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US lawmakers seek consensus on RFS reform, see no help from oil, ethanol groups

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US lawmakers seek consensus on RFS reform, see no help from oil, ethanol groups

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Opponents of the US Renewable Fuel Standard do not have enough votes to force a repeal of the ethanol blending mandate, key lawmakers said Tuesday.

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But efforts to reform the hot-button law are not being helped by the ethanol and oil industries digging in their heels and refusing to cooperate, exasperated members of the House of Representatives' Energy and Commerce Committee said on the first day of a two-day RFS hearing.

"We are committed to move on a fix," Representative John Shimkus, an Illinois Republican, told a witness panel composed of biofuels and petroleum trade group leaders. "It would be helpful if you all start negotiating in good faith. If you keep these positions, nobody's going to be happy, and nothing's going to be done."

Representative Lee Terry, a Nebraska Republican, added: "It has been frustrating to hear the same old, entrenched arguments. It doesn't leave us with a lot of options for this committee to look at."

But even after the scoldings and lectures, neither side appeared particularly chastened.

The oil industry maintained that the RFS, which requires annually increasing amounts of ethanol to be blended with gasoline supplies, must be repealed. The industry has long said the mandate will cause gasoline prices to rise, among other negative impacts to the US economy.

"Right now, the best interest of the nation is to repeal this dysfunctional, unworkable law, so we will continue to push for repeal," Jack Gerard, CEO of the American Petroleum Institute, said on the sidelines of the hearing after testifying. "Right now, the statute is so dysfunctional, people need to make sure it's a crisis that's addressed."

Ethanol advocates, on the other hand, staunchly insisted that the RFS is fine as is. They defended the law as a bulwark against volatile oil prices and said changing the RFS would cause investment in next-generation biofuels to dry up.

"I think one of the things Mr. Gerard should have walked away with today is that repeal is a bridge too far," Michael McAdams, president of the Advanced Biofuels Association, told reporters after testifying. "I'm hoping that he will recalibrate their view of what the problems with the RFS are."

The committee convened the hearing to examine the economic impacts of the RFS, with many observers saying they expect the panel to introduce legislation later this year to reform the law.

In addition to the hearing, the committee has issued a series of bipartisan white papers on the RFS, which Congress first instituted in 2005 and then expanded in 2007.

Representative Ed Whitfield, the chairman of the committee's Energy and Power Subcommittee who has led the panel's efforts to study the RFS, said he does not have a specific timeline for any reform package to be introduced. He said the committee will review all the public comments it receives on its RFS white papers before proceeding.

"We don't necessarily have a timetable, but I do think we'll know rather quickly whether we'll have areas of consensus in which we can move forward," he said.

Unlike many issues facing the politically polarized Congress, the ethanol mandate is not one that falls strictly along party lines. Though many fossil fuel-friendly Republicans have urged a repeal of the law -- and strongly expressed those opinions in the hearing -- many other Republicans from Corn Belt states, such as Shimkus and Terry, support large portions of the RFS.

Meanwhile, some environmentally minded Democrats have raised concerns about land-use impacts and energy requirements of producing corn ethanol, and other lawmakers have questioned whether the RFS is raising corn prices.

That has the committee's majority Republicans focused primarily on reforming the RFS, instead of repealing, to ease problems raised by various stakeholders. Those issues include the impending blend wall and spikes in prices of renewable fuel credits, known as RINs, which refiners and other obligated parties can purchase in order to satisfy their RFS requirements.

The blend wall refers to the situation in which rising ethanol blending mandates exceed 10% of the US gasoline supply, and RINs prices appear to be rising sharply in response to fears that the blend wall will soon be reached. Most automakers will not honor warranties if car owners use fuel with a greater than 10% blend of ethanol.

"We're in a situation now where a political compromise eight years ago appears not to be working because the marketplace has changed," said Representative Joe Barton, a Texas Republican who was chairman of the Energy and Commerce Committee when the 2005 law creating the RFS was passed. "We have some who want to repeal it, and others who want to keep it. My guess is the majority of the committee is probably for modification, taking the middle road."

--Herman Wang,
--Edited by Katharine Fraser,