The Renewable Fuels Association (RFA) shook up the market with its assertion that President Donald Trump’s administration is working on changes to implementation of the U.S. biofuels program that would shift the responsibility for blending from refiners to gasoline wholesalers who supply the fuel to retail outlets. Billionaire investor Carl Icahn, who is a majority owner of CVR Energy Inc. and a special adviser to Trump, and a biofuel lobby group that includes representatives of the refiner Valero Energy Corp., reportedly provided the deal to the Trump administration for revamping the Renewable Fuel Standard (RFS). But the White House denies any such executive order on ethanol is in the works.
When RFA was told “in no uncertain term that the point of obligation was going to be moved,” Bob Dineen, head of RFA, said he wanted to see “one of our top agenda items moved.” Namely, the coming executive order will reportedly include a waiver allowing gasoline blends containing 15% ethanol (E15) to be sold year-round in U.S. markets.
Currently, the Environmental Protection Agency (EPA) regulates the vapor pressure of gasoline sold at retail stations during the summer ozone season (June 1 to Sept. 15), limiting access to E15 during the summer driving season. Traders are trying to figure out if it would somehow “automatically” move the standard ethanol from E10 to E15. We don’t think that would be the case.
The three-part accord would also reportedly aim to curb imports of biodiesel from Argentina by ensuring domestic producers qualify for a currently expired $1 per gallon tax credit, potentially moving it from a blender credit to a producer credit. This is something Senator Chuck Grassley (R-Iowa) has long worked to change.
Major Players React
The corn and soybean markets surged in response to the news today and RIN prices plummeted. Industry reaction varied widely.
RFA’s Dineen saying the waiver would “greatly expand the market opportunities for ethanol, and I think it is a darned good thing for our industry.”
In contrast, Jeff Broin, the CEO of POET, the nation’s largest biofuel producer, condemned the “back-room ‘deal’” that he says was made without leading voices in the biofuels industry, noting that RFA’s largest member is an oil refiner. He calls the deal a “bailout” for people who want out of their obligations under the Clean Air Act. “Bob Dineen does not have the authority to negotiate on behalf of the biofuels industry, and Icahn does not have the authority to negotiate policy on behalf of the U.S. government,” he continues.
Growth Energy expressed similar sentiments regarding the “back-room deal” that it says would “irreparably change the RFS.” If true, Emily Skor, CEO of Growth Energy, says the proposal “would eviscerate America’s progress under the RFS and impose indefensible costs on consumers.”
She continues, “Any assertion that this tradeoff would ‘greatly expand the market opportunities for ethanol’ is simply untrue. An RVP waiver means little if retailers no longer have an incentive to sell higher ethanol blends. This would halt and likely reverse all the progress we’ve made with hundreds of gasoline retailers who now offer consumers higher blends of ethanol.”
Skor also points out that “Changing the point of obligation impacts hundreds, if not thousands of new parties, demanding new rules, new staff, and new infrastructure. Moreover, the EPA is ill-equipped to manage such a large-scale restructuring of fuel markets, which could mean turmoil for retailers, higher costs for consumers, and years of uncertainty for hundreds of thousands of workers in the biofuel industry.
Meanwhile, the American Coalition for Ethanol (ACE) cautions that “this is not a done deal and not a take-it-or-leave-it scenario,” explaining that changing the point of obligation and making summer blending of E15 easier will require EPA rulemaking and public comments. ACE is also opposed to the deal that it says would eliminate one of the most important tools to help drive higher blends remaining in the RFS. It says the only clear winners of such a deal would be Icahn and oil refiners.
In reaction to today’s revelations, Fuels America, the nation’s leading coalition of biofuel advocates, says it has severed ties with RFA and has resolved to reject Icahn’s play to “permanently destabilize” the RFS.
