Don't Mess with the RFS
Resources for the discussion of RINs and the Renewable Fuels Standard
Simple talking points:
- Increasing ethanol use is important – Blending more homegrown biofuels like ethanol into gasoline lowers the cost to consumers, provides cleaner air, increases our U.S. energy independence, provides nearly 360,000 industry jobs, and helps grind more corn — (ethanol accounted for 30% of total corn demand in 2017).
- The RFS works — RINs are the market mechanism that drives blending to obligated levels. Any cap or other manipulation would disrupt that mechanism and diminish the related incentive to blend. According to an ISU study, a RIN cap would remove over 700 million gallons from the RFS and lower corn prices by 25 cents per bushel.
- RVP waiver is the best fix — If Senator Cruz and the refineries’ goal is to stablilize RIN prices, Allowing the RIN market to operate freely with year-round sales of E15 would increase the production and consumption of ethanol, increase the supply of RINs available for compliance and LOWER RIN prices. This can be done by fixing the RVP waiver to allow higher ethanol blends to be sold year-round.
Ethanol: Iowa Senators Chuck Grassley and Joni Ernst were part of White House meeting with Texas Senator Ted Cruz and others to discuss RINS and the Renewable Fuels Standard. You’ll remember earlier this year, Senator Cruz asked for a cap on RIN prices, which would destroy demand for ethanol in the RFS. RINS are assigned to ethanol that is blended to prove compliance with the RFS. The RFS provides market access for ethanol. Since then, it has been discovered that EPA Administrator Scott Pruitt has been granting waivers to several refiners.
Meeting outcomes are somewhat fuzzy:
President Trump agreed to allow E15 fuel to be sold year-round, by granting an RVP waiver. The arcane RVP rule, limits the sale of E15 for vehicles 2001 and newer during the summer months. But Senator Cruz said the president was considering assigning RINS to ethanol exports. The corn and ethanol industries question the legality of that concept.
Senator Ernst addressed the concept of assigning RINS to ethanol exports and other topics from the meeting: “While I am still assessing the full implications of the President’s notion to attach Renewable Identification Numbers (RINs) to exported ethanol, an idea Administrator Pruitt committed to not pursue in a letter last October, I am pleased that the President did not move forward with a RIN cap that would have destroyed demand, hurting both farmers and biofuel producers. Allowing E15 year-round will drive up domestic ethanol production and consumption to help maintain already low RIN prices. Additionally, I am encouraged the administration will be taking a closer look at the “hardship” waivers that have been abused by EPA to undermine the RFS.
Senator Grassley also commented on the meeting: “President Trump agreed to allow for the sale E15 year-round. That’s good news for farmers and consumer choice at the pump. Allowing higher blends of ethanol to be sold in the summer months fits in well with EPA’s deregulatory agenda. There was also an agreement to not pursue an artificial cap on RIN prices, which would have destroyed demand for biofuels and hurt biofuels workers. I told the President and Administrator Pruitt that EPA’s ‘hardship’ waivers for billionaires are hurting biofuels and undermining the RFS. They also undercut the President’s commitment to meet the annual 15 billion gallon volume obligation set by Congress under the RFS. There was discussion about how to reallocate the waived obligations so that demand for biofuels wouldn’t be hurt. While details weren’t decided, I look forward to reviewing a plan being developed by Secretary Perdue and Administrator Pruitt. Any fix can’t hurt domestic biofuels production.”
Ethanol RINs Issue Update
By Greg Krissek, CEO
First, I want to thank all of our KCGA members who have taken action on this issue that threatens to significantly cut demand for ethanol, and in turn, lower the price you receive for corn.
What’s the latest?
–This week, we received good news from USDA as Agriculture Secretary Sonny Perdue said that he’s pressing President Trump not to endorse a cap on the price of RINs.
–Last week, Kansas Governor Jeff Colyer signed on to a letter from Midwest governors to President Trump, urging him not to cap RIN prices.
–Also, this week, the American Coalition for Ethanol held a fly-in in Washington DC. I was with one of our Kansas Corn leaders, Dennis McNinch from Ness County, for the meeting, and we conducted Hill Visits on this issue.
Background–The RFS/RIN issue heated up in late February when many corn growers were at the national Commodity Classic. Texas Senator Ted Cruz continues to lead an effort to cap the price of RINs, which are the mechanism that blenders use to prove compliance with the Renewable Fuels Standard (RFS). RINs are traded between fuel blenders who blend ethanol and those who do not blend enough ethanol to be in compliance with the RFS. Senator Cruz wrongly blamed the failure of a Pennsylvania refinery on RIN prices. The true motivation of the Texas senator and the refiners is to lower the amount of ethanol required to be blended in the RFS. I hope you will continue to be outspoken and active on this issue. We are working with NCGA’s Action Center to keep the pressure on the administration to continue its support of the RFS. Link: http://www.ncga.com/public-policy/legislative-action-center?vvsrc=%2fcampaigns%2f57698%2frespond
Where we stand: While it is true the RIN market can been volatile, there is a simple solution that we support. If EPA would simply lift the RVP regulation to allow higher blends of ethanol, like E15, to be sold year-round, RIN prices would level out. This would benefit both the oil refiners and ethanol producers. Simply put, don’t mess with the RFS! READ MORE here: https://kscorn.com/rfs/
So, where are we now with this issue? While discussions continue to take place, the White House meetings on this issue have slowed down. Ethanol industry groups, corn growers, USDA, EPA and the Trump administration continue to discuss the issue. There are many moving parts in this discussion. Corn growers continue to insist that the RVP waiver to allow higher blends of ethanol year-round is a win-win for ethanol and oil.
One positive outcome of our work came this week when Secretary of Agriculture Sonny Perdue, came out publicly against a RIN cap.
Agriculture Secretary Sonny Perdue said this week, he’s pressing President Trump not to endorse a cap on the price of renewable fuel credits (RINs), a flashpoint in the debate over the RFS.
Perdue told reporters after a speech at the National Press Club that capping prices on renewable credits — also known as Renewable Identification Numbers, or RINs — is an overly simple solution to the complexities of biofuel markets. He said he doesn’t know whether the White House will take that approach and that he’s not meeting with U.S. EPA Administrator Scott Pruitt on the issue this week, despite a news report claiming that this morning. He said they met last week to discuss potential solutions and that the USDA position is against price caps.
“We’ve impressed upon him that simple is good in some things but not good in others,” Perdue said. “I don’t know that the president will make that choice; it has been obviously offered early on as a solution, but sometimes simple solutions don’t work for complex problems.”
Perdue continued, “This is a complex issue that I think needs a reasonable solution that doesn’t include a RIN cap.”
Mr. President, Don’t Cap Our Future
WASHINGTON (March 9, 2018) – The National Corn Growers Association President Kevin Skunes told US Secretary of Agriculture Sonny Perdue this morning that proposed changes to the Renewable Fuel Standard would trigger significant losses in farm income and in rural jobs. Skunes asked the Secretary to work with President Trump to ensure the President understands the economic challenges farmers are facing today.
“Corn farmers have fought hard the past ten years, within Congress, with the last Administration, and in the Courts to protect the opportunity for renewable fuels to continue to grow as an option for consumers,” said Skunes. “Today, the President is considering a proposal from the oil industry that could cut farm income almost $4 billion dollars per year for the next two years. It is a deal that American farmers cannot afford. My message to the Secretary today was to ask the President not to cap future growth and opportunity in rural America by implementing a bad policy that would only serve to bailout a small handful of oil refiners.”
NCGA is opposed to an oil industry proposal that would cap the price of Renewable Identification Numbers (RINs). According to a study released this week by Iowa State University, a RIN cap would reduce ethanol demand by more than 750 million gallons and cost corn farmers as much as 25-cents/bushel.
“We’ve made our case to the Secretary and the President that there are options that can provide a win-win to farmers, ethanol, and oil—namely, fixing existing Reid Vapor Pressure (RVP) regulations to allow year-round use of fuel blends above 10 percent ethanol. Unfortunately, the oil industry continues to insist those changes are not enough. Three years ago, NCGA took the Obama Administration to court over decisions that violated the Renewable Fuel Standard. We are hopeful that the President is willing to consider an RVP fix as the best solution, but we will continue to oppose any deal that includes a RIN cap or waiver credits.
“We understand the President is committed to protecting jobs—so are we. We need the President to understand that this commitment needs to extend to rural America—to our farms, biofuels plants, and the manufacturing and processing jobs that depend upon American agriculture.”
The attack on the RFS continues. Washington needs to continue to hear from growers on this issue. Kansas Corn continue to be engaged on this issue working with NCGA and our Congressional delegation.
The White House could cut a deal with oil refiners in the coming days that would significantly harm the RFS by capping the price of Renewable Identification Numbers (RINs). RINs are the market mechanism that drives biofuels blending. A cap on RIN values or RIN waiver credits would disrupt this market mechanism and take away the incentive to blend biofuels.
According to Iowa State research released just this week, this proposal would take away 700 million gallons of ethanol demand and cost farmers as much as 25 cents/bushel at a time when farm income is already at its lowest level since 2006.
KCGA staff has been on calls with NCGA and Corn Grower states, ethanol partners and our congressional delegation on this issue. Kansas Corn leaders are participating in a listening tour stop with Congressman Roger Marshall tomorrow at the Kansas Ethanol plant in Lyons.
There are better solutions for both farmers and refinery workers, including RVP parity that would allow year-round sales of blends greater than 10 percent, that reduce RIN values by blending more ethanol. That’s a real win-win.
We need your help! Follow this link to NCGA’ Legislative Action Center to take action now! https://www.votervoice.net/NCGA/campaigns/57698/respond
Social media? A Tweet Storm starts tonight! Use #RFSWorks and tweet to @realDonaldTrump and/or @POTUS.
Sample Tweets:
President @RealDonaldTrump – Let the RIN market work because the #RFSWorks for my family and our country.
President @RealDonaldTrump – Remove blending barriers to lower RIN prices and allow the #RFSWorks
More information?
Visit the NCGA RFS resource page at http://www.ncga.com/rfs and the Kansas Corn RFS resource page at https://www.kscorn.com/rfs
- NCGA wrote a letter to the President outlining our concerns about proposed changes to the RFS. We were able to get the American Soybeans Association, the National Wheat Growers Association, National Sorghum Producers Association, the National Farmers Union and the American Farm Bureau Federation to join us in signing the letter. A copy of the letter is attached.
- On Monday, we asked growers attending the Issues Briefing at Classic to contact their members of Congress about this situation and to express support for the RFS. We also asked growers to use social media with the hashtag #rfsworks. We appreciate the many growers who made those calls and posted on social media.
- President Skunes and CEO Chris Novak had a short discussion about the RFS with Secretary Perdue before the Secretary addressed the General Session of Commodity Classic. NCGA leaders will attend a breakfast with Secretary Perdue today to continue this discussion.
- We have been monitoring the situation around the White House meeting that occurred yesterday in Washington. We have been in regular contact with Senators Grassley and Ernst (our champions) who attended the meeting. We are also following closely the meeting scheduled for today at the White House.
- Once the meeting at the White House concludes and we receive a report from the participants attending on our behalf – including Senator Ernst, we will send out a report. KCGA and other state corn associations will continue to coordinate with NCGA on this issue.
- The RFS works – RINs are the market mechanism that drives blending to obligated levels. Any cap or other manipulation would disrupt that mechanism and diminish the related incentive to blend – a 10 cent RIN cap would lock the market into an E10 ceiling or lower, by substantially reducing the incentive for higher blends. If the economics aren’t there, volume targets will not be met.
- Increasing ethanol use is important – Blending more homegrown biofuels like ethanol into gasoline lowers the cost to consumers, provides cleaner air, increases our U.S. energy independence, provides nearly 360,000 industry jobs, and helps grind more corn – (ethanol accounted for 30% of total corn demand in 2017).
- RVP waiver is the best fix – Allowing the RIN market to operate freely with year-round sales of E15 would increase the production and consumption of ethanol, increase the supply of RINs available for compliance and LOWER RIN prices. Farmers don’t want high RIN prices – we want higher blends!
- President @RealDonaldTrump – Let the RIN market work because the #RFSWorks for my family and our country.
- President @RealDonaldTrump – Remove blending barriers to lower RIN prices and allow the #RFSWorks
Statement by National Corn Growers Association President Kevin Skunes regarding a new study by the Center for Agricultural and Rural Development (CARD) at Iowa State University.
“This economic analysis backs up what corn farmers have been telling the Administration – that manipulating the RIN market mechanism would reduce ethanol blending and impact corn prices. A drop of 25 cents per bushel in corn prices, as CARD economists project from a RIN price cap, would devastate farmers and stagger rural communities.
“This spring farmers will begin planting knowing they face their fifth growing season with corn prices hovering at or below the cost of production. According to the Federal Reserve Bank, we lost 12,000 farms in 2016. This decline must be stopped.
“The CARD analysis clearly shows an artificial cap on Renewable Identification Number (RIN) prices in exchange for an RVP waiver allowing year-round sales of E15 would be a bad deal for rural America and the nation’s consumers.
“Providing regulatory parity for E15 and higher blends helps address concerns about RIN values. Allowing the RIN market to operate freely with year-round sales of E15 would increase the production and consumption of renewable fuels, increase the supply of RINs available for compliance and lower RIN values. Combining RVP parity with a RIN price cap is counterproductive and would lower ethanol blending.
“Last week, corn farmer delegates in the National Association of Corn Growers Corn Congress unanimously passed a resolution urging President Trump to retain the current RIN market mechanism without change. This analysis supports our resolution.”