Ag Groups: Leave RFS Alone

Commodity Groups Warn Trump That Weakening RFS Would Hurt Farmers

Agriculture groups told President Donald Trump they're concerned that changes to the Renewable Fuel Standard would further damage the struggling ag economy. (DTN file photo)

ANAHEIM, Calif. (DTN) -- With the agriculture economy struggling and the future of the Renewable Fuel Standard at the center of discussions at the White House early this week, ag interest groups are pressing President Donald Trump to prevent changes to the policy.

On Monday, the president and Vice President Mike Pence were slated to meet with U.S. Secretary of Agriculture Sonny Perdue and U.S. Environmental Protection Agency Administrator Scott Pruitt, reportedly to discuss a number of potential changes to the RFS. Politico reported Monday that Perdue and Pruitt are planning to propose capping the price of renewable identification numbers, or RINs, among other proposals.

A second meeting is planned for Tuesday at the White House with Sens. Ted Cruz, R-Texas; Charles Grassley, R-Iowa; Joni Ernst, R-Iowa; and Pat Toomey, R-Pa.; along with Perdue and Pruitt, to discuss the RFS.

Leaders from the National Corn Growers Association on Monday warned of dire consequences because of the talks in Washington. NCGA told members gathered in Anaheim, California, for the beginning of the Commodity Classic convention to contact lawmakers as soon as possible to stave off any possible changes to the RFS.

"This deal is bad and it's getting some traction with the administration," said Jon Doggett, NCGA's executive vice president for government affairs. "There are some in the administration who are going ahead saying 'Yeah, let's go ahead and resolve this problem for these poor refiners.'"

He encouraged every corn farmer to call their congressman or senators as soon as possible to stave off the oil industry and oil-state senators.

"This is probably the most serious and direct attack since the energy boom," Doggett said.

In a letter to Trump on Monday, a number of agriculture groups essentially pled with the president to leave the RFS alone.

"While millions of Americans are benefitting from a growing economy and from your tax reforms, times are tough in rural America," the groups said in the letter.

"The U.S. Department of Agriculture projects 2018 net-farm income will decline $4.3 billion, a 6.7% reduction from 2017 levels. This represents the lowest net-farm income, in nominal dollars, since 2006 and is a 50% decline in net-farm income since 2013. The heart of America is being left behind when it comes to economic growth and opportunity."

The letter is signed by Kevin Skunes, NCGA's president; John Heisdorffer, president of the American Soybean Association; Zippy Duvall, president of the American Farm Bureau Federation; Roger Johnson, president of the National Farmers Union; Gordon Stoner, president of the National Association of Wheat Growers; and Don Bloss, chairman of the National Sorghum Producers.

Cruz has previously proposed capping RIN prices at 10 cents. Last week, Cruz held a rally at the now-bankrupt Philadelphia Energy Solutions. The East Coast refiner claimed in its Chapter 11 bankruptcy filing that the price of RINs was the reason for its financial difficulties. At the rally, Cruz held up PES as the poster child for a need for RFS reform, although the refiner has a number of other management and other issues weighing on its bottom line.

The ethanol industry has spent years trying to get EPA to change the Reid Vapor Pressure rules for 15% ethanol, to no avail. Now, Doggett noted the White House seems willing to waive the pressure rule for E15 in exchange for putting a 10-cent cap on RIN prices. RINs are now trading around 70 cents a gallon.

"Capping RIN prices reduces the incentive to blend ethanol," Doggett said. "I think once you do that, it really starts unraveling the RFS."

Doggett pointed to a Reuters article last week about the Philadelphia Energy Solutions refinery and how PES' parent company soaked the refiner for payments, then PES made some bad sales and got on the wrong side of the RIN market.

"These guys made every mistake they could possibly make," Doggett said. "Then they sold their RINs about a year ago, and now RINs are higher and they are going to have to buy those RINs. They made every mistake they could, and now they are blaming the RINs program and the RFS for their bankruptcy."

In addition, Sen. John Cornyn, R-Texas, reportedly is drafting legislation to reform the RFS.

In their letter, the agriculture groups pointed to the RFS as a "strong engine driving" the rural economy.

"The RFS, which sets targets for blending ethanol and biodiesel into our nation's fuel supply, created new markets for our farmers, created new jobs in rural America, gave consumers more fuel choices, and improved our nation's air quality," the letter stated. "By any measure, the RFS has been successful not only for agriculture, but for our nation. This growth has slowed, however, in the face of past government policies and oil industry opposition.

"But while our fellow farmers struggle with declining farm income and a poor agricultural economy, most oil refiners are experiencing a boom. Refiners are reporting surging profits and significant gains from recent tax reforms."

The groups said an EPA analysis found RIN values were not causing economic harm to refiners.

"The failings of one company should not be used as an excuse for undermining a law that serves hundreds of ethanol and biodiesel plants, tens of thousands of renewable fuel plant workers, and millions of farmers who rely upon the strong market demand created by the RFS," the ag groups said.

"As you meet this week to discuss these issues, we ask that you not entertain proposals that would undermine the purpose and intent of the RFS. There are options to address refiners' concerns that do not undercut the RFS. Any action that seeks to weaken the RFS for the benefit of a handful of refiners will, by extension, be borne on the backs of our farmers."

Capping RIN prices essentially would end the RFS mandate for biodiesel and possibly hurt corn-based ethanol, a recent analysis found.

According to a December 2017 analysis by farmdoc at the University of Illinois Urbana-Champaign, capping RINs essentially would be waiving RFS requirements to blend more biofuels.

Corn farmers at an issues forum at Commodity Classic said they can't just sit back and let this play out.

"It's just critical for us to stand up and have our voices heard," said Keith Alverson of South Dakota. "It's not acceptable for us to just let this continue."

Read the letter here: http://bit.ly/…

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

Follow him on Twitter @toddneeleyDTN

(AG/CZ)