White House considering RFS compromise

Source: Marc Heller, E&E News reporter • Posted: Friday, March 2, 2018

The administration is exploring a compromise on ethanol mandates that would place new controls on the price of renewable fuel credits while allowing year-round sales of higher-ethanol fuel, participants in a meeting with President Trump said yesterday.

The president floated the idea in a meeting with key senators and representatives from ethanol and refining interests as the administration weighs changes to the federal renewable fuel standard, according to industry and congressional sources. A follow-up meeting may be scheduled for next week, they said.

If the administration pursues that route, it’s likely to run into objections from corn-state lawmakers such as Iowa Sen. Chuck Grassley. The influential Republican has said he cannot support limits on prices of renewable fuel credits, also called renewable identification numbers, which refiners buy to show compliance with the decade-old biofuel blending law.

But Grassley and others highlighted what they said was Trump’s willingness to accept the ethanol industry’s top priority: promoting higher-ethanol gasoline called E15, or 15 percent ethanol, that cannot be sold in the summer because of U.S. EPA fuel volatility rules. Most gas sold now is E10.

“An emerging solution appears to be year-round E15, which would drive down RIN prices,” Grassley said in a statement after the meeting.

Grassley participated, along with Sens. Joni Ernst (R-Iowa), Ted Cruz (R-Texas) and representatives of ethanol and petroleum refining companies. It was the second RFS-related gathering in Trump’s office this week, suggesting the White House is serious about crafting a solution (E&E News PM, Feb. 27).

Both sides agreed that the discussion touched on allowing expanded sales of E15 fuel in the summer, in exchange for tweaks in the system of renewable fuel credits. The restrictions are tied to air pollution, but the ethanol industry says E15 actually produces less pollution than E10.

Trump appeared to be interested in a “waiver credit” proposed by Cruz that would allow refiners to buy RINs from the government if they couldn’t do so cost effectively on the market, said a refining industry source close to the discussions. One possibility, the source said, is a 10-cents waiver credit put in place for two years in exchange for the greater availability of E15.

The waiver credit isn’t the same as the 10-cents-per-RIN price cap Cruz has also discussed, but it would have a similar effect, the source said. Renewable credits bought from the government wouldn’t be attached to an actual gallon of ethanol, but RINs that are attached to actual ethanol would be priced at a discount.

The discount would help make RINs less costly for refiners who buy credits attached to ethanol. That addresses a concern from Cruz and other lawmakers from oil-producing states that the high cost for renewable fuel credits are straining merchant refiners.

Those refiners don’t always have the capacity to blend ethanol into gasoline, forcing them to buy credits from others who do.

Credits bought from U.S. EPA would generate revenue that could be used to support more blender pumps in gas stations or other infrastructure aimed at promoting E15, said a petroleum industry source familiar with the discussions.

A refining industry group called the Fueling American Jobs Coalition said in a statement that the meeting appeared to advance the cause of adjustments to the RFS.

“Tens of thousands of direct and indirect refining jobs in Pennsylvania, Texas and across the country will benefit if the president provides clear direction on administrative adjustments to the RFS program,” the group said. “Today’s meeting continues the clear forward momentum towards a durable solution. We look forward to helping the process get across the finish line.”

Cruz said earlier in the day that talks have been “very, very productive” and added that “the basic contours of a solution would be limiting the cost of RINs substantially so that the regulatory burden is dropped on refineries and you don’t have thousands of blue-collar jobs being lost.”

Other regulations that Cruz said limit the growth of ethanol could be lifted, Cruz said, without elaborating.

“That’s the basic exchange, which ends up with everyone winning. And the question is going to be are the players all willing to take yes for an answer and end up doing better,” Cruz said.

Ethanol advocates remained firmly opposed to controls on prices of RINs. Farm incomes are already dropping due to low corn prices, Grassley said.

“If the RFS were undermined with a RIN price cap or waiver, that would be made even worse,” the senator said. “Thousands of jobs in rural America could be lost.”

The CEO of the biofuel company Poet LLC, Jeff Broin, attended the meeting. In a statement later, he said, “It’s clear from this conversation that another refinery bailout is more important to Sen. Cruz and the EPA than the economic crisis facing Midwest voters at the moment.”

“Nothing new was discussed in this meeting,” Broin said. “Removing accountability from oil companies would deprive millions of Americans the freedom to choose less expensive, homegrown biofuels and imperil countless jobs and family farms across America’s heartland.”