Debate Centers on RFS as Ethanol Industry Continues to Fight
Source: By Todd Neeley, DTN/Progressive Farmer • Posted: Tuesday, January 30, 2018
The ethanol industry continues to fight for expanded markets and stability in federal policy in 2018. (DTN/The Progressive Farmer photo by Jim Patrico)
OMAHA (DTN) — Nothing is set in stone with federal policy and the ethanol industry, and the same is true for 2018. The industry will continue to face annual political fights and legal battles to keep the Renewable Fuel Standard in place, the backbone of the industry.
With commodity prices low and input costs high, changes to the RFS can affect the demand for ethanol and ultimately corn in the United States. About 15 billion gallons of corn ethanol is produced per year, which equates to about 5.4 billion bushels of corn demand.
Although President Donald Trump’s administration appears to be firmly behind the RFS, corn farmers and ethanol producers should continue to monitor closely the strong press by ethanol opponents to scrap, reform or back off enforcement of the RFS.
“We knew, coming into the administration, the president’s support for ethanol generally and the RFS specifically would be unwavering, and it has been,” Bob Dinneen told DTN. Dinneen is chief executive officer and president of the nation’s largest ethanol advocacy group, the Renewable Fuels Association.
Scott Pruitt’s EPA met the Nov. 30 deadline to set RFS volumes — a rare moment in the program’s history in 2017 — and perhaps a sign that ethanol and corn producers can expect more of the same in 2018.
From 2008 to 2016, the agency set the renewable volume obligations, or RVOs, on time for RFS2 just three times — in 2008, 2009 and 2016. Meeting the deadlines provides certainty to biofuels producers and others who invest in the sector.
Despite ethanol support from the current administration, DTN Energy Editor and Product Manager Brian Milne said oil market conditions have changed since RFS2 became law in 2007. Since 2008, oil and natural gas production has grown and energy security concerns waned.
“This doesn’t mean renewables aren’t important to energy supply growth,” he said. “They are part of the mix and offer benefits; i.e. ethanol adds octane. The question is, however, does this industry need to be subsidized by demand mandates?”
Bill Northey’s nomination to a USDA undersecretary post continues to be held up by Sen. Ted Cruz, R-Texas. Cruz demands changes to the RFS, most notably to the biofuels credit program to help refiners control costs to comply.
Last week, East Coast refiner PES Holdings, LLC, a subsidiary of Philadelphia Energy Solutions LLC, filed for Chapter 11 bankruptcy protection. In part, the company blamed RFS compliance costs for the action.