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Orlando Sentinel: Too flawed to fix, outdated mandate should be repealed
Friday, March 28, 2014
It takes a flawed policy to inspire criticism from such diverse industry and consumer groups as the oil and natural gas industry, restaurant and grocer associations, automobile manufacturers and producers of poultry, pork and beef. Yet the damage caused by the Renewable Fuel Standard is so widespread, the mandate has motivated all of these groups to speak out.
The RFS requires the blending of more and more ethanol into the nation’s fuel supply each year, regardless of consumer demand. The resulting rush to produce ethanol has diverted more than 40 percent of the U.S. corn crop from food to fuel, making the RFS the leading driver of food-price increases. The consumer price index for food has jumped 25 percent since 2005 — well above the 16 percent rate of inflation during the same period.
Increased food prices are putting the squeeze on families and businesses alike. According to the National Chicken Council, poultry producers’ costs have gone up $8.8 billion since the RFS was enacted in 2007, while National Council of Chain Restaurants members report that restaurant franchises have experienced $3.2 billion in annual commodity cost increases — or about $18,000 per restaurant.
The economically damaging increase in food costs is just one of the unintended consequences of the RFS. The misguided law is also likely to lead to engine damage and increased fuel costs.
When the RFS was enacted in 2007, ethanol targets were tied to projections that pointed to steadily increasing fuel consumption. Due to increased fuel efficiency and changing driver habits, gasoline demand actually decreased by 424 million gallons compared to projections in 2007. Yet ethanol requirements keep automatically increasing each year under the RFS. This means fuel suppliers are required to blend ever-greater volumes of ethanol into a shrinking quantity of fuel.
To meet this unreasonable standard, the Environmental Protection Agency approved E15 — a fuel that would increase the volume of ethanol in gasoline from the current 10 percent (E10) to 15 percent. The vast majority of cars on the road today were not designed to use fuel with more than 10 percent ethanol, and extensive testing conducted by the auto and fuel industries has shown that E15 could lead to fuel-system damage, fuel-pump failures and other problems that could leave motorists stranded on the side of the road.
AAA, along with Dodge, Toyota, Nissan and nearly every other automaker, have warned that engine damage caused by E15 will not be covered by warranty. Groups representing motorcyclists, boat manufacturers and power equipment like lawnmowers and chain saws warn their products are also not compatible with E15.
The EPA late last year proposed a slight ethanol volume reduction for 2014 RFS requirements. It’s a step in the right direction, but it’s not enough. Without further action, we remain in jeopardy of experiencing the negative economic impacts of the E10 blend wall, and unsustainable volume requirements still threaten to drive ethanol-free fuel out of the market entirely, reducing choice for consumers who need E0 for classic cars, as well as small-engine vehicles and equipment.
Recognizing motor-fuel formulation is best left to knowledgeable industry engineers, the Florida Legislature has taken action. Last year, the Legislature took the first step and repealed Florida’s RFS mandate. State Sen. Greg Evers and Rep. Matt Gaetz understand EPA’s moderation efforts are only temporary. Therefore, this year they turned their focus federally and are sponsoring resolutions urging Congress to repeal the federal RFS.
Surging domestic production and decreased fuel consumption have combined to achieve the stated goals of the RFS to reduce foreign crude imports and enhance energy security. The outdated RFS is too flawed to fix. It’s time to repeal this unworkable law before it causes more harm to Florida consumers.
David Mica is the executive director of the Florida Petroleum Council, based in Tallahassee.