Biofuels Political Battles Continue

Source: By DTN Washington Insider • Posted: Tuesday, June 22, 2021

U.S. biofuel policy has become one of the biggest areas of friction in Washington in recent years and the change in administration is quickly showing that situation has not changed.

Reuters is reporting that biofuel-backing Democratic lawmakers are eyeing a massive infrastructure package as a way to get some wins for the sector. Democrats are said to be looking at a $6 trillion infrastructure plan with at least $3 trillion in new spending that could be pursued if the party opts to push ahead without any Republican support for infrastructure.

Democratic lawmakers intend to introduce two bill soon that they hope will be melded into the potential big infrastructure plan, including one that would set aside $2 billion to pay for new fuel pumps and other infrastructure needs to get higher levels of ethanol and biodiesel blended into fuels.

Plus they are also looking for a 5-cent-per-gallon tax credit for gas stations offering E15 — 15% gasoline and 85% ethanol. The higher blend has been cleared by EPA and the agency has approved year-round sales of the fuel that previously had been prevented from being sold in the summer months.

Getting more “flex fuel” vehicles on the road is another effort, with lawmakers said to be eyeing a $200-per-vehicle tax credit for automakers relative to marketing vehicles that can use up to 85% ethanol fuel.

Reuters said the lawmakers making the push are Sen. Amy Klobuchar, D-Minn., and Democratic Reps. Cheri Bustos of Illinois, and Cindy Axne of Iowa.

“Investments into our electric vehicle system are necessary and good, but liquid fuel is not going to disappear overnight,” Bustos told Reuters. “The way we look at is biofuels have the potential to drive down our carbon emissions now, not 10 years from now, not by 2050, but right now.”

But even with the trio of Democrats said to be behind the push, not all lawmakers and environmentalists are not in favor of biofuels. They argue that will keep alive internal combustion engines and take away from the push for electric vehicles which they eye as a way for the U.S. to get to net-zero carbon emissions by 2050.

The potential arguments over tax credits and expanding biofuel use harken back to the battles that emerged over E15 fuels in recent years.

And there were major battles over tax credits that resulted in so far only biodiesel keeping a tax credit, but even that is currently scheduled to end. So trying to resurrect a new tax credit could prove to be yet another battle for the industry.

Biofuel policy was being eyed as an area of hope when the Biden administration took office. The sector was angered by the Trump administration’s dramatic expansion of the use of small refinery exemptions (SREs) and the matter ended up in court.

In fact, some expect the U.S. Supreme Court to issue a ruling soon on the SRE issue after the Ninth Circuit Court determined that three of the SREs for the 2016 compliance year were invalid. Refiners took the matter to the nation’s top court. The Biden EPA came out in favor of the Ninth Circuit decision and said that it would not act on scores of SRE requests made by refiners until after the Supreme Court ruling.

But now there are states that have requested a general waiver of requirements under the Renewable Fuel Standard (RFS), which EPA said it is considering. That has sent shudders through biofuel markets and the market for Renewable Identification Numbers (RINs) that refiners can buy to demonstrate compliance with their RFS obligations.

The current effort, coming from Democratic governors, has sparked concerns with biofuel supporters the Biden administration could grant the request. EPA has never granted such waiver requests under the RFS when they were made in the past.

Even early in the Trump administration, there was an effort by Trump himself to order those within the administration to find a “win-win” solution on biofuels. That resulted in meeting after meeting with those on each side of the issue, with each session ending with commitments as they viewed them that would support their position. It was enough of a back-and-forth situation to have some lawmakers deploy holds on USDA and trade nominees as they sought to pressure the administration not to give in to biofuel backers.

Now each side continues to wage their battles in the press and in sessions with Biden administration officials. Refiners are warning of massive losses of union jobs as they say costs of complying with the RFS will cause refineries to close. Biofuel supporters are warning Biden not to reduce the levels of biofuels that go into the nation’s fuel supply, arguing that will negatively impact markets for corn and soybeans as a portion of those crops go into the biofuel market.

So we will see. For what started as a way to use up more corn and soybean supplies as U.S. farmers became more and more productive, biofuel policy has turned into a major battleground and the outcome of these battles need to closely followed, Washington Insider believes.


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