EPA waivers reduce incentive to produce biofuels

Published: Mar. 20, 2019 at 5:52 AM CDT
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Between 2017 and 2018, U.S. ethanol consumption dropped for the first time in a decade and the Renewable Fuels Association says that's because of the Environmental Protection Agency hurting demand.

One of the reasons former EPA Administrator Scott Pruitt resigned from the agency was because of approving dozens of refiner waivers. Despite lawsuits pending over those approvals, the new EPA Administrator Andrew Wheeler has approved several more waivers.

These waivers are given to refiners and remove responsibility for blending ethanol. They have eliminated nearly 2.6 billion gallons of congressionally mandated ethanol blending over the last two years.

Under the Renewable Fuel Standard (RFS), 15 billion gallons of ethanol are required to be blended.

Iowa Congressman Steve King weighed tweeted out, "Year-round E-15 seems to have come with an offset for the petroleum industry... The EPA has granted oil refiners biofuel waivers that undermine the RFS. Billions of gallons of RFS blending will be extinguished. This action hurts our family farms."

Monte Shaw with the Iowa Renewable Fuel Association says last year's data shows the waivers hurt the industry, "Our farmers can produce more. Our plants can produce more. And yet, because of the actions of the EPA. We're actually using less ethanol in 2018 than we did in 2017. That is not what the RFS is designed to do."

One of the causes for dropping demand involve Renewable Identification Numbers (RINs), which were established under the EPA to give refiners more options.

RINs act as a way for refiners to trade obligation for blending ethanol. A refiner interested in making more ethanol than they're required, say through E-15 fuel or E-85 fuel, can take on another refiner's responsibility by selling a RIN to a company not as well equipped to blend ethanol.

But in January, some RIN prices fell as low as 17 cents per gallon.

Shaw says to maintain E-10, they need 14.3 billion gallons of blended ethanol a year, "That means we've got to blend more than 14.3. If the requirement is 15 billion, that sounds great, right? Not when you exempt a billion and a half out. So as long as small refinery exemptions exempt over 700 million gallons of conventional biofuels, there is no incentive under the RFS to blend beyond E10. And that's why you see RIN prices really low."