Farm Progress

This has been an interesting week on the biofuels front from rumors to industry in-fighting and ending with some movement on Capitol Hill.

Jacqui Fatka, Policy editor

March 3, 2017

6 Min Read

It was quite a wild week for the biofuels industry. Reports that the Trump administration would issue an executive order changing the point of obligation under the Renewable Fuel Standard (RFS), denials of the report from the White House, the banishment of the Renewable Fuels Association (RFA) from a broad industry coalition formed to protect the RFS, and the announcement by a key congressional leader of plans to revise the RFS were just a few of the top headlines.

It all started Monday night when there was a release from the leading ethanol producers – POET – commenting on what they called a “backroom deal” between the Renewable Fuels Association and President Trump’s advisor Carl Icahn on the RFS point of obligation.  

Trump’s adviser investor Carl Icahn, who owns 82% stake in CVR Energy, has made a lot of noise about changing the point of obligation under the RFS. In November the Environmental Protection Agency denied a refiners’ petition which sought to change the obligated party from the refinery to those entities that own gasoline before it is blended for retail sale.  

Another comment period just closed Feb. 22 on the topic. Many comments were made on the need to keep the policy as EPA originally implemented. Under the RFS, fuel producers and importers must demonstrate compliance with federal targets by blending specific volumes of renewable energy into the fuel mix. Those who don’t may purchase credits from other blenders under a flexible system that was created at the urging of oil companies.

The term “point of obligation” merely specifies which link in the supply chain – refiners and importers – is responsible for accumulating credit for blending biofuels. Under the requested change, this obligation would shift to fuel retailers and distributors, which groups such as Growth Energy said would create a “logistical nightmare” and put E15 gains at risk.

In many ways it brought to fruition many of the fears the biofuels industry has had for months with the interesting clash between the apparent strong support from President Trump on the RFS (check out this video clip from Iowa Lt. Gov. Kim Reynolds) , while one of his top advisors Icahn looks to be ready to undermine the RFS as he’s been so regularly challenging.

But POET, as well as a handful of other groups including Growth Energy, said RFA had no right to make a deal on behalf of the industry. “RFA does not represent a majority of the biofuels industry; RFA’s largest member is an oil refiner [Valero], which would also profit directly from such a change,” Growth Energy CEO Emily Skor said.

Interestingly Growth Energy was launched in 2008 in an effort to bring a strong lobbying focus on behalf of the producers and supporters of ethanol. Growth Energy represents two of the four biggest U.S. ethanol producers as well as large gas stations changes can benefit from the existing system. Although many ethanol producing companies are also members of RFA, the question remains whether there are still those who do not believe RFA has the best interests of ethanol producers in mind.

By Tuesday afternoon Fuels America – a coalition of biofuel advocates – said since RFA’s position is no longer aligned with America’s biofuel industry, the “Fuels America coalition has resolved to sever ties with the group.”

The outcry Tuesday from ethanol interests protesting any "deal" on the point of obligation agreed to by the RFA prompted the White House through a spokesman to quickly deny that any deal had been offered.

By Wednesday, Bloomberg News, who had reported the proposal to shift the point of obligation on Monday, reported that White House officials spent two days talking with billionaire refinery owner Carl Icahn, an unpaid advisor to Trump on regulation issues, over his proposal to move the obligation.

The week prior, Growth Energy, National Farmers Union, American Coalition for Ethanol and the Advanced Biofuels Council sent a letter urging EPA Administrator Scott Pruitt urging the agency not to change the point of organization. By Thursday, another coalition – this time including an additional 12 organizations representing fuel retailers, convenience stores and petroleum marketers sent a letter to Pruitt again asked for EPA’s support in denying the change on the point of obligation.

The fear by those in the ethanol industry is that moving the point of obligation downstream would remove that imperative for refiners and inject uncertainty into the program.

On Thursday, at the Commodity Classic in San Antonio, RFA’s CEO Bob Dinneen told reporters that the RFA remains opposed to changing the point of obligation "because we are concerned that it would undermine the integrity of the program by creating a compliance mechanism that is unworkable, or that in a transition there would be disruption in the marketplace that would hurt the industry." But, he said, if those two concerns can be addressed, "we'd be okay with moving the point of obligation.

The supposed “deal” between Icahn and RFA’s Dinneen was that EPA would provide a waiver to Reid Vapor Pressure (RVP) limits, a change that already has strong bipartisan support because it is a common sense solution that would increase summer sales of higher ethanol blends, Growth Energy said.

A bipartisan group of senators actually introduced the Consumer and Fuel Retailer Choice Act which would allow retailers to offer E15 without restrictions from June 1 to September 15. RVP is a measure of how quickly fuel evaporates, and the EPA regulates vapor pressure/RVP to prevent increased ozone or smog from vehicle emissions. Congress granted regular gasoline with 10 percent ethanol (E10) an RVP waiver because E10 reduces tailpipe emissions. EPA does not give E15 the same RVP waiver as E10, even though it is less volatile.

Meanwhile, on the House side, House Energy and Natural Resources Committee, Rep. Greg Walden, R- Ore., said his panel will make changes to the RFS and pipeline permitting its top legislative priority, adding that the committee would "put the consumer first and build policy from there."

Rep. Greg Shimkus, R-Texas, who chairs the panel's environment subcommittee, was even more direct in his intent with the RFS, suggesting he would seek to kill the 12-year-old mandate.

He told reporters that he is hopeful that some revision of the RFS can happen this year, "really with the ultimate goal of just freeing up the market, getting rid of the mandate and letting competition fill the void."

But, he conceded, "That's going to be a lot. That's going to be a heavy lift."

No doubt, the ethanol industry has attacks from many different facets. And unfortunately, it doesn’t seem like those advocating on behalf of the industry are in lockstep.



About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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