Perdue: RFS Support 'Unequivocal'

Ag Secretary Sees RFS Volumes, RIN Prices as Separate Discussions

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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U.S. Agriculture Secretary Sonny Perdue speaks to farmers at Commodity Classic in Anaheim, California, on Wednesday. (DTN photo by Chris Clayton)

ANAHEIM, Calif. (DTN) -- Agriculture Secretary Sonny Perdue defended his support for the Renewable Fuel Standard on Wednesday as he spoke to farmers at Commodity Classic, making it clear that President Donald Trump "unequivocally" supports ethanol, corn farmers and the RFS.

Biofuel industry leaders and corn farmers are concerned that Perdue doesn't understand the value of the Renewable Identification Number credits to the biofuels industry. Leading up to Perdue's speech, corn farmers were hearing reports about the White House meeting on Tuesday with Republican Sens. Charles Grassley and Joni Ernst of Iowa in which the issue of RINs was reportedly discussed.

Speaking to thousands of corn, soybean, wheat and sorghum farmers, Perdue said he was beginning to understand what President Trump means when he talks about "fake news," as he has drawn fire since Tuesday over talk coming out of the White House about what exactly could be a proposal to change RIN mandates.

Perdue reiterated his support for the RFS is "unequivocal" as well, and he sought to quell any questions about whether he would support a policy that would risk hurting corn demand.

"Hear me clearly, all of you," Perdue said. "I will not, I have not and will not support any policies in this country that diminish the demand, undermine the RFS and are harmful to our agricultural producers. I will not."

Those comments led to long, roaring applause before he continued his speech.

Corn farmers and ethanol industry leaders, though, have serious concerns following Tuesday's talks in Washington that the White House is supporting the idea of the Environmental Protection Agency agreeing to issue RIN waiver credits to refineries. While policymakers have referred to it as a price cap, the concept would allow EPA to issue waiver credits at substantially lower values than RINs are trading on the market. By buying those cheap credits, refiners could offset the actual requirements and costs of blending ethanol.

Talking to reporters after his speech, Perdue reiterated that he would not support anything, including export RIN credits, that would diminish the annual renewable volume obligations (RVO) required of refiners.

"My bottom line is I'm not going to support anything, whether it's export RINs or whatever that diminish the RVO standard and where we are now," Perdue said.

Perdue said his main goal is to get EPA to solve the problem of the Reid Vapor Pressure (RVP) restrictions that limit when 15% ethanol blends can be sold nationally. Getting rid of the RVP situation for 15% ethanol blends is "where we can build up a culture of 15% ethanol for the future," Perdue said.

Yet, Perdue also told reporters he does not understand why corn farmers should be concerned about what happens to RIN prices. "I've had direct conversations trying to understand why corn farmers would think they are going to benefit from high RIN prices in a way where I know where that RIN dollar is going and who's generating it," Perdue said.

The secretary added, "We're looking for things to build demand. I think some people have confused RIN prices with demand. I don't see it that way. I'm meeting with the leadership of associations tomorrow, and I'm an open book about being educated on that. But I fail to understand how the collaboration or connection between RIN prices and demand and RVO volume make up and work together. That may be part of the confusion."

Mark Recker, president of the Iowa Corn Growers Association, spoke briefly with Perdue on Wednesday, seeking to make the connection of RINs to ethanol use and corn farmers.

"The importance of the RINs to the RFS is they work hand-in-hand," Recker said. "You can't have one without the other and have the RFS function like it should. It seems there is a bit of a disconnect with the secretary there about the importance of the RINs and why they shouldn't be changed in any fashion."

One proposal that reportedly has been floated for controlling RIN prices that has drawn fire from ethanol and ag groups is attaching RINs to export gallons of ethanol. Doing so would basically translate into a loss of demand for corn, according to the U.S. Grains Council, which has studied the issue. Further, there are possible World Trade Organization issues, as other countries would look at export RINs as a subsidy.

Recker said the conversation will continue Thursday over breakfast as commodity group leaders meet with Perdue.

Talks about biofuel and petroleum policies will continue Thursday on both coasts. President Trump has invited the National Corn Growers Association, as well as Sens. Grassley and Ernst back to the White House on Thursday. Agriculture Deputy Secretary Steve Censky will represent agriculture at the meeting, which also will include representatives from the oil industry.

Perdue said Sens. Ted Cruz, R-Texas, and Pat Toomey, R-Pa., have made their case to President Trump about job degradation in the refinery industry.

"That's something obviously that the president has to listen to, and if it bears out that high RIN prices are contributing to that, irrespective of PES," Perdue said. Editor's Note: PES is Philadelphia Energy Solutions , a bankrupt refiner that blamed RIN prices for its financial problems.

Perdue reiterated that Trump "is strong for the farmers," and committed to them, but said the president has to look at all aspects of the economy.

Perdue also insisted there have been no specific proposals for RIN caps or RIN waiver credits in the talks at the White House earlier in the week.

"There were no proposals there. Ideas came from both groups there, primarily from Cruz and Toomey over issues to mitigate RIN prices. They are alleging that RIN prices are contributing to job loss among refiners, and the president listened. That's why he wanted to hear more the corn growers and invited them to the White House tomorrow (Thursday) to let them hear directly from them," Perdue said.

Grassley spoke briefly to reporters on a call Wednesday about Tuesday's talks at the White House. He and Ernst made a strong defense for ethanol, but Grassley also said Perdue has solutions about proposals from Cruz, including linking RINs to exports.

"There was a lot of feeling you could have RINs apply to exports," Grassley said. "For people in the ethanol industry, it would be very harmful for RINs to be counted for exports. There were people at the meeting who thought it was a solution. There was a feeling among too many people we could solve the RVP issue and put a cap on RINs. Obviously, I disagree with that. If we take care of RVP, the price of RINs goes down."

Editor's note: DTN Staff Reporter Todd Neeley contributed to this report.

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Chris Clayton