RFA counters refiners’ RFS claims

ELLISVILLE, Mo. — Within days after Michael Regan took the helm as U.S. Environmental Protection Agency administrator, letters began rolling in from anti and pro renewable fuel factions.

The American Fuel and Petrochemical Manufacturers urged Regan, who was confirmed as EPA administrator on March 10, to “take swift action” on the Renewable Fuel Standard by extending compliance deadlines and “setting achievable targets” for the current and coming years.

“Regulatory uncertainty has helped push Renewable Identification Numbers prices to near all-time highs, threatening the viability of many refineries,” said AFPM president/CEO Chet Thompson in a letter to Regan.

“The 2020 RFS rule was inflated by an extra 770 million gallons in expectation of small refinery exemptions that have not been awarded. RIN generation from new biofuel blending in 2020 was approximately 800 million gallons short of the requirement.

“If EPA does not exercise its statutory authority to intervene and reduce RFS requirements for 2021 and 2022, the RIN bank could be exhausted, placing many refineries in significant difficulty.”

In response to the AFPM letter, the Renewable Fuels Association asked that Regan “stay the course” on the RFS.

“If the RFS was broken, they wouldn’t be squawking.”

—  Geoff Cooper, RFA president/CEO

Geoff Cooper, RFA president/CEO, addressed this and other ongoing issues in a recent RFA podcast.

The oil industry has been making a lot of noise lately about the RFS. What sway do you think their arguments are going to have with the new administration?

Cooper: “It’s hard to know exactly what’s happening behind close doors, but the refiners and their champions in Congress and some governors of the oil states are making a lot of noise right now, sending a lot of letters to EPA and to the White House and raising quite a stink about the RFS.

“It’s just a complete rinse and repeat over everything we see in these folks every time there’s a change in leadership in Congress or administration. They sort of dust off the old playbook and start relaunching all of the myths and misinformation about the RFS. They start crying wolf about RIN prices again and everything that they think high RIN prices does.

“Fortunately a lot of the folks in the Biden administration, at the White House, at EPA, at USDA have been around the block and they’ve seen this movie before. They remember a lot of these arguments from the Obama presidency and we think they’re going to be very skeptical and take a real hard look at some of the claims refiners are making about the RFS.”

In a letter recently sent to EPA, governors of some oil states asked for more RFS waiver requirements.

Cooper: “It’s sort of rinse and repeat. Some of the letters being sent actually include the same verbatim language that they included in letters years ago, asking the Obama administration then asking the Trump administration to waive the RFS because it’s such a economic burden on the refining sector. That’s the argument, and we all know that’s nonsense.

“We know that refiners are passing along the costs of acquiring RINs and that includes large refiners, small refiners, integrated refiners, merchant refiners. It is well established that they pass that cost along by slightly marking up the selling price of their gasoline and diesel, so their customer at the wholesale level at the terminal is absorbing that RIN cost and then that RIN cost is offset when biofuels like ethanol and biodiesel are blended with gasoline and diesel. The consumer sees no impact from RIN prices. It’s a closed-loop system.

“We’ve been down this road many times before. We’ve had these debates and in our view it should have been settled, but these guys are relentless and I’m not surprised at all that we’re hearing some of the same arguments that we’ve heard the last 10 years around the RFS. To me, that just shows the program is working.

“The American Petroleum Institute and AFPM Fuel and all the refining guys and their champions in Congress say the ‘RFS is broken.’ That’s nonsense; if the RFS was broken, they wouldn’t be squawking. The RFS is doing what it was intended to do, which is driving more renewable fuel consumption and production, expanding the use of renewables in our transportation fuel supply and that’s why they don’t like the program. It displaces their product and creates competition that they’re not used to.”

The Energy Independence and Security Act enacted by Congress in 2007 included RFS legislation targeting mandated biofuel volume increases from 4.7 billion in 2007 to 36 billion in 2022. There are no mandates past next year under the current law. What happens after 2022 and a potential RFS sunset?

Cooper: “I remember thinking back (in 2007) that 2022 is a long way away and we have all kinds of time to prepare for that. Well, it’s here. We’re basically nine months away from the beginning of 2022 and we know that beginning in 2023 EPA has much more discretion to set the volumes for the RFS. There are no numeral volumes in the law for 2023 and beyond.

“So, this will be a very important, very pivotal process and rulemaking for the future of the industry and we know EPA is getting started in this process. We’ve had a few conversations with the agency and what we want to see and what we believe is required of EPA is that the 2023 volumes and beyond continue to stimulate growth in renewable fuel consumption and production.

“If you go back and read the law, yes, it doesn’t include numerical volumes beyond 2022, but it is crystal clear that the purpose of the law is to continue to grow renewable fuel production and use well beyond 2022, well into the future. So, at a very high level, that’s what we expect to see from EPA and really what that means to us more specifically is the volumes for 2023 and beyond, we can’t see any backsliding, we can’t go backward on those volumes. We think we should expect to see growth in the requirements for all categories of renewable fuel versus the volumes finalized in 2022.

“According to the law they should have this rule finalized by October of this year. That’s not likely to happen. EPA hasn’t even proposed it yet and this is kind of a casualty of the sort of disarray and discord at EPA under (former) administrator (Andrew) Wheeler. They were really slow to get going on this process and they’re behind schedule already, but I think working very diligently to get caught back up.”