Deal or No Deal– Either Way We Need to Keep Moving
by Doug Durante (Clean Fuels Development Coalition/Biofuels Digest) … First of all the export RIN issue does raise trade questions but if RINS go back to pennies then it would be hard for anyone to consider it a subsidy. And how do you get RINS to go back to pennies? Put a lot more ethanol in the market. How do you do that? Make sure whatever final deal emerges from this process is not an RVP limit to E15. The higher octane and carbon reduction value of ethanol is in blends of 20, 30 and even 40% and provides great margins along the way. As is well established by now, the vapor pressure goes down with volume so there is no logical justification to “cap” our access to the market at 15%. And with today’s pricing, ethanol blends save everyone–both refiners and consumers– money.
Secondly, the demand destruction of 1.3 billion gallons or more resulting from the EPA waivers is nothing less than a reversal of the Renewable Volume Obligations the industry fought so hard for every year to finally get to the maximum 15 billion gallons of conventional biofuel. For Senator Cruz to suggest that E15 is a new market of 700 million gallons is only half of what was just taken from the ethanol industry under the waiver nonsense. And Cruz is wrong– the market isn’t 700 million gallons– its 140 Billion gallons– we just need access to it, access Cruz had promised to help provide by the way when he was conning his way through Iowa during the Presidential primary.
While not ideal, allowing exports to generate RINS is certainly preferable to the preposterous notion of a RIN Cap or fixed price. Someone still has to buy the ethanol and export it, it reduces domestic use and demand but not overall demand. If we had a true free market that wouldn’t matter, demand would be determined by value.
But what bothers me the most about that approach is the assumption that we do not seem to value that ethanol here, at home.
And we also need to recognize the future of the RFS is unclear– anyone who tells you what is going to happen after 2022 is dreaming– but what we do know, and what makes these refinery waivers so debilitating is that if the cut essentially becomes the baseline, that will stay in place for the remainder of the current authority to 2022.
They have already announced they are developing the permanent re-set of all RVOs, which they are required to do after 2016 under the RFS. In other words they have the legal authority to set the conventional biofuel demand at 13.5 or thereabouts for the next four years and all the screaming and hand wringing by the ethanol industry cannot change that.
Therefore, any so called deal has to re-establish the full 15 billion gallons. But then what? Is anyone in the ethanol industry suggesting a 15 billion gallon RFS and an E15 market is nirvana? We need to be looking beyond the RFS and there are several opportunities the ethanol industry needs to rally around, right now.
Clearly we have ignored the health benefits of replacing the aromatic carcinogens and toxics in gasoline. EPA has been required to do so since the 1990 Clean Air Act and not taken action, The last time they at least looked at doing so in 2007 they admitted ethanol was a superior octane enhancer but there was not enough ethanol in a cost benefit analysis to reduce aromatics. Not enough ethanol? Within a year or two of that determination we were producing plenty of ethanol and here we are in 2018 trying to figure out where to put it and giving it away often below cost.
Similarly, the other opportunity at hand and one we have failed to capitalize on is the CAFE and GHG Rule, and the critical role clean octane from high ethanol blends can play. We have piles of studies from the auto industry and the Department of Energy confirming high octane fuels, and particularly high octane fuels from ethanol, can meet the efficiency gains and ghg reductions that are required by the rule.
This reported deal may or may not become reality but if it does we simply cannot allow the RVP waiver to be limited to 15% . And we need to look at life both with and without the RFS– either way we must develop new markets and get the value we deserve.
Lets put all these free market advocates to the test– no one is mandating anything but Senator Cruz and others need to understand that we do not have a gasoline market, we have fuel market. The petroleum industry may have captured the market but they do not own it. Let us in and then these RFS issues will take care of themselves. READ MORE
RFS Roundup: White House’s “Last Meeting” on RFS Raises More Questions than Answers (Environmental and Energy Study Institute)
RINs for Exports Would Mean More Demand Destruction (Energy.AgWired.com)