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Oil Refiners And Farmers Battle Over Biofuels

Biofuel

President Donald Trump has agreed to meet representatives of the U.S. oil refining industry and oil-supporting lawmakers to discuss the Renewable Fuel Standard Program—a meeting that could set the stage for negotiations over the U.S. biofuels policy that has been pitting the oil refining industry against the Midwest farm lobby.

The post, Oil Refiners And Farmers Battle Over Biofuels, was first published on OilPrice.com.

“The president was briefed, and has agreed on a meeting. Now it is just a matter of finding an hour window,” a source told Reuters last week, adding that he was told by the White House that the meeting would likely take place in the week of December 11.

Under the Renewable Fuel Standard (RFS), oil refiners are required to blend growing amounts of renewable fuels into gasoline and diesel. The Midwest farm belt benefits from the policy, but the oil refiners do not—they lose petroleum-based market share of fuels and meeting the blending requirements costs them hundreds of millions of dollars.

While President Trump is a vocal supporter of the U.S. oil industry, he also supports the RFS, especially corn-based ethanol, which protects farming jobs in the Midwest.

Even if President Trump meets with the oil refiners, he is unlikely to move to overhaul the U.S. biofuel policy, because the powerful farm lobby will not support reforms.

Last week, the Environmental Protection Agency (EPA) issued the 2018 volume requirements for advanced fuels and biofuels. Relative to the levels finalized for 2017, the 2018 volume requirements for advanced biofuel and total renewable fuel are higher by 10 million gallons, the EPA said. A week before that, the EPA denied petitions for changing the so-called ‘point of obligation’ for the RFS away from refiners and importers and onto fuel blenders.

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“In the short term we believe that initiating a rulemaking process to reconsider or change the point of obligation would work counter to the program’s goals by causing significant upheaval and uncertainty in the fuels marketplace,” the EPA said in its motivation to deny the petitions.

The RFS policies have been pitting lawmakers from the corn belt against senators from the oil states in recent months.

On October 19, EPA Administrator Scott Pruitt sent a letter to several Midwestern Senators, assuring them of the administration’s commitment to the biofuels industry.

“Sen. Chuck Grassley of Iowa and other Midwestern senators received several assurances in a letter from Environmental Protection Agency Administrator Scott Pruitt, including that the agency will not follow through on a proposal that would have undermined the integrity of the Renewable Fuel Standard and represented an abandonment of President Donald Trump’s commitments to biofuels and a strong RFS,” Senator Grassley said.

On the other hand, Senators from oil refining states, including Texas and Oklahoma, sent a letter to President Trump in late October to ask for a meeting and discussions over a possible change in the biofuels policies.

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“If your administration does not make adjustments or reforms on matters related to the Renewable Fuel Standard, it will result in a loss of jobs around the country, particularly in our states,” the letter—signed by Texas Senator Ted Cruz, Oklahoma Senator Jim Inhofe, Pennsylvania Senator Pat Toomey, and six others—said, as carried by Reuters.

The senators called for a meeting that would also include Midwest lawmakers, representatives of the biofuels industry, and relevant administration officials, so they all could “discuss a pathway forward toward a mutually agreeable solution.”

Senator Grassley of Iowa has said that a meeting would be a “waste of time”, and his spokesman told Reuters that no meeting had been scheduled.

Even if a meeting were to be held in the near future, it is unlikely to result in any moves that would amend U.S. biofuel standards and policies.

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John Miller's picture
John Miller on December 5, 2017

Let’s correct the obvious error in this post: “Midwest farm belt benefits from the policy, but the oil refiners do not” – yes, corn farmers have historically benefited in providing the feedstock to produced ‘conventional’ ethanol. This conventional ethanol biofuel benefit was maxed out in 2015, when the RFS2 required levels hit the ‘Blend Wall’ and the EPA created the maximum blend level of 15 billion gallons per year. Refer to EPA RFS2 data. As the EPA continued to increase RFS2 biofuels blending standard levels each year (2015-2017), producers of ‘advanced’ ethanol biofuels increasingly benefited, not conventional ethanol producers and corn farmers.

Major Oil Companies Refiners also have benefited from conventional ethanol blending requirements due to the more favorable economics of buying and selling most available RIN’s (advanced biofuel credits) and the economic benefits of blending larger volumes of ethanol then the large economic penalties experienced by smaller, independent U.S. Oil Refiners.

Who benefits increasingly in the future as the EPA increases ‘advanced biofuels’ RFS2 levels? Those companies who produce ‘advanced biofuels or ethanol’ and most likely from foreign imports, and those who dominate the RIN markets. Past example: Impacts of the EPA Certifying Sugarcane Ethanol as an ‘Advanced Biofuel’