Policy Corner: White House Seeks to Grow Biofuels and Cut Costs for Refiners

Biofuels Industry Rejects RIN Cap and Promotes “Win-Win-Win” Plan

Stakeholders from biofuels and agriculture remain closely engaged in conversations with the White House, EPA, USDA, lawmakers, and other interested parties, over the last several weeks regarding proposed changes to the Renewable Fuel Standard (RFS). Since late last year, the White House has been considering a proposal by Senator Ted Cruz (R-Texas) that would put a 10 cent cap on Renewable Identification Numbers (RINs), which are the primary mechanism to ensure that refiners blend biofuels.

Merchant oil refiners claim that it is too expensive to comply with the law. However, larger integrated oil companies have profited handsomely by generating RINs from blending biofuels. The biofuels industry has made it clear to the White House that Senator Cruz’s “RIN Cap” proposal is unacceptable. It would destroy incentives for refiners to blend homegrown biofuels, jeopardize thousands of jobs and family farms across the Midwest, and further reduce demand and prices for U.S. grain. Iowa State University recently released a study showing that Senator Cruz’s proposal would reduce biofuel blending and lower corn prices by 25 cents per bushel.

The biofuels industry continues to advocate for a true win-win-win solution, including a permanent Reid Vapor Pressure (RVP) waiver for E15, which would give Americans year-round access to E15 and help lower compliance costs for merchant refiners. With RVP, nationwide adoption of E15 would drive demand for an additional 2 billion bushels of surplus grain annually.

Regretfully, the White House and merchant refiners will not agree to an RVP-only solution. The USDA subsequently asked stakeholders to submit their alternatives. The biofuels industry – led by Growth Energy and several companies including ADM, Green Plains and POET – replied to the USDA’s request with an alternative, market-based concept that would provide existing obligated parties with 1.3 RINs for every gallon of biofuels blended above E10. The plan would include RVP relief for E15 retailers. This RIN multiplier concept has precedent and would be administered similar to existing EPA programs.

Stratas Advisors determined that a RVP+Multiplier scenario compared to the status quo would create 700 million more biofuel gallons by 2020 and more than 1 billion gallons from 2021 onward.

The RVP+Multiplier plan – with unified support from biofuels and agriculture – is the best opportunity for an administrative solution that would actually grow the market for homegrown biofuels and increase demand and prices for America’s surplus grain. So far, it is the only proposal that offers a “win-win-win” for refiners, biofuel producers and farmers.




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