Governors' Biofuels Coalition

The nation’s ethanol mandate, called the Renewable Fuel Standard (RFS), was enacted a decade ago to improve our energy security by replacing foreign oil from unstable regions of the world with a homegrown alternative. While U.S. oil production has surged over the past few years thanks to the shale revolution and while we are more energy secure than we have been in decades, we are still a major oil importer. The need for a robust ethanol industry remains.

However, the RFS has not been without its challengers. The latest challenge comes from a small group that is intent on implementing a major – and unwise – change.

Some obligated parties, those tasked with blending ethanol into our fuel supply, such as fuel importers and refiners, claim to have had trouble meeting their RFS obligations. However, that’s simply not the case. There are multiple options for them to meet their obligation. Their qualm is not about technical challenges but about a perceived unfair cost.

A minority of obligated parties is now advocating for policymakers to move the point of obligation down the supply chain. Instead of putting the obligation of blending ethanol into our fuel supply on the shoulders of refiners or importers they want fuel marketers – such as gas stations and other fuel retailers – to shoulder the burden. That would be a costly mistake.

This shift in the point of obligation could raise fuel prices for consumers, reduce our use of renewable biofuels and add more bureaucratic complexity to a rule that already has plenty. Pushing the point of obligation on retailers would place a huge burden on many small businesses that do not have the expertise and materials needed to navigate the complexity of RFS compliance reporting.

Furthermore, fuel marketers and retailers don’t control whether or not the nation’s petroleum supply can be blended with biofuel. Refiners have that capability and that’s precisely why they are currently the obligated party under law. If the point of obligation was pushed onto marketers, they would be at the mercy of refiners to access the special blends of motor fuel that comply with U.S. Environmental Protection Agency (EPA) standards. Fuel refiners would surely charge a premium for these specialty blends, increasing the cost of fuel for every American. Artificially inflating the price of the nation’s gasoline supply is not the policy solution we need.

In a recent poll conducted by Penn, Schoen and Berland, a nationally-recognized market research firm, more than seven out of 10 voters agreed that shifting the burden of obligation onto small businesses is a mistake. And a similar number agreed that if such a shift were to happen it would hurt consumers.

Heading the small but vocal group calling for the shift in obligation is a billionaire investor, whose focus is not U.S. energy security, the wellbeing of consumers or the future of small business gas stations. Rather, he is a major investor in a merchant fuel refiner who, according to him, isn’t making as much as it should because of the RFS. He’s not looking to improve the nation’s biofuels program. He’s simply looking to manipulate energy policy for a personal windfall.

The EPA has proposed rejecting the petition for shifting the point of obligation citing “significantly increased complexity” and the potential to harm the renewable fuels program. The EPA is right and is joined in that judgment by an unprecedented coalition of fuels groups including the American Petroleum Institute and the Renewable Fuels Association – groups that have never before seen eye-to-eye on almost any aspect of the RFS. Consensus is hard to come by in Washington, but when it arrives you shouldn’t think twice about running with it. Formally rejecting this shift in the point of obligation is the obvious choice.

Ryan McNutt is the CEO of the Society of Independent Gasoline Marketers of America (SIGMA).

 

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