Shared concerns over biofuels credit prices may spur RFS deal

Source: Marc Heller, E&E News reporter • Posted: Friday, December 15, 2017

Texas Republican Sen. John Cornyn said yesterday that shared concerns in Congress about manipulation of renewable fuel credit markets might help pave the way to a deal on adjustments to the renewable fuel standard.

Cornyn yesterday told reporters that Sen. Chuck Grassley (R-Iowa), ethanol’s biggest defender in Congress, recently shared with him a letter he’d written expressing concern about potential market manipulation driving up the cost of renewable credits.

That means the corn-state senator shares a common complaint with the oil companies he’s been fighting over the RFS.

“I talked to Sen. Grassley about that this morning,” said Cornyn, the second-ranking member in the Senate Republican leadership. “He actually showed me a letter that he’d written previously expressing some concerns about the speculators driving up those prices.”

At issue, Cornyn said, is the secondary market for renewable fuel credits, also called renewable identification numbers, or RINs. Refineries typically buy RINs to meet the renewable fuel standard’s requirements, leaving the actual mixing of biofuels into gasoline to fuel blenders.

A spokesman for Grassley, Michael Zona, said Cornyn was referring to a private letter, the details of which he didn’t share.

The senator’s concern with RIN manipulation isn’t new; four years ago, he wrote to the Commodity Futures Trading Commission urging an inquiry into the market (E&E News PM, Oct. 22, 2013).

Biofuel supporters have cheered Grassley for pressuring U.S. EPA and President Trump not to ratchet down biofuel volumes (E&E Daily, Oct. 11).

Grassley and other ethanol supporters’ willingness to accept measures that would lower RIN prices will determine what kind of agreement — if any — congressional and White House negotiators are able to reach on tweaks to the renewable fuel standard in the coming weeks.

“He is amenable,” Cornyn said.

In Cornyn’s view, RIN prices driven up on the secondary market don’t affect ethanol production so much as increase costs to refineries that have to buy the credits.

That’s putting some refiners on the verge of bankruptcy, he said, although industry analysts say RIN prices have fallen in recent months and may not be hurting refineries nearly as much as two years ago.

Grassley told reporters yesterday that he hasn’t seen a proposal, which Sen. Ted Cruz (R-Texas) has said could satisfy both sides.

“All I can say is we’re having discussions,” Grassley said. “I haven’t seen text yet. We were told that there’s a plan where everybody can win, and I want to see it on paper.”

Some refiners have suggested a cap on RIN prices, which pro-biofuel groups oppose. Mostly, the RIN system is working as intended, they say, although the Renewable Fuel Association has said it would support a more transparent market overseen by CFTC.

Some energy industry sources point to the Renewables Enhancement and Growth Support Rule, a proposed regulation by EPA that would make several changes to the RFS, as potential ground for agreement because it has provisions agreeable to each side.

Among other provisions, the proposed rule would allow feedstocks that are partially converted at non-renewable fuel facilities — called biointermediate feedstocks — to be fully converted at a renewable fuel facility.

The proposal also would require refiners to report a breakdown of their gasoline, diesel and heating oil production and would allow ethanol and naptha from certain feedstocks to qualify for cellulosic ethanol RINs — addressing a part of the renewable fuel business that has fallen far short of congressional goals.

That proposed rule is slated for completion in November 2018, according to the Trump administration.

Reporter Geof Koss contributed.