Lawmakers Stand Against Changes to RFS Point of Obligation

Source: By Todd Neeley, DTN/Progressive Farmer • Posted: Monday, March 20, 2017

OMAHA (DTN) — A bipartisan group of senators this week joined a growing chorus of voices opposing any changes to the point of obligation in the Renewable Fuel Standard.

A group of 23 senators, including 17 Democrats and six Republicans, wrote to President Donald Trump on Thursday, asking him to leave the point of obligation unchanged in the RFS.

In recent weeks, reports surfaced that the White House may be drafting an executive order to change the point of obligation from refiners to gasoline retailers, while changing a federal rule that limits the sale of E15 ethanol blends. So far, such an executive order has not come to pass. The point of obligation determines which businesses are responsible for meeting the biofuels mandates.

“When Congress adopted the Renewable Fuel Standard more than 10 years ago it intended to provide stability for the renewable fuel producers that would reduce our reliance on foreign oil, drive investments in the industry and diversify our fuel supply,” the letter said.

The senators added that if the point of obligation is shifted downstream, refiners would have little incentive to make the necessary blendstocks available, leaving downstream businesses unable to comply. Moving the point of obligation may eliminate the incentive in the supply chain for purchasing and blending renewable fuels, they said.

The letter is signed by Sens. Charles Grassley, R-Iowa; Joni Ernst, R-Iowa; Roy Blunt, R-Mo.; John Thune, R-S.D.; John Hoeven, R-N.D.; Tammy Duckworth, D-Ill.; Richard Durbin, D-Ill.; Amy Klobuchar, D-Min.; Debbie Stabenow, D-Mich.; Heidi Heitkamp, D-N.D.; Brian Schatz, D-Hi.; Claire McCaskill, D-Mo.; Sheldon Whitehouse, D-R.I.; Edward Markey, D-Mass.; Al Franken, D-Minn.; Tammy Baldwin, D-Wis.; Mazie Hirono, D-Hi.; Jeanne Shaheen, D-N.H.; Michael Bennet, D-Colo.; Joe Donnelly, D-Ind.; Jack Reed, D-R.I.; Gary Peters, D-Mich.; and Jeff Merkley, D-Oregon.

“This type of change would not only wholly undermine the intent of the program, but would also result in a massive, costly, time-consuming shift in compliance,” the letter said.

“Moving the point of obligation to the blender, marketer or retailer would lead to an exponential increase in the number of obligated parties. Many small- and mid-sized retailers have no experience with regulatory programs of this nature and smaller businesses, particularly in rural areas, often have limited resources, making compliance a costly and time-consuming task. It would also complicate the administration of the program and unnecessarily result in significant uncertainty and market disruptions.

“It should also be noted that changing the point of obligation is broadly opposed. Fuel marketers, retailers, truck stop operators, petroleum producers and renewable fuel producers oppose the change because it would add complexity and uncertainty to the current program and would undermine investments that businesses have made to comply.”

In February, Renewable Fuels Association President and Chief Executive Officer Bob Dinneen said he was told by someone connected to the Trump administration that the White House was planning to issue an executive order changing the point of obligation.

Dinneen said he had received a call from an official saying the White House was planning to shift the point from oil refiners to gasoline wholesalers. The shift would benefit Carl Icahn, owner of CVR Refining and a Trump adviser. The RFA then was ejected from Fuels America, a biofuels coalition, because of what was perceived as Dinneen striking a deal with the White House.

The RFA did not respond to the senators’ letter this week.

A number of biofuels groups filed comments with the U.S. Environmental Protection Agency, expressing opposition to changing the point of obligation. Groups opposed to the switch fear it would discourage expanded ethanol blending.

Groups that support the switch claim that obligating blenders would spread compliance costs through the renewable identification number, or RIN, market. That market is designed to allow obligated parties to show compliance with the law by buying either physical gallons or the credits attached to actual gallons produced.

In the past, EPA has opposed the switch because it would make the Renewable Fuel Standard more complex by expanding the number of companies required to comply from hundreds to thousands.

Brooke Coleman, executive director of the Advanced Biofuels Business Council, said the senators’ involvement is important to the future of biofuels.

“We applaud champions in the Senate for rallying against changes to the RFS that would harm consumers, threaten the growth of U.S. biofuels, and jeopardize investments in clean, American energy,” he said in a statement to DTN.

“The RFS has worked effectively for more than 11 years to foster market access for homegrown biofuels, and efforts to rewrite the point of obligation are categorically opposed by a broad coalition of biofuel producers, retailers, consumers and other market participants. Restructuring the program would halt any progress under the RFS, creating regulatory chaos for retailers and dragging down economic growth in rural America.”

Brent Erickson, executive vice president of BIO’s industrial and environmental section, said the RFS as written is needed to spark innovation and investment in advanced biofuels.

“The RFS has been a success,” he said in a statement to DTN. “Congress established the program to ensure that advanced biofuels would be produced and used in the United States. And Congress appropriately put the obligation on refiners and importers to ensure that the market was open to renewable fuels.

Erickson said the problems with the RFS have been delays in yearly rulemaking to set the volumes and proposals to undercut investment in advanced and cellulosic production.

Growth Energy Chief Executive Officer Emily Skor, whose group has stood opposed to changes to the point of obligation, said just the rulemaking itself to make the change would disrupt the industry.

“The fact is, shifting the point of obligation from refiners and importers to fuel marketers, convenience stores, railroads, truck stops and trucking companies, and even consumer service companies like FedEx and UPS, would throw the RFS into chaos,” Skor said in a statement to DTN.

Skor added that such a change “would immediately trigger long and complicated rulemaking that would take years to complete.” That would cause long-term uncertainty in the market, she added, and reduce consumer demand. It would also risk removing the economic incentive for retailers to offer higher biofuel blends.

“This is an issue where there is no room to equivocate or barter,” Skor added.

Read the letter here:…