls for moderate productivity growth and flat, declining real prices for agricultural commodities. However, as we have seen over the past 7 years, an unexpected shortfall due to adverse weather could precipitate higher 

prices. 

Mr. Chairman, that completes my testimony. 

Mr. WHITFIELD. Well, Dr. Glauber, thank you. 

[The prepared statement of Mr. Glauber follows:] 

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STATEMENT OF DR. JOSEPH GLAUBER 

CHIEF ECONOMIST, U.S. DEPARTMENT OF AGRICULTURE 

BEFORE THE U.S. HOUSE COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON ENERGY AND POWER 

June 26, 2013 

Chairman Whitfield, Ranking Member Rush, and Members of the Subcommittee, thank you for 

the opportunity to be at today's hearing to address the question of how the Renewable Fuel 

Standard (RFS) has affected U.S. agriculture. Com ethanol production increased dramatically 

over the past decade, from just over 2 billion gallons in 2002 to almost 14 billion gallons in 

2011. Driven by a combination of favorable market forces and government biofuel policies, 

including the RFS, the increase has spurred com production and com use for ethanol and has 

been one of the factors in the recent grain price boom and overall improvements in farm balance 

sheets including record farm incomes over the past few years. 

Strong demand for agricultural commodities, combined with global supply shortfalls, have 

reduced global stocks and increased price volatility. We have seen three price spikes since 2006. 

Moreover, driven in part by tight feed supplies and high feed costs, low operating margins have 

characterized the livestock, dairy and poultry industry over the past few years. Com ethanol 

production has been a factor; however, the rise in commodity prices over the past few years has 

been due to a variety of factors, such as increasing global demand, key production shortfalls due 

to droughts, as well as increasing energy prices, and any increase in farm prices for com and 

soybeans due to increased biofuels production has likely had only a small effect on U.S. retail 

food prices. 

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Looking forward, with com use for ethanol slowing due to constraints on domestic ethanol 

consumption (the so-called "blend wall") and prospects for record com and soybean harvests this 

fall, stock levels are anticipated to rise and prices moderate, which should lead to stronger profits 

in the livestock and dairy sectors. The outlook over the next 10 years calls for moderate 

productivity growth and flat to declining real prices for commodities. However, as we have seen 

over the past 7 years, an unexpected supply shortfall due to adverse weather could precipitate 

higher prices. 

In my testimony today I will review trends in com ethanol production and how those trends have 

affected agricultural markets. I will discuss their effects on agricultural markets, grain and food 

prices, agricultural land use, and farm income. I will then give a brief overview of how the U.S. 

Department of Agriculture (USDA) views the 10-year outlook for agricultural markets given 

projected ethanol use from the Energy Information Administration (EIA). Lastly, I will also 

discuss next generation biofuels and projections for ethanol made from non-food feedstocks 

going in the future. 

Expanding ethanol production 

Since the late 1970s, there have been many federal and State policies that have influenced 

ethanol production, including tax credits to encourage blenders to include ethanol in gasoline 

formulations, tariff and duties on imported ethanol, State incentives for biofuel production and 

consumption, and regulations requiring the blending of oxygenates like ethanol and methyl 

tertiary butyl ether (MTBE) to meet reformulated gasoline requirements under the Clean Air Act 

Amendments (see for example, CBO 2009). Yet, ethanol production grew slowly from 1980 to 

2000. Existing production capacity was less than 1.8 billion gallons in 2000 (see table I). 

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However, from 2000 to 2005, ethanol production increased by about 400 million gallons 

annually. 

A number of factors were responsible for that rapid growth in ethanol. From 2000 to 2005, the 

price of imported oil grew by over 75 percent (and by over 55 percent even adjusting for 

inflation). High oil and gasoline prices relative to the cost of producing ethanol increased the 

attractiveness of blending ethanol with gasoline. The net effect of higher energy prices and 

policies that encouraged ethanol production was to increase operating margins for ethanol 

producers (see figure I). Liability issues over the use of MTBE because of water quality 

concerns resulted in its phaseout as an octane enhancer and oxygenate in 2006. With the 

phaseout ofMTBE, ethanol experienced a surge in demand as the most cost effective and readily 

available oxygenate replacement and achieved a premium over gasoline prices. Energy prices, 

blending subsidies and limited production capacity relative to MTBE replacement demand 

contributed to production margins of up to $3 per gallon for producers in 2006, which helped 

quickly build refining capacity (Babcock 2011). Ethanol production capacity grew by almost 700 

million gallons in 2006 and by January 1,2007, planned expansion of existing and new facilities 

exceeded existing production capacity. 

The Energy Policy Act of 2005 established the RFS, which mandated blending 7.5 billion 

gallons of renewable fuel with gasoline annually by 2012. The Energy Independence and 

Security Act of 2007 (EISA) expanded the RFS program, by setting a target of36 billion gallons 

of biofuels to be produced or imported by the United States annually by 2022. EISA also 

established separate categories for renewable fuels based on greenhouse gas reduction criteria 

and set limits on the amount of corn-based ethanol that could be used to satisfy RFS 

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requirements rising to 15 billion gallons by 2015 (see the RFS requirements under EISA in table 

2). 

From 2005 to 2012, annual ethanol production grew from 3.9 billion gallons to almost 14 billion 

gallons, an average increase of about 1.4 billion gallons per year. As of January 1,2013, ethanol 

production capacity was estimated at 14.7 billion gallons. However, expansion has slowed over 

the past three years for several reasons: (1) margins have weakened with high feedstock prices; 

(2) production levels are approaching the I5-billion gallon cap on com-based ethanol that can be 

applied towards meeting the RFS; and (3) ethanol production is limited in part by the amount 

that can be blended and sold into the domestic fuel supply. 

Impacts on corn production and use 

The rapid expansion of com-based ethanol production has had significant impacts on U.S. com 

production and use over the period 2000/0 I to 2013/14 (see figure 2). From 2005/06 to 2010/11, 

com use for ethanol increased by about 700 million bushels per year, rising to about 5 billion 

bushels by 2010/11. The sharp increase in the demand for com for ethanol was a factor behind 

the increase in com prices over the period from 2005 to 2010. From January 2000 to December 

2005 the monthly average price paid to com producers averaged $2.10 per bushel. Over the 

period January 2006 to December 2010, com prices averaged $3.61 per bushel, a 72 percent 

increase (see figure 3). Higher prices encouraged producers to plant more com to meet the 

increased demand. Com planted acreage, which had averaged 79 million acres between 2000 

and 2006, averaged over 90 million acres between 2007 and 2012. Increased plantings, 

combined with increased yields resulted in com production of 13.1 billion bushels in 2009, an 

increase of2.8 billion bushels over average production levels over the period from 2000 to 2006. 

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Despite the increase in com production since 2006, other uses for com have declined as more 

com has been diverted for use in ethanol production (see table 3). Com feed and residual 

disappearance declined by 26 percent from marketing year 2005/06 to 2011112 while com 

exports declined by 28 percent over the same period. However, the decline in com use for feed 

has been partially offset by the increased availability of protein feeds such as distillers' dried 

grains (DDGs), a co-product of the ethanol dry milling process. Nearly one-third of a bushel of 

com used for ethanol production is returned in the form of DDGs. The decline in U.S. com 

exports have been offset in world markets by increased exports from foreign suppliers, 

principally Brazil (see figure 4). Over (the trade marketing) years 2000/01 to 2005/06, the 

United States exported, on average, 47.8 million metric tons of com (1.9 billion bushels) and 

accounted for over 60 percent of total world com exports. By 2011112, U.S. com exports had 

fallen to 38.4 million tons and accounted for 37 percent of total world exports. With droughtreduced supplies in 2012/13, U.S. com exports are expected to fall to 18.5 million tons, less than 

20 percent of total world exports, and while U.S. com exports are projected to recover to 33 

million tons in 2013114, they are projected to account for only 32 percent of total world exports. 

Ethanol production and commodity prices 

Agricultural prices declined in real terms (that is, adjusting for inflation) throughout most of the 

50 or so years following the end of World War II (see figure 5) reflecting strong gains in 

agricultural productivity over the period. Prices began to increase in real terms around 2000 with 

increasing population growth, rapid economic expansion in developing countries, and rising per 

capita meat consumption globally along with rising energy prices (see Trostle 2008). Those 

factors coupled with the rapid expansion of ethanol production following the phaseout of MTBE 

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increased demand for com, for conversion into ethanol and for animal feed and pushed prices for 

com higher (see Collins 2006). 

Prices spiked in 2007/08, in 2010/11, and most recently in 2012 as supply shortfalls coupled with 

strong global demand saw inventory levels for major grains and oil seeds fall to low levels. Some 

studies suggested that the main factor for those spikes was increased ethanol production. For 

example, Mitchell (2008) attributed almost 75 percent of the increase in commodity prices 

during the 2007/08 price spike to the increase in biofuel production. Studies also examined 

whether com demand for ethanol production is less price responsive (under current economic 

and policy conditions), compared to other uses such as feed use or to meet export demand, which 

could exacerbate price volatility, particularly when stock levels are low (see for example Collins, 

2006 and Wright, 2010). Other studies pointed out that there were numerous factors contributing 

to the overall rise in price levels during that period including production shortfalls due to adverse 

weather, biofuel production, strong global economic growth, rising energy prices (see for 

example, Trostle 2008 and Trostle et al. 2011). Still others suggested that the rapid rise in 

commodity prices during that period was tied to other macroeconomic conditions at the time, 

such as fiscal expansion and lax monetary policy in many countries, depreciation of the US 

dollar, and increased investment fund activity (see for example, Baffes and Haniotis 2010, and 

Roache 2010). 

Even though com planted acres jumped by more than 10 million acres between 2006/07 and 

2007/08, com prices still jumped by more than $1 per bushel on average. In 2008, my office was 

asked to examine the impact of biofuels on food prices and in testimony before the Senate 

Energy Committee I reported our findings that increased ethanol production accounted for about 

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30 percent of the increase in corn prices over 2007 to 2008 accounting for the increased 

production needed to meet the rise in ethanol production (Glauber 2008). More recently, the 

increase in U.S. ethanol production was estimated to account for about 36 percent of the increase 

in com prices over the period from 2006 to 2009 (see Babcock and Fabiosa 2011). 

More recent studies have found similar results (see recent reviews of econometric analyses of the 

impact of ethanol on corn prices can be found in Condon et aJ. 2013 and Hochman et al. 2013). 

Studies in general draw distinct differences between the short run where the effects are larger 

and the long run impact on corn prices after the market has an opportunity to adjust. Those 

effects form the basis for the discussion of the effect of biofuels and biofuel policy on issues of 

food security and poverty. For net sellers of corn and closely related commodities, the increase in 

prices offers an opportunity to improve farm incomes. However, on balance, the increase in 

commodity prices is expected to increase the number of food insecure people worldwide but the 

short run impacts of yield variation (drought, etc.) and unanticipated shifts in policy will remain 

a significant threat to low income consumers and net-importing countries (the U.S. is a net 

exporter of corn) (Condon et al. 2013). 

As I noted in 2008, the increase in the farm prices for corn and soybeans due to increased 

biofucls production has likely had only a small effect on U.S. retail food prices. The farm 

component of most food sales is relatively small-about 14 percent of the overall food dollar. 

Higher corn and soybean prices are passed through to the consumer largely through higher fat 

and oil prices and indirectly through higher feed costs. Analysis of the price spike of 2007/08 

suggests that ethanol had a small role in raising food inflation compared to other factors such as 

energy costs. The Department's estimates for food prices show average levels of food price 

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inflation in 2013 down from a peak in 2011, despite record high commodity prices. 

Impacts on farm incomes 

Increases in the prices received by farmers for row crops due to growing demand abroad, higher 

energy prices, and increased biofuel production, have changed farming patterns and management 

in many ways since 2005. In general, higher commodity prices over the past few years have 

strengthened farm balance sheets by raising farm receipts and produced record farm incomes. 

Over the period from 2000 to 2006, cash receipts for the farm sector averaged $217 billion (see 

table 4). However, over the period 2007 to 2013, cash receipts are projected to average $339 

billion, an increase of almost 56 percent. Net cash income increased from an average $68.7 

billion per year over 2000 to 2006 to a projected $105 billion over 2007 to 2013, an increase of 

53 percent. 

Based on analysis of farm business data, net cash income for grain and oilseed producers have 

shown significant increases since 2005, with net cash income levels up by more than 78 percent 

for com, wheat and soybean producers By contrast, livestock, dairy and poultry producers have 

faced more uneven, and in some cases, declining returns since 2005 (see table 5). In general, 

higher feed grain prices have helped net cash income for row crop producers, but have also 

raised feed costs that lowered profit margins for livestock, dairy and poultry producers. Feed 

costs make up 51 percent of expenses for dairy, 19 percent for beef cattle, 42 percent for hogs, 

and 35 percent for poultry farm business. Price-feed ratios for most species show a decline 

throughout most of the period since 2005/06 (see figure 6). 

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Productivity gains, such as increased pigs per litter and increased milk production per cow, have 

helped offset higher feed costs, along with increased availability of DDGs as mentioned 

previously. Moreover, feeding ofDDGs has replaced as much as 80 percent of the calories lost 

through the reduction of com fed to livestock, while adding to the overall protein content of 

feeds (Ferris 2013). Those co-products and the ability of farmers to adjust feed rations to 

increase feeding efficiency have helped mitigate the impact of higher feed grain prices and loss 

of some com as feed. 

Biofuel policies aud increasing ethanol production 

One distinction that is important to consider when evaluating the effect of ethanol production on 

commodity prices and agricultural production is the extent to which high energy prices or other 

macroeconomic factors have driven biofuel production as a petroleum substitute and the extent 

to which various State and federal policies encouraged expansion in the biofuel sector. Studies 

have shown, for example, that biofuel policies over the past decade could have accounted for 

about 80 percent of the increase in ethanol production (see Ferris 2013). Others argue that high 

energy prices accounted for the majority of the impetus behind expanded ethanol production (see 

for example, Babcock and Fabiosa 2011). 

However, with a large production capacity now in place, a more relevant question today is what 

might be the effect of adjusting biofuel policies? Many analyses last fall examined petitions of 

state governors for EPA to waive the RFS. The likely impact of a short-term waiver was found 

to be small (see Babcock 2012, and Irwin and Good 2012, and EPRINC 2012). At the time, 

researchers cited the need to stockpile production credits as a compliance strategy for the blend 

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wall, the importance of ethanol as octane enhancer, and the current prices of ethanol and 

gasoline, which favor blending ethanol. 

The impact of a longer-term waiver, just as long-run production levels, depends on energy 

prices. So long as ethanol is priced less than gasoline, it is unlikely that there will be much 

reduction in ethanol usage from current levels. Most studies that examined a longer term waiver 

on mandates forecasted a larger impact on com ethanol production than under a short-term 

waiver (see for example, FAPRI 2013). Further, if oil prices were to fall and/or ethanol 

production costs to rise over the longer term, it is likely that the refining sector could be 

reconfigured to meet octane requirements in gasoline using other additives (EPRINC 2012). In 

that case demand for ethanol could fall to levels equal to previous usage of MTBE, or about 4 

billion gallons. We note, however, that waivers of the required RFS volumes are subject to 

statutory authorities granted to EPA under the Clean Air Act. The waiver authority under Clean 

Air Act Section 211(0)(7), for example, limits the duration ofa waiver to one year. 

Non-agricultural economic activity 

The growth of the ethanol industry has brought jobs to rural America and has contributed to 

economic growth. Ethanol production is primarily concentrated in the com producing states of 

the Midwest and much of it is transported to the coasts which represent the bulk of motor fuel 

demand. Estimation of the job impact of ethanol production requires a careful segregation of net 

new productivity from productivity that already existed in the region before the plant was built. 

For example, ethanol plants do not necessarily create new farm production jobs. In a recent 

analysis of the Iowa economy, Swenson (2012) estimates that ethanol plants contributed 5,995 

jobs to the Iowa economy in 2011, a modest increase to a workforce of 1.7 million. Total value 

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added was estimated at $1.06 billion, of which $280 million was labor income. The net 

additions to the Iowa economy for each 100-million gallon plant was equal to 525 jobs and a 

total value added of $92.8 million, of which $24.5 million was labor income. Similar job 

impacts were found in Illinois (Low and lsserman 2009) and Nebraska (Petersan 2002). 

Outlook 

In February, USDA released its projections for crop production and farm prices for the next 10 

years (see the USDA Agricultural Projections to 2022, February 2013) and earlier this month 

updated the projected production levels and prices for the 2013 crop (see the World Agricultural 

Supply and Demand Estimates Report, June 2013). A rebound in yields is expected to push U.S. 

com and soybean production to record levels this year. Assuming moderate yield growth over 

the next 10 years, crop prices are projected to fall from recent record highs but remain above pre2007 levels (see figure 7), providing some reduction in feed costs for livestock producers. 

Lower feed costs will increase profitability in the sector and encourage expansion. 

Although the production of com-based ethanol in the United States is projected to rebound from 

2012's decline, the pace of further expansion is expected to slow considerably. After 2015, 

continued strong com export demand will offset slowing demand from ethanol producers to 

support prices and moderate declines in com planted area (see table 6). Yield growth and supply 

response both in the U.S. and abroad will help moderate crop prices in the long run, but for the 

near term, tight supplies will keep markets volatile with much attention paid to growing 

conditions worldwide. The combination of world economic growth and higher oil prices supports 

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continued expansion of biofuels production outside of the United States as well as longer run 

gains in world consumption and trade of crops. 

While USDA's baseline does not foresee significant expansion of corn-based ethanol over the 

next 10 years, over the longer tenn, much will depend on the level of energy prices relative to 

com. As we saw in 2005 and 2006, large margins will foster biofuel expansion. If prices of 

biofuels remain low relative to gasoline, there will be incentives to blend higher percentages. 

However, several factors will likely hinder further growth in com use for ethanol over the next 

few years. One, U.S. gasoline consumption has been declining since 2008. At the time the 

Energy Act of 2007 was passed, forecasts by the EIA for gasoline consumption implied almost 

150 billion gallons of blended gasoline by 2014. Increased fuel efficiency and fewer miles 

driven due to the slow economic recovery have caused gasoline consumption to decline. Current 

EIA forecasts of blended gasoline fuel consumption in 2013 are less than 134 billion gallons, 16 

billion less than forecasts made in 2008. Two, ethanol penetration rates remain near 10 percent 

as growth in higher blends, such as EI5 and E85 (blends of up to 15 percent and 85 percent 

ethanol, respectively), remains limited. Current penetration rates would imply a blend wall of 

less than 13.4 billion gallons for ethanol. Ethanol produced in excess ofthat amount must be held 

as stocks or exported. Lastly, while export markets have in the past welcomed U.S. ethanol 

production, current export prospects are reduced because of increased competition from Brazil 

and anti-dumping duties imposed on U.S. exports to the European Union. Indeed, EIA projects 

net imports of ethanol increasing over the next 5 years, rising to 1 billion gallons in 2018. 

Projecting trade of ethanol between the U.S. and Brazil remains highly uncertain and will depend 

on biofuel policies in both countries as well as fuel prices. 

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Looking forward, as the quantity of conventional biofuels produced from com which qualifies 

for the RFS reaches its maximum, "next generation" advanced fuels created from non-food 

feedstocks will be needed to achieve the goals outlined in EISA. Examples of next generation 

fuels from materials that are not associated with food production include biomass, algae, and 

crop residues. Demonstration plants have been constructed to assess various conversion 

technologies that can produce next generation biofuels, such as cellulosic ethanol, butanol, biojet 

fuel, and Fischer-Tropsch diesel. While the production costs associated with the development of 

these fuels remains high, they are falling quickly and increasing volumes of next generation fuels 

are expected to reach commercial scale in the next few years. Since 2009, USDA has invested 

about $320 million to accelerate research on renewable energy ranging from genomic research 

on bioenergy feedstock crops to development ofbiofuel conversion processes. 

Challenges remain however to bringing sufficient next generation advanced fuels in a form 

which can be absorbed into existing infrastructure, to the market quickly enough to meet the 

rapidly rising mandates in EISA (see for example Coyle 2010 and USDA 2010). Many of those 

challenges are surmountable, such as acquiring sufficient biomass to ensure stable production 

volumes, and securing financing through the early years of development. The USDA, for 

example, has a number ofinitiatives to support growers, landowners, and producers of renewable 

energy feedstocks to move beyond com-based ethanol. To encourage feedstock production for 

renewable energy, USDA manages the Biomass Crop Assistance Program to provide biomass to 

energy conversion facilities. USDA offers insurance coverage for farmers growing biofuel crops 

like switchgrass and camelina. 

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However, the most immediate challenge is the blend wall, which must be overcome to reach the 

future goals of the RFS. In order to get beyond the blend wall, there has been considerable 

investment in drop-in fuels, which are substantially similar to gasoline, diesel and jet fuels and 

therefore have less blending constraints than ethanol and can help, along with additional 

biodiesel use, overcome the blend wall. These fuels can be made from a variety of biomass 

feedstocks and are designed to "drop-in" to existing infrastructure. The Department has entered a 

partnership with the Department of Energy and U.S. Navy to invest up to $510 million during the 

next three years to produce advanced, drop-in aviation and marine biofuels to power military and 

commercial transportation. The Department has also forged partnerships with the FAA and the 

aviation industry to promote aviation biofuels to help meet our nation's energy needs. The 

national work is being expanded at the regional and state level, and two commercial airlines have 

flown their first domestic flights powered by biofuels. 

Mr. Chainnan, that concludes my statement. 

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Petersan, D. N. 2002. Estimated Economic Effects for the Nordic Biofuels Ethanol Plant in 

Ravena, Nebraska. Economic Development Department, Nebraska Public Power District, 

Columbus. 

Roache, S.K. 2010. What Explains the Rise in Food Price Volatility? IMF Working Paper No. 

WP/I 01129, May 20 I 0, http://chede.org/chede/wp-contentluploads/20 I 0/06/IMF-Reasonsfor-Food-Price-volatility.pdf 

Swenson, D. A. 2012. Estimating the Importance of the Ethanol Industry to the Iowa Economy 

in 2011, Department of Economics Staff Report, Iowa State University, January 2012 

Trostle, R. 200S. Global Agricultural Supply and Demand: Factors Contributing to the Recent 

Increase in Food Commodity Prices, U.S. Department of Agriculture, Economic Research 

Service, May 200S. www.ers.usda.gov/medial2IS027/wrsOSOI_I_.pdf 

17 
49 


86385.035

Trostle, R., Marti, D., Rosen, S., and Westcott, P. 2011 Why Have Food Commodity Prices 

Risen Again?, WRS-Il 03, U.S. Department of Agriculture, Economic Research Service, 

June 2011. www.ers.usda.gov/medialI26752/wrslI03.pdf 

U.S. Department of Agriculture. 20 I O. USDA Regional Roadmap to Meeting the Biofuels Goals 

of the Renewable Fuel Standard by 2022, U.S. Department of Agriculture Strategic 

Production Report, June 2010. 

www.usda.gov/documentsIUSDA_Biofuels_Report_623201 O.pdf 

Wright, B.D. 2010. Recent Agricultural Price Volatility and the Role of Grain Stocks. In IPCSummer Seminar: Agricultural Price Volatility: Prospects, Challenges and Possible 

Solutions, 3. Barcelona: International Food and Agricultural Trade Policy Council (IPC), the 

University of Barcelona, and the International Centre for Trade and Sustainable Development 

(ICTSD) 

18 
50 


86385.036

Figure 1: Ethanol Margins 

Dollars per gallon 

$3.50 --------

$3.00 

$2.50 

$2.00 

Net cost of corn ~. 

$1.50 

$1.00 

$0.50 

$0.00 / Return over operating costs 

·$0.50 ... ... '" '" '" '" '" .. ... " " i ~ ~ '1' .. ~ '1' .. ~ '1' 5! 

~ ~ ~ ~ :!i! ~ ~ :i! ~ 

~ '" 9 '" 0 0 0 .. i i ~ > ~ ~ ~ ~ ~ ~ :i! 0 

z z 

SOlJ"ce Iowa Slate Unll'el1ilty (2013 www.card.IBstate,eduiresearch) 

Figure 2: Com Use, Marketing Year 

Millon bushels 

7000 

N 

~ 

Dollars per gallon 

$3.50 

$3.00 

$2.50 

$2.00 

$1.SO 

$1.00 

$0.50 

$0.00 

-$0.50 N N .., 

" ~ ~ ~ i 

Million bushels 

7000 

Feed and Residual Baslineprojections 

6000 6000 

5000 5000 

4000 4000 

3000 3000 

2000 2000 

1000 1000 

ODOOO-O.(J£lOOOO 

SOUf'Ce HIstory USDA-NASS, Forecast USDA·WAGB (2013J14 4Jdeted to June 2013 WAS DE) 

19 
51 


86385.037

Figure 3: Monthly corn farm prices 

Dollars per bushel 

$8.00 

$7.00 

$8.00 

$5.00 

$4.00 

$3.00 

$2.00 

$1.00 

Source: USDA·NASS 

Dollars per bushel 

$8.00 

$7.00 

$6.00 

$5.00 

$4.00 

$3.00 

$2.00 

$1.00 

$0.00 

Figure 4: US and Rest of World corn exports, Trade marketing year (October- September) 

MiUionMT MiliionMT 

90 90 

80 1>. 80 

70 to. Il. 70 

60 60 

50 50 

40 40 

30 30 

20 20 

10 10 

N 1i! Ii! .., ., .. ~ '" C> N ~ ~ 51 ~ 51 51 e ~ ! l: g N :3 ~ ~ .., :g .. C> C> C> C> Ii! ~ § lil lil lil lil lil lil lil lil lil lil C> lil lil N 

Source: USDA WASDE f:, Rest of world _United States 

20 
52 


86385.038

Figure 5: Annual crop prices, in 2005 dollars 

Dollars per metric ton (2005=100) Dollars per meb'ic ton (2005=100) 

$700 --------------------------------------------- $700 

$600 

$500 

$400 

$300 

$200 

$100 

$0 

! ~ I i " ~ ; !§ !!! i " E ~ ~ ~ ; g 

::l 

Wheat --Com --- Rice -Soybeans 

Source USDA-NASS QUlckstats (pnces received by farmers) 

Figure 6: Livestock price to feed price ratio, Monthly 

Dairy and Broilers 

-"-" ..... ,, 

'\ .. -, ... -..... ~/ 

---Dairy -Broilers ",o"'Hogs 

Soull;e: USDA.ERS 

21 

$600 

$500 

$400 

/ $300 

$200 

$100 

$0 

Hogs 

30 

25 

20 

86385.039

m 

1:: r !! '" 

g 

g g g g o 

il 1990191 I 

1991/92 1992/93 1993/94 1994/95 1995/96 

1996/97 

1997/98 

• 1998/99 

1999/00 

2000101 2001102 2002103 2003104 m 

g 2004/05 I 2005106 2006/07 

2007108 2008/09 2009110 i 

[ 2010/11 

• 2011112 

2012/13 

N 

2013114 

N 2014115 

J 2015116 w 2016117 [ 

2017118 2018119 2019120 2020121 ! E' 2021122 2022123 

o 1:: r 

- CO 

g g g g g " g 
54 


86385.040

Table I: Ethanol existing capacity, capacity under construction and ethanol production, Calendar year 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 

(million gallons) 

Existing capacity (nameplate) 1,749 1,922 2,347 2,707 3,101 3,644 4,336 5.493 7,888 10,569 11,877 13.508 14,907 14,712 

Under construction/expansion 92 65 391 483 598 754 1,778 5,636 5,536 2,066 1,432 522 140 158 

Production 1,622 1,765 2,140 2,804 3,402 3,904 4,884 6,521 9,309 10,938 13,298 13,929 13,300 13,396 

Source: Ethano! production (Energy Infonnation Administration); Capacity as of January 1 (Renewable Fuels Association) 

Table 2: Renewable Fuel Standard Mandates. Energy Independence and Security Act of2007, Calendar year 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 

(million gallons) 

Renewable fuels (1) 11.100 12,950 13,950 15,200 16,550 18,150 20,500 22,250 24,000 26,000 28,000 30,000 33,000 36,000 

of which ad1£lnced fuels (A) 600 950 1,350 2,000 2,750 3,750 5,500 7.250 9,000 11,000 13,000 15,000 18,000 21,000 

of which cellulosic biofuels (S) 0 100 250 500 1,000 1,750 3,000 4,250 5,500 7,000 8,500 10,500 13,500 16,000 

of which bio-based diesel (B) 500 650 800 1.000 1,280 ~1,00O <:1,000 ;>:1,000 <=.1,000 ;.:1,000 ;;:.1,000 <:.1,000 ~1,OOO <":1,000 

Renewable fuel gap (C) = (T~A) 10,500 12,000 12,600 13,200 13,800 14,400 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 

Source: Energy Independence and Secunty Act of 2007 (EISA) 

23 
55 


86385.041

Table 3 Com Supply and Demand Balance Sheet (September-August marketing year) 

2000101 2001102 2002103 2003104 2004/05 2005106 2006107 2oo7{08 2008109 2009110 2010/11 2011112 2012/13 2013114 

(million bushels) 

Begmnlng slocks 1,718 958 2,114 1.967 1,304 1,624 1,708 1,128 989 769 

Production 9,915 11,806 11112 10,531 13,038 12,092 12,447 12,360 10,780 14,005 

Imports 10 14 14 11 9 12 20 14 28 29 150 25 

Supply, total 11,639 11,412 10,578 11,188 12,775 13,235 12,510 14,362 13,729 14,774 14,182 13,516 11,919 14,799 

Feed and residual 5.822 5,849 5,548 5.781 6,135 6,115 5,540 5,858 5,182 5,125 4,795 4,545 4,400 5,200 

Food, seed & Industrial 1,977 2,062 2,355 2,707 3,019 3,541 4,442 sms 5,961 6,426 6,439 8,050 6,350 

Ethanolforfuei 630 707 996 1,323 1,603 2,119 3,049 3,709 4,591 5.011 4,650 4,900 

Oomestic,total 7,799 7,911 7,903 R842 9,134 9,081 10,300 10,207 11,086 10,985 10,450 11,550 

Exports 1,941 1,905 1,588 1,900 2,t25 2.437 1,849 1,980 1,834 700 1.300 

Use, total 9.740 9,815 9,491 10,230 11,207 12.737 12,056 13,066 13,055 11.150 12,850 

Ending stocks 1.899 1,596 1,087 958 2,114 1.967 1,304 1,624 1,673 1.708 1,128 989 769 1,949 

eee In-.entory 6 0 0 0 

Free stocks 1,891 1,590 958 2,113 1.967 1,304 1.624 1,128 989 769 1,949 

Outstanding loans 253 213 164 280 171 116 106 48 41 50 50 

(dollars per bushel) 

Avg. farm price 185 197 232 242 206 200 304 420 406 355 5,18 6.22 695 480 

Source. WASDE, June 2013 

24 
56 


86385.042

Table 4: Income statement for the U.S, farm sector, 2000-2013F 

2000 2001 2002 2003 2004 2005 2006 2007 200s 2009 2010 2011 2012F 2013F 

Cash income statement (billion dollars) 

a Cash receipts 192 200 195 216 238 241 241 289 316 289 321 374 391 393 

Crops 11 93 93 101 110 114 116 122 150 175 169 180 206 220 216 

Ul.E:stock 100 107 94 106 123 125 118 138 142 120 142 166 172 177 

b. Direct Gcr.emmenl payments 21 23 22 12 17 13 24 16 12 12 12 12 10 11 11 

c, Farm-related Income 3f 12 13 13 14 16 14 17 ,. 21 22 18 26 31 36 

d. Gross cash income (a+b+c) 227 235 220 247 267 280 273 318 350 323 352 411 433 44D 

e. Cash expenses 4/, Sf 170 173 169 175 183 193 205 241 261 248 252 276 298 317 

f. Net cash income!d-e) 57 62 51 72 84 87 68 77 89 76 99 135 136 123 

Source: USDA·ERS Numbers may not add due to rounding 

F = forecast 

1/ Includes cce loans. 

2/ Note: GOl,.emment payments reflect payments made direcUy 10 all recipients in the farm sector, including landlords. The nonoperator landtords' share is 

offset by its inclusion In rental expenses paid to these landlords and thus is not reflected in net farm income or net cash income. 

3J Income from custom work, machine hire, recreational activities, forest product sales, and other farm sources. 

4f Excludes depreciation and perquisites to hired labor. 

5/ Excludes farm households. 

Note: This farm income forecast rellects USDA's assessment of the outlook for commodities as reflected in the latest WASOE report. 

25 
57 


86385.043

Table 5: Average net cash income by farm business specialty, 2005·2013F 

2005 2006 2007 2008 2009 2010 2011 2012F 2013F 

(dollars/farm) 

Wheat 50,080 42,060 59,083 50,546 73,503 108,158 117,848 150,204 139,052 

Com 95,186 63.915 115,156 143,770 128,425 126,904 165,873 169,616 152,584 

Soybeans 58,548 32,861 55,160 66,152 82,514 85,148 87,790 103,766 95,293 

CaUie 44,298 25.319 28,112 15,081 16,833 22,349 29,936 35,919 31,660 

H09s 186,918 202,932 240,876 97,370 170,594 306,883 204,895 174,618 161,361 

Poult!)' 81,054 68,675 139,875 76,761 78,266 93,401 89,172 97,385 95,280 

DallY 129,258 101,608 190,585 151,603 70,110 158,112 190,533 98,079 83,872 

Source: ERS, USDA Agncultural Resource Management Sur..ey estimates 

26 
58 


86385.044

Table 6: Com, wheat and soybean planted area, history and forecast, Crop marketing year 

Wheat Soybeans Com 

(million planted acres) 

2000101 62.5 74.3 79.6 

2001/02 59.4 74.1 75.7 

2002103 60.3 74.0 78.9 

2003/04 62.1 73.4 78.6 

2004/05 59.6 75.2 80.9 

2005/06 57.2 72.0 81.8 

2006107 57.3 75.5 78.3 

2007/08 60.5 64.7 93.5 

2008/09 63.2 75.7 86.0 

2009/10 59.2 77.5 86.4 

2010/11 53.6 77.4 88.2 

2011/12 54.4 75.0 91.9 

2012/13 55.7 77.2 97.2 

2013/14 56.4 77.1 97.3 

2014/15 54.0 74.0 90.0 

2015/16 51.0 75.0 86.0 

2016/17 51.0 75.5 88.0 

2017/18 51.0 76.0 89.0 

2018/19 50.5 76.0 90.0 

2019/20 50.5 76.0 90.5 

2020/21 50.5 76.0 91.0 

2021/22 50.5 76.0 91.5 

2022/23 50.0 76.0 92.0 

Source: History: USDA-NASS Quickstats 

Forecast: USDA-ERS Outlook 

27 
59 

Mr. WHITFIELD. And thank all of you. We appreciate your testimony. And at this time, we would like to ask questions of the 

panel, and I would recognize myself for 5 minutes to begin. 

Mr. Grundler, States have on three different occasions petitioned 

the EPA to grant waivers from the RFS, and it is my understanding that EPA denied all of those waivers. And I would like to 

know, what is the criteria that you use in making a decision to 

grant a waiver or not? 

Mr. GRUNDLER. You are correct, Mr. Chairman. We have received 

two separate requests, one in 2008 from the State of Texas, and 

then one again last year by a numerous number of States, as well 

as other petitioners. 

The criteria in the statute are severe economic harm. So the Administrator was provided the discretion by the Congress to waive 

the standard in the event he or she determines that implementing 

that standard would create severe economic harm for a State or region or the United States. 

Mr. WHITFIELD. And how would you go about defining severe economic harm? 

Mr. GRUNDLER. As you know, Mr. Chairman, Congress typically 

provides the Agency across numerous environmental statutes different waiver authorities to deal with unanticipated circumstances. 

And it is pretty typical that the Administrator is given discretion 

to view these on a case-by-case basis and looking at the economic 

conditions at the time. 

In the case of last year’s situation, where we had this devastating drought, which was creating very harmful conditions 

across many parts of our country, for sure, we determined that the 

RFS, in fact, was not having an impact. So the first question that 

the agency had to answer was, is the RFS causing this harm? And 

after extensive modeling and consultation with other parts and experts in the government, some of which are sitting right here, and 

something like 500 different model scenarios, we found that the 

most likely result is that the RFS was not having impact. In other 

words, the RFS was not binding. 

And the reason for that is over the last many years, the transportation fuel system has optimized around the use of ethanol. As 

my colleague from the EIA has noted in his written testimony, ethanol has a strong economic value to refiners. And so what we determined was that if we had waived the standard it would not have 

changed the demand for ethanol because refiners were still demanding this to blend in their products for octane and for volume 

enhancement. So that is why we felt that the statutory criteria for 

issuing a waiver were not met, and we had to deny it. 

Mr. WHITFIELD. But you all did have consultations with the Department of Agriculture before the decision was made and EIA? 

Mr. GRUNDLER. Oh, absolutely. And we saw public comment. 

What we did was we did the analysis to determine if the RFS was 

binding. And then we relied on the Ag Department and the DOE 

department to give us estimates in those small number of cases 

where it was binding, what would be the impact on food prices and 

energy prices. 

Mr. WHITFIELD. And you all had also made the decision that 

model years 2001 and newer, that E15 could be used, but if it was 

60 

older than 2001 could not be used in those vehicles. How did you 

decide that? 

Mr. GRUNDLER. That was based, again, on extensive analysis and 

testing programs. The Department of Energy did an extensive, statistically based testing program using a statistical sample of many 

vehicles, both newer vehicles and older vehicles. 

Mr. WHITFIELD. But was it primarily based on your concern 

about damage to engines in those older vehicles? 

Mr. GRUNDLER. Again, the Congress has given us very specific 

guidance as to when we need to grant a waiver. And we look at 

whether or not a new fuel would create the situation where emission standards would be violated if this fuel was used. So that was 

based on not only extensive DOE test program, but also consulting 

with many different stakeholders and reviewing over 30 different 

studies in the literature with respect to the impacts of ethanol on 

engine systems. 

Mr. WHITFIELD. Would you expect that E15 would ever be approved for these older vehicles? 

Mr. GRUNDLER. Our engineering judgment wouldn’t suggest, and 

the available information would suggest that that would not be a 

good idea. 

Mr. WHITFIELD. Dr. Glauber, you touched on this in your testimony, but we have some groups come and say, boy, this raising, 

the prices of corn going up, it is affecting feedstocks, whatever, 

whatever, in price, and other groups say, well, it has no impact at 

all. Just from your analysis, your experience, what would your view 

be on that? 

Mr. GLAUBER. Well, I think, you know, it is clear that, as I said 

in my opening statement, that increased ethanol production has 

precipitated a large increase in corn production and a large increase in corn demand. With that, you see increased prices. 

Now, a lot of other factors are out there in the world that affect 

prices. There is a whole list of things that people typically talk 

about. But things like we had some fairly serious droughts over the 

period. We have had, you know, increase in foreign demand, a 

number of things have affected price. 

But most of the studies that we have looked at show that ethanol 

has contributed to some share of that increase. And I think my own 

study showed about 30 percent. That is similar to a lot of other 

studies that have been out there. 

Mr. WHITFIELD. Thank you. 

Mr. GLAUBER. I am sorry. 

Mr. WHITFIELD. I am sorry. My time has expired. But thank you 

for answering. 

And at this time recognize the gentleman from Illinois, Mr. Rush, 

for 5 minutes. 

Mr. RUSH. Mr. Grundler, has the RFS failed to meet the overall 

gallon amount of the RFS in any year so far? Yes or no? 

Mr. GRUNDLER. The total RFS standard has been met so far, yes. 

Mr. RUSH. Mr. Sieminski, in your estimation, what would happen 

to domestic energy prices if ethanol was removed from the vehicle 

fuel system? 

Mr. SIEMINSKI. We think that the use of ethanol would not 

change very much if the Renewable Fuel Standards were elimiVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
61 

nated because of the use by the industry of ethanol as an octane 

enhancer and a volume enhancer. It is cheap enough, they are 

quite happy to add it to gasoline. The key thing is its use as an 

octane and oxygenate enhancer. 

Mr. RUSH. Thank you. 

Mr. Grundler, I am going to come back to you again. There has 

been a tremendous amount of peer-reviewed research and modeling 

conducted to estimate the reduced greenhouse gas emissions realized with conventional biofuels, which would help show that the 

RFS is working. These new numbers show that some conventional 

biofuels are 50 percent less than the CO2 emissions of the 2005- 

based gasoline. When will EPA update their numbers on the carbon index for conventional biofuels? 

Mr. GRUNDLER. Sir, right now, we have no plans to update our 

basic methodology for doing lifecycle analytical work. That is a 

pretty serious undertaking. But we do update our models as we get 

new information. But right now we have no plans to revise our 

basic lifecycle analytical methodology. 

Mr. RUSH. So because it is a serious undertaking, is that the reason why you would not? 

Mr. GRUNDLER. Well, not only that it is an enormous amount of 

work but many people have made plans based on the results that 

we have already promulgated, and it would be fairly disruptive for 

us to redo all of that work. But we are very serious about keeping 

up with the science and are incorporating new information as we 

get it through our pathway petition process when we approve new 

fuels, when we do our lifecycle work. 

Mr. RUSH. Dr. Glauber, can you discuss what has happened to 

farm income in the U.S. since we adopted RFS in 2005? And, conversely, can you discuss what is happening with government payments to farmers? 

Mr. GLAUBER. Yes. Thanks. It is a great point. As I mentioned 

in my opening statement, both cash receipts are up by over 50 percent, and net cash income, you know, that is, after subtracting out 

all the expenses and adding in the government payments, they are 

up about 53 percent or so. So a very large increase. 

Government payments have gone down. Understand that by 

2005, for the most part, we weren’t making—we have a lot of government programs under the farm legislation that pay producers 

when prices fall below certain legislated levels. And prices have 

been above those levels for most commodities since about the mid2000 period. Now, again not all that was due to the Renewable 

Fuel Standard, but there has been, as I mentioned, a large increase 

in corn prices, a large increase in soybean prices and others. 

Mr. RUSH. Thank you. 

Mr. Sieminski, has the RFS reduced the need for foreign oil? 

Mr. SIEMINSKI. I am sorry, could you repeat that? 

Mr. RUSH. Has the RFS reduced the need for foreign oil? 

Mr. SIEMINSKI. For foreign oil. The Renewable Fuel Standard 

itself, where it is really having an impact at the margin is in the 

advanced areas. So not the corn ethanol. And that number at this 

point is very small. Probably 300,000—— 

Mr. RUSH. Thank you so much. 

Mr. SIEMINSKI. Not so much. 

62 

Mr. RUSH. Thank you. 

Mr. Grundler, how will the development of advanced and cellulosic ethanol projects be impacted if Congress were to make 

changes to the RFS? 

Mr. GRUNDLER. I would really hate to speculate on that matter. 

What Congress has told us is each year to make an estimate of 

what the future production year would look like. So long as we are 

following that process and establishing that number based on good 

data and good science, I would think that the cellulosic marketplace would have a steady signal. 

Mr. WHITFIELD. Gentleman’s time has expired. 

At this time recognize the gentleman from Texas Mr. Barton for 

5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. 

Mr. Grundler, you, in your written testimony, if I understood you 

correctly, indicated that you don’t, EPA doesn’t plan to do anything 

to revise the volumetric requirement for RFS blending this year. Is 

that correct? 

Mr. GRUNDLER. Mr. Barton, what we have done is we have proposed a 2013 standard that reflects the statutory volumes. We are 

right now taking comment on that. We asked for comments specifically for an adjustment of 200 million gallons, and we are reviewing those comments right now. 

Mr. BARTON. What happens this year if, in spite of the rosy scenario estimates, it is just not there? Is the EPA prepared to waive 

the fines or come back later in the year and lower the estimate, the 

requirement? Because in my conversations with knowledgeable experts, they indicate that this year the blend wall is going to be hit 

and they are just not going to be able to meet the requirement unless they export gasoline, which seems to me kind of a silly way 

to meet it. 

Mr. GRUNDLER. Congressman, we are quite confident in our estimate of the number of excess RINs that are in the marketplace to 

achieve compliance. And while we do believe that there are some 

refiners who are facing this blend wall, there are others who have 

not. And so each refiner is in a slightly different market position. 

But they all have different compliance options to meet their obligation. They can use these carryover RINs, they can go to the market 

to buy RINs, they can carry over a deficit into the next year. We 

really think the blend wall and what we are seeing in the RIN 

market is reflecting concerns about shortfall looking forward in 

2014. 

Mr. BARTON. So for this year the EPA policy is basically going 

to be cross your fingers and pray. What about next year? Is there 

any doubt that next year, in spite of RIN carryforward and everything else, it is not going to be met? 

Mr. GRUNDLER. Sir, we noted in our proposal for 2013—which we 

haven’t finalized yet, I want to again restate—we said that 2014 

looks much more challenging. And we are seeking comment, and 

we have gotten a lot of comment on—— 

Mr. BARTON. You have been well briefed to testify before Congress. It is much more challenging, like impossible, but I will let 

that go. 

63 

Mr. Sieminski, do you care to speculate on, when the blend wall 

is finally hit, which is going to happen this year or next year, the 

expectation of refineries, if they are not given some relief, having 

to export gasoline simply because they don’t have the ability to create the RINs? 

Mr. SIEMINSKI. Some refiners have said that in addition to the 

possibility that they would just export to avoid the problem, there 

is also the possibility of simply cutting back on domestic production. The EIA kind of looks at that, and our conclusion is that that 

is not really a viable long-term strategy for refiners in a competitive market. 

Another possibility would be that we end up with lower retail 

prices to stimulate demand for E15 and E85. And how that would 

happen is under the RINs program, the RINs themselves would 

end up making it attractive for people to use more E85 and E15. 

But the cost of doing that or buying that down has to come from 

the greater gasoline pool, or the E10 pool. That is one way to get 

around this problem, but I am not sure. That is a policy issue that 

Congress would have to look at to decide if that is how they wanted 

to proceed. 

Mr. BARTON. Now, if I understood you, I think in response to Mr. 

Rush, you indicated that if we repealed the RFS mandate approximately the same amount of ethanol would be used to blend in the 

gasoline because it makes economic sense for a number of reasons. 

Is that fair—— 

Mr. SIEMINSKI. Roughly speaking, yes, it might be a little bit less 

but correct. 

Mr. BARTON. Dr. Glauber, do you agree with what Mr. Sieminski 

just said that, absent a mandate you would still have approximately the same amount of ethanol consumed and put into gasoline? 

Mr. GLAUBER. I think it depends on two factors and one was 

mentioned, the octane enhancer, and I think that is a very powerful thing to continue to blend ethanol at least in the short run. 

Over the longer run, there may be other potentially cheaper 

sources that they can move to, but the big thing will be just that 

basic equation of the price of corn versus the price of oil. And if 

corn is cheap relative to that, then they will continue to make it. 

Understand with the blend, while you kind of have an upper bound 

and I presume a lower bound at, you know, the Clean Air Act reformulated gas pool, which is about 4 billion or so. 

Mr. BARTON. Thank you, Mr. Chairman. 

Mr. WHITFIELD. At this time, I recognize the gentleman from 

California, Mr. Waxman, for 5 minutes. 

Mr. WAXMAN. Mr. Sieminski, the climate scientists tell us that 

to avoid dangerous climate change, the U.S. must reduce greenhouse gas emissions by at least 80 percent by 2050. Based on EIA’s 

projections, is the U.S. currently on track to reduce our greenhouse 

gas emissions by 80 percent by 2050. 

Mr. SIEMINSKI. No, sir, we are not. We are making quite a bit 

of progress. The 1990 level that that target was based against was 

about 5 billion metric tons of carbon dioxide emissions from energyrelated activity. We hit about 6 billion metric tons in 2005. We are 

64 

down now to about 5.3 but to get to that level you would have to 

be down close to 1 billion metric tons—— 

Mr. WAXMAN. Clearly, we are going to need to do a lot more. 

Mr. SIEMINSKI. You would have to do a whole lot more. There 

would have to be policy—— 

Mr. WAXMAN. And a cleaner transportation system would be part 

of the solution. 

The renewable fuel standard is one policy that is designed to 

achieve this goal. When Congress amended the RFS in 2007, we 

specifically required that renewable fuel and in particular advance 

biofuels, such as cellulosic biofuel and biodiesel, reduced greenhouse gases compared to gasoline. 

And Mr. Grundler, what aspects of the RFS produce climate benefits? Do advanced biofuels reduce significantly less carbon pollution than gasoline. 

Mr. GRUNDLER. Yes. There is no question about that. Our detailed analysis looking at both the direct and the indirect impacts 

of the advanced biofuels, clearly, the majority of the benefits from 

the RFS will come from the advanced pool. 

Mr. WAXMAN. Last year, American companies produced more 

than 20,000 gallons of cellulosic biofuels. This is the first time that 

such levels were produced commercially in the United States, and 

both EPA and EIA expect production to grow. EPA anticipates a 

production will reach 14 million gallons in 2013. Earlier this year, 

EIA projected that we could reach 250 million gallons by 2015. 

Mr. Grundler and Administrator Sieminski, would the cellulosic 

biofuels industry be expected to grow this rapidly without the advanced biofuels policy in the RFS? 

Mr. GRUNDLER. In my opinion, sir, there is no question that the 

RFS policy has produced an enormous amount of private investment in this advanced fuel sector. 

Mr. WAXMAN. And is that your view, Mr. Sieminski? 

Mr. SIEMINSKI. It has, factually, it is just not moving fast enough 

to come anywhere close to the targets that were set in 2007. 

Mr. WAXMAN. So it appears that we are at a critical juncture in 

this industry. Companies report that they are poised to scale up 

production of cellulosic biofuels dramatically, but the next few 

years will be important to achieve and solidify these gains. 

Mr. Grundler, if Congress weakened or eliminated the RFS requirements for advanced biofuels, do you think that would undermine the development and growth of this industry? 

Mr. GRUNDLER. Well, of course, it would really depend on how 

Congress went about that. The cellulosic standard right now is a 

nested standard within the total and the advanced pool. 

So if Congress chose to reduce both the cellulosic target and the 

advanced target, the logical impact of that would be considerable 

uncertainty and presumably financing issues for the industry. 

Mr. WAXMAN. And without an advanced biofuel industry, it is 

clear, is it clear how to substantially reduce carbon pollution from 

liquid transportation fuels? 

Mr. GRUNDLER. Sir, the RFS, as written by Congress, clearly anticipated that that is where the growth would come from. These are 

the lowest carbon liquid fuels, based on our analysis. 

65 

Mr. WAXMAN. Mr. Chairman, I commend you for undertaking 

this examination of the renewable fuels standard. 

Stakeholders have raised a number of concerns with the RFS. I 

am interested in understanding these concerns and working with 

our colleagues to determine an appropriate course of action. However, cutting carbon pollution to address climate change must remain a priority for Federal fuels policies, and the renewable fuels 

standard appears to be playing a key role in supporting and encouraging innovation in low carbon advanced biofuels. I think it is 

important to foster this innovation, even as we continue to evaluate 

the law. Thank you very much. 

I yield back. 

Mr. WHITMAN. The gentleman’s time has expired. At this time, 

I recognize the gentleman from Louisiana, Mr. Scalise for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. 

I appreciate your having this hearing. I want to thank our panelists for being here. We are starting to get a lot more questions from 

constituents, as they recognize the impact of the renewable fuel 

standards, not only how it would impact refiners, how it may impact people that own older cars that are concerned about warranties being violated, but also how ultimately it will affect the price 

of gasoline at the pump, which is already higher than it should be, 

too high for many people, and getting higher. 

But especially when you look at the fact that a lot of the assumptions that were made in 2007, many of which were used to pass 

this law, many of those assumptions just don’t exist in today’s marketplace based on, number one, technologies that we have today 

but also in economic conditions. I know when some of our panelists 

talk about the problems that we are facing with why these numbers were so off, some of it was based on assumptions in ethanol 

and corn production, and we are seeing now maybe higher food 

prices because of that. But we also are seeing because of both efficiencies, as well as economic conditions, people using less fuel. If 

somebody doesn’t have a job, they are not driving to work every 

day. That was not anticipated back in 2007, yet that is part of the 

economic reality we are dealing in today, and yet none of that is 

factored into when we look at some of the rules coming out from 

EPA. 

So I am a strong supporter of repeal of the renewable fuel standard; I cosponsored legislation to do that. But I think it is important 

to get some of these facts out there about the marketplace we are 

living in today. 

I want to ask you, Mr. Grundler, when you were answering one 

of the questions that Chairman Whitfield had brought up about 

significant economic harm, and there is some discretion you have 

in coming up with that definition, can you share with this committee the models that you used because we don’t have that information, when you all are running these models to determine significant economic harm, I think it would be important for us to 

know what models you are actually using. Could you share with 

the committee that information? 

Mr. GRUNDLER. I would be happy to. 

Mr. SCALISE. Thank you. 

66 

Regarding E15 engine testing, is it—what exactly kind of vehicles did you use? Did you just look at emission failure? Did you 

look at engine failure? 

Mr. GRUNDLER. First of all, we looked at a number of different 

studies in the literature that looked at fuel effects on across a variety of vehicles. The testing was actually done and managed by the 

Department of Energy, and they looked at a wide range of impacts, 

the priority, of course, was based on the statutory criteria as to 

what is the impact of higher ethanol blends on emission control 

systems, and would they lead to violating the emissions standards. 

But they also looked at materials compatibility about engine durability. They tore down a number of engines—— 

Mr. SCALISE. Would you share with the committee all of that information that you used in coming up with those tests? 

Mr. GRUNDLER. Absolutely. All that was all shared with the public. We can provide all that information to you from the waiver. 

Mr. SCALISE. Thank you when you were answering one of Barton’s questions regarding RVOs, he was asking about the timing, 

and I think under the law, you are supposed to, by November 30th, 

come up with those standards for the following year. And of course, 

we don’t have those for 2013. And you said you are still in the development process, getting information, and of course, that creates 

uncertainty in the marketplace, I hope you understand that. But 

then looking forward to 2014, can we be assured, can you give us 

assurance that by November 30th, we would have those rules available for 2014? 

Mr. GRUNDLER. The priority right now, frankly, for me, Mr. Congressman, is to get 2013 done, and we are working very hard to 

do that, and I hope we will get that final by this summer. 

Mr. SCALISE. You are like a year—a half year late already. 

Mr. GRUNDLER. I understand that. 

Mr. SCALISE. Maybe you are overwhelmed. Maybe another argument for repealing RFS is that you are too overloaded to do the 

things you are currently tasked with all these other things that are 

coming down that are creating so much uncertainty with waivers. 

I think, Mr. Sieminski, you have touched on some of these waivers, and I think, in your testimony, you talked about the importance of EPA exercising that waiver ability, because just the marketplace isn’t going to be ready for what is coming. I don’t know 

if you want to expand on what you talked about in your testimony 

regarding that. 

Mr. SIEMINSKI. In terms of your commentary, I would say that 

shifts in demand that we have seen have played a part in the blend 

wall problem, that the biggest problem post 2014 has been in the 

slow development of the advanced technology and that that is what 

is leading to the issues associated with meeting the high targets 

that were set in 2007. 

Mr. SCALISE. I appreciate that. I look forward to hearing more 

testimony. 

And I yield back the balance of my time. 

Mr. WHITMAN. At this time, I recognize the gentleman, Mr. 

McNerney from California for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

67 

Former Chairman Barton’s opening statement indicated the good 

intentions that went into the 2005 law and how the changing technology and market conditions present significant challenges to the 

RFS. However, one thing to me is quite clear, the RFS has spurred 

innovation, and given the threat of climate change, innovation is 

going to be a critical factor in moving forward. 

So my first question is to Mr. Grundler from the EPA, does the 

agency have the necessary technical advances? Do you see the necessary technical advances emerging to meet the projected targets? 

Mr. GRUNDLER. Every year, as we go through this annual process, particularly with respect to the cellulosic target, we meet with 

the producers so we get detailed information about where they are 

in scaling up their technology and from the laboratory to a commercial scale facility. That takes a, that is not an easy task and 

that, obviously, if you look at this historical record, it has taken 

longer than the Congress expected. But when we go through this 

process every year, we get up-to-date information on where they 

are, on new ideas. We get new petitions every year for new pathways and new processes and new technologies. So there is—it is 

clear to me that there is a lot of innovation. There is a lot of invention that is going on, and the reality is that this takes time to scale 

up to commercial production levels. 

Mr. MCNERNEY. Good, well as the EIA mentioned, we are now 

on a path to meet the RSF targets by 2022, do you feel that your 

agency has sufficient flexibility under current law to meet the challenges of the changing technology and marketplace? 

Mr. GRUNDLER. Yes. The Congress gave us a number of different 

kinds of authorities to adjust these standards as well as the, actually, the nondiscretionary duty if we do adjust the standard as we 

have now with cellulosic to reset the statutory volumes beginning 

in calendar year 2016. We are not ready to undertake that work 

we are focusing more on 2013 and 2014, but the Congress did provide the agency with a number of tools to—for an orderly implementation of these standards. 

Mr. MCNERNEY. So you can say, we don’t really need to repeal 

the law; you have sufficient flexibilities if you are given the resources to meet the changing marketplace? 

Mr. GRUNDLER. I am not here today to give you a recommendation on legislation, but we are focused on using as much common 

sense as we can muster to address the facts and address the reality. And we are doing a lot of listening, we are getting a lot of 

different advice from different stakeholders on how to use those authorities, and we are contemplating all these issues right now. 

Mr. MCNERNEY. Thank you. 

Mr. Glauber, what steps are the USDA taking in helping producers throughout the country develop the feedstocks necessary to 

meet the future by biofuel demands. 

Mr. GLAUBER. I think there is no question, as far as corn is concerned, there hasn’t been an issue. The farmers have increased production. We are currently producing enough corn certainly to meet 

the demands for corn use for ethanol. 

Insofar as advanced biofuels are concerned, I think that has been 

some of the discussion here about the underlying economics of that. 

We have USDA, in association with other departments, like the DeVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
68 

partment of Energy, have put forward development of, say, dropin fuels. We have a program right now with the Navy for that. We 

have been talking to FAA about looking at potential for drop in 

fuels for airplanes. We have helped develop crop insurance products for things like for some biodiesel feedstocks and things like 

that. So we are limited in terms of programs we have for these, but 

we have been trying to orient research and other things toward development of advanced biofuels. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

I will yield back. 

Mr. WHITMAN. The gentleman yields back. 

At this time, I recognize the gentleman from Texas, Mr. Hall, for 

5 minutes. 

Mr. HALL. I thank you, Mr. Chairman, and I thank you for this 

very important hearing today. 

The renewable fuel standard has been successful in bringing 

biofuels into the transportation fuel supply here in the U.S., but 

the approaching, quote, ‘‘blend wall,’’ unquote, raises a lot of unanswered questions, and we need to be careful and thoughtful about 

how we go forward and how we manage the renewable fuel standards. 

Mr. Sieminski, can you give us an overview of the changed energy landscape today compared to 2007 and particularly speak of 

gasoline demands and future projections and their effect? 

Mr. SIEMINSKI. Certainly, Mr. Hall, as I discussed in my testimony, the outlook for gasoline demand is a lot lower, while projected domestic oil production is significantly higher. Lower gasoline demand projections reflect higher vehicle efficiency standards, 

slower economic growth, higher gasoline prices. Production is primarily reflecting the role of tight oil in places like Eagle Ford in 

Texas and the Bakken in North Dakota. That was not really foreseen in 2007, or if it was, it was at the far end of the optimistic 

range. 

Together those changes have resulted in a significantly reduced 

projection for net dependence on imported oil, so that is the biggest 

impact of the demand and supply shift since 2007 is the impact on 

imported oil has been dramatic. 

Mr. HALL. And what has brought about that dramatic situation? 

With regard to the Arabs that we have relied on I think at one 

time in the last, 4 or 5 years, maybe the last 2 years, for 50 or 55 

percent of our energy, and it is down to about what percent is that 

relying on? 

Mr. SIEMINSKI. It was at 60 percent in 2005, and 2012, 2011, we 

got it down to about 40 percent, and right now, it is just a little 

over 30 percent. So a lot of progress has been made in doing that. 

That is a net dependence on imported oil. 

Mr. HALL. Do you think we are nearing the E10 blend wall? 

Mr. SIEMINSKI. It is going to be very difficult, given the constraints on vehicle warranties and infrastructure issues and just in 

terms of how you can sell at above 10 percent ethanol mix at the 

pump, it is going to be very difficult, so, yes, I think that that is 

an issue. The way around that is you have to sell more E15 and 

E85, and the problem there is only about 5 percent of the vehicles 

69 

are capable of using E85 and less than 2 percent of the gasoline 

stations of the ability to sell it. 

Mr. HALL. Either of you other two gentlemen have any improvement on that answer or criticism of it? 

Mr. GLAUBER. I would just say I agree. I think that that is the 

key thing is penetration of higher blends that you just don’t have 

the pumps and the, at least currently, those higher blends are not 

being priced competitively enough on an energy basis with gasoline. 

Mr. HALL. And Mr. Scalise asked you about any doubts you had 

about the approval of E15 in the face of overwhelming skepticism 

from automobile makers, I didn’t really get your answer to them. 

Can you describe the test at EPA and DOE undertook before approving E15, and did you take into consideration things like engine 

durability or fuel pumps or anything like that? 

Mr. GRUNDLER. The testing really was very extensive. 

Mr. HALL. Was very what? 

Mr. GRUNDLER. Extensive DOE ran a lot of vehicles and ran a 

lot of miles, up to 120,000 miles, to test the impact over the full 

useful life of this vehicle. They tore down engines to look at engine 

wear. They looked at components. So the answer to your question 

is yes. I don’t have any doubts that we made that decision given 

the best information that we had at the time. 

Mr. HALL. And I didn’t fully you understand your answer to why 

you didn’t grant the waiver that we sought. I wrote you a letter 

back in 2012 and in response Texas and other States talking about 

relief of the drought, and Mr. Barton got into that a little bit. And 

I understood you to say, well, your answer wouldn’t have made any 

difference anyway; it wouldn’t have changed anything. Isn’t it a 

fact that the reason we requested that relief was a 2012 drought 

that reduced corn yields and temporarily increased corn prices? 

Mr. GRUNDLER. There is no doubt that the drought had those effects. The question in front of the agency under the law is, did we 

think that—could we make a determination that implementing the 

RFS would create severe economic harm to the State of Texas or 

other parts of the United States? And we could not make that determination. 

Mr. HALL. Well, how you made that determination I would like 

to get into that some time when we have a lot more time, but I 

don’t have much respect for the good data and the good science 

that you say EPA has handled up to this time. 

But I think I am near the end of my time. I will yield back my 

time. 

Mr. WHITFIELD. The gentleman’s time has expired. 

At this time, I recognize the gentleman from New York, Mr. 

Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chairman. 

Mr. Grundler, EPA has proposed to maintain the RFS volume 

standard for 2013. In light of current conditions and EIA’s projections, many would ask why? I would think the current conditions 

of the market would lead EPA to use the flexibility under the law 

and adjust the required volume somewhat? Your opinion on all of 

that. 

70 

Mr. GRUNDLER. You are right that we did propose not to adjust 

the volumes in 2013, although we did request comment on making 

an adjustment, and we are taking those comments right now. But 

in the proposal, and we laid out an explanation of why, we do think 

that there is not going to be a difficulty in 2013 to comply because 

of the large amount of excess credits that are available to meet the 

refiners’ obligation. 

But we are quite clear that, with respect to 2014, again based 

on EIA’s estimates as well, that the challenge becomes much greater because the statutory volumes increase substantially, and we 

have asked for the public to give us some comments and some advice on whether or not we should consider adjustments going forward, how to use our authorities to do so, and we are looking at 

those comments very carefully right now. 

Mr. TONKO. And when will you provide any sort of assessment 

of that? 

Mr. GRUNDLER. We intend to finalize the 2013 standard very 

soon, before the summer is over, and my goal is to propose a 2014 

standard shortly thereafter. 

Mr. TONKO. Thank you. 

What does USDA predict would happen to corn acreage if we 

were to reduce the target volumes for RFS? 

Mr. GLAUBER. Well, first, I think it is instructive to know what 

we are projecting if we maintain the standards, and that is for corn 

area to fall a little bit, just because productivity in corn yields were 

currently—this year, we will have numbers out on Friday—but in 

the mid 90 range for corn acreage. We anticipate that to fall to 

closer to 90, 91 million acres over the next 10 years just because 

of improvements in yields, and so more production off the current 

area. 

If the RFS were to be removed, then the real question is, obviously, does one continue to make ethanol out of corn? And I think 

that we tried to address that in the earlier question and that a lot 

will depend on the price of corn relative to oil. Right now, given the 

projections, it is assumed that producers would still or that ethanol 

producers would still have incentives to make ethanol, but understand that that is very sensitive now. Absent mandates, it would 

be very sensitive to price disruption, so higher corn prices, for example, and you could expect a reduction. And if indeed over the 

longer period that were to cause a significantly lower area of ethanol from corn being produced, then you would expect that to have 

some impact on corn area. 

Mr. TONKO. And if you repealed the RFS? 

Mr. GLAUBER. I am sorry. That was the scenario I was discussing. 

Mr. TONKO. OK, I just wanted to make certain that is what we 

were addressing. And the EPA, and for any of our witnesses here, 

EPA has proposed designating biobutanol derived from corn as an 

advanced biofuel. Does that move us away from using a food crop 

for fuel? And I am not certain this would help with food and feed 

prices, what benefit would this have, if any, in addressing some of 

the other problems with current RFS program anything from infrastructure to the blend wall and beyond? 

71 

Mr. GRUNDLER. First of all, we estimate that it does qualify for 

as an advanced biofuel, so it would provide greenhouse gas reductions, and it would provide an easier way to move this fuel into the 

transportation system. 

Mr. TONKO. In some conversations that I have had with individuals concerned about some smaller engines, those in boats or motorcycles and other specialty vehicles, they have had trouble running on even blends with 10 percent ethanol. Are fuels with lower 

ethanol blends becoming more scarce? And are they higher price 

than, what has the info feed your way been on some of these smaller specialty engines? 

Mr. GRUNDLER. My understanding is practically the entire fuel 

supply now is at a 10 percent blend. Marinas will often provide E0 

for their customers who may have older boat engines who weren’t 

designed for the 10 percent blend, but 10 percent blends have been 

around for 30 years or so, so all the modern boat engines are designed to operate well on E10. 

Mr. TONKO. Is that true, too, with the motorcycle engines? 

Mr. GRUNDLER. Yes. 

Mr. WHITMAN. The gentleman’s time has expired. 

At this time, I recognize the gentleman from Illinois, Mr. 

Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Too many questions, too little time. It is great to have you all 

here. Let me start with just a couple statements in response. Mr. 

Sieminski, I would say that no one wants to be a prognosticator, 

especially after the fact. I don’t want to do it in sports, and I don’t 

want to do it in politics, but just for the record, in 2011, you said 

there would be 2.79 billion gallons of ethanol, and production actually was 13.93 billion gallons. So projections are great. They are 

projections. We shouldn’t take those to the bank as what will happen as things will change. 

I also have to respond to Mr. Waxman. I am glad the President 

talked to college students. I would rather he come talk to my coal 

miners, who won’t be able to afford to send their kids to college because of what his announcement did yesterday, so I think you have 

to pick your audience, and I think the President did and he just 

didn’t pick the audience that are in my district. 

And so as many people in this room know that I have more desire to get this fixed than anybody. I have two refineries in my district. I have got the largest corn-producing district. I have got the 

biggest high play of oil now because of the fracking in my district. 

I have got coal mines. I have got power-generating plants, so we 

are working hard to go through this dilemma and walk away 

standing up, which I think we are going to be able to do. 

So let me go to a question. No one has mentioned, and Mr. 

Grundler really because it really is part about the requirements by 

law, no one has mentioned so far biodiesel and no one has mentioned the fact that actually it has exceeded its blending capabilities so it actually is helpful in this, is that correct? 

Mr. GRUNDLER. That is correct the country—— 

Mr. SHIMKUS. And there is no blending debate. There is no fueling debate. There is no engine debate, et cetera, et cetera, et 

cetera. 

72 

Mr. GRUNDLER. Not at current blends no. 

Mr. SHIMKUS. That is kind of a success story that is kind of getting lost. There is some success in this debate. And as I think was 

said earlier, if you are a climate person, there is reduction in the 

carbon emissions on that. 

Mr. GRUNDLER. That is true. 

Mr. SHIMKUS. So there is biodiesel is part of the success story 

that we just we have to keep in part of this debate. 

I also want to talk about the greenhouse gas threshold a little 

bit. We export corn-based ethanol is that correct overseas? 

Mr. GRUNDLER. That is correct. 

Mr. SHIMKUS. We import a cane-based advanced biofuels, correct? 

Mr. GRUNDLER. That is correct. 

Mr. SHIMKUS. Do we calculate the transportation cost of these 

two ethanol products that are, in essence, no different in a greenhouse gas calculation? 

Mr. GRUNDLER. Yes, we do. 

Mr. SHIMKUS. You do. I would like to see that. I would argue 

that, maybe, well, I would like to see how you calculate that, but 

I would argue that that doesn’t make a lot of sense if you want to 

reduce greenhouse gasses and we are sending ethanol outside and 

importing ethanol in and that is not a net increase, versus a status 

quo or a decrease. 

Let me go on. 

Mr. GRUNDLER. Can I clarify my answer, sir? 

Mr. SHIMKUS. Go ahead. 

Mr. GRUNDLER. When we do the lifecycle determination as to 

whether or not sugar cane ethanol qualifies as an advanced fuel, 

we take into account the transportation emissions from Brazil to 

the United States. 

Mr. SHIMKUS. But not the refilling of sending of an equal amount 

of ethanol and corn-based overseas to another country? 

Mr. GRUNDLER. Correct. 

Mr. SHIMKUS. And that is maybe—— 

Mr. GRUNDLER. But it is not an equal amount. It is not—the 

trade relationship is not a direct one for one. 

Mr. SHIMKUS. Let me go, what do you attribute—going back to 

Mr. Grundler again, this 2013 and not having the standards is a 

major problem because you can’t expect refineries to meet goals 

and objectives if we don’t have that. Now I applaud your most recent response on the shortly following, 2014 numbers will be approved because that could ease a lot of our stress and strain based 

upon the fact that you all have to set the blending, you have to, 

you set the standards. 

Mr. GRUNDLER. Correct. 

Mr. SHIMKUS. And my colleagues are right; we are 6 months into 

a year, and we don’t know what the 2013 standards are. That is 

why people are crazy out there. 

Mr. GRUNDLER. I understand. 

Mr. SHIMKUS. So I would say move rapidly on 2013 and quickly 

follow 2014. That could help ease a lot of pressure here. And I 

know my time has almost expired. 

73 

What do you attribute the increase in the RIN prices that occurred earlier this year to? 

Mr. GRUNDLER. Most observers, EPA included, believe that the 

market is reflecting the coming situation in 2014 and 2015, as 

these statutory volumes go up, and they are anticipating a scarcity 

of RINs or a higher cost in terms of moving higher blends of ethanol. 

Mr. SHIMKUS. So there is a risk and uncertainty premium based 

upon the unknown—— 

Mr. GRUNDLER. That is right. 

Mr. SHIMKUS. Which is why giving some—— 

Mr. GRUNDLER. I get it. 

Mr. SHIMKUS. Data might be helpful to ease that risk. 

Mr. WHITMAN. At this time, I recognize the gentleman from 

Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

I have a habit of following my colleague from Illinois, I guess. 

Director Grundler, some have advocated E85 and E15 as solutions to the E10 blend wall. What do you see as the major barriers 

of these fuels as solution to the E10 blends wall? 

Mr. GRUNDLER. There are significant infrastructure barriers at 

the moment, as has been referenced in some of my colleagues’ testimony. There are only roughly 3,000 E85 stations at the moment 

selling 85 and roughly 11.5 million vehicles that are capable of 

using it, and that is a significant challenge to moving more volumes of E85. With respect to E15, there are very stations today 

that are offering that product. 

Mr. GREEN. I heard that there are only a few stations as you said 

selling E15 in our country, and while E85 may be popular in the 

Midwest, it is not in most regions. I understand there was only one 

E85 station. I think in the Houston area, I think I found the one, 

but so it is not very widely spread, except in the Midwest. 

Mr. GRUNDLER. My understanding is that we have roughly 3,000 

retail stations that are selling versus over 150,000 stations that 

sell gasoline. 

Mr. GREEN. Do you believe the EPA has the tools available to relieve the pressure on the blend wall in the short term? And if so, 

will EPA exercise this authority in the coming months? 

Mr. GRUNDLER. Sir, clearly, the Congress provided us with a 

number of tools to adjust these standards. And right now, we are 

in the midst of getting a lot of advice. We are doing a lot of listening. And we are focusing on this very, very carefully. And I am just 

not in a position today to forecast where we are going to come out 

in 2013 and 2014. 

Mr. GREEN. On Monday, the EPA won a victory when the Supreme Court declined to hear three separate lawsuits on E15. It 

seems, however, that the consumer will actually lose though. Automakers with limited exemptions are warning consumers that their 

automobiles will not be warranted for E15. How do you not have 

doubts about the approval of E15 in the face of skepticism by our 

automakers? 

Mr. GRUNDLER. Sir, that is a very good question. I guess the way 

I would answer it is that we did do an enormous amount of listening. We did an enormous amount of testing. We did all the testing. 

74 

We looked at all the data that was available, and it simply did not 

show that there was going to be an impact on emission control systems by E15. We are not mandating the use of it, sir, and we are 

not advocates for E15. We are not opponents of E15. We simply 

made a determination under the law that it met the waiver criteria, and it will be up to the marketplace as to whether or not people will be offering that to their customers. 

As to the warranties, I would have to defer to the automakers 

why they make those sorts of decisions. 

Mr. GREEN. I guess just alcohol and oil sometimes just doesn’t 

mix. I understand EPA and DOE has for years used the Coordinated Research Council to conduct vehicle emissions studies in research products likes the national surveys of E85 fuel quality, the 

advanced collaborative vehicle emission study and the nonroad vehicle emission study. 

Can you explain why you think the coordinated council of research is valuable in these instances but discounts their E15 test 

results when it appeared that EPA and DOE played significant 

roles directly through the National Renewable Energy Lab and 

CRC’s mid-level ethanol blends research program? 

Mr. GRUNDLER. You are correct, sir. We have a long history of 

working with the CRC and cooperating on a whole variety of test 

programs. 

Frankly, we regret that we weren’t given the kind of role that 

we ordinarily have in their latest work on E15. We were unable to, 

even though we asked, to be much more involved in selecting the 

vehicles and selecting the criteria, and regretfully, we were not allowed to do that. But we look forward to continuing our historical 

relationship with the CRC in the future. 

DOE has also commented pretty extensively on the shortcomings 

of the latest E15 work that you are referring to, including that it 

hadn’t been peer reviewed, that the criteria that they chose as a 

failure criteria seemed arbitrary, that there were no control vehicles chosen, and so on, and I would be happy to provide to you their 

review of the scientific shortcoming. 

Mr. GREEN. I would be glad to see it. I appreciate it. 

Administrator Sieminski, your 2013 annual energy outlook early 

released presented a much dimmer picture for the growth of E85 

sales compared with last year. Can you discuss the reasons why 

these projections are so much lower? 

Mr. SIEMINSKI. Well, the basic reason is that the projects that 

were underway to produce cellulosic and advanced biofuels just 

simply haven’t materialized in the timeframe that we believed that 

they would. There is consequence; our projections for how much of 

these fuels can be produced just keep slipping. 

As Mr. Grundler said earlier, at the end of last year, we thought 

there would be 9.6 billion gallons of these fuels, and we are now 

down to 4 to 5—excuse me, million gallons. And these are, we only 

have two plants that are in the running at this point. One of them 

is up and operating. At one point, it appeared that there were as 

many as 10 or 12 plants to produce these fuels. And so the inability 

of the technology to advance as quickly as was expected in the 

years between 2007 and 2012 is the main factor. 

75 

Mr. GREEN. Well, obviously, it could cause a substantial volatility 

in the market if the technology is not there that we thought would 

be there and so that may be why we’re having this hearing today 

I hope. 

Mr. Grundler, can you please describe the misfueling mitigation 

measures EPA has in place and why EPA believes they are adequate? 

Mr. GRUNDLER. I would be happy to Congressman. We required 

anyone who wishes to market E15 to submit to us a misfuel mitigation plan. That plan includes labeling the E15 pumps with warning 

labels to make sure that customers don’t improperly use the fuel 

in vehicles that can’t tolerate or small engines. We require a survey 

and tracking and reporting so that we know that E15 is being 

tracked carefully and is being used properly and a number of other 

details in the mitigation. I would be happy to get you the—— 

Mr. GREEN. If you could get that. The last question is, why does 

EPA believe that 14 million gallons of cellulosic biofuels is appropriate for 2013? How much is produced so far during the first 5 

months, 6 months? 

Mr. GRUNDLER. 8,332 RIN. I want to clarify that when we came 

out with proposal, that was our best estimate at the time. We are 

now updating that estimate based on the latest information from 

both producers, and we are consulting with our colleagues at EIA, 

and the final number will be based on that most recent information. 

Mr. GREEN. Thank you very much, Mr. Chairman. 

I appreciate your courtesy. 

Mr. WHITFIELD. The gentleman from Nebraska, Mr. Terry, is recognized for 5 minutes. 

Mr. TERRY. Thank you, and I am not in the same position as Mr. 

Shimkus; we only have corn. We don’t have quite the diversity of 

resources in Nebraska as Illinois. 

But I want to focus on the waiver because I am just not grasping 

the full extent of the waiver. When the RFS was written, it included provisions for the administrator to issue waivers if the requirements of the program would impose economic harm or impose 

harm on the economy. 

And I am very interested in better understanding to what extent 

can the agency use this waiver authority? And do you agree that 

there is a waiver authority? 

Mr. GRUNDLER. Indeed, sir, and there is more than one. If we determine, as we have for the last 3 years, that there is not the cellulosic volume to meet the Congressional standard, we adjust it, 

and we can also, we have chosen not to in the past, but we could 

also adjust the total and the advanced by that same amount. In the 

past, we have chosen not to because we determined that there was 

sufficient other advanced fuel to meet that target. 

The other waiver authority, which you referenced, is a general 

waiver authority, where if the administrator can either be petitioned by a party or can on her own determine that the RFS implementation would create a severe economic harm to a region or a 

State and that the previous conversation we have been petitioned 

a couple of times and determined that, again, because of market 

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anol that the statutory test simply was not met, and we are not 

allowed to grant that waiver. 

Mr. TERRY. All right. Then, again, helping me grasp this, so because cellulosic hasn’t really gotten out of the pilot to mass production yet, you were able to just waive that portion that was designated for this cellulosic growth? 

Mr. GRUNDLER. That is correct. We adjusted the volume down 

something like 98, 99 percent, based on our estimate about what 

that volume would be in the forthcoming year. 

Mr. TERRY. So, then, the amount that could be done, normal ethanol, corn-based ethanol, you increased though, still increased the 

volume or number of gallons from 2011 to 2012, and are you looking to do that again in 2013? I realize you haven’t finalized that, 

but you said you are working on it diligently. 

Mr. GRUNDLER. The proposal would have us adopt the statutory 

volumes for total and advanced, and then we are proposing to 

waive the cellulosic portion of the standard, but not, we are not—— 

Mr. TERRY. Just the cellulosic, but there are still advanced fuels 

that are on top of the regular ethanol. 

Mr. SHIMKUS. Would the gentleman yield quickly? 

Mr. TERRY. Yes, I will yield. 

Mr. SHIMKUS. But you reduce the one point of the advanced, but 

you didn’t reduce the overall level commensurate with the loss of 

production. Is that true? 

Mr. GRUNDLER. That is correct. 

Mr. SHIMKUS. And I think that is a problem. 

Mr. TERRY. Part of the confusion here I think as well. 

So you do the estimates on the 2013 crop, and how much advanced? What is your—any of your early thoughts of how much cellulosic is going to be on the market this year? 

Mr. GRUNDLER. Our original estimate that was in the proposal 

was 14 million gallons, and we are now updating that based on the 

comments we received. 

Mr. TERRY. That is the totality. 

Mr. GRUNDLER. That is correct, and if I could just respond to 

Congressman Shimkus, the reason we didn’t make the coincident 

adjustment in the advanced is because we determined that there 

are many other fuels, including biodiesel, that can make up that 

advanced pool, as well as in other advanced, domestic advanced 

ethanol, as well as projected imports from Brazil. 

Mr. TERRY. You mentioned with E15 or greater, there are infrastructure problems. Could you state maybe at the gas station level 

what the specific problems would be? 

Mr. GRUNDLER. With respect to E15, again, based on all the people that we have been talking to and listening to, we understand 

that there are both market barriers for the widespread adoption of 

E15, as well as remaining regulatory barriers. There are numerous 

kind of State and local requirements that would need to be met to 

sell E15. Many States still have a cap of E10 for sales in their 

States. There are underground storage tank and dispenser requirements that need to be met. So these all contribute to barriers to 

more E15 sales. 

My own opinion is that these liability concerns are the predominant challenge at the moment. 

77 

Mr. WHITMAN. The gentleman’s time has expired. 

At this time, I recognize the gentleman from Pennsylvania, Mr. 

Doyle, for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman, and thank you to the 

panelists. 

Dr. Grundler, I see the President’s Council of Economic Advisers 

is warning us that increasing production of food-based fuel, such as 

ethanol, not only increases the demand for agricultural feedstocks 

but may also make demand less elastic, through such measures as 

biofuel blending requirements, and as such, the integration of food 

and energy markets can cause shocks in one market that get transmitted to the other. We have seen the expansion of corn ethanol 

increase corn prices by 36 percent from 2000 to 2009. 

CBO estimated that the use of ethanol for fuel accounted for 

about a 28 to 47 increase in the price of corn and a 10 to 15 percent 

increase in food prices. And it is important to note that these increases occurred during a time when the U.S. harvested a record 

13.1 billion bushels of corn. 

Grocery bills have been rising 3 to 4 percent every year, and they 

will rise by the same margin in 2013. In 2011, retail food costs rose 

3.7 percent according to the USDA. After increasing corn ethanol 

mandate in 2007, the consumer price index for meat, poultry, fish, 

and eggs accelerated by 79 percent. The doubling of the ethanol 

mandate in 2007 caused a 30 percent increase in the price of corn 

from 2006 to 2010, according to economists. And the USDA is 

warning us that corn shortages, caused in part by the ethanol mandate, will drive up U.S. food prices by another 3 to 4 percent in 

2013. 

In light of your comments and your written testimony on the E10 

blend wall, what tools does the EPA have to ensure that higher 

blends of ethanol into gasoline will be filled by cellulosic and advanced biofuels? As we are moving from E10 to E15, what can you 

do to make sure that that space is not entirely filed by corn ethanol 

that can negatively affect feed prices and for farmers and food 

prices for consumers? 

Mr. GRUNDLER. As we have been discussing, the agency has a 

number of tools, including its responsibilities on an annual basis to 

set these different standards, these four different standards. With 

respect to what will ultimately be the mix of these different fuels 

is really something that is going to be a market choice. We will be 

establishing, again, what our best estimate of what the cellulosic 

volume will be. And with respect to the total and advanced, we will 

also be setting those targets. But how that gets sorted out in the 

marketplace in terms of the mix will be left to the market. 

Mr. DOYLE. And also, I understand your testimony, you said that 

EPA is recently proposing to broaden the specific fuels that will 

qualify under the RFS program, can you tell me a little bit more 

about that proposal, and what you are doing to make this program 

as flexible as possible? 

Mr. GRUNDLER. Thank you. Yes, we have been very busy evaluating these different feedstock and pathway petitions that people 

submit to us and doing the necessary lifecycle analysis to determine what their overall emissions would be and whether or not 

they qualify for these advanced categories. 

78 

The reason this is important work and why it is important that 

we continue to find ways to streamline this process and make decisions faster is because this gives the marketplace many different 

options and choices in terms of complying with their obligations, as 

well as has been discussed fostering innovation and invention in 

lower cost ways to meet the standard as well as provide the greenhouse gas benefits. 

So we have—and I would be happy to give you the details of 

this—approved quite a number of advanced pathways that are 

sourced domestically from these different feedstocks and using 

these advanced technologies that will provide these benefits. 

Mr. DOYLE. Good, I will look forward to that detail. Mr. Chairman, that is all I have. 

Mr. WHITMAN. Thank you. At this time, I recognize the gentleman from Ohio, Mr. Latta, for 5 minutes. 

Mr. LATTA. Well, thank you, Mr. Chairman, I appreciate it. And 

thank you very much for our panel. And if I could ask Mr. 

Grundler, thanks very much for your testimony today. 

And one of the things I have been hearing, oh, in the last year 

really deals with the renewable identification number, RINs, and 

a company was out there and some others that were selling fake 

RINs for the fuel credits. How is it, for one thing, that these companies were doing that and they weren’t caught and that took so 

long? 

Mr. GRUNDLER. Well, sadly in addition to all the innovations that 

the RFS policy has inspired in terms of new technology, it has also 

inspired a lot of innovation in the criminal mind. And we have discovered what can only be called as counterfeiters, and we discovered this through our enforcement arm at the agency, through hotlines and tip lines. And as I hope you can appreciate, it takes a 

while to build a criminal case and to gather the evidence to make 

the prosecution. 

But the good news is that the United States achieved several 

convictions already with extended jail time, prison time for these 

counterfeiters as well as very high fines and confiscated private 

jets and luxury automobiles in the process. 

So I think that is a good result. The bad result that you are no 

doubt alluding to is this did create a chill in the marketplace because of concern about the validity of RINs that obligated parties 

were buying. 

Mr. LATTA. Could I just ask, and you are probably ready to answer that, but what steps have the agency taken to prevent this 

from happening in the future? 

Mr. GRUNDLER. I was just about to get to that. Again, we did a 

lot of listening. We worked with the oil industry and the producers 

and third party validators and proposed earlier this year a voluntary quality assurance program that would provide for an affirmative defense, so if you are an obligated party and you utilize one 

of these quality assurance programs in purchasing these RINs, and 

they later turn out to be fraudulent, the government is going to 

hold you harmless from penalizing you for that purchase. This is 

public comment, we have got a number of different options we have 

proposed, and we are going through those comments right now, and 

we will be finalizing this at the end of the year. But I think it has 

79 

been successful, sir, in opening up this RIN market, and the evidence there is we have got more biodiesel producers this year than 

we did last year. And that was our concern, that these small producers would be frozen out of the market because people would 

only buy from large producers that they know that have deep pockets. 

Mr. LATTA. Let me ask this, you say you have an affirmative defense out there. Some of the information I have had, maybe this 

is the affirmative defense is since that time, is there still a buyer 

beware along with that affirmative defense? 

Mr. GRUNDLER. Yes. 

Mr. LATTA. May I ask this, this agency, is there a due diligence 

that has to be exercised by that buyer of that RIN? 

Mr. GRUNDLER. We do expect some due diligence. But, again, if 

they do that due diligence, if that RIN has been through this quality assurance program, then the affirmative defense would apply. 

Mr. LATTA. Could I just ask, what is your definition of due diligence then that a company would have to exercise? 

Mr. GRUNDLER. Can I get back to you on the record on that? This 

is a legal question that I would like to consult with my enforcement. 

Mr. LATTA. Because I think, again, if there is an affirmative defense on the one side, but then you are supposed to be exercising 

due diligence and the two have to come together at some point, I 

think it is pretty important that folks know exactly what that is 

because you might think, well, I have gone to the Web site, this 

is what the EPA says that this company or this RIN is a good one, 

and I think, OK, even if something goes wrong, I have got an affirmative defense, but then if the question is then for that person 

or that company, I should say is what happens with the definition 

of the due diligence, and we will—— 

Mr. GRUNDLER. We will be very clear on that. 

Mr. SHIMKUS. I was—— 

Mr. LATTA. I will yield to the gentleman. 

Mr. SHIMKUS. I just wanted to—I just want to put from the 

World Bank May 20, 2013, on this food fuel debate, the World 

Bank says in the final paragraph, it concludes that most of the 

price increases are accounted for—I am talking about food prices— 

are accounted for by crude oil prices, more than 50 percent, followed by stock to use rations and exchange rate movements, which 

are estimated about 15 percent each. Crude oil prices mattered 

most during the recent boom period because they experienced a 

large increase. So that was in reference to the food fuel debate and 

escalation of prices mostly on energy costs. 

Mr. LATTA. Thank you very much, Mr. Chairman. 

My time has expired, and I yield back. 

Mr. WHITMAN. At this time, I recognize the gentleman from Kansas, Mr. Pompeo, 5 minutes. 

Mr. POMPEO. Great. Thank you, Mr. Chairman. 

Like Mr. Shimkus, I have got a lot of questions, too. It is no secret to anybody here that I have a deep skepticism of energy subsidies and mandates. This skepticism extends to the RFS as well. 

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ducers in the world, but we are past the time when parochial interests can set policy for the country. 

RFS is a bad policy. I think today’s testimony bears it out. Folks 

back home are listening to RINs and blend walls and cellulosic 

mandates and RIN waivers and confiscation of airplanes associated 

with a market, right, consumers trying to buy gasoline at the pump 

and fuels to drive their trucks around. I think their head would 

spin with a set of Rube Goldberg device like the RFS that we have 

ended up with. 

I hope we can move away from that. I expect we can’t undo it 

just yet, and I hope this hearing will lead us to a thoughtful path 

forward on how we get how out of this mess. 

Mr. Grundler, you talked about a minute ago a question I think 

it was Mr. Terry’s question, you talked about innovation that has 

resulted from the RFS. I would tell you I think mostly what has 

happened is rent seeking. So tell me what innovation the RFS has 

lead to over the I guess we are between 2005 and 2007 and now. 

Mr. GRUNDLER. Thank you for that question, Congressman. 

The innovation I was referring to was coming up with new ways 

to make transportation fuel from a whole variety of different feedstocks, from wastes, to switch grass to crop residues in a way to 

power America’s cars and vehicles. 

Mr. POMPEO. And in spite of all that information, where, according to Mr. Shimkus, if I understood it right, about half the way to 

the 36 billion gallon target. Is that right? 

Mr. GRUNDLER. That is correct. 

Mr. POMPEO. So we have got less than half of the innovation that 

Members here who voted for this bill half a decade ago, almost a 

decade ago, supposed we might get as a result of this set of mandates. 

Mr. Grundler, you have got a difficult challenge. You have got to 

implement not only this RFS but the CAFE and GHG standards 

for cars and trucks. The RFS last revised in 2007, we have got new 

CAFE and GHG rules. Have the CAFE and GHG rules affected 

compliance with the RFS in a material way? 

Mr. GRUNDLER. What they have done is reduced the demand for 

gasoline in the country as my colleague, Mr. Sieminski, has pointed 

out, and that makes the blending challenge that much harder. So 

with respect to that, I don’t think it has affected it yet, but it has 

certainly accelerated this blend wall phenomena faster than anyone 

expected in 2007. 

Mr. POMPEO. So we have got two sets of rules and we are now 

trying to mix too many renewable fuels into too little gasoline, that 

is the mathematical challenge you face is that correct? 

Mr. GRUNDLER. Essentially. 

Mr. POMPEO. I have heard from Kansas refiners, pretty small refiners, 130,000 barrels a day in some cases, I heard some folks in 

Pennsylvania have the same problem, they are not integrated merchant refiners, and there is no relief for them specifically today. 

What I wanted to know I guess, Mr. Grundler, do you think you 

have the authority to grant some sort of relief to these nonmerchants smaller, although not small by regulation, refiners? 

Mr. GRUNDLER. They are not eligible for the small refiner provision under the law, which is the definition of 75,000, so with reVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00086 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
81 

spect to a particular facility, a specific relief, they would not be eligible, no. 

Mr. POMPEO. So you don’t think you have the authority to grant 

them relief or a waiver in any way under the statute as currently 

drafted? 

Mr. GRUNDLER. I do not. 

Mr. POMPEO. Thanks. 

I guess the last question, and this is really both to Mr. Grundler 

and Mr. Glauber, you both referred to that the challenge of higher 

blends. 

And you, I think, Mr. Glauber, said you called it a price disruption as impacting how much is blended if we remove the RFS. 

I guess I don’t think of markets creating price disruptions. I 

think of mandates as creating market disruptions. I am interested 

in what a price disruption is when we have willing consumers and 

willing sellers trying to come to an agreement to price and purchasing. 

Mr. GLAUBER. Yes, let me clarify. All I am talking about is price 

variability, and I am just saying when prices move the opposite 

way, the market will respond, either by producing or not producing. 

Mr. POMPEO. Fair enough. And then you have both also referred 

to absence of infrastructure pumps and the like. Isn’t that just 

price, too? When you talk about liability concerns, isn’t that just a 

price term, as well? Isn’t what we really face here, we just have 

consumers don’t want this stuff because they are not willing to pay 

for it. You can build infrastructure; it is just money. You can buy 

insurance to take your liability risk away. It is just money. Isn’t 

it the case it is just a price issue, and we have got an RFS that 

is trying to artificially intervene to solve this lack of consumer demand for this product? Do either of you agree with that or disagree 

with it? 

Mr. GRUNDLER. There is no doubt that consumers have not demanded high amounts of E85, and it is likely because of the way 

the product is priced. It is not today priced consistent with its energy content and I think consumers, some consumers have figured 

that out. 

And I would just say you are right, no one is going to put in infrastructure unless they have—are going to make those investments themselves unless they can see recouping those investments. 

Mr. POMPEO. Thank you, Mr. Chairman. I yield back. 

Mr. WHITFIELD. Gentleman’s time has expired. 

At this time recognize the gentleman from Texas, Dr. Burgess, 

for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. Grundler, let me ask you a question, because I guess back 

in the summer of 2010, the soon-to-be-departed Ed Markey had a 

briefing where your agency, the EPA, the Department of Energy 

were brought into this room, and it wasn’t a hearing, so there was 

no official transcript. It was a briefing. But I asked the question 

of both the EPA and Department of Energy about the testing being 

done on vehicles, automobiles, to allow the introduction of E15 in 

a safe manner. And what I got from both the Department of Energy and the Environmental Protection Agency was the other guy 

is doing the testing. 

82 

Well, that was unsatisfactory. I really had a lot of difficulty actually getting the testing data from either Department of Energy or 

the EPA. But now you cite this afternoon, in response to I think 

Mr. Barton’s question, you cite extensive vehicular testing. Can you 

give me a figure of the number of vehicles in which this was tested? 

Mr. GRUNDLER. I don’t want to give you a misleading figure, so 

I would like to respond for the record. 

But my recollection is that the DOE tested on the order of 80, 

89 somewhere in that order of magnitude. But I would like to respond for the record specifically. 

And I would also like to, if you are interested, provide you with 

any other technical information or reports as a result of that testing. I can state with 100 percent confidence that DOE did have the 

lead and did conduct this testing. 

Mr. BURGESS. Right. And that was the testing conducted out at 

Sandia Labs. 

Mr. GRUNDLER. In part I believe it was in Sandia, but I was not 

involved at the time. But I can certainly find out. 

Mr. BURGESS. Well, according to the USA Today from about a 

year ago, May of 2012, the engine durability study took duplicates 

of eight different vehicle models, spanning the 2001 to 2009 model 

years. All 16 vehicles were tested over a 500-hour durability cycle 

corresponding to about 100,000 miles of vehicle usage. A range of 

engine operating parameters were monitored during the test, including cylinder compression, valve wear, valve leakage, emissions, 

and emission control, system diagnostics. Two of the engines tested 

on E15 had mechanical damage, another engine showed increased 

tailpipe emissions beyond the allowable limit. 

So that is three out of the eight in this admittedly limited, but 

I am given to understand, I mean, this was the study upon which 

the agencies are relying to provide us with this information. 

Now, the question comes up for the retailer, for the mom-and-pop 

store, the 7–Eleven that is selling gasoline, what limit of liability 

do they have if someone doesn’t read the fine print on the little 

stick-on label that is going to be affixed to the tank that ‘‘don’t put 

this in your car if your vehicle model is earlier than 2001’’? What 

limit of liability does the retailer have in that situation? 

Mr. GRUNDLER. Congressman, I would like to respond for the 

record with respect to the liability question, because I don’t feel I 

am qualified to answer that aspect of the question. 

I do want to clarify that with respect to the testing that you referenced, that is only part of the information that the Agency relied 

on to make its determination. And I would like to respond more 

fully for the record to describe the bulk of the work that DOE conducted, as well as the other studies that EPA looked at with respect to E15 and its impacts on emission control systems. 

Mr. BURGESS. Well, I just have to tell you, I have got a radio 

show, ‘‘Car Guy,’’ on Saturday mornings back in the Dallas-Forth 

Worth market, Ed Wallace. And he has written about this extensively in his own column in the Fort Worth Star-Telegram and 

Businessweek. I just want to quote from an article that he wrote 

in Businessweek in 2010: ‘‘The older cars owned by those less financially secure will likely be the first to go. In fact, that has alVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
83 

ready happened in thousands of cases nationwide.’’ He is talking 

about the introduction of E15 of these vehicles. ‘‘Maybe when it 

starts happening to some of those on more solid financial ground 

then someone will listen. Adding an expensive, harmful, useless 

filler to gasoline is not remotely the same thing as having a legitimate national energy policy.’’ 

Mr. Chairman, I thank you—— 

Mr. SHIMKUS. Will the gentleman yield for just 10 seconds? 

Mr. BURGESS. I will yield for 14 seconds. 

Mr. SHIMKUS. Just a point. There is legislation that I have introduced on liability protection, both for the retailer and for the refiner, on selling an approved fuel—— 

Mr. BURGESS. Reclaiming my time. I will also mention that I 

have introduced legislation that would actually take us back to the 

pre-2007 days, when the inadvised increase in the ethanol mandate 

was passed by the House in 2007 and signed by President Bush in 

that year. It is H.R. 1469, if members want to take a look at the 

legislation. 

Thank you, Mr. Chairman. I will yield back. 

Mr. WHITFIELD. The gentleman’s time has expired. 

At this time I will recognize the gentleman from Texas, Mr. 

Olson, for 5 minutes. 

Mr. OLSON. I thank the chair. And welcome to our witnesses. 

This clearly is a very passionate issue that crosses party lines. But 

we owe the American people a thorough review of the RFS for one 

simple reason: The American energy outlook that drove the creation of ethanol tax subsidies in RFS is in the dustbin of history. 

Tax preferences for corn-based ethanol were created last century 

and mutated into RFS this century. 

Why the spur of government activity? Because we thought we hit 

peak gas. Meaning that to feed our ever-growing demand for gasoline we had to buy more and more oil from foreign sources that 

weren’t reliable. Our production was going down every single day. 

But the American innovator, with new technology, has pushed 

peak oil back to the next century. And while I think the best solution to this problem is to repeal RFS, my mind is not closed. But 

it is not empty either. 

Mr. Sieminski, it seems to me that the only way that RFS could 

be viable in years ahead, without any modifications, would be if 

market conditions dramatically change. And following former 

Chairman Dingell’s lead, I will ask you to answer yes or no. 

Yes or no: Does EIA expect a dramatic spike in gasoline demand 

over the next few years? 

Mr. SIEMINSKI. Does EIA expect what? 

Mr. OLSON. A dramatic spike in gasoline—— 

Mr. SIEMINSKI. No, sir, we do not. 

Mr. OLSON. Absolutely not. 

Yes or no: Does the EIA expect a spike in the use of either E15 

or E85? Spike E15, E85, next couple years. 

Mr. SIEMINSKI. In production volumes? 

Mr. OLSON. Production volume, use in automobiles, transportation. 

Mr. SIEMINSKI. No, we are seeing a lot of difficulty in producing 

those fuels. 

84 

Mr. OLSON. So I think that is a no; no spike there. 

Yes or no: Does EIA expect sudden widespread production of advanced biofuels in the next few years? 

Mr. SIEMINSKI. Not without a technological breakthrough. 

Mr. OLSON. There we go. So in your opinion, these facts bode 

well for compliance with the RFS as it stands today? 

Mr. SIEMINSKI. As my testimony said, the RFS as it is currently 

constituted simply can’t be met. 

Mr. OLSON. OK. So my next question for you, sir, if it doesn’t 

match the standards, if all those answers were no, can RFS be 

saved or is it easier to end it and start over making a product and 

policy that reflects new U.S. energy reality? Think so? Good idea? 

Mr. SIEMINSKI. That is a policy issue. 

Mr. OLSON. OK. Appreciate that. 

And my next question is for Dr. Glauber. 

Sir, in your opening remarks you touched on how corn-based ethanol has increased the price of commodities. Conclusions vary, but 

you cited several studies discussing ethanol contributing to over 30 

percent of the increase in corn prices. And I have a copy of the 

USDA research piece that was put out earlier this year by Dr. 

Richard Volpe, Ph.D., from the Food Markets Branch. 

[Slide shown.] 

Mr. OLSON. And the first panel is the outlook for 2013. And I 

quote, ‘‘But high-priced corn, soybeans, and wheat will permeate 

supermarkets. Structural inflation for beef, pork will intensify. 

Overall, inflation higher than the historical average.’’ 

Next slide. 

[Slide shown.] 

Mr. OLSON. ‘‘What does this mean for consumers? Food prices increase.’’ 

I heard from Wendy’s restaurants last week. And they said very 

publicly that their average retail location lost nearly 30,000 per 

store last year because of commodity price increases. Restaurants 

have a tight profit margin. That is money that doesn’t go towards 

expansion and doesn’t go towards a new employee. Briefly, what 

are the ways in which commodity prices increase have negatively 

impacted nonfarm businesses? 

Mr. GLAUBER. Well, Congressman, understand last year most of 

this is due to the fact that we had a very extreme drought in the 

Midwest that sharply reduced corn and soybean yields and pushing 

those crops’ crop prices up substantially. I think what is the surprising thing—that piece was written a while back—I think the 

surprising thing is the fact that thus far we haven’t seen much increase in the overall retail price of food. 

Now, this isn’t saying that Wendy’s or other businesses that you 

have talked about haven’t faced higher costs. I understand that. 

But at least as measured by BLS, Bureau of Labor Statistics, just 

the most recent report said prices for food at home were about 0.8 

percent higher than they were at this time last year. 

Now, to understand how inflation works, when you see higher 

corn prices, it doesn’t make itself known right away. And that is 

largely because one of the major uses for corn is for cattle feed and 

for livestock feed. So that takes time. You see shorter, you know, 

smaller margins, and some producers liquidate herds. That drives 

85 

up the price of livestock products, which then shows up in retail 

foods. 

That effect is much, much, much smaller than the overall effect 

on commodities. So corn prices can go up a lot, retail prices go up 

much, much smaller percent. And that is largely because the farm 

gate price in a retail food dollar is only about 14 percent or so. You 

have transportation of it, you have distribution. 

But it is an impact on inflation. When ERS just put out new 

numbers—the Economic Research Service, of which you were 

quoting from there, they just put out new numbers yesterday. They 

are talking about food inflation being on the average of 2.5 to 3.5 

percent this year, which is certainly higher than it was last year, 

but in line more or less with where we have been over the last 10 

years. It is not denying that these things have inflationary pressure, because they do. But understand again the main part was because of the drought that we saw. 

Mr. WHITFIELD. Gentleman’s time has expired. 

At this time, recognize the gentleman from Virginia, Mr. Griffith, 

for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Mr. Grundler, let me ask you this question, and here is the concern. Our retail gas folks—and you have heard the questions earlier, and I am not going to go back through the history about E15. 

And we heard about the question on, you know, legal liability for 

the person if they put the wrong fuel into the engine for a car that 

is pre-2001. Of course, I am driving a 2003, and I don’t know if 

that will impact them a little bit or not. But for these older cars 

we have heard about that, and you are going to get us an answer, 

and I appreciate that. 

But one of the concerns that a lot of the folks who sell the gas, 

the convenience stores and the gas stations, is quite frankly they 

are also concerned that, you know, if they decide that they are 

going to sell the E15 alongside E10, what is the risk to them that 

your agency will hit them with a violation of the Clean Air Act? 

And there is some concern, they gave me some history on it, because apparently when they were switching from, you know, unleaded fuel to leaded fuel, if the gas station owner didn’t go out and 

physically say, no, you can’t buy, that is the wrong car for that 

leaded gas, they got fined, and it appears the fines that can be assessed are up to $37,500. 

So what I am asking you is, is that there have been some indications that certainly your agency wouldn’t go in that direction, but 

we have nothing in writing to assure these folks. I am asking you, 

can you get us something in writing that will assure the convenience store operators,the gas station operators that, you know, if 

they are trying to do what is right, they are not going to be fined 

when a consumer comes up and puts the wrong kind of gas into 

the vehicle. 

Mr. GRUNDLER. Just to clarify, sir, the question is will they be 

fined by—— 

Mr. GRIFFITH. For a CAA violation. 

Mr. GRUNDLER. —the government—— 

Mr. GRIFFITH. By the government, yes. 

Mr. GRUNDLER. —if a consumer ignores the label and—— 

86 

Mr. GRIFFITH. That is the question, sir. 

Mr. GRUNDLER. I would be happy to take that back and talk to 

my counsel and see what our response would be. 

Mr. GRIFFITH. It would seem to me, you know, we heard testimony it is going to be difficult to get the E15, it is going to be difficult to use, that there are going to be some problems, we have got 

a question about legal liability, would seem to me at the very least 

that is something that the government ought to be able do, is to 

reassure these folks that on top of all the other headaches in trying 

to move forward with this program that they don’t have to worry 

about the government coming in and hitting them with a pretty 

hefty fine. Because if you are a small retailer, not a big chain— 

maybe the big chains can handle it, but the small retailer, that is 

a lot of money, particularly in a district like mine where the average household income is only $36,000 a year. That is, you know, 

annual salary for somebody. 

Mr. GRUNDLER. I understand. In fact, this issue was just brought 

to my attention yesterday by the head of the association of these 

kinds of businesses. 

Mr. GRIFFITH. Sure. 

Mr. GRUNDLER. So we are listening very carefully. And if there 

are any kind of barriers that EPA is putting in the way, we would 

like to address those. 

Mr. GRIFFITH. I appreciate that. 

Dr. Glauber, you have talked a little bit about the corn costs 

going up affecting the cost of food. But don’t we also have a situation where it affects those livestock dealers? And I think you just 

mentioned that some of them are liquidating their herds. And isn’t 

it maybe the unintentional consequence that we have helped the 

row farmers but we have hurt all these other farmers? And it is 

certainly not the intent of the government to hurt the livestock, 

poultry, and dairy farmers, is it? 

Mr. GLAUBER. Well, it is certainly the case that if you look from 

2005 to current that profits in those industries have declined. And 

it is no mystery, it is due to the higher feed costs. It is been exacerbated and particularly over the last year exacerbated by the 

drought, which not only shot up feed prices, but also reduced pasture conditions in most of the U.S. 

Mr. GRIFFITH. Right. And wouldn’t we expect at some point on 

the food inflation, I mean, not only because the feed costs went up, 

but because the liquidation of some of those herds, that at some 

point there may be pressure upward on the price of beef, particularly? 

Mr. GLAUBER. Well, again, that is how inflation typically occurs 

in those industries. I would just point out that one thing—— 

Mr. GRIFFITH. Got to be quick, because I am running out of time. 

I have got another question. 

Mr. GLAUBER. I am sorry. 

Mr. GRIFFITH. I will get the rest of it from you at a later time 

because it is important—— 

Mr. GLAUBER. I am a talkative guy. I apologize. 

Mr. GRIFFITH. That is all right. We are trying to get some information here. 

87 

And the problem is these industries I think should factor in on 

a decision when you are hurting these industries on the waivers. 

But last year I one was of the Congressmen that wrote a letter asking for a waiver—and this is coming back to you, Mr. Grundler. 

The Governor of Virginia asked for a waiver trying to help our 

farmers out. Do you need new legislation—because the waiver 

wasn’t granted in a time when I think it probably screamed to be 

granted—do you need new legislation or do you think that the EPA 

can actually look at these waivers in an unbiased manner and 

grant some of these waivers? When, like last year, we had a 

drought, it is affecting the farmers in my district. And I have an 

agriculture and coal district. It is two of my big industries. And we 

are under attack on coal now. Seems like agriculture is not getting 

any help when it needs it. Isn’t there some waiver process or do 

you want me to put it in a bill? 

Mr. GRUNDLER. Of course, it is completely up to Congress in 

terms of how you would like the EPA to administer these authorities. You gave us a pretty stringent test, which was severe economic harm, and that the RFS is responsible for that. Again, based 

on all the information and the objective analysis we did in response 

to the Governor of Virginia’s request, we determined that the demand for ethanol is such that waiving the RFS would not have influenced that demand, would not have influenced feed prices, would 

not have influenced corn prices at all. 

Mr. GRIFFITH. I would just say that my farmers in my district, 

I can’t speak to the rest of the country, disagree. 

And I yield back. 

Mr. WHITFIELD. Gentleman yields back. Gentleman’s time has 

expired. 

At this time, recognize the gentleman from New York, Mr. Engel, 

for 5 minutes. 

Mr. ENGEL. Thank you, very much, Mr. Chairman. I appreciate 

it. 

And I first want to say that there has been a lot said, both good 

and bad, obviously, regarding the Renewable Fuel Standard. And 

the most important information I think to remember is that the 

RFS reduces our dependence on foreign oil and reduces our carbon 

emissions. And we will have to see whether or not it will be a success or a failure. 

But I think there are things we can do now to help strengthen 

the RFS, decrease our reliance on foreign oil, and improve our national security. For many years, and I just recently introduced the 

bill for this Congress, I call it the Open Fuel Standard Act, which 

I believe is a complement to the RFS. I introduced it in a bipartisan way, as I always have, with Congresswoman Ileana RosLehtinen as my cosponsor. 

And what the legislation essentially does is requires auto manufacturers to build cars that can run on alternative fuels in addition 

to gasoline. Mr. Shimkus and I have in previous Congresses 

teamed together to push this. This could include ethanol, methanol, 

natural gas, electricity, biodiesel, hydrogen, or a new technology. It 

would empower consumers to make a choice about which fuel was 

best for them. And I hope that we would take up this legislation. 

88 

Got the idea for it many years ago when I was the chair of the 

Western Hemisphere Subcommittee in the Foreign Affairs Committee and I drove into a gasoline station in Brazil and saw that 

there were many blends, many mixes, many choices that consumers had. And since I believe that choice helps keep costs down, 

it seemed to me that it was foolish for us not to do it in this country. 

And when I learned more in those years about what it would cost 

to manufacture flex-fuel cars in America, no one told me it would 

ever be more than $100 a car to manufacture them. In fact, some 

experts said it was as low as $35 a car. The most anyone told me 

was $100. And so for such a little amount of money, it seemed to 

me almost criminal that we weren’t doing it. 

So let me ask Mr. Grundler, one of the major concerns with the 

RFS is the so-called blend wall. And can you comment on how 

adoption of my Open Fuels Act and the adoption of more flex-fuel 

vehicles might affect the blend wall? 

Mr. GRUNDLER. That is hard to answer, sir. Currently, as has 

been stated, I think there are somewhere between 10 and 12 million flex-fuel vehicles on the road right now. But it appears, based 

on the evidence, that consumers are not using them to buy E85. I 

think roughly 100 million gallons of E85 was sold last year. Perhaps Mr. Sieminski has got a better number. 

And it is likely that is due to a number of factors. Some owners 

don’t know they have got a flex-fuel vehicle. Some owners have 

these flex-fuel vehicles but they may live in Texas where, I learned 

earlier, that there might be one station selling E85. And some are 

discouraged by the price of E85. 

So your question, if there were more flex-fuel vehicles available 

would that change this pricing dynamic, and I don’t know if it 

would. Today, I think Ford is roughly making 40 percent of their 

vehicles as flex-fuel; General Motors is 40, maybe, slightly above; 

Chrysler is making a significant percentage. So they are on track 

to meet their commitment of 50 percent of production. And yet the 

evidence to date shows that consumers have not been choosing to 

use the higher blend ethanols. 

Now, that condition may change if the pricing structure for E85 

changes. But that remains to be seen. 

Mr. ENGEL. Yes. I believe that it would increase consumer demand. But I do agree with your thinking that a lot of people right 

now are not aware of it. It is not something that we promote or 

we push. And if people don’t see it is going to bring them any kind 

of benefit at the pump, everyone likes to think they care about the 

environment, but they care more about their pockets, I think. I 

think that is part of it. 

Let me ask Administrator Sieminski, would you agree, what 

would be your opinion, do you think that adoption of the Open Fuel 

Act would increase consumer demand for ethanol and other alternative fuels? 

Mr. SIEMINSKI. I have to ask our people to take a look at it. I 

think the market itself is driving some alternative fuels. I just 

heard today from Ford that there is a very high demand. They 

can’t even meet the demand for heavy pickup trucks that use compressed natural gas, for example. 

89 

So I think that there is some consumer demand out there for 

these fuels. And as Mr. Grundler said, a lot of it has to do with 

consumer behavior and what the price of the fuels is. If we had, 

either through a regulatory system or through the market itself, 

lower prices for these advanced fuels, then I think that there would 

be a lot less consumer resistance. 

Mr. WHITFIELD. The gentleman’s time—— 

Mr. ENGEL. Well, let me say—I see my time is up— but I just 

want to say I believe with all my heart that if it works in Brazil 

it can work here if we wish it to work. But I thank you both for 

your comments. 

Thank you, Mr. Chairman. 

Mr. WHITFIELD. Now, some of you in the audience may noticed 

that these two gentlemen on the left, Mr. Welch and Mr. Matheson, 

have been here the entire hearing. And some of you, when I 

stopped rotating, looked quizzically at me. And I want you to know 

I have great admiration and respect for both of these gentlemen, 

and I am not discriminating against them. But we have a rule in 

the Energy and Commerce Committee that if you are not a member 

the subcommittee you have to wait until every member of the subcommittee has asked a question. So while they are a member of 

other subcommittees on the Energy and Commerce, and they are 

valuable members of the Energy and Commerce, that is why we 

waited for that. So I didn’t want you all to boo and hiss at me when 

I left this afternoon. 

But I am delighted to recognize them now. And I recognize Mr. 

Matheson for 5 minutes. 

Mr. MATHESON. Well, thank you, Mr. Chairman. And I would not 

boo or hiss you. I can tell you that. And I appreciate the witnesses 

being here today. 

I have a lot of questions. I assume maybe if we can’t get them 

all in, we can ask for written questions after. That would be great. 

Dr. Glauber, you have talked in response to a few different questioners about RFS, the RFS impact on increasing corn prices and 

how that translated into the broader issue of raising food price. 

You mentioned that the drought may have been a more significant 

factor in that 1 particular year. Has the Department of Agriculture 

really tried to analyze this where they normalize that 1 year where 

there was a severe drought? 

I mean, this is something that has been around for a long time. 

We are increasing the cost of corn over time, it has been going up. 

In your testimony you mentioned that. I just think it would be 

helpful to this committee to understand what the impact is on food 

or if the Department has had a chance to analyze that, taking out 

the factor of the significant drought impact. 

Mr. GLAUBER. Yes. And it is a great question and an obvious one. 

We did actually look at this back in 2008. I believe I testified before an Energy Committee over in the Senate. And there, if I remember correctly, and I can get this to you in writing and get the 

study to you. 

Mr. MATHESON. I appreciate that. 

Mr. GLAUBER. But there the impact on corn again in the order 

of 30 or so percent impact, on soybeans in the order of 40, 45 percent, as high as that, and how that translated in, in terms of a perVerDate Nov 24 2008 14:06 Feb 05, 2014 Jkt 037690 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-61 CHRIS
90 

centage impact on retail food prices was actually pretty small, like 

in the order of a percentage point increase on CPI. Again, I want 

to be very careful here. 

Mr. MATHESON. I understand. 

Mr. GLAUBER. But again the point is, is the transmission is a little bit smaller—— 

Mr. MATHESON. I would be interested to see how are going, going 

forward, too. That was 2008. 

Mr. GLAUBER. Happy to answer that. 

Mr. MATHESON. Mr. Grundler, we talked earlier, in response to 

an earlier question, somebody was talking about the carbon emission benefits of advanced biofuels. Can you speak briefly to the carbon emissions from corn-based ethanol on a lifecycle basis? 

Mr. GRUNDLER. I would be happy to. As you probably know, Congress, in developing the RFS, came up with basically two different 

categories of fuels and chose to grandfather any facility that hadn’t 

commenced construction at the time of passage. So corn-based ethanol, most of that volume is, in fact, grandfathered, and so it is not 

required by law to meet the 20 percent greenhouse gas reduction 

threshold. 

Now, we know over time that there are a number of economic incentives to improve the efficiency of your operation to look for 

cheaper crops, seek higher yield feedstocks. So we expect that that 

efficiency will improve. And, in fact, in our analysis of new plants 

and future plants out in 2022, when we did the impact analysis, 

did determine that those new plants would achieve the 20 percent 

reduction. 

Mr. MATHESON. But the current plants, because they are grandfathered, are not. 

Mr. GRUNDLER. Well, it depends. It was going to be a plant-specific thing. For example, those plants that may have switched from 

coal to natural gas would be more efficient. 

Mr. MATHESON. Let me ask you, you have had a few questions 

also from folks about how you undertook the testing for impact on 

automobiles from going to E15. You may have answered this, but 

I just want to clarify this. Did it just focus on emission controls or 

did the tests include specific tests to evaluate engine and fuel system durability? 

Mr. GRUNDLER. There has been a lot of confusion on that, sir. 

And I would be happy to give you the details. But the answer is 

that the Department of Energy looked at both, and in fact did tear 

down a number of vehicles and did a number of different types of 

testing to evaluate not just the emission control catalyst durability 

question, but also these other questions. 

Mr. MATHESON. OK. So you will submit that for the record? 

Mr. GRUNDLER. Be delighted to. 

Mr. MATHESON. Great. 

Mr. Sieminski, I wanted to ask you a question about RINs. Before 2013 they were selling for just a few cents. Beginning of this 

year, we have the price skyrocket. It was over a dollar at one point. 

I hear right now it is in the 80 to 90 cent range for a RIN. What 

caused the huge jump in RIN prices? And will rising RIN prices— 

what is its impact on the price of gasoline for consumers? 

91 

Mr. SIEMINSKI. I think we heard earlier from Mr. Glauber that 

the RIN price increases probably had a lot—the increases in the 

first quarter of this year had an awful lot to do with the uncertainties in meeting the program targets. So RINs would be very valuable if you thought that you weren’t going to be able to produce the 

right amount of fuel. 

As far as we can tell, and we have tried to look at this at EIA, 

we can’t really see a big impact in the price of gasoline from what 

happened with RINs in the first quarter of this year. I do think 

that there might have been some impact in the diesel prices because of the way the program works. Going forward, if there aren’t 

changes in the program, we would expect it to begin to impact—— 

Mr. MATHESON. Have you projected where you think RIN prices 

are going to be in the next couple years? Have you projected that 

out. 

Mr. SIEMINSKI. We haven’t because it is extremely difficult to do 

that without understanding what decisions ultimately are going to 

be made by the EPA. 

Mr. MATHESON. Mr. Chairman, my time has expired. I will submit other questions for the record. Thank you so much. 

Mr. WHITFIELD. Well, thank you. 

And, Mr. Welch, you are recognized for 5 minutes. 

Mr. WELCH. Thank you very much, Mr. Chairman. I appreciate 

being here and I have enjoyed the hearing. 

And I want to thank the witnesses for all the work that do you 

on behalf of our country. 

I have sat through this hearing because I have come to the conclusion that corn ethanol is bad for the—it is a bad environmental 

policy, bad energy policy, bad food policy. And that is largely because of two things that I have been hearing over and over again 

from everyday Vermonters, first farmers, who have just been hammered with the increase in the feed cost that is associated in part 

with the corn-based ethanol. And then, secondly, a lot of the small 

engine repair people are absolutely convinced that the ethanol is 

detrimental to these engines. And if I didn’t believe it, my own 

chain saw got wrecked, and I am pretty upset about it, let me tell 

you. 

So this is serious business for our farmers and for our recreation 

industry, anybody using a small engine. And Congress did it. So, 

you know, you are implementing it. But I just do have a few questions about it. 

One is, you know, we did provide a safety valve. And last year 

when we had the worst drought in 50 years, more than 70 percent 

of the cattle country was impacted. Ten Governors, 156 Members 

of Congress, including me, in a broad coalition of farm and food 

groups requested an EPA waiver. And that was denied—on the 

RFS—that was denied. But in denying the waiver, the EPA appears to have created a stricter standard than Congress had, at 

least that is how I read it, rejecting harm to States or regions and 

instead determining that the agency needed to show that RFS implementation would severely harm the entire U.S. Economy. 

So I need some clarification on that, because the spike in feed 

prices certainly hurt us. It hurt every agricultural activity associated with livestock. So I am wondering what it would take from the 

92 

perspective of where you sit for a waiver to have a valid factual 

basis for you to act. And I think I will address that to Mr. 

Grundler. 

Mr. GRUNDLER. Thank you, sir. 

There is no doubt that the drought had devastating effects, and 

where I am from in the Midwest I have seen it. Again, but the 

question before the agency was, was implementing the RFS responsible for these severe economic conditions? And we determined 

after extensive analysis and consultation and using a probabilistic 

statistic modeling framework to look at all these different variables 

in terms of corn yields and oil prices, that the RFS itself wasn’t 

driving this demand. And it is because of the way our refining system has—— 

Mr. WELCH. So does that mean that if you have—the RFS standard requires more corn, obviously, to be going into the ethanol production, and that means less corn going into feed. And you have 

a drought. So the two probably work together. I don’t know how 

you can precisely attribute how much of it is to the RFS and how 

much of it is to the drought. But obviously RFS becomes more difficult when there is a drought impact. So you are saying—— 

Mr. GRUNDLER. We ask ourselves the question, if we waived the 

RFS what would be the ethanol demand in the country? Which 

was, again, the ethanol demand, which is getting the corn and 

changing the commodity markets. And the answer was, in 89 percent of the scenarios that we ran, is that it would not change that 

demand. The refiners are demanding this ethanol for the reasons 

Mr. Sieminski mentioned, it is because they want the octane. It has 

economic value because it is cheap, cheaper than the other alternatives. And so we could have waived the whole RFS and they 

would still have demanded that product. 

So it is a case-by-case situation. So in 2012, and looking at that 

year and looking at the price of oil and corn yields and all the other 

variables, that was the determination that we made. But that 

doesn’t mean that if we were looking at the situation this year or 

next year with different market conditions that different result—— 

Mr. WELCH. My time is almost up. Thank you. But, you know, 

it sort of reinforces my concern about this demand that is created 

for corn for ethanol as opposed to food, because as many of my colleagues have pointed out, both sides of the aisle, it is having a real 

impact on food prices and certainly really wicked on these dairy 

farmers that are hanging on by their fingernails. 

Mr. Chairman, I really appreciate you having this hearing. I 

think both sides of the aisle here share some concerns about this 

policy. So thank you. 

Mr. WHITFIELD. Thank you, Mr. Welch. 

And I want to thank the witnesses. We appreciate your being 

with us. And I hope that everyone in the audience enjoyed it as 

much as we did. And we intend to have a couple more hearings on 

this as well. 

So that will conclude today’s hearing. We will keep the record 

open for 10 days. 

And we look forward to working with all of you as we move forward. 

With that, the hearing is adjourned. 

93 

[Whereupon, at 5:05 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

94 


86385.045

July 19,2013 

Mr. Christopher Grundler 

Director, Office of Transportation and Air Quality 

Office of Air and Radiation 

U.S. Environmental Protection Agency 

1200 Pennsylvania Avenue, N.W. 

Washington, D.C. 20460 

Dear Mr. Grundler: 

Thank you for appearing before the Subcommittee on Energy and Power on Thursday, June 26, 2013, to testifY at 

the hearing entitled "Overview of the Renewable Fuels Standard: Government Perspectives." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open for ten 

business days to pennit Members to submit additional questions for the record, which are attached. The format of your 

responses to these questions should be as follows: (l) the name of the Member whose question you are addreSSing, (2) the 

complete text of the question you are addressing in bold, and (3) your answer to that question in plain text. 

Also attached are Member requests made during the hearing. The format of your responses to these requests 

should follow the same format as your responses to the additional questions for the record. 

To facilitate the printing of the hearing record, please respond to these questions and requests by the close of 

business on Friday, August 2, 2013 . Your responses should be e-mailed to the Legislative Clerk in Word fonnat at 

Nic~ahal1R~illl'lLbous~y and mailed to Nick Abraham, Legislative Clerk, Committee on Energy and Commerce, 

2125 Rayburn House Office Building, Washington, D.C. 20515. 

Thank you again for your time and effort preparing and delivering testimony before the Subcommittee. 

Sincerely, ad 

Chairman 

Subcommittee on Energy and Power 

cc: The Honorable Bobby L. Rush, Ranking Member, Subcommittee on Energy and Power 

Attachments 
95 


86385.046

The Honorable Ed Wi1itticld 

Chairman 

Subcommittee 011 Energy and Power 

Committee on Energy and Commerce 

U.S.llouse of Representatives 

Washington, DC 20515 

Dear Chainnan Whitlield: 

Thank you for your leller of July 19,2013. requesting responses to QuestiollS for the Record 

following the June 26, 2013. hearing before the Subcommittee on Energy and Power entitled 

"Overview of the Rcr.ewable Fuels Standard Government Perspectives." 

The responses to the questions are provided as an enclosure to this letter. If yeu have any further 

questions. please contact me or your stafl'may contact Cheryl Mackay in the EPA's of1ice of 

Congressional and Intergovernmental Relations at mackav.ehervl!u .. cpa.gov or (202) 564·2023. 

Enclosure 

Sincerely, 

Deputy Associate Administrator 

lor Congressional Affairs 

cc: The Honorable Bobby L. Rush. Ranking Member 

Subcommittee on Energy and Power 
96 


86385.047

Questions for the Record 

House Suhcommittee on Energy and Power 

Committee on Energy and Commerce 

June 26, 2013, Hearing 

"Oveniew of the Renewable Fuels Standard: Government Perspectives" 

The Honorable Michael C. Burgess 

1. How many vehicles have been tested with E-15 gasoline by EPA or DOE'! 

The EPA and/or DOE have conducted or participated in eight test programs since the mid-l 990s 

involving more than 100 motor vehicles. The studies were designed to investigate the potential 

impacts ofE15 (a gasoline-ethanol blended fuel that contains greater than 10 and up to 15 

volume percent (vol%) ethanol) on motor vehicles. Other, more limited testing involved nonroad 

vehicles, engines, and equipment. The vehicles were operated for millions of miles on E15 to 

evaluale its potential impact on exhaust and~vaporative emissions, materials compatibility of 

engine and fuel system components, and drivability. The results of these studies, plus other 

relevant information obtained from studies conducted by industry, academia, and other 

government agencies, are thoroughly reviewed in EPA's EI5 Partial Waiver Decisions and the 

E15 Misfueling Mitigation Rulemaking and are also included in the information provided below 

in response to question 2. Taken together, these studies formed the basis for EPA's decision to 

approve the E15 waiver request for model year 2001 and newer light-duty motor vehicles. 

2. During the hearing, you indicated that you were willing to provide technical 

information andlor reportS resulting from vehicle testing with E-15, please pro"ide that 

information. 

Copies of all relevant studies related to vehicle testing with E15 cited in the E15 Partial Waiver 

Decisions and the E 15 Misfueling Mitigation Rulemaking are available in the docket. These 

studies can be aecessed at http://www.regulations.gov by searehing under Docket ID number 

EPA-HQ-OAR-2009·0211 and referring to the Supporting Doeuments section. 

3. What limit of liability does an independent private retailer have with respect to 

misfueling? 

Like other EPA fuels regulations, the E 15 Misfueling Mitigation Rulemaking specifies which 

regulated parties can be held liable for violations and allows assertion of defenses to such 

liability if a party mcets specified conditions. A retailer who properly labels fuel dispensers and 

did not misfuel or cause misfueling would not be held liable for misfueling violations. The E 15 

Misfueling Mitigation Rulemaking prohibits any person from selling, introdueing, causing or 

permitting the sale or introduction of gasoline containing more than 10 vol% ethanol into certain 

vehicles and engines. In the preamble to the Misfueling Mitigation Rule, the EPA explained that 

"[t]he obligation of a retailer is to not misfuel and to not eause misfueling. Misfueling may occur 

in or as a result of varied circumstances .... " The preamble further gave one specific example, 

that of a marina that sells fuel almost exclusively for use in boats, as a case where a retailer eould 

still be judged as causing or contributing to misfuelingdespite labeling the pumps appropriately. 

For the vast majority of retailers, following the misfueling mitigation requirements of the 
97 


86385.048

regulations will be an effective means to prevent misfueling and hence avoid retail liability for 

misfueling under the Clean Air Act. 

The Honorable Robert E. Latta 

1. Could you explain the scope of the affirmative defense built into the quality 

assurance program for purchasing Renewable Identification Numbers 

(RINs» 

a. What must a RIN buyer do in order to be adequately protected under 

the quality assurance program? 

b. What level of 'due diligenee' is required by the buyer? 

c. How de.es the Environmental Protection Agency derme 'due 

diligence'? 

d. How will the agency cQmmunica.te the criteria for due diligence to RIN 

buyers. so they are adequately protected by the quality assurance program? 

The affirmative defense mechanism described in the RFS Renewable Identification Number 

Quality Assurance Program (QAP) Proposed Rule would allow any party, other than the 

generator of an invalid RIN, who holds invalidly generated RlNs verified through a QAP, to 

avoid civil liability for a prohibited act involving the transfer or use of invalid RlNs for purposes 

of fulfilling a renewable volume obligation. 

The proposed QAP rule would provide regulated parties a structured way to conduct due 

diligence and assure that RlNs entering commerce are valid through audits of renewable fuel 

production and RIN gcneration conducted by independent third parties using quality assurance 

plans. The proposed QAPs would include validations such as verification of type of feedstocks, 

verification that volumes produced are consistent with amount offeedstocks processed, and 

verification that RINs generated are appropriately categorized and match the volumes produced. 

The proposed program would provide an affmnative defense against liability for civil violations 

under certain conditions for the transfer or use of invalidly generated RlNs, and would specify 

both the conditions under which invalid RINs must be. replaced with valid .RlNs, and by whom. 

The proposed program is Voluntary, and would be available to RIN buyers who wish to take 

advantage of it. The agency is currently reviewing the comments received on the proposed rule 

and is working on the [mal rule. 

The Honorable H. Morgan Griffith 

On July 25, 2011, EP ~ published in the Federal Register a [mal rule, Regulation to 

Mitigate the Misfueling of Vehicles and Engines with Gasoline Containing Greater than 

Ten Volume Percent Ethanol and Modifications to the Reformulated and Conventional 

Gasoline Programs (40 CFR Part S(}). In testimony before the House Energy and 

Commerce Subcommittee on Energy and Power on June 26, 2013, Mr. Christopher 

Grundler summarized that under this rule. retailers who wish to offer E15 for sale mn!;t 

submit to EPA a misfueling mitigation plan, affix to their dispensers EPA required labels 

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that inform the consumer of appropriate and prohibited uses of the fuel, and submit to a 

survey to assist EPA in tracking the availability and sale ofEIS. 

I have learned from fuel retailers that they are concerned about potential liability under 

the Clean Air Act in the event a self-service customer introduces E15 into a vehicle for 

whh:h it is not approved. These retailers express concern that even if they are compliant 

with the requirements of the above referenced misfueling mitigation regulation, they may 

be found in violation of tbe Clean Air Act and possibly fined by the EPA or sued by a 

private party exercising their rights under tbe Act, if a consumer misfuels with E15. 

If a retailer complies with the misfueling mitigation requirements of 40 CFR Part 80, and a 

person other than the retailer or the retailer's appointed agent introduces E15 into a 

vehicle or engine for which it has uot been approved: 

1. Is that retailer in violation ofthe Clean Air Act? 

2. Is that retailer guilty of misfueling? 

3. WiD that retailer be subject to enforcement actions by the EPA fur violating a control 

or prohibition of the Clean Air Act? 

A retailer who properly labels fuel dispensers and did not misfuel or cause misfueling would not 

be held liable for misfueling violations. The E 1 S Misfueling Mitigation RuJemaking prohibits 

any person from selling, introducing, causing or permitting the sale or introduction of gasoline 

eon.taining more than 10 vol% ethanol into certain vehicles and engines. In the preamble to the 

Misfueling Mitigation Rule, the EPA explained that "[t]he obligation of a retailer is to not 

misfuel and to not cause misfueling. Misfueling may occur in or as a result of varied 

circumstances ... ." The preamble further gave one specific example, that of a marina that sells 

fuel almost exclusively for use in boats, as a case where a retailer could still be judged as causing 

or contributing to misfueling despite labeling the pumps appropriately. For the vast majority of 

retailers, following the misfueling mitigation requirements of the regulations will be an effective 

means to prevent misfueling and hence avoid retail liability for misfueling under the Clean Air 

Act. 

4. Will that retailer be subject to tbe private right of action provisions of the Clean Air 

Act? 

Under section 304(a) of the Clean Air Act, federal district courts have jurisdiction to hear 

lawsuits claiming that a person has violated or is in violation of an emission standard or 

limitation. The phrase "emission standard or limitation" is defined in section 304(f), for purposes 

of section 304( a), as including "a control or prohibition respecting a motor vehicle fuel or fuel 

additive .... " In this case, EPA's £15 Misfueling Mitigation Rulemaking adopted various 

controls on the distribution and sale of the motor vehicle fuel £IS. Beyond noting the 

jurisdictional provision in section 304, the EPA is not in a position to comment on the validity of 

any claim that might be filed under this citizen suit provision. 

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