WASHINGTON, February 29, 2012 -Lobbyists representing a wide range of energy-related interests that have often found themselves in conflict in past years reached a somewhat definitive consensus in a panel discussion at last week’s National Ethanol Conference: former Michigan Gov. Mitt Romney will win the Republican presidential nomination, but will lose to President Obama in the fall elections.

Still, the representatives of the oil industry, corn farmers, auto makers, next-generation biofuel producers and environmental interests all agreed with Shane Karr, vice president of government affairs for the Alliance of Automobile Manufacturers, that catastrophic events, including conflict arising from Iranian threats to close the Straits of Hormuz or the Israelis bombing Iranian nuclear installations, could alter the political landscape so drastically that no predictions could hold up.

As for the look of Congress after the November elections, the lobbyists pretty much agreed with the assessment from Michael McAdams, president of the Advanced Biofuels Association, who said that Republicans likely will lose some seats in the House, while the balance of power in the Senate, now narrowly controlled by Democrats, may change. Any alteration in the numbers, however, is not likely to be significant enough to end the ongoing divisiveness and partisan environment in the next Congress, making the passage of broad energy policy difficult, if not impossible.

Much of the conversation focused on the federal Renewable Fuels Standard, which mandates 32 billion gallons of biofuels in the nation’s fuel supply by 2022, including 16 billion in cellulosic ethanol. The RFS has been under assault from lawmakers who say the mandate undermines a focus they say is needed on expanding domestic oil production.

In each of the past two years, the EPA has reduced what is supposed to be a gradually increasing annual mandate for cellulosic ethanol because the industry has yet to commercially produce the fuel in the amounts needed to meet the mandate. The oil industry has asked the EPA to waive the RFS requirement for advanced biofuels, claiming they are being fined $6 million for failing to blend an additive that does not exist. The advanced biofuels industry has responded by claiming oil companies have other means of meeting the requirement without incurring penalties, that the RFS is an essential element in sustaining their industry’s growth, and even contending that the oil companies appear to be spending more than $6 million to seek the waiver.

“Our number one objective is to preserve the RFS,” McAdams said in laying out his organization’s legislative goals this year. He said he believes his industry and its allies can make such a strong case for the RFS this year that opponents will be less likely to try and dismantle it in a new Congress in 2013. He said the advanced biofuels industry “stand[s] on the back of the

corn ethanol industry,” noting the technology developed in the past 10 years is leading the way to advanced biofuel technology. However, he said RFS opponents are trying to pit one segment of the biofuel industry against another. “We need all of the fuels,” he said. “For this moment in time, we’ve got to stand together.”

Jon Doggett, vice president for public policy for the National Corn

Growers Association, told the ethanol conference audience that the RFS “is more important to the NCGA than a new farm bill.” The RFS, he said, “incentivizes folks to make investments in technology, research” and other factors that enhance farm production, yield and efficiency.

In addressing the RFS, Karr said all of his automaker alliance members are producing high-ethanol burning flex-fuel vehicles and those numbers will grow. “Our biggest problem are foreign manufacturers” who have yet to enter into the FFV field of production.

As a possible solution to the domestic automakers’ issues, Bob Dinneen, president and CEO of the Renewable Fuels Association, and moderator of the panel, raised the proposed Open Fuels Standard. The OFS would mandate that automakers phase in the production of vehicles that run on a wide variety of fuels, including fossil fuels, flex fuels, ethanol, advanced biofuels, natural gas, hydrogen and electricity. But, Karr said, “We oppose technology mandates in general. The government should not be picking winners and losers.”

Marty Durbin, executive vice president for government affairs with the American Petroleum Institute, insisted that he and his organization “have no problem with the RFS,” the issues over the advanced biofuels dispute notwithstanding. Durbin said his industry understands the need to diversify.

“We are not the enemy,” Durbin said. Acknowledging the “all-of-the-above” energy approach seemingly adopted by everybody currently in Washington, he said that in 15 years, North America could fully meet its liquid fuel needs independently with advanced biofuels, tar sands oil from Canada and domestic oil production.

Durbin acknowledged the call from the ethanol industry for Congress to eliminate oil company subsidies and treat both the fossil fuel and biofuel sectors equally. “We receive no subsidies,” Durbin said, defining the term as “direct payments.” He said the oil and gas industry benefits from drilling cost recovery provisions under the tax code, a provision available to most manufacturers expanding operations and adding jobs. And the oil industry lobbyist said he understands why the ethanol industry is the biggest supporter of the OFS “because ethanol is the cheapest way to comply” with the proposed standard.”

Turning to the lobbyists’ legislative goals this year, most were pessimistic of any forward movement.

“This is a most unusual Congress,” McAdams said, calling it “broken and dysfunctional.” He predicted that his organization’s goals, including the extension of tax credits for advanced biofuel production, cannot be achieved until after the November elections, likely in a lame duck session at the end of the year. Different industries need different incentives, he said. “The problem now is that we have nothing but the production tax credit for new biofuels, and that runs out at the end of this year before any (advanced biofuel) plants can be built.”

McAdams said he feared that “without an adequate, energy source-neutral suite of policies within a comprehensive framework,” new technologies under development in the United States were going to end up overseas where they would be used to manufacture products. “We’re going to gift new energy technology to China,” he said.

Durbin was equally doubtful in seeing energy policy progress. “We’re not going to see any energy legislation from this Congress,” he said, so API will use the presidential campaign to promote the issues important to the oil industry – approval of the Keystone XL pipeline, expanded oil exploration, maintenance of recovery tax credits, among others – and keep them prominent in the national energy discussion. “The [Canada to Texas] XL pipeline will be built eventually,” Durbin said of his group’s top priority. “The United States will need more oil and it’s just a question of where we want to get it from.”

Doggett summed up much of the sentiment in the room when he said that because of the boom in ethanol production over the past 10 years, “corn growers now have a much bigger piece of the [revenue] pie.” The ethanol industry is good for agriculture, he said, because it has helped bring about better technology, higher yields and greater efficiency. “And it is good for this country” by decreasing U.S. dependence on foreign oil.



Original story printed in February 29, 2012 Agri-Pulse Newsletter.

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