Ethanol Blog: Economist Proposes Two RFS Changes to Appease Oil, Ethanol

by Todd Neeley (DTN Progressive Farmer) With a reported big deal for biofuels in flux, an economist at the University of Illinois Urbana-Champaign put forward a plan on Thursday to account for more than 4 billion gallons of biofuels exempted to small refineries from the Renewable Fuel Standard from 2016 to 2018 by President Donald Trump's EPA.

University of Illinois agriculture economist Scott Irwin wrote in farmdoc daily on Thursday, that there was a simple way to appease both sides.

Irwin suggests EPA could provide a blanket waiver for small refineries as part of the 2020-2022 annual rulemaking. "This will allow SREs to be accounted for when computing the final percentage standards for each year," he said.

In addition, Irwin said the agency could add 1.35 billion gallons to total renewable volumes for 2020-2022, "to restore the reduction in volumes over 2016-2018 due to SREs. The total reduction in renewable volumes over 2016-2018 is 4.05 billion gallons, or an average of 1.35 billion gallons. In this way, the backfilling of the SRE reductions in total volume is spread out over three years."

Irwin said the changes would be temporary but could be applied to future renewable volume obligations past 2022.

"Finally, these changes may require congressional action, but not necessarily changes to the RFS statutes themselves," Irwin said.

"The first part of the plan, a blanket waiver for small refineries, has the benefit of addressing concerns of small refineries with the RIN (renewable identification number) costs of complying with the RFS. This would eliminate the RIN cost concerns of small refineries and the controversy surrounding how many SREs are awarded and to whom. Since all small refineries (and refiners) receive a waiver there is no need for any applications to be written by small refineries or considered by the EPA."

The first RFS included a small-refinery waiver through 2010 and was temporarily extended as a blanket waiver for the 2011 and 2012 compliance years.

"The revised plan would almost certainly increase RIN prices across-the-board due to both the higher total renewable fuel requirement and the blanket small-refinery waiver being incorporated into the percentage standards," Irwin writes.

"The economic impact of the EPA's recent policy on SREs involves a tradeoff between the economic losses of the biofuel sector and the economic gains to small refineries. To begin, there is approximately a one-for-one decline in the overall demand for biofuels associated with the RVO reductions. All major categories of biofuels have been negatively impacted, including corn ethanol, cellulosic ethanol, biogas, biodiesel, and renewable diesel." READ MORE

Excerpt from Storm Lake Times: However, there are signs of bipartisan movement toward more innovative solutions that do not require Congressional action, only a stroke of this or the next President’s pen. A recent The Hill op-ed, “Environmental Advocates Should Take Another Look at Biofuels” by Senate Finance Committee Chairman Charles Grassley (R-IA) and former Senator Tim Wirth (D-CO) expressed growing bipartisan support for regulatory policies to reduce transportation sector carbon footprints and harmful toxics emissions.

We noted that your article was printed in The Guardian, a respected journal which recently reported on a landmark study which is directly relevant to the use of ethanol in the U.S. and worldwide: “Revealed: air pollution may be damaging ‘every organ in the body’.” The lead author of the study is Dr. Dean Schraufnagel from the University of Illinois-Chicago and we are working with him and others to help them appreciate the direct connection between the harmful compounds in gasoline identified by the two Senators and the most dangerous pollutants in urban environments.

As I said, the beauty of our proposed solution is that Congressional action is not required. A mandatory statute has been on the books for years, but EPA bureaucrats have defied clear Congressional intent and refused to enforce the law. I recently wrote President Trump urging him to exercise his considerable powers by directing EPA to require high octane, low carbon ethanol blends like E30, which automakers have requested for years. With one stroke of his pen, President Trump could get the RFS monkey off his back, protect the health of all Americans, help the auto industry make more fuel efficient high performance vehicles, and reduce the need for imported oil by one billion barrels or more per year (in effect a “renewable Strategic Fuel Reserve” that replenishes itself every day). https://thehill.com/ blogs/congress-blog/energy-environment/459240-a-farmers-plea-to-the-president-fix-our-fuel

U.S. farmers would no longer be dependent upon fragile export markets, the nation’s trade deficit would be dramatically reduced, and the RFS targets would be fulfilled via marketplace forces. Best of all, our nation’s children would lead healthier and more productive lives. READ MORE