To Win RFS Fights, We Must Stand United

Growth Energy's CEO outlines the arguments to not change the point of obligation in the Renewable Fuel Standard in the Drive column from the April print issue of Ethanol Producer Magazine.
By Emily Skor | March 28, 2017

An important debate is happening in the nation’s capital, and it revolves around the efforts by biofuel critics to rewrite a key element of the Renewable Fuel Standard—the point of obligation.

Under the RFS, the point of obligation defines which participants in the fuel supply chain (currently oil refiners and importers) are responsible for ensuring that biofuel blends reach consumers. To comply with the law, refiners that don’t add biofuels to the mix must purchase credits from other market participants. These credits are known as renewable identification numbers (RINs), and the current system creates strong financial incentive for retailers to sell higher biofuel blends. In turn, this has allowed us to rapidly expand the market for affordable consumer options such as E15.

Now, a small group of refiners are working to secure an exemption from the RFS by shifting the obligation to retailers and fuel distributors. This would not only eliminate the incentive to sell higher biofuel blends, it would create a logistical and regulatory nightmare in fuel markets. Hundreds, if not thousands, of retailers would suddenly be required to demonstrate compliance—demanding new rules, new staff, new infrastructure and years of recalibrating a program that already works. The three-year delay we experienced in biofuel targets before 2016 from the U.S. EPA is just a sample of what could occur. Worse, the savings that consumers now enjoy thanks to homegrown biofuels could evaporate, raising costs and depressing the market for renewable fuels.

At a time when rural communities are suffering and grain surpluses are rising, this is a regulatory scheme that cannot be allowed. Farmers are already facing a fourth straight year of declining income, down nearly 50 percent from 2013, according to the USDA.

The sales pitch by refiners is hardly new. They’ve attempted to make this change for years. And, as always, the biofuels industry has stood united with farmers, distributors, retailers and other market participants to protect the RFS. Just recently, Growth Energy rallied with a broad coalition of trade groups representing everyone from the American Highway Users Alliance to the National Association of Convenience Stores to oppose changes to the point of obligation. Even other refiners like Tesoro agree.

The reason our critics are wrong is simple—the RFS is working, exactly as intended. In fact, the flexible system for trading RINs was originally created at the behest of the oil companies. Infrastructure is being deployed, and the number of stations selling E15 doubled last year, thanks to our efforts with programs like Prime the Pump.

The small band of refiners seeking to change the rules are the same group that have worked for over 11 years to gut the RFS. More recently, the owner of CVR refining, Carl Icahn, has even sought to convince biofuel advocates that sacrificing the RFS should be acceptable in exchange for a long-sought waiver from an unnecessary and outdated regulatory barrier that limits summer sales of E15. But without any incentive to sell higher biofuel blends, those sales would never take place, and retailers that have worked hand-in-hand with ethanol producers to offer new consumer options would be left at the mercy of oil refiners. To capture these summer sales, we need a functional RFS and a real fix for Reid vapor pressure (RVP) limits, such as the bill recently introduced by our biofuel champions in Congress, including Sens. Deb Fischer, R-Neb., Joe Donnelly, D-Ind., and Chuck Grassley, R-Iowa, as well as Reps. Adrian Smith, R-Neb., and Dave Loebsack, D-Iowa.

To win these fights, we must stand united. This industry is strongest when we all work together. Our critics are too well-financed and too sophisticated for anything less. I’ve seen this first-hand since taking the helm at Growth Energy almost a year ago. In that time, Growth Energy has worked side-by-side with dedicated champions from across our industry to strengthen the RFS and protect the growth of our industry and the jobs it provides. It hasn’t always been easy, but if we stand strong, we can ensure that fuel retailers have the certainty they need to invest in growth and help consumers gain access to cleaner, more affordable choices at the pump.

Author: Emily Skor
CEO, Growth Energy
202-545-4000
eskor@growthenergy.org