Gov. Reynolds testifies in favor of E15 in Michigan

Source: By Office of Governor Kim Reynolds • Posted: Tuesday, April 2, 2019

DES MOINES – Gov. Reynolds traveled to Ypsilanti, Michigan this morning to testify in favor of E15 at the Environmental Protection Agency’s (EPA) public hearing on its proposed E15/RIN reform rule. You can watch her remarks live on Facebook here. 

Below are her remarks as prepared for delivery:

Much has occurred since I was here to testify last July.

I noted then that trade uncertainty combined with attacks on the RFS has increased angst throughout the countryside and that remains true today.

In fact the economic pressures on rural Iowa have only intensified.

Now as Iowans are valiantly working to recover from devastating floods impacting rural counties and farmers especially hard, I traveled here today because defending the renewable fuels industry is incredibly important to our state.

The renewable fuels industry in Iowa accounts for nearly $5 billion of Iowa’s GDP, generates over $2.4 billion of income for Iowa households and supports almost 47,000 jobs through the entire Iowa economy.

As the #1 producer of corn, ethanol, biodiesel and cellulosic ethanol, we pride ourselves in leading the charge in advancing the renewable fuels industry.

Last July I called on the EPA to take action to allow year-round sales of E15.

Iowans across the state hailed President Trump’s announcement last October when he directed the EPA to start the rulemaking process and complete it in time for the summer driving season.

I commend the EPA for working hard to ensure that this E15 rulemaking can still be completed by June 1 when the summer E15 restrictions would otherwise go into effect.

I encourage you to complete the E15 rule by June 1, even if it means separating the RIN reforms also proposed in this draft rule.

President Trump made a commitment to Iowa last October and Iowans expect it to be kept.

I want to highlight 4 key points about the draft rule.

First, the RIN reform proposals would diminish the value of ethanol blending for retailers by destroying the value of the D6 RIN.

It is unreasonable to require retailers who offer higher blends like E15 and E85 to sell 100% of their RINs each and every quarter while allowing the obligated parties to purchase only a portion of their compliance volumes and defer their compliance deadlines for months .

Retailers will be forced to sell while the obligated party is free to wait until the value of the RIN would be rendered worthless.

While refiners detest the price of a RIN at any value, it’s essentially the price they are willing to pay to NOT blend a physical gallon of biofuels.

Conversely, the RIN is the incentive for someone else to blend that extra gallon.

Take away that incentive by undercutting RIN values and you’ll get less ethanol blending, not more E15 sales.

We’ve already seen this with the destruction wrought by widespread small refinery exemptions, the resultant crash in RIN values led to the first decline in domestic ethanol blending in over 2 decades.

If the EPA wants to meet the President’s pledge to remove barriers for higher ethanol blends, it must restore some symmetry to any RIN market reforms between the buyers and the sellers and between the obligated parties and retailers.

If finalized as proposed, this draft rule would simply replace a regulatory barrier for E15 with an economic barrier.

I say again, that was not what I or Iowans across my state heard the President promise.

Second, we commend the EPA for proposing a straight-forward, common-sense interpretation of the current RVP statute.

E15 does in fact contain 10% ethanol, 10% and a little more.  This interpretation should remain in the final rule.

Third, we strongly urge the EPA to retain the substantially similar option in the final rule.

Since 2017, the certification fuel for automakers has been E10.

All the testing data supports that E15 is substantially similar to E10.

We feel strongly this is the clearest and most defensible argument for applying RVP relief for E15 blends.

Fourth, for a decade E85 blended with natural gasoline, which is legal to sell year-round, has been used in blender pumps to create other blends like E15.

In fact, the USDA spent $100 million dollars in its Biofuels Infrastructure Partnership (BIP) program to dramatically extend this very practice.

Ethanol plants have invested in blending infrastructure and retailers, many in Iowa, have invested in blender pumps as the preferred way to bring the choice of E15 to the public.

After permitting this widespread practice for so many years,  the EPA now proposes to outlaw the use of natural gasoline in E85 used in blender pumps.

This will strand millions of dollars in both federal and private investments, and punish those who moved the earliest to bring E15 to consumers.

Further, it will restrict competition in the marketplace and lead to higher consumer prices for both E85 and E15.

Restricting this widely used practice will not lead to better environmental performance, it’s simply another unnecessary regulatory hurdle that will disproportionately harm small retailers.

There is some speculation that the use of natural gasoline in E85 could cause E15 to be out of spec for volatility or sulfur.

Our ethanol plants in Iowa source the proper natural gasoline to ensure that when it’s used in a blender pump, the resulting E15 is on spec.

Do not outlaw this practice.

The EPA allows natural gasoline to be used in the various gasoline blend stocks that would be used to make E15 at a terminal.

Why?

Those blend stocks meet the final fuel spec.

Instead of outlawing E85 in blender pumps, EPA should simply adopt a compliance system previously proposed to address this very situation.

In the draft REGS rule, the EPA proposed a system where retailers could use product transfer documents (PTDs) to show the E85 they purchased was proper for blending into E15.

The EPA should not ignore this common-sense approach that was previously proposed in order to ban a product that when properly used can be an appropriate and cost-saving addition to E85, just as it is for certified gasoline blend stocks.

The EPA should not outlaw this option for Iowa’s ethanol plants when they allow it for petroleum refiners.

While it is not the topic of focus today, I would be remiss not to urge the EPA to change its course on granting small refinery exemptions to the RFS.

The billions of gallons of exemptions granted over the last year have wreaked havoc on rural Iowa and farmers.

As our senior Senator Chuck Grassley pointed out, almost 1 billion bushels of corn demand have been destroyed through the abuse of these waivers and all at a time when commodity prices are at decade-low levels.

According to official data from DOE’s Energy Information Office, for the first time in 20 years, in 2018 less ethanol was blended into US fuel than the year before.

20 years of progress was stopped cold and reversed because of unjustified exemptions to the RFS.

The demand destruction is real and the data proves it.

Moreover, we have seen alarming press reports that the lawsuits challenging these exemptions have unearthed facts that DOE’s analysis and recommendations to deny at least half of the exemption requests were ignored by the EPA.

In fact, to date not a single small refinery exemption has been denied during the entire Trump Administration.

As refiners enjoy record profits, Iowa farmers are hurting, ethanol plants have been shuttered, and U.S. ethanol use has declined.

For example, according to a particular refiners annual report they made $408 million last year from reduced compliance costs.

Yet they spent $319 million to buy 3 distressed ethanol plants last year, including 1 in Iowa.

Clearly these rampant exemptions are having a disastrous impact and are not in line with the letter or spirit of the RFS.

I realize that most of these exemptions were granted under the previous EPA Administrator.

So I ask Administrator Wheeler to chart a new course.

Steer back to a reasonable evaluation of whether the RFS causes actual, verifiable, disproportionate economic harm to a refinery.

RIN prices have dropped from near a dollar to where only a few days ago an obligated party could buy a 2018 compliance RIN for only 8 cents.

Granting exemptions with RINs at such absurdly low prices would be detrimental to the RFS.

I call on the EPA today to end the unjustified demand destruction and to live up to President Trump’s promise to Iowa voters to protect the RFS.

In closing, I want to again commend the EPA for keeping the possibility of finalizing this rule by June 1 alive and encourage you not to let that timeline slip.

The draft rule contains a solid foundation for removing regulatory hurdles to year-round E15 use as President Trump called for.

Those provisions should stay in the final rule.

But the new barriers to E15, in the form of blender pump restrictions and RIN value destruction have no place in a rule that the President said was focused on increasing E15 sales.

These provisions should be stricken from the rule or replaced with provisions that advance, not diminish, E15 sales.

Thank you for the opportunity to publicly weigh in on this important issue today.

I leave here asking the EPA to rein in the small refinery exemptions and finalize a solid RVP rule that removes barriers for E15 without replacing them with new ones.

|