Chain restaurants on Thursday launched a campaign aimed at repealing a renewable fuel mandate they say is hiking costs for franchisees nationwide.
Robert Green, the head of the National Coalition of Chain Restaurants, said the goal is to “leverage the grassroots strength of franchisees” who are “in every congressional district around the country,” as Congress takes initial steps to tackle the eight-year-old mandate.
The restaurateurs’ push joins other fights against the Renewable Fuel Standard, which requires refiners to blend steadily increasing amounts of corn-based ethanol and other alternatives into the nation’s transportation fuel supply.
Record prices: Ethanol leading to a corn-based bubble
As gasoline use has declined, the oil industry says it can no longer blend in enough ethanol to meet the mandate, without exceeding a 10 percent threshold that is approved for use in all cars and trucks. A higher 15 percent mix, known as E15, is only approved for vehicles made since 2001.
Meanwhile, farmers and the food industry complain that as some growers shift from food-grade sweet corn to field varieties destined for ethanol, it has pushed the costs of feeding livestock higher. Lisa Ingram, the president of White Castle, who spoke at a news conference on the chain restaurants campaign Thursday, said the RFS “has led to a dramatic increase in the price of corn.”
“Since the RFS was established in 2005, the price of corn has risen over 300 percent,” she said.
And Mark Behm, the owner of Wendy’s franchises in Michigan, said the renewable fuel standard is pushing costs so high that “it’s harder for restaurateurs like me to invest in growing our business.”
A Pricewaterhouse Coopers study commissioned by the National Council of Chain Restaurants concluded that the RFS mandate is a significant driver of food input costs for their members. The report estimated that by the time the RFS is fully phased-in two years fro now, it will hike chain restaurants’ costs by up to $3.2 billion annually.
But there are lots of reasons for escalating corn and food costs. After all, oil prices also have nearly doubled since the RFS went into effect eight years ago.
Ethanol supporters said the new campaign misses the mark.
Tom Buis, the CEO of Growth Energy, said “Big Oil” is the real reason food costs have climbed.
“Only 14 percent of the price of food is attributable to the cost of the commodity, while the rest can be attributed to energy costs and marketing,” Buis said, noting the energy-intensive nature of processing, packaging, storing, refrigerating and other work needed to “bring food from the farm to the table.”
“The true driver in food costs is energy prices,” Buis said.
Bob Dinneen, president of the Renewable Fuels Association, quipped that “chain restaurants should put a sign up saying ‘1 billion half-truths served.'” He said about a third of every bushel of grain used in the ethanol production process is returned to the market as livestock and poultry feed.
The House Energy and Commerce Committee is set to delve into the issue next week, with a high-profile hearing on the RFS. The panel has so far taken a deliberative approach to the topic, by issuing a series of white papers exploring aspects of the RFS and inviting stakeholders to comment.
Legislation pending in the House would repeal the standard, and Sen. John Barrasso, R-Wyo., is set to introduce a companion measure in the Senate on Thursday.
Some lawmakers have pushed different approaches. For instance, while Rep. Bob Goodlatte, R-Va., has sponsored a full repeal bill, he also has introduced separate legislation that would eliminate an “advanced biofuels” category in the RFS and decrease the amount of the alternative fuels that are required through 2022. That measure also would effectively reverse the Environmental Protection Agency’s decision to allow 15 percent ethanol blends in the marketplace.
The American Petroleum Institute has argued that the 15 percent blend has not been proved safe, there are high “misfueling” risks that could cause filling station owners to face liability when the fuel is inadvertently pumped into older cars and there is a limited market for the mix, especially since some automakers have warned drivers that using the fuel will void their warranty.
Jet fuel: United planes to fly on advanced biofuel
But the real urgency for refiners is that many have started hitting the so-called “blend wall,” a point at which the required volumes of ethanol that can be blended into the nation’s petroleum-based gasoline exceed 10 percent. Because the RFS was established with target volumes — rather than percentages — a drop in gasoline use means that blend wall has arrived sooner than expected. The effects are different from some refiners; their individual obligations are determined by their share of the fuel market.
Renewable fuel supporters counter that the mandate was designed to drive innovation in the fuels market and force changes by refiners, automakers and motorists. The blend wall is just the point at which potentially tough decisions and investments have to be made, they say.
Jeremy Martin, a senior scientist with the Union of Concerned Scientists told a House committee earlier this month that the “blend wall” is more accurately described as “a set of speed bumps.” He stressed the importance of keeping a stable RFS in place to foster next-generation alternatives.
The RFS was meant to help wean the U.S. off foreign oil, in exchange for domestically produced alternatives.
Also on FuelFix: