Ethanol Blog

Federal Agencies to Meet on RFS Changes

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
Connect with Todd:

Officials from the USDA, EPA and the U.S. Department of Energy are expected to meet on Thursday, as reported by Politico, to begin discussions on how to make possible changes to the Renewable Fuel Standard.

Those agencies reportedly will be considering steps toward allowing year-round E15 sales, to reallocate ethanol gallons lost as a result of small refinery waivers granted by EPA in recent years, as well as a controversial proposal to attach Renewable Identification Numbers, or RINs, to ethanol exports.

Growth Energy Chief Executive Officer Emily Skor said in a statement to DTN the agencies need to move quickly on E15.

"We're pleased the USDA is taking up the president's call to action and pressing for an immediate E15 fix, before the start of the summer driving season," she said.

"As (Agriculture) Secretary (Sonny) Perdue has noted, a flood of illegitimate waivers from the EPA has resulted in 'demand destruction' for U.S. farmers at a time when rural communities can least afford it. Even petroleum giants like Marathon are now expecting 'small refinery' handouts. Regulators should, instead, focus on the president's plan to reallocate lost biofuel gallons that were siphoned away by EPA waivers. President Trump promised to protect statutory targets under the RFS, and we support Secretary Perdue's efforts to ensure the EPA upholds that commitment to rural families.

"There is no reason to delay action or attach unrelated gimmicks designed to benefit a few refinery owners. EPA Administrator Pruitt should stand by his word in 2017, when he vowed not to pursue an export scheme that would cannibalize demand for U.S. biofuels, destroy farm income, and spark retaliatory tariffs against the entire fuel and farm supply chain."

Ethanol and agriculture interests will be paying particularly close attention to the RINs/exports idea. The concern is doing so will erode domestic demand for ethanol.

Scott Irwin, an economist at the University of Illinois, said he doesn't believe attaching RINs to exports would hold up in court. Even if the agency implements such a policy, he said, the E10 market would not change either way. The biggest concern for biofuel interests would be the potential harm to E15 and E85 blends.

"We have not done any formal analysis, because we don't think it is a legal policy," Irwin said.

"I actually think the consequences are not very large even if it is somehow implemented. I start from the position that E10 volumes will be the same with or without the RFS. In other words, E10 is cost-competitive in the gasoline blend today. This implies that the domestic ethanol blend rate will not fall below 10% regardless of the policy changes with the RFS."

What would be at risk, Irwin said, is lost gains in allowing year-round E15 sales or E85 "due to the incentive effects of higher RIN prices." As a consequence, the future of advanced biofuels could become increasingly murky as their markets primarily would reside in higher blends.

If RINs are attached to exports, RIN stocks rise and their prices fall, Irwin said, which is exactly what refiners want.

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

Follow me on Twitter @toddneeleyDTN

(TN)

Comments

To comment, please Log In or Join our Community .