White House compromise on RFS "extremely problematic," says biofuels lobby

9 May 2018 |

US ethanol producers will be able to sell the E15 blend all year round and exported ethanol will be allowed to count towards the Renewable Fuels Standard, following a tentative compromise deal agreed at the White House on 8 May.   

The deal emerged after President Donald Trump and cabinet officials met with senators allied with biofuels producers, and lawmakers representing the interests of refiners. 

The Trump administration appears to have ruled out caps on the price of compliance credits, which are otherwise known as RINs, but after the meeting, the biofuels lobby said that the waivers from the RFS granted to refiners remained a "great concern".

"The Renewable Fuels Association continues to believe an effort should be taken to reallocate the exempted volumes, which likely totals 1.6 billion gallons or more," said Bob Dinneen, chief executive of the RFA.

Texas senator Ted Cruz said the deal was a "win-win" for corn producers and refiners because the lost volumes from waivers could be reallocated by allowing exported ethanol gallons to count toward an obligated party’s blending requirement.

Tying exported ethanol to RFS obligations is expected to act as an artificial cap on RIN values and reduce compliance costs for refiners.     

Prices for D6 ethanol RINs were sold as low as 25 cents/RIN in reaction to the outcome of the meeting, down from 33 cents/RIN earlier in the day, according to assessments by OPIS, a price reporting agency.

Prices for D6 ethanol RINs were trading around 72 cents at the start of the year. 

Under the RFS, refiners either have to blend ethanol into gasoline or purchase RINs to fulfil their requirements, a measure that the oil industry says has shrunk margins and prompted the high-profile bankruptcy of an east coast refiner.

But the RFA said allowing exported ethanol to count toward an oil company’s RFS obligation "is extremely problematic".

"Depending on potential implementation, allowing exports to qualify for RFS compliance could dramatically reduce domestic ethanol demand, while most certainly resulting in retaliatory trade barriers from the countries importing US ethanol," Dinneen said.   

The RFA said the "real disgrace" of the proposal is that ethanol producers and farmers would bear the brunt of any retaliatory tariffs.

"They would be subsidizing highly profitable oil companies, who would benefit from the reduced RINs costs. In no way will that ever be acceptable or considered a win for our industry," Dinneen added.

E15

Biofuels and farm lobby groups were much more welcoming to President Trump’s renewed commitment that E15 will soon be allowed for use in the summer months, overturning a longstanding ban on the use of the blend imposed because of concerns about air quality.

Biofuels groups say that the EPA had acted too slowly to relax rules for E15 after president Trump made a similar commitment in April.

'Devil in detail'

The impact of an all-year-round mandate for E15 is likely to increase corn demand by just 1%, according to analysts, as many gasoline stations in the east coast of the US don’t sell the fuel.

Following yesterday’s meeting, the Environmental Protection Agency and the Department of Agriculture will be tasked with formulating revised rules to the RFS and ethanol exports.

In a Tweet, Chuck Grassley, a pro-corn senator from Iowa who attended yesterday’s White House meeting, said the compromise entailed "devil in [the] details".

In a statement on his website, Grassley said: "I look forward to reviewing a plan being developed by Secretary Perdue and Administrator Pruitt. Any fix can't hurt domestic biofuels production."

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