House hearing will scrutinize refiner fuel credits

Source: Marc Heller, E&E News reporter • Posted: Monday, July 23, 2018

A House Energy and Commerce subcommittee this week will delve into one of the dicier aspects of biofuel mandates — the renewable fuel credits that are driving much of the debate over the policy’s future.

The Subcommittee on Environment, chaired by Rep. John Shimkus (R-Ill.), takes up renewable identification numbers, or RINs, at a hearing Wednesday.

At issue are credits that refiners buy in order to show compliance with biofuel-blending requirements, particularly if the refinery doesn’t actually blend ethanol into gasoline. Refiners say the cost of compliance is burdensome when market prices for RINs climb, as they did in recent years.

The system is also complex and, critics say, lacks transparency, leaving the RFS vulnerable to fraud and abuse. Advocates for revamping the renewable fuel standard say the RIN system is especially ripe for an overhaul, and even supporters of ethanol mandates say they’d welcome modifications to make it more transparent.

Shimkus has been working toward changes in the RFS, the details of which he has yet to propose. In a notice of the hearing, the subcommittee said it would take testimony for background on RINs as the chairman considers changes to the system.

A RIN is a 38-digit number assigned to a gallon of biofuel. It is essentially the currency of the RFS, the subcommittee said in the notice.

“The RIN market is an especially complex part of the RFS and is often not well understood,” Shimkus said in a news release. “As we look at the future of transportation fuels, we must develop a better understanding of what RINs are, how they are used, and what changes, if any, are needed to address issues in the marketplace.”

RINs are at the center of the debate about how the RFS affects small refineries. EPA has granted increasing numbers of economic “hardship” waivers to the plants, even though they’re sometimes owned by highly profitable bigger companies; the agency has said it’s required to look only at the refinery in question, although the ethanol industry has complained sharply about the practice.

Petroleum industry sources say the government never intended RIN prices to rise higher than pennies per credit when the law was enacted in 2005 and updated in 2007. After rising to more than a dollar in 2016, prices tumbled as low as 18 cents in June, a response to the Trump administration’s signals about potential policy changes.

Ethanol advocates such as Sen. Chuck Grassley (R-Iowa) and the Renewable Fuels Association have said they’d favor making RIN trading more open, possibly with oversight from the Commodity Futures Trading Commission.

Oil and gas industry groups such as the American Petroleum Institute say the RFS, along with the RINs, should be repealed.

Shimkus hasn’t outlined specific ideas for revamping the system, but lawmakers skeptical of the RFS say they’d consider controls on RIN prices, such a federally determined cap, possibly around 10 cents (E&E Daily, March 2).

Schedule: The hearing is Wednesday, July 25, at 9:15 a.m. in 2322 Rayburn.

Witnesses: TBA.