Governors' Biofuels Coalition

By calling for price caps on renewable fuel credits, Texas Republican Sen. Ted Cruz on Wednesday made clear that a wide gulf remains between lawmakers from agricultural states and those from oil patch states over the future of biofuels, even within the GOP.

His comments also dimmed hopes that Cruz would lift his hold on the confirmation of Bill Northey, an Iowan nominated by President Donald Trump to be undersecretary for Farm Production and Conservation at the Department of Agriculture. That hold has led to rhetorical skirmishes between Cruz and Iowa Republican Sen. Charles E. Grassley.

Cruz, speaking at the recently bankrupted Philadelphia Energy Solutions refinery, sided with the company in arguing that the price of Renewable Identification Numbers or RINS caused the company’s financial troubles, an assertion that has been rejected by the biofuels industry and agricultural state lawmakers, including Grassley.

The “broken” RIN system is threatening the economy and bankrupting refineries, Cruz told company employees, referring to the credits that refiners can buy and sell like stocks in an open market to meet federal renewable fuel standards.

“This is about jobs,” Cruz said, adding that the RIN system isn’t working and needs to be fixed.

The Renewable Fuel Standard, a congressional mandate to add biofuels to the nation’s transportation fuels, is credited as the most successful federal effort to increase the use of plant-based fuels derived from corn, soybeans and other agricultural products. But the policy has faced consistent opposition from the oil industry, which has called for its repeal or overhaul. Refiners, of which Cruz’s state of Texas has many, have complained about RINs being too pricey.

Cruz, like other oil patch lawmakers, argued that the inflated price of RINs have made compliance with the standard costly for refiners like PES, which blamed its bankruptcy on a $218 million RIN obligation in 2017.

RIN prices, Cruz said, should be capped at 10 cents. But biofuels backers fear that setting lower prices for the credits would discourage refiners from buying more plant-based fuels as it would be cheaper to buy the RINS.

Seeking a ‘win-win’

“Senator Cruz’s efforts to secure a so-called ‘win-win’ solution to protect refining jobs are entirely misdirected,” Renewable Fuels Association President and CEO Bob Dinneen said in a statement following the lawmaker’s speech. “His proposal to cap RIN prices would not protect these workers, and would most assuredly risk agricultural jobs across the country. All Senator Cruz is really protecting is corporate greed, because that’s what’s really at the heart of PES’ financial problems.”

Ethanol advocates have also blamed PES’ corporate decision-making, including reliance on high cost imported crude oil and inefficient refinery technology, for its troubles. Grassley, a staunch RFS defender, shot back at Cruz, calling the PES event an “anti-RFS rally.”

“Every independent study shows the PES bankruptcy was due to management decisions that did not work out, not the Renewable Fuel Standard,” Grassley said in a statement. “It sure looks like PES management and its private equity owners are scapegoating the RFS to distract from their own failings, which have risked the livelihoods of more than a thousand workers. Like the refining industry, America’s biofuels industry creates tens of thousands of middle class jobs that support families across the country.”

This is not the first time the two senators have exchanged words on the topic.

On Feb. 7, Grassley took to the Senate floor seeking unanimous consent to confirm agriculture nominee Northey, who has been blocked by Cruz over the Texas lawmaker’s concerns with the RFS implementation.

The Texas Republican blocked Grassley’s request, prompting a back-and-forth over the efficacy of RINs. Just like he did on Wednesday, Cruz argued for a cap on the price of RINS.

RIN compliance was also the subject of a recent White House meeting that included a dozen senators from oil states. Trump directed the group to find a “win-win” legislative fix to the RFS program that would benefit corn states and oil states.

That direction has prompted a working group on Capitol Hill, although no new ideas have yet emerged to overhaul the RFS. The war of words between Grassley and Cruz may indicate the difficult path ahead for those negotiations.

For Cruz, who is up for reelection in Texas where the primaries are less than two weeks away, taking the position he did Wednesday could win him political points. But the Iowa GOP has warned that if Cruz continues to block Northey over RFS, they’ll oppose him if he ever again seeks national office.

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