RFS Wrangling Continues

GOP Senators Ask for Small-Refiner Waiver Suspension

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Since 2016 the U.S. Environmental Protection Agency has granted an estimated 40 Renewable Fuel Standard waivers to refiners. (DTN/The Progressive Farmer file photo)

OMAHA (DTN) -- President Donald Trump's administration will continue to explore possible changes to the Renewable Fuel Standard following a cabinet meeting on the issue on Monday.

No decisions were made during the meeting reportedly held between Trump, U.S. Environmental Protection Agency Administrator Scott Pruitt and U.S. Secretary of Agriculture Sonny Perdue.

"The president instructed his cabinet to continue to explore options that protect American farmers and America's refinery workers," the White House said in a statement. "He is grateful for the attention and care Secretary Perdue and Administrator Pruitt have devoted to this issue."

During a news conference on Tuesday, Sen. Charles Grassley, R-Iowa, said although he is not pleased with Pruitt's actions on the RFS, he doesn't expect that issue will lead to his resignation or firing. Instead, Grassley said, questions about Pruitt's spending of tax dollars and other ethics issues are more likely to cause a problem.

"Before he (Trump) fires, he's got to be cognizant that we have three cabinet spots to fill," Grassley said. "We've got our plate full with those three. He better hold off a little bit. I don't approve of what the EPA director is doing on the RFS dating back to last year."

Among those positions yet to be filled is Trump's nominee to be No. 2 at the EPA, Andrew Wheeler.

Growth Energy CEO Emily Skor said in a statement the president continues to support the biofuels industry.

"We are encouraged that the White House continues to rebuff Sen. (Ted) Cruz's efforts to place a cap on RINs (renewable identification numbers), which would destabilize the RFS and devastate struggling farm communities," she said. "The president has always voiced strong support for the Renewable Fuel Standard, and his administration should move quickly to lift outdated limits on summer-time sales of E15, which would support growth on all sides, generate a new supply of RINs, and ease pressure on refiners. The EPA also must stop issuing waivers to petroleum giants, which undercut the administration's commitment to the RFS and threaten the livelihood of America's farmers."

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Renewable Fuels Association President and CEO Bob Dinneen decried the administration's inaction on the RFS.

"Kicking the can down the road might be an expedient means of addressing the concerns of those refiners who have steadfastly refused to make the investments necessary to meet the RFS cost-effectively," he said in a statement to DTN. "But it is a real kick in the teeth to farmers across this country who have watched as EPA Administrator Pruitt has engaged in a systematic destruction of biofuels demand with small refinery 'hardship' waivers totaling more than a billion gallons to highly profitable companies that don't need them, flouting a court-ordered remand of the 2016 RVO requiring reallocation of 500 million gallons of demand, and surrendering 329 million gallons in RFS demand to a company forced into bankruptcy because of its own incompetence, not the RFS."

Dinneen said the agency should help agriculture by allowing the year-round sale of E15 to help farmers who have "been kicked enough."

Cruz and refining industry interests have suggested capping the price of renewable identification numbers, or RINs, at 10 or 20 cents, as a way to control RFS compliance costs for refiners. In exchange, ethanol industry interests have been pushing for EPA to approve year-round sales of E15.

Prior to the White House meeting, five Republican U.S. senators asked Trump on Monday to suspend RFS small-refiner waivers.

The EPA is under fire for granting nearly 40 RFS waivers to so-called small refiners since 2016, including about 25 in 2017 alone.

The letter from Sens. Charles Grassley and Joni Ernst, Iowa; Deb Fischer, Neb.; John Thune, S.D.; and Roy Blunt, Mo., was also sent to Pruitt. In the letter, the lawmakers reminded Trump about his support for the ethanol industry.

"On March 15, 2018, we wrote you to relay our strong opposition to placing a waiver cap on renewable identification numbers and reiterate constructive solutions to lower the cost of RINs in a way that truly represents the cooperative deal you are seeking," the senators said in the letter.

"However, as we await the opportunity to meet with you to continue this dialogue, we must alert you to ongoing Environmental Protection Agency (EPA) action that is concurrently undermining your commitment of a 15-billion-gallon RFS," the senators said in the letter. "The EPA is using its small refiner economic 'hardship' waiver authority in an unprecedented manner to benefit some of the largest refiners in the nation, including Andeavor, which posted a profit of approximately $1.5 billion last year. The application of such waivers appears to be incongruent with the EPA's own definition, which states that 'the exemption may be granted only if EPA determines, based on supporting evidence provided in the petition, that compliance with RFS obligations will impose disproportionate economic hardship on the refinery in the year for which exemption is requested.'

The senators said the waivers "effectively reduced" the amount of corn-based ethanol required for blending from a statutory 15 billion gallons down to 13.8 billion gallons in 2016.

"If this trend continues, demand for corn could drop by hundreds of millions of bushels, with some modeling equating such displacement to slashing corn prices as much as 50 to 70 cents per bushel, which would mean a nearly $100 per acre loss for farmers," the senators wrote.

"Notwithstanding the underlying uncertainty regarding the RFS, already suppressed commodity prices, and China's threatened tariffs, the EPA's liberal use of hardship waivers is striking a severe blow to farmers and biofuel stakeholders in our states and across the Midwest. We therefore urge you to call on the EPA to cease all RFS waiver action until the agency's administration of the RFS can proceed in a more transparent and impartial manner. We are concerned that any continued action will further undermine the RFS and violate the good-faith discussions you have fostered toward a true win-win solution."

On Monday morning, the hashtag #RFSWorks was trending on Twitter, as ethanol interest groups, ethanol plant owners and operators, farmers and others were flooding Twitter with tweets urging Trump to stand by his commitment to the RFS.

Claremont, Minnesota-based AI-Corn Clean Fuel, an ethanol cooperative, tweeted: "In other @EPAScottPruitt related bad news, EPA grants 'hardship waivers' for companies that made $1.5B last year, while leaving farmers suffering from true economic hardship behind. RVP relief for E15 & higher blends is a real solution @realDonaldTrump #RFSworks"

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

Follow him on Twitter @toddneeley

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Todd Neeley