Sen. Pat Toomey seeks to shred biofuel mandates as part of oil exports bill

Joint Economic Committee members Sen. Pat Toomey, R-Pa., left, and Sen. Dan Coats, R-Ind. talk on Capitol Hill in Washington, Thursday, Dec. 6, 2012 (AP Photo/ Evan Vucci)
Sen. Pat Toomey, R-Pa., left, and Sen. Dan Coats, R-Ind. talk on Capitol Hill in Washington, Thursday, Dec. 6, 2012 (AP Photo/ Evan Vucci)

WASHINGTON — If the Senate is going to lift the nation’s longstanding ban on oil exports, Sen. Pat Toomey wants to make sure a federal biofuels mandate vanishes at the same time.

The Republican from Pennsylvania is advancing a plan — cosponsored by Sen. Dianne Feinstein, D-Calif. — that would lift the requirement to blend traditional ethanol-based renewable fuels into U.S. gasoline.

Toomey is set to offer the measure as an amendment to legislation that would authorize widespread oil exports when it is considered by the Senate Banking Committee on Thursday.

A second possible Toomey amendment would delay any newly authorized oil exports under the bill until Congress enacts a law spiking the mandate for traditional corn-based ethanol.

The biofuel policy change is sought by some refiners — including a handful in Toomey’s home state of Pennsylvania — that say they are hitting a blend wall where they can no longer incorporate enough ethanol to meet steadily escalating volumetric targets without exceeding a 10 percent threshold acceptable for use in all cars and trucks.

Two Pennsylvania-based refiners — Delta Air Lines’ Monroe Energy and Philadelphia Energy Solutions — are actively lobbying against crude exports.

Even some refiners who do not oppose oil exports, such as Tesoro Corp., have pressed for an overhaul of the federal Renewable Fuels Standard, possibly as part of a broader debate on crude trade policy.

An RFS change is seen as potentially softening the blow for domestic refiners who could face higher costs for U.S. crude if oil exports are widely allowed.

But it does not appear likely a majority of the Banking Committee members would vote to approve a sweeping change to the renewable fuels law. And Toomey’s broader biofuel proposal might not even be considered “germane” to the panel’s work, potentially allowing it to be ruled out of order before a substantive debate or vote on the measure.

Toomey is one of two Republicans on the Senate banking panel facing competing pressures on the oil export bill. The other: Illinois Republican Mark Kirk, who, like Toomey, is trying to hold on to his seat in the Senate during next year’s elections.

The underlying oil exports bill is similar to one that was already approved by the Senate Energy and Natural Resources Committee. The measure coming before the Senate banking panel on Thursday is sponsored by Sen. Heidi Heitkamp, D-N.D.

Toomey’s biofuels proposal takes aim at the biggest piece of the Renewable Fuels Standard, which requires refiners to incorporate steadily increasing amounts of the alternative fuels. Under a stand-alone Feinstein-Toomey bill, refiners would still have to satisfy a mandate for advanced biofuels, but the annual quotas for traditional renewable fuels — typically ethanol derived from corn — would disappear.

Toomey has said that under the RFS, “refiners, such as ours in Trainer, Pa., are forced to make a choice: increase the ethanol content in their fuel blends or pay a penalty by purchasing credits from energy traders.”

A Toomey spokeswoman, Elizabeth “E.R.” Anderson, said Toomey’s move to push the RFS change signals he “is tired of the government using corporate welfare to shower money on a favored industry and then sending the bill to taxpayers.”

RFS advocates say it is important policy that ensures some market demand for alternative fuels and helps to diversify the nation’s fuel supply. And while Toomey’s measures focus on traditional ethanol, biofuel boosters say it would inevitably undermine efforts to develop next-generation alternatives, because many of the same companies pursuing advanced biofuels are actively churning out traditional renewable fuels already.

“Big Oil should be satisfied with achieving their highest priority, a repeal of the export ban, and drop then their crusade against clean-burning biofuels,” said Sen. Chuck Grassley, R-Iowa, on the Senate floor Wednesday. “It is time for Big Oil to stop acting like pigs at the trough. It is time for Big Oil to lay off the renewable fuel standard.”

What bothers me is not that Big Oil is on the cusp of achieving their highest priority in getting Congress to pass a bill to repeal the export ban, what bothers me is that Big Oil is pushing Congress to repeal the ban, while at the very same time continuing to attack and undermine domestic renewable fuels. I

The underlying oil exports bill would undo decades-old restrictions that block most U.S. crude from being sold outside the country. Refined petroleum products, such as gasoline and diesel, are not affected by the ban, which also makes exceptions for oil shipments to Canada and exports of some Californian and Alaskan crude.

Oil producers argue the change would give at least a modest boost to U.S. crude prices, pushing them closer to that of the higher-cost international Brent crude benchmark.

But some critics say it makes no sense to widely export U.S. crude as long as the country is still importing foreign supplies — even if those are a heavier grade and lower quality better matched for many domestic refineries.

Sen. Robert Menendez, D-N.J., is set to offer an amendment that would delay the effective date of the crude oil export ban repeal until a government study on potential job losses fro the change. The current measure already directs the Government Accountability Office to do such an analysis, but only after the change is already made.

Related: Democrat floats strategic crude exports

A second Menendez amendment possible at Thursday’s banking committee meeting would postpone any oil exports under the bill until the U.S. is producing enough crude to meet domestic consumption.

A report from the non-partisan Congressional Budget Office issued late Tuesday concluded that a House bill lifting the oil export ban would add an estimated $1.4 billion to federal coffers over the next 10 years, with the extra revenue coming from “new oil and gas leases” on federal lands and waters.

Oil export advocates said the calculation lowballed the true potential benefits, by focusing only on the government selling more federal drilling rights and ignoring broader, economy-wide changes, such as more jobs tied to increased energy development and the tax revenue associated with them. They are pushing the CBO to do another analysis of the exports bill, this time dynamically scoring the potential government revenue from liberalizing oil trade.

“As concluded in more than a half dozen studies and reports, lifting the ban would reduce our trade deficit, increase GDP, protect and create jobs and generate additional tax revenues,” said George Baker, executive director of the Producers for American Crude Oil Exports. “None of these macroeconomic considerations were captured in the CBO analysis.”

Jay Hauck, executive director of Consumers and Refiners United for Domestic Energy, which opposes the exports bill, noted that the CBO report “confirms that domestic crude prices would rise as a result of exports.”

According to the analysis, domestic wellhead prices of light oil would climb roughly $2.50 per barrel over the next 10 years on an expected value basis.

The report itself casts doubt on the potential benefit for American producers, acknowledging that U.S. crude exports could be offset by production elsewhere around the world.

“The net benefit to U.S. producers would depend on whether other international suppliers would respond by lowering the prices they charge in order to maintain market share,” the CBO said, adding, that “is difficult to predict.”

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