Ag Policy Blog

Texas Senator May Have Scored an Own-Goal in RFS Battle

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Sen. Joni Ernst spoke Thursday morning to members of the American Coalition for Ethanol as part of the group's fly-in to Washington.

The Iowa Republican indicated to reporters beforehand that the Trump Administration seems to be backing away from the idea pitched that the oil industry needs a price cap of some sorts on the Renewable Identification Numbers, or RINs, that are attached to every gallon of ethanol. The White House appears willing to turn the RINs idea over to Congress.

"We think that by backing away we can come away OK on this," Ernst said. She added, "We want to find ways to strengthen the RFS, if at all possible. I think we will be OK."

The RINs cap came as an idea from major oil refiners, but were championed by Sen. Ted Cruz, R-Texas, who held up USDA Undersecretary Bill Northey's nomination for roughly four months as Cruz and others blamed RINs obligations for the bankruptcy of a small Pennsylvania refinery, Philadelphia Energy Solutions. Over the last few weeks, it turns out, that refinery was getting drained of funds by its corporate ownership, while the state of Pennsylvania now claims the refiner owes $3.8 billion in back taxes -- nearly five times the amount of RINs obligations that the refiner's leadership, and Cruz, claimed led to its demise.

"They were concerned in particular about one small oil refinery that was having difficulty with RIN prices so their win-win was to cap RINs," Ernst said. "That's not a win for us. That undermines the RFS. For us, a win-win is the RVP waiver and going toe E15 year-round and know we have more ethanol being consumed in the summer months. That brings the RIN prices down, which was their big concern."

But Cruz, it seems, could be the true biofuels hero here -- like the guy who accidently scores an own goal against his team. Cruz's theatrics and demands for White House meetings led to the ethanol industry and biofuel defenders such as Sens Ernst and Charles Grassley to get in front of President Donald Trump. And then they all got to talk about the prospects of E15. Basically, Cruz's grandstanding over RIN prices could inadvertently lead to more ethanol use year-round.

"President Trump agrees year-round sales of E15 would bring down RIN prices," Ernst said. She added, "The president thought that was a brilliant idea. We've been talking about that forever. It just took that discussion over the last month or so for that to set in."

Now, EPA, headed by a lawyer, just needs to ensure they find the legal basis to approve E15 year-round and eliminate the so-called Reid Vapor Pressure restriction.

Regarding possible congressional changes to the RFS, Ernst said she's willing to participate in talks that strengthen the RFS and offer more consumer choice.

"This conversation is essential, especially as the administration continues to discuss the fate of the Renewable Fuels Standard," Ernst said. "We all know rural America relies upon growing the biofuels industry."

Iowa has 43 ethanol refineries producing 4 billion gallons of ethanol, including 55 million gallons of cellulosic ethanol, as well as 12 biodiesel plants producing more than 350 million gallons. A waiver cap "has ethanol clearly in the crosshairs," but Ernst noted "biodiesel is collateral damage here."

"I remain opposed to a RIN waiver cap mechanism," Ernst said. "The proposed waiver credit would destroy demand and replace millions of gallons of manufactured biofuels with paper credits."

Tom Blazek of Lake Charles, La., who owns an LLC with investments in several ethanol plants, told Ernst an EPA official spoke to ACE members on Wednesday and stressed a "win-win" solution for both ethanol and oil refiners. Blazek wondered what a win-win scenario means, but further Blazek wanted to know where it is in the EPA's government mandate to ensure there are win-win scenarios for industry.

"They are responsible for clean air and clean water and I don't know anything that says 'win-win,'" Blazek said. "They have to do cost-benefit analysis, but playing this win-win with the ethanol industry and the oil industry is a smoke screen that takes away from the real issue, which to me is clean air."

Scott McPheeters, a farmer from Gothenburg, Neb., suggested if prices were the concern then perhaps oil prices should be capped or oil-executive salaries should be capped.

I also happened to ask Ernst briefly if she can get E85 in Red Oak, Iowa, where she lives. I live in Glenwood, Iowa, about 30 miles from where Ernst lives. Oddly enough, just like the problem I have, Red Oak does not have any flex-fuel blender pumps. And we both kind of laughed that we really need to get this fixed.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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Steve Kramer
3/22/2018 | 11:48 PM CDT
You might want to check with the Iowa Corn Growers about that.