Put Workers and Consumers Above Politics

Source: By Mike Sommers, Real Clean Energy • Posted: Sunday, September 22, 2019

It’s been a good summer for Americans traveling on the roads – with low gas prices in multiple states, according to AAA. But refining jobs could be at risk and consumers may face higher fuel costs if the White House advances proposals to dramatically increase biofuel mandates.

Higher-ethanol fuels can cause engine damage for vehicles that aren’t designed for it, and most vehicles aren’t. Nearly 70 percent of vehicles on the road today were not designed to run on fuel with 15 percent ethanol volume, known as E15. Using it can void warranties and require costly repairs. Plus, it’s less energy dense than ethanol-free gasoline, requiring more frequent fill-ups. That’s why the Renewable Fuel Standard (RFS), which mandates yearly ethanol quotas, is so bad for consumers.

But regulators have options to protect consumers. And, until now, the Trump administration has largely done a good job exercising them.

Although the Environmental Protection Agency’s (EPA) yearly biofuel requirements have mandated increased ethanol volumes, the agency has stopped short of raising levels high enough to bring about problems associated with E15. It’s a sensible approach not only because most vehicles aren’t ready for E15 but also because most of our gas station infrastructure isn’t either.

But producers of corn-based ethanol are pushing back – calling on regulators to force more ethanol into the fuel supply whether consumers want it or not.

The latest target of the corn lobby’s ire is the Trump administration’s decision to exempt small refineries suffering hardship from obligations to comply with the costly mandate. Under the RFS, refiners must either blend biofuels like ethanol into gasoline or purchase credits – known as Renewable Identification Numbers (RINs) – to demonstrate compliance. Removing these exemptions could put upward pressure on RIN prices – potentially increasing costs for small and large refiners alike and diverting resources away from investments in upgrades or maintenance projects that employ a largely unionized workforce.

But now the White House is signaling it may backtrack on a policy that is good for drivers, construction workers, refiners and gas stations – the vast majority of which are independently owned small businesses. All because the ethanol industry is dissatisfied. The ethanol industry says the administration’s current approach decreases ethanol demand. It is simply not true.

Statistics from the federal Energy Information Administration (EIA) show ethanol consumption has remained steady since the first waivers went into effect in 2016. That tracks with research from the University of Illinois at Urbana-Champaign’s Department of Agricultural and Consumer Economics, which recently published research showing “there is little if any evidence that the blend rate for ethanol has been reduced by [Small Refinery Exemptions].”

Even though there’s no evidence the waivers are hurting ethanol consumption, President Trump seems poised to comply with the ethanol lobby’s demands. Media reports indicate the administration plans to mandate an additional 500 million gallons of corn-based ethanol in 2020 while keeping the small refinery exemptions in place.

These additional volumes would be a mistake. Last year alone, refiners imported hundreds of millions of gallons of fuel to meet these mandates, displacing U.S.-produced gasoline and diesel. Artificially increasing the mandates yet again will do nothing more than increase costs on U.S. manufacturing while increasing incentives for more imports.

It also represents a departure from the balanced approach the administration seeks on ethanol policy. There’s no good way to implement a policy as flawed and outdated as the RFS – which was designed to cut energy imports during a decade of energy scarcity, and never revised to reflect our new position as the world’s leading oil and natural gas producer, and major energy exporter. But at least the status quo is the classic DC middle ground, where none of the energy or corn industry stakeholders are entirely happy, but at least consumers are largely unscathed. That may no longer be the case in 2020.

For Washington scorekeepers, the ethanol conversation is all about politics. Pundits have little doubt the decision is designed to satisfy politically significant corn states. With union support the highest in 50 years, let’s hope the White House changes course and puts consumers and the thousands hardworking Americans employed by refineries at the center of ethanol policy.

Mike Sommers is president and CEO of the American Petroleum Institute. Sean McGarvey is president of North America’s Building Trades Unions. Chet Thompson is president and CEO of the American Fuels and Petrochemicals Manufacturers.