The biofuels industry reacts to White House RFS meetings

By Erin Voegele | December 15, 2017

President Trump has hosted two meetings in recent weeks with Sen. Ted Cruz, R-Texas, and others focused on the Renewable Fuel Standard and renewable identification numbers (RINs). Those representing the biofuels industry are speaking out against efforts to alter the RFS and are offering solutions to help lower RIN prices.

On Dec. 15, a group of more than 85 businesses set a letter to Trump offering insights on how to maintain growth under the RFS while minimizing any potential for undue financial stress in certain parts of the refining industry.

“We are aware of the viewpoints expressed by some refiners about [RIN] prices,” the businesses said in the letter. “Importantly, refiners are not required to buy RINs under the RFS; rather, a RIN credit is attached to each RFS-eligible biofuel gallon purchased. If a refiner chooses to instead to buy a RIN credit, the [U.S. EPA] ruled last month that ‘refiners are generally able to recover the cost of RINs in the prices they receive for their refined products, and therefore high RIN prices do not cause significant harm to refiners.’ Oil companies and refiners are making investments in biofuel infrastructure to allow them to sell RINs and profit from the RFS. Recent quarterly earnings statements evidence that—despite claims to the contrary—independent refiners are doing quite well. Consumers then save at the fuel pump because biofuels displace expensive fuel additives and extend the supply of homegrown energy.”

The letter stresses that the biofuels industry has for years advocated for policies that would bring down the price of RINs. For example, the ethanol industry is working to secure regulatory parity for Reid vapor pressure (RVP) between ethanol-blended fuels and standard gasoline. According to the letter, outdated RVP rules needlessly constrain ethanol blending and put more pressure on RIN markets.

“Many of the refiners concerned about RIN prices oppose the RVP fix that would bring down RIN costs,” said the businesses in the letter. “Lifting outdated RVP regulations on fuel retailers would create new economic opportunity across America’s heartland, generating a vast new supply of RINs and easing compliance among refineries that elect to purchase biofuel credits instead of biofuel liquid gallons to comply with the RFS.”

The letter also points to a lack of transparency in RIN trading markets as a factor leading to instability in RIN prices. The biofuels industry has asked the EPA and the U.S. Commodity Futures Trading Commission (CFTC) to improve transparency to prevent market manipulation,” the letter states. “We have made some progress, but there are additional safeguards available to stabilize RIN prices.”

In addition, the businesses argue that RFS implementation is being constrained by inequitable treatment of biofuels and oil in the U.S. tax code. “The oil industry receives billions of dollars annually in permanent tax breaks that de-risk investment in oil extraction and infrastructure,” wrote the businesses in the letter. “In contrast, the tax incentives and investment vehicles offered to biofuels expire frequently and disrupt the commercial deployment of homegrown fuels.” The letter states that extending the biodiesel credit and second-generation biofuels producer tax credit, and addressing other tax and infrastructure inequities would level the playing field while encouraging biofuel production and holding down fuel prices. “Long-term certainty around these tax provisions would not only stabilize RIN values, it would increase demand for biofuels and generate a strong and affordable supply of additional RINs for refineries,” said the businesses in the letter.

“There are ways to address RIN values for refiners without undercutting the RFS and rural America,” the letter continues. “We have been working on many of them for years, and we would welcome the opportunity to move these ideas forward.”

The Advanced Biofuels Business Council, American Biogas Council, National Biodiesel Board, Biotechnology Innovation Organization, Growth Energy and Renewable Fuels Association are among the organizations that signed the letter.

Emily Skor, CEO of Growth Energy, has criticized recent actions taken by Cruz. “Senator Cruz’s latest ploy sabotages the open and genuine conversation he requested,” she said. “After stating he would relinquish his hold on well-qualified USDA nominee Bill Northey following a White House meeting, he continues his hold after multiple White House meetings. Undermining the RFS is not an option. It is working to revitalize the rural economy, as promised by the president, and no one is going to accept gimmicks designed to slow the growth of homegrown fuel. The ready solution to Senator Cruz’s stated concerns is to blend more ethanol and send clear regulatory signals about the future growth of biofuels under the RFS. RVP relief would immediately add another three months’ worth of E15 sales to the market. That’s how RFS is meant to work.”

Brook Coleman, executive director of the ABBC, stressed that Cruz is spreading misinformation about the RFS. “Ted Cruz and his backers don’t seem to be taking the White House seriously,” he said. “President Trump vowed to protect rural America. No one is going to raise costs on consumers, jeopardize our energy security, and threaten jobs across the heartland based on misinformation about how the RFS works. Instead of refinery handouts, we should cut the red tape and let customers decide whether to buy E15 all year long.”

Brent Erickson, executive vice president of BIO, called on refiners to invest in biofuels. “Independent refiners should follow the example set by other refiners and invest in advanced and cellulosic biofuels,” he said. “It will allow them to capture high RIN values and improve their competitiveness. RIN price controls are more likely to hurt small companies than help.”

The American Coalition for Ethanol has also spoken out in response to the Whitehouse meetings on the RFS and RINs. Brian Jennings, CEO of ACE, said ACE members are grateful president Trump has reiterated his support for holding up the RFS and to key U.S. senators that have reaffirmed that Crus does not seem to have a genuine win-win solution to put on the table.

“These antics from Senator Cruz aren’t about RIN prices or Bill Northey’s nomination to USDA, Crus is trying to limit ethanol’s market share on behalf of Big Oil,” Jennings said. “If Senator Cruz or refiners truly want to take pressure off RIN prices, there is a viable ‘win-win’ solution on the table that doesn’t involve dismantling the RFS. The solution is to update the antiquated Reid vapor pressure (RVP) limit which restricts the availability of E15.  The quickest way to reduce RIN prices is to increase the supply of RINs.  The quickest way to increase the supply of RINs is to blend more ethanol.  The quickest way to blend more ethanol is to provide RVP relief for E15.  Senator Cruz should cosponsor S. 517 (the Consumer and Fuel Retailer Choice Act) or join us in calling on EPA to address this matter.”

“The RFS is the law of the land and refiners are bound to comply with it,” Jennings continued. “Refiners and Senators who represent oil states have mischaracterized recent actions by EPA as “wins” for ethanol when in reality the administration has simply upheld and defended the law of the land.”