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Senators Want RFS Change
Monday, December 11, 2017 3:04PM CST
By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- Eight United States senators who met with President Donald Trump on Thursday are expected to reach out to lawmakers from corn-ethanol states on the Renewable Fuel Standard in order to find ways to make the law acceptable to both sides.

Reuters reported on Friday the president asked the senators to find a solution during the meeting that also included U.S. Environmental Protection Agency Administrator Scott Pruitt.

As of Friday morning, no meeting has been scheduled.

Michael Zona, a press aide to Sen. Charles Grassley, R-Iowa, told DTN on Friday the senator had a telephone discussion with the White House following Thursday's meeting.

"Following the White House meeting, Chief of Staff Gen. (John) Kelly spoke with Sen. Grassley over the phone and reiterated the president's unwavering commitment to ethanol, the RFS and Midwestern farmers," Zona said. "No meeting has been scheduled. Sen. Grassley would of course meet with any senator who requests a meeting."

Eight senators from oil-producing states raised concerns about the costs to comply with the RFS, namely when it comes to the price of renewable identification numbers, or RINs.

The meeting with Trump and Pruitt included Republican Sens. Ted Cruz of Texas, Pat Toomey of Pennsylvania, James Lankford of Oklahoma, Mike Enzi and John Barrasso of Wyoming, Bill Cassidy and John Kennedy of Louisiana, and Mike Lee of Utah. In a joint statement, the senators said the discussions went well.

"We had a productive meeting today (Thursday) with the president to discuss how to fix the RFS compliance problem in a way that protects both refinery workers and corn farmers," the statement said. "We look forward to working with our colleagues representing Midwest states to find a win-win solution."

The price of RINs has been a sore spot for refiners such as Valero Energy. Obligated parties in the RFS can either blend ethanol in gasoline or buy RINs to comply with the law. Valero had proposed leaving RINs attached to U.S. ethanol gallons produced in the U.S. and exported. Currently, the credits are removed from exported gallons. The biofuels industry was concerned that doing so would flood the market with RINs and harm domestic biofuel producers.

According to news reports, one idea presented to the president would be to cap the price of RINs as a way to keep compliance costs in check.

Renewable Fuels Association President and CEO Bob Dinneen said in a statement that a cap isn't necessary.

"Numerous analyses, including those recently conducted by Wells Fargo, Harvard University, MIT, the University of Michigan, Iowa State University, and other institutions, show that merchant refiners recoup their RIN costs through higher refining margins, while retail gasoline prices are unaffected by RINs," Dinneen said.

The EPA reached a similar conclusion in its final 2018 RFS rule issued last week.

The final rule states, "EPA has invested significant resources evaluating the impact of high RIN prices on refiners. After reviewing the available data, EPA has concluded that refiners are generally able to recover the cost of RINs in the prices they receive for their refined products, and therefore high RIN prices do not cause significant harm to refiners. In light of these findings, EPA does not have the statutory authority to reduce the required renewable fuel volumes for 2018 in an effort to achieve lower RIN prices."


The concern among ethanol industry representatives is capping RIN prices would erase the incentive for higher ethanol blends such as E85.

Today, ethanol costs about $1.35 per gallon. The RIN attached is worth about 80 cents. At wholesale, gasoline costs about $1.70 per gallon. So a blender can buy ethanol and gasoline, and make a gallon of E85 for about $1.40.

The blender then gets to separate the 80-cent RIN from ethanol and sell it to a refiner for about 68 cents (80-cent RIN, times 0.85 gallon of ethanol in the blend). The blender can pass some of that RIN value on to retail by discounting E85.

For example, assume the blender keeps 8 cents of the RIN value and passes on 60 cents. Now the E85 cost to the retailer is just 80 cents per gallon (excluding taxes, shipping, profit, etc.)

Then assume the RIN price is capped at 10 cents. The RIN value of a gallon of E85 would be just 9 cents instead of 68 cents.


In October, Pruitt sent a letter to senators from the Midwest to put to bed concerns in rural America the agency would be making changes to the RFS that could be harmful to agriculture and biofuels.

In that letter, Pruitt said the EPA would not be further reducing RFS volumes, had no plans to attach RINs to exported biofuels gallons, was preparing to reject a petition to change the point of obligation, and continued to explore its legal options to expanding year-round E15 sales.

While the E15 issue continues in flux, the agency did not make the other proposed changes.

The letter was sent to several farm-state Republican senators, including Grassley and Sen. Joni Ernst of Iowa, Ben Sasse and Deb Fischer of Nebraska, Pat Roberts of Kansas, and John Thune and Mike Rounds of South Dakota.

Todd Neeley can be reached at

Follow him on Twitter @toddneeleyDTN


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