October 2, 2017
By Steve Roe
In the decade since the Renewable Fuel Standard (RFS) has been in place, it's been a tremendous success, providing a cleaner, lower-cost choice for consumers and boosting local economies.
However, two recent actions by Environmental Protection Agency administrator Scott Pruitt, and a rumored third proposal, threaten to reverse the progress made and put refiners — not consumers — in the driver's seat.
Administrator Pruitt has indicated he wants to lower the price of Renewable Identification Numbers (RINs), the credits used by refiners in the RFS to add flexibility and lower cost in the program. That's driving EPA's rationale for proposing to lower the 2018 Renewable Volume Obligations (RVO), the first time the agency has lowered the RFS from the previous year's level.
Administrator Pruitt's RIN price destruction campaign is not ending there. Recently, EPA released a Notice of Data Availability, seeking comment on another idea hatched by the oil industry — to lower the 2018 RVO's equivalent to potential biodiesel imports, arguing that the RFS was intended as a domestic fuel program and imported volumes should not be accounted for in determining available supply.
The problem with this approach is obvious. First, reducing the RVO will not discourage imports from entering the U.S., meaning that available supply will remain the same, but demand will have been butchered, thus lowering prices for refiners. Second, for the U.S. to use a domestic energy program to discourage imports has "World Trade Organization violation" stamped all over it.
Meantime, a rumor circulating now suggests EPA is considering a proposal to allow RINs attached to exported gallons to count toward a refiner's RFS obligation. Currently, those RINs are retired because the statute requires the renewable fuel be used in the United States. It is a domestic energy program, after all.
One might conclude that if EPA were to lower the RFS to account for imports, it would increase the RFS to account for exports. But that's apparently not what EPA is contemplating. The objective here is to add about 1.2 billion RINs (the approximate amount exported today) to an already saturated RIN market, cratering the market and undermining any future investment in biofuels infrastructure or technology.
Administrator Pruitt is missing a critical point — lowering the price of RINs does not translate into consumer savings. RINs are free. When ethanol producers sell a gallon of biofuel to a gasoline marketer, EPA requires them to supply an RIN, as well. The RIN market is created when obligated parties separate them from the gallon of biofuel and sell them to another obligated party that has failed to blend enough ethanol to meet their obligation.
Consumer prices are unaffected.
Whenever President Trump visits Iowa, he extols the virtues of ethanol, American energy and the RFS. It is past time for the President to act on his commitment. He must rein in his EPA administrator, who is implementing the RFS in a way that accommodates oil companies, not renewable fuels and certainly not consumers. He must make the RFS great again.
Read the original article: Trump Must Make the Renewable Fuel Standard Great Again