Supporters of ethanol and biodiesel are generally pleased with the outcome of the May 8 meeting at the White House on the Renewable Fuels Standard (RFS). President Trump reaffirmed his commitment to removing summertime restrictions on the sale of E15. However, there is concern the president could decide to attach RIN credits to ethanol exports. The RIN or Renewable Identification Number credits must be purchased by oil refiners if they don’t blend enough ethanol into gasoline, as specified by the RFS.
It is reported there was consensus during the meeting on moving forward with year-round E15 sales and to scrap the idea of creating a new RFS waiver credit program, often referred to as a RIN cap. President Trump was joined in the meeting by four key Republican U.S. Senators active on the RFS issue: Sens. Ted Cruz of Texas, Pat Toomey of Pennsylvania, and Chuck Grassley and Joni Ernst of Iowa.
“It is very positive to see that consensus was reached on year-round E15 sales,” says Monte Shaw, executive director of the Iowa Renewable Fuels Association (IRFA). “Unnecessary restrictions have hampered retailers offering E15. Once the restrictions are removed, the boost in E15 sales will boost ethanol demand and corn prices. We look forward to President Trump acting quickly on E15 before the June 1 deadline.”
Tying RFS to ethanol exports is a bad idea
During a discussion on how to make the RFS whole after an unprecedented number of small refinery economic hardship exemptions were granted by EPA Administrator Scott Pruitt, Texas Senator Cruz floated the idea of allowing exported gallons of ethanol to count toward domestic RFS blending requirements. There was no agreement on this export RIN proposal, which if put into place would be favorable to the oil industry, not ethanol producers and corn growers. It would let ethanol exports count toward fulfillment of RFS requirements by petroleum refineries.
“An RFS export RINs scheme would slash overall ethanol demand by at least 1.4 billion gallons, destroying billions in farm income,” says Shaw. “Such a scheme would break President Trump’s promise to voters to uphold the RFS, and break Pruitt’s commitment to several Senators to not pursue the idea. It would break the letter of the law that requires gasoline used in the U.S. to contain the applicable volume of renewable fuel. It would also break the U.S.’s WTO commitments as a clear export incentive, and would reduce overall ethanol production – undercutting the goal of U.S. energy dominance. Ultimately, we need President Trump to fix the demand destruction from unwarranted small refinery exemptions, and not agree to yet another demand destruction scheme.”
Still need to stand up and protect the RFS
Shaw concludes: “We are not done fighting to protect the RFS. We will continue to work to protect a 15-billion-gallon domestic ethanol market and to have the right to grow ethanol exports without undercutting domestic demand.”
Iowa Senators Grassley and Ernst issued statements saying they are glad the president is staying with his commitment to remove the regulatory barriers to the year-around use of E15, and they will keep the pressure on EPA to get this done as quickly as possible. Grassley calls this part of the proposed RFS deal “good news for farmers and renewable fuels.”
If the president decides to attach RIN credits to U.S. ethanol exports, it would have “a crippling impact on American agriculture—significantly reducing demand for ethanol and corn,” says Emily Skor, CEO of Growth Energy, representing ethanol producers and supporters. “It would also have major trade implications, as export RINS would be considered a subsidy by our global trading partners, who will likely challenge this as an unnecessary advantage to U.S. ethanol.”
Proposal to attach RINs to ethanol exports
Ernst says she is still considering the implications of attaching RIN credits to exports, something Pruitt had previously said EPA would not pursue when he issued an October 2017 letter to senators. However, she says she is skeptical of the idea.
The National Corn Growers Association issued the following statement from North Dakota farmer Kevin Skunes, president of NCGA:e
“President Trump on May 8 reaffirmed his commitment to our nation’s farmers by approving year-around sales of E15 without a RIN cap. This is a positive step because we know a RIN price cap would have been damaging to farmers. We have numerous questions, however, about a potential plan now being developed by USDA Secretary Perdue and EPA Administrator Pruitt to address the small refiner waivers being offered by EPA. This plan would potentially offer biofuel credits on ethanol exports, an idea that would harm our ethanol export success.
Important unanswered questions remain
“NCGA has opposed RIN credits on exports, an idea that EPA said last fall it would not pursue,” notes Skunes. “Offering RIN credits, which are supposed to be derived from a domestic renewable fuel use, for ethanol exports would threaten trade markets and impact corn farmers’ economic livelihoods. Pursuing a path that includes RIN credits on export gallons would violate the letter and spirit of the RFS, serving the interests of oil refiners who have already benefitted from EPA Administrator Pruitt’s unprecedented RFS volume waivers at the further expense of America’s farmers.”
Skunes adds, “We appreciate the agreement on eliminating the outdated regulation on higher blends such as E15, and thank Senators Grassley and Ernst for their tireless efforts. However, many questions remain unanswered as Secretary Perdue and Administrator Pruitt determine the next steps and provide more details. Moving forward, NCGA will continue to advocate for policies that protect our farmer members.”
EPA must stop handing out hardship waivers
National Farmers Union President Roger Johnson released the following statement in response to the announcement:
“While there are certainly positives coming out of this meeting, there are several major potential pitfalls that will need to be mitigated as the administration sets out to implement these policies. Farmers Union supports the administration’s promises to make E15 available for year-round use, yet it is essential we move our transportation fuel market into higher blends of ethanol like E30. We also appreciate that a cap will not be put on RIN prices, as this would disincentivize the blending of homegrown, renewable fuels in our transportation fuel sector.
“However, this agreement contains no offset for the dozens of hardship waivers the administration has handed out to oil refiners. These have waived up to 1.6 billion gallons in RFS volume requirements, effectively destroying demand for the surplus of corn that’s keeping prices low for farmers. The agreement also includes a particularly detrimental plan to assign RIN credits to biofuel exports, which would both devastate domestic demand for biofuels and likely provoke our trading partners into retaliation.
“We urge the administration to immediately begin implementing a plan that expands use of higher blends of ethanol, as our nation’s family farmers need to be rid of burdensome corn stocks to start earning a decent price from the market. The administration must also avoid any plan that includes RIN credits for biofuel exports and must pursue actions that restore the demand for biofuels that was lost as a result of the hardship waiver handouts from EPA.”