Ethanol Blog

Ethanol, Petroleum Groups Vie for Regan's Attention on the RFS

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
Connect with Todd:
Ethanol and petroleum groups are asking EPA Administrator Michael Regan to take actions on the Renewable Fuel Standard. (DTN file photo)

With new EPA Administrator Michael Regan taking office both petroleum and ethanol interests are jockeying for position on the future of the Renewable Fuel Standard.

Earlier this week the Chet Thompson, president and chief executive officer of the American Fuel and Petrochemical Manufacturers asked Regan to extend the 2020 renewable volume obligation deadlines and to set volumes for 2021 and 2022 at "reasonably achievable levels," https://www.afpm.org/….

In the letter, Thompson said rising prices for renewable identification numbers, or RINs, has made it difficult for refiners to comply with the RFS.

On Wednesday, Renewable Fuels Association President and Chief Executive Officer Geoff Cooper, said the EPA needs to continue to maintain the RFS, https://files.constantcontact.com/….

"However, just as it has always done whenever RIN values have risen in the past, AFPM is claiming again that higher RIN values are 'threatening the viability of many refineries,'" Cooper wrote in a letter to Regan.

"But, as usual, they do not explain how or why. In reality, refiners who comply with the RFS by purchasing RIN credits (i.e., rather than blending renewable fuels) are passing the cost of those credits along to wholesale purchasers of their refined products. Indeed, according to EPA, 'refiners are generally able to recover the cost of RINs in the prices they receive for their refined products, and therefore high RIN prices do not cause significant harm to refiners.'"

Cooper said higher RIN values were "a sign that the RFS is finally being allowed to work as intended to transform the transportation fuels marketplace."

Thompson also wrote in his letter to Regan it would be "impossible" for refiners to comply with the statutory RFS requirement for conventional renewable fuels in 2021.

"That assertion is patently false," Cooper said.

"Obligated parties have multiple options available for complying the RFS in 2021."

In short, Cooper said refiners could blend more flex fuels such as E85, blend more E15, more biomass-based diesel, purchase RINs, use surplus RINs, or carry forward compliance deficits into the following year.

"Put simply, refiners have numerous options and strategies available for compliance with the RFS," he said.

"Most likely, refiners will use some combination of the above strategies. That optionality is a hallmark of the RFS program. It does not dictate what specific biofuels or strategies must be used to comply with the annual conventional renewable fuel standards. Rather, it allows obligated parties to choose the compliance strategy that is most operationally and economically feasible for them."

Thompson told Regan if even if EPA maintains biofuel volumes for 2021 at the same levels as the previous couple of years, "it will be impossible for refiners to comply using RINs generated by physical blending. For this reason, some analysts project that the U.S. may exhaust the RIN bank built by overcompliance in previous years. EPA has repeatedly stated that maintaining the RIN bank is critical for liquidity and cost control."

Cooper asked Regan to make sure the 2021 and 2022 RVO rules include conventional renewable fuel volumes of at least 15 billion gallons, as well as to include court-ordered 500 million gallons "illegally waived" from the 2016 standards.

"In closing, as you begin your tenure as administrator, we respectfully encourage you to stay the course on the Renewable Fuel Standard," Cooper said.

"Even in the face of continued attempts by the oil refining industry to undermine the program, the RFS has been an incredibly effective tool for reducing greenhouse gas emissions, cutting criteria tailpipe pollutants, reducing petroleum imports, and boosting rural economies."

Chris Bliley, Growth Energy senior vice president of regulatory affairs, said in a statement AFPM's claims are untrue.

"AFPM has been making the same misleading claims about RINs since long before the pandemic," he said.

"Even other oil industry representatives have agreed with the EPA that RIN prices are not costs absorbed by refiners. The fact is that any refinery's obligation under the Renewable Fuel Standard is set as a percentage of the volume produced. When that volume drops, so does the obligation. Biofuel producers were among the hardest hit by COVID-19, with over half the industry offline at the peak of the crisis. Using COVID-19 as a pretext to attack the RFS is wrong, and it poses a needless threat to our climate goals and efforts to revitalize rural communities. AFPM's members would be better served to follow the RFS and blend more biofuels."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow me on Twitter @toddneeleyDTN

Comments

To comment, please Log In or Join our Community .