Enforcement and Inspection

Senators Say Biofuel Program Hurts Big Oil

Seventeen Republican senators on August 23 sent EPA Administrator Michael Regan a letter urging him to waive or significantly lower the 2020 renewable volume obligation (RVO) for Renewable Fuel Standard (RFS) compliance and set the 2021 and 2022 “RVOs at levels that comport with reality.”

Led by Sen. Pat Toomey, R-Pa., and joined by 16 colleagues from oil-rich states, the group’s letter said the RFS is making it difficult for oil refineries to continue operations.

The RFS program was created by Congress under the Energy Policy Act of 2005 and expanded under the Energy Independence and Security Act of 2007. Its purpose is to reduce reliance on imported oil, expand the renewable fuel sector in the United States, and reduce greenhouse gases.

Biofuel blending targets are set by Congress and increase each year. The EPA is tasked with assessing those targets and creating annual rulemaking to set reasonable RVO standards, taking current market conditions into account.

The 2020 RVO was set at 20.09 million gallons, with advanced biofuel set at 5.09 billion gallons and biodiesel set at 2.43 billion gallons.

The program requires oil refiners to blend “billions of gallons of biofuels into the nation’s fuel mix, or buy tradeable credits, known as RINs, from those that do,” according to Reuters. “Farmers and biofuel producers argue that reducing mandates harms demand for their products, though refiners reject that claim and say the costs of the program puts blue-collar refinery jobs at risk.”

Several sources report that the EPA has recommended retroactively lowering the 2020 blending mandates and plans to recommend lowering the minimum RVOs for 2021. The 2021 mandates have already been delayed by 6 months due to the pandemic.

RIN credits

The senators’ letter states EPA data indicates there will not be enough renewable identification number (RIN) credits generated and that there are not enough carryover credits from previous years to meet the current mandates.

“If the RIN bank is depleted, there would be no RINs available for obligated parties to purchase, leaving U.S. refiners little choice but to cut fuel production, increase fuel exports, or face non-compliance with the RFS. All of these outcomes would harm U.S. consumers, threaten union jobs, and curtail the ongoing economic expansion,” the senators wrote.

The letter also pointed to the recent cyberattack on the Colonial Pipeline as an example highlighting “the need for a stable, geographically diverse, and secure fuel supply.”

“As a result of the hack, over 30% of gas stations in seven states experienced fuel outages, and gas prices hit six-year highs, including a 25-cent spike in Georgia over the course of one week,” the letter stated. “Additionally, seven U.S. refineries shuttered or repurposed their operations in the last year alone, reducing the country’s refinery capacity to the lowest level since 2015.”

Speculation surrounding the mandates has caused a drop in RIN trading prices, reports Reuters.

Biofuel response

“I’m disappointed to hear the EPA is planning to lower the minimum required renewable fuels volumes for this year. If the reports are true, then once again, the EPA is giving a gift to Big Oil and is playing games with the Renewable Fuel Standard law. This has been a particularly difficult time for Iowa farmers and producers, and they don’t need the additional uncertainty this announcement brings,” says Sen. Chuck Grassley, R-Iowa, as reported by FarmProgress.  “Releasing the proposed volume obligations for 2021 when we are already more than halfway through the year is completely unfair to members of the biofuels community. EPA can’t just keep painting over this gaping hole of a problem that leaves the regulated community with more questions than answers.”

Lowering the RVO mandates for 2020, 2021, or 2022 will place the Biden administration in an awkward position in the ongoing clash between the biofuels industry and oil refiners. It will also likely jeopardize Biden’s timetable to reach zero emissions by 2050, Renewable Fuels Association (RFA) President and CEO Geoff Cooper says in FarmProgress.

“Asking EPA to waive the 2020 RFS standards—which were finalized by the previous administration in 2019—is a fool’s errand; EPA has repeatedly stated that it does not have the authority to go back in time and change RFS volumes that have already been finalized.

“And the Biden administration knows that reducing the 2021 and 2022 RFS volumes would derail the President’s agenda related to clean energy, climate and domestic manufacturing jobs. It would also mark a big step backward on the path to net zero GHG emissions by 2050. RFA continues to urge EPA to preserve the 2020 RVOs (that were finalized nearly two years ago) and move expeditiously to adopt strong RVOs for 2021 and 2022, including the statutory allotment of 15 billion gallons of conventional renewable fuel annually,” Cooper adds.

RFS program

On the opposite side of the coin are the “onerous” requirements of the RFS program.

“We urge EPA to take action to reduce RFS compliance costs in order to avert additional financial hardship for consumers and protect the continued viability of U.S. refineries,” stated the Republican senators’ letter to the EPA.

Joining Toomey in signing the letter are Shelley Moore Capito, R-W.Va.; Cynthia Lummis, R-Wyo.; Steve Daines, R-Mont.; John Barrasso, R-Wyo.; James Lankford, R-Okla.; James Inhofe, R-Okla.; John Kennedy, R-La.; Ted Cruz, R-Texas; Michael Lee, R-Utah; James Risch, R-Idaho; Bill Cassidy, R-La.; Roger Wicker, R-Miss.; Mike Crapo, R-Idaho; Marsha Blackburn, R-Tenn.; John Cornyn, R-Texas; and Bill Hagerty, R-Tenn.

The RFS program statute “contains a general waiver authority that allows the Administrator to waive the RFS volumes, in whole or in part, based on a determination that implementation of the program is causing severe economic or environmental harm, or based on inadequate domestic supply,” according to the EPA.

The program provides formal avenues to request waivers for volume requirements and petition the EPA for various reconsiderations related to the mandated RVO standards.

From the available information, it appears there are no clear winners regarding RVO standards. Oil refiners claim the program is too costly for profitable operations, farmers supplying corn for ethanol claim economic harm when the mandates are lowered, consumers feel the pinch in their pocketbooks from higher fuel prices, and green groups point to the environmental damage caused by all carbon-based fuel.

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