Hill, White House staffers explore solutions to biofuel feud

Source: Marc Heller, E&E News reporter • Posted: Thursday, December 14, 2017

Congressional staff for biofuel supporters and critics met yesterday with White House staff to discuss possible compromises on renewable policy, as industry groups dug in to opposing views.

The Trump administration is exploring as many as 10 ideas that could ease the cost of renewable fuel credits to fuel refiners, a refining industry source said. But two ideas that might satisfy those companies — capping the price of credits or backing off on renewable fuel standard enforcement by U.S. EPA — continue to fall flat with ethanol advocates.

Unlike a meeting last week at the White House with President Trump, this meeting included congressional staff for both advocates and critics of ethanol and other biofuels.

A spokesman for Sen. Chuck Grassley (R-Iowa), the chief biofuels supporter in the Senate, said the next step is for Sen. Ted Cruz (R-Texas) to circulate proposals for consideration.

He added, “The integrity of the RFS is Sen. Grassley’s priority, and there was an understanding expressed broadly in the meeting that any outcome can’t undermine the integrity of the RFS.”

Earlier, Sen. Jim Inhofe (R-Okla.), whose chief of staff attended, told reporters that Sen. John Cornyn (R-Texas) is leading the way toward a compromise that involves EPA regulation and “might require legislation, too.”

“A potential agreement may not come this year,” however, said Inhofe, who’s called for a revamp or repeal of the RFS. “Announcement time isn’t here yet.”

Controls on the price of renewable fuel credits, also known as renewable identification numbers, may be an especially hard sell to the renewable fuels industry.

A cap on the price of RINs is a nonstarter, said Geoff Cooper, executive vice president at the Renewable Fuels Association, representing biofuel companies.

“RINs are the engine that drives the RFS, and they serve as a critical economic incentive to expand the production and use of renewable fuels,” Cooper told E&E News yesterday.

“RIN prices reflect the marketplace’s understanding of the relative ease or difficulty in meeting annual RFS standards,” he said. “Capping RIN prices would destroy the market-based design of the RFS and discourage increased ethanol blending.”

Refineries buy RINs in order to comply with the renewable fuel standard’s volume requirements for ethanol and other biofuels, because they don’t necessarily handle the actual renewable fuel themselves.

Capping RIN prices — or simply signaling that the administration may do so — would bring prices down without cutting into ethanol mandates, refining industry sources said.

Cruz and other oil-state lawmakers blame high RIN prices for financial woes at refineries, including Philadelphia Energy Solutions, the largest petroleum refinery on the East Coast.

In asking EPA to waive RFS requirements for his state, Texas Gov. Greg Abbott (R) told EPA Administrator Scott Pruitt in a Dec. 1 letter that renewable fuel credit costs are having “extreme, detrimental” effects on the refining industry and “have now placed unacceptable burdens on the Texas economy and the economy and security of the nation as a whole.”

In his letter, Abbott also raised the possibility of “enforcement discretion” by EPA — essentially asking Pruitt not to hold refineries accountable for showing compliance with the renewable fuel standard.

The refining industry and allies in Congress continue to cast renewable fuel credit prices as burdensome, even as those prices fall.

RIN prices have tumbled by 23 percent since October and are averaging slightly below 70 cents each this year, down 16 percent from a year ago, according to figures compiled by the Oil Price Information Service and Argus Media.

“Oil companies and their champions on the Hill weren’t making near as much noise about RIN prices last year, even though RINs were nearly 20 percent more costly,” Cooper said.

While some of the decline may be a response to reports about talks between the White House and Congress about scaling back the renewable fuel standard, ethanol advocates said the trend undercut critics’ suggestions that RIN prices are exploding.

If Congress or the administration want to reduce RIN prices, officials should find a way to blend more ethanol into the fuel supply, biofuel supporters said. That could happen by allowing expanded sales of fuel with 15 percent ethanol, or E15, into summer months when it’s not allowed in most areas, industry groups say.

Congress could expand E15 availability by changing regulations called Reid vapor pressure rules, a measure of fuel volatility.

“There already is a solution to all of the issues being discussed in this meeting; it’s RVP relief,” Emily Skor, chief executive of Growth Energy, a pro-ethanol group, said in a statement. “Blending more ethanol is what lowers RIN prices.

“If Mr. Cruz and his coalition are unwilling to consider this obvious solution, these meetings are nothing more than a charade to get his name in headlines,” she said.

Grassley, the Senate champion of the renewable fuel standard, is caught between allies in the biofuel industry and a desire to see Cruz lift his hold on Iowa Agriculture Secretary Bill Northey’s nomination to an undersecretary position at the Department of Agriculture; Cruz has declined to answer reporters’ questions about whether he’ll do so.

Grassley’s grandson, Pat Grassley, is a candidate for the state agriculture secretary position Northey would vacate to serve at USDA, and the senator has endorsed him (E&E News PM, Dec. 7).

Reporter Corbin Hiar contributed.