Waivers to Refiners May Hurt Ethanol, Corn

Source: By Todd Neeley, DTN/Progessive Farmer • Posted: Friday, April 6, 2018

OMAHA (DTN) — Damage may have been done to ethanol and corn markets by waivers granted to refiners in recent years, but one ethanol industry official said it’s too soon to know the extent because the U.S. Environmental Protection Agency is withholding details about those waivers.

The agency is under fire for granting nearly 40 Renewable Fuel Standard waivers to so-called small refiners since 2016, including about 25 in 2017 alone.

As a result, the Renewable Fuels Association is stepping up pressure on the agency to provide information on the waivers. On Thursday, the RFA filed a new Freedom of Information Act request with both the EPA and the U.S. Department of Energy, after the EPA didn’t respond to the ethanol industry’s January request for similar information.

RFA Executive Vice President Geoff Cooper told DTN the agency’s waivers, along with a settlement reached between EPA and Philadelphia Energy Solutions on Wednesday, are creating “uncertainty and confusion” for ethanol and corn demand.

“I don’t think anyone knows the magnitude of the market impact right now because we are still missing key information,” Cooper told DTN. “How much volume was exempted, for what compliance years do the exemptions apply, how many RINs (renewable identification numbers) are going to be dumped back into the market, how much blending is not going to happen as a consequence of these decisions?”

The most immediate impact has been what Cooper said is the “cratering” of the RIN market. Prices have fallen from 95 cents in November to about 30 cents on Wednesday. RIN values provide an incentive for the expansion of ethanol blending beyond E10, he said.

“The crash in RIN prices does not bode well for E15 and E85 growth prospects,” Cooper told DTN. “We’ve also seen ethanol futures prices drop 10% since mid-March even though stocks have been shrinking and export demand has been strong. That tells me the market is reading the PES settlement and the small-refiner bailouts as highly bearish news.”

The small-refinery waivers may be creating a “slow burn that will have long-term impacts,” Cooper said.

“By retroactively exempting dozens of refiners from RFS compliance in years that have already passed, EPA is creating a situation where hundreds of millions of RINs that refiners were holding for compliance will now be dumped back onto the market,” he said. “The impacts of these decisions will continue to play out over time.”


In a news release on Thursday, RFA President and CEO Bob Dinneen said the last straw was EPA’s approval of waivers for larger refining companies such as Andeavor, the nation’s fifth-largest refiner.