Trump admin to float RFS changes to senators

Source: Marc Heller, E&E News reporter • Posted: Monday, February 26, 2018

The Trump administration will pitch changes to federal ethanol standards in a meeting with key senators tomorrow, sources familiar with the matter said today.

Among the ideas is a directive from President Trump for U.S. EPA to move toward lifting seasonal restrictions on the sale of high-ethanol fuel, according to a petroleum industry source close to policy negotiations with Congress.

In return, the administration would seek a cap on the price of renewable fuel credits, which refiners that don’t blend fuels buy to show compliance with the biofuel mandate. The move wouldn’t necessarily involve an executive order but would involve formal rulemaking, industry sources said, although lobbying groups said they were short on details.

The discussions stem from refining industry complaints about the high cost of renewable credits, known as Renewable Identification Numbers. Philadelphia Energy Solutions, a Pennsylvania refiner, has filed for bankruptcy protection, blaming RIN costs that were more than double the cost of payroll last year.

Expanding availability of fuel with 15 percent ethanol — up from 10 percent in most gasoline today — is a top priority for the ethanol industry. Capping prices on renewable fuel credits is the opposite: one of the industry’s top ideas to fight.

“I think ethanol producers will reject it outright,” said the source, who requested anonymity to speak frankly about the yet-to-be-announced proposal. He said he hadn’t seen a written proposal.

The issue was the topic of a meeting this morning at the USDA involving EPA Administrator Scott Pruitt and Agriculture Secretary Sonny Perdue, who has been frustrated by Sen. Ted Cruz’s (R-Texas) hold on the nomination of Iowa Agriculture Secretary Bill Northey to a USDA undersecretary position over the dispute.

Others close to the fuel industry said they expect a second meeting next week with Trump, Pruitt, Perdue, and Sens. Cruz, Chuck Grassley (R-Iowa), Joni Ernst (R-Iowa) and Pat Toomey (R-Pa.).

The plans for a White House meeting were first reported last night by Bloomberg News and Reuters.

Cruz has been in regular communication with the White House about potential compromises. Grassley and Ernst’s offices didn’t return messages this morning seeking reactions.

Controls on RIN prices remain a non-starter with the Renewable Fuels Association, representing biofuel companies. A cap would prevent growth in the industry, said RFA President and CEO Bob Dinneen.

“Capping RINs codifies a blend wall and makes growth in renewable fuels exponentially more difficult,” Dinneen said in a statement. “The objective of the RFS was to grow the renewable fuels industry, not to stagnate it.”

Cruz has proposed capping RIN prices at no more than 10 cents each, well below the 60 or 70 cents seen recently in the market. Congress didn’t envision RIN prices above a few pennies each, he said at a rally at a refinery Wednesday (E&E News PM, Feb. 21).

In addition to pressing E15 fuel and the RIN price cap, the administration would seek restrictions in the RIN market that would discourage speculation, an industry source said. That could happen by limiting the ability of companies that fall under the RFS requirements — so-called “obligated” parties — to sell RINs to other companies that aren’t obligated under the law to meet the mandate, the source said.

The debate has political overtones, as well, with around 1,000 jobs at stake at the Philadelphia refinery, which is in a swing state that helped elect Trump in 2016.

Ethanol supporters say Philadelphia Energy Solutions overstates the impact of the fuel mandate, and that the company’s own financial missteps over the years set the stage for its troubles.

PES could have avoided trouble with RINs by upgrading its plant with blending equipment, as other refiners have done, said Jon Doggett, executive vice president of the National Corn Growers Association.

Cruz has cast himself as a dealmaker on ethanol, saying he has a “win-win solution” that would save refineries while boosting corn and ethanol production. But he’s been silent on the industry’s call to let gas stations sell E15 year-round; current EPA fuel volatility rules restrict sales in summer.

“He has not bit on that hook at all,” Doggett said.

Instead, Cruz in a speech on the Senate floor earlier this month said ethanol would flourish if the biofuel mandate were lifted entirely and the market was allowed to dictate supply and demand (E&E Daily, Feb. 8).

The proposal from the White House may not please lawmakers or companies that have sought broader changes in the renewable standard — and that might see a short-term solution as undercutting that bigger goal. Sens. John Cornyn (R-Texas) and Tom Udall (D-N.M.) are leading that effort.

Reporter Hannah Northey contributed.