Senator says system hurts oil sector and asks president to cap renewable fuel credits at a fraction of their current value
ANAHEIM, Calif. — Ethanol is once again under attack in the United States, threatening corn and other grain prices.
Texas Senator Ted Cruz and the oil industry have asked U.S. President Donald Trump to cap renewable fuel credits at 10 cents per gallon, which is a fraction of their current value.
Credits can be bought by oil refiners who did not invest in ethanol blending equipment from those who did in order to comply with the U.S. Renewable Fuel Standard (RFS).
Refiners complain that the credits, which are called RINs, have become so expensive it is putting them out of business.
Cruz recently attended a rally at a bankrupt refinery in Philadelphia that blamed the high cost of RINs and the RFS in general for its demise.
He also held up for months the appointment of Iowa Agriculture Secretary Bill Northey as the U.S. Department of Agriculture’s undersecretary for farm production and conservation in an attempt to get the RFS reforms he is seeking.
Kevin Skunes, president of the National Corn Growers Association, a group that represents 300,000 corn growers, said maintaining the RFS is the association’s top priority.
“Our farmers cannot afford any deal that undermines demand for ethanol,” he told reporters gathered at the 2018 Commodity Classic.
The U.S. ethanol industry consumes about one-third of total U.S. corn supply annually.
Skunes said studies by Purdue University and Iowa State University show that placing a cap on RINs would reduce overall biofuel blending, halt investment in higher blend infrastructure and drive some ethanol plants out of business.
The Iowa State study concludes it would reduce ethanol demand by 2.8 billion litres in 2018 and lead to a 25 cents per bushel drop in corn prices.
Skunes said the oil industry proposal would cost farmers $4 billion per year for the next two years.
The U.S. Environmental Protection Agency has concluded that RIN values are not causing economic harm to refiners.
Skunes said the bankruptcy of Philadelphia Energy Solutions Inc. had nothing to do with the high cost of RINs.
In the meantime, a new bill from two Democrats wants to change the RFS to reduce incentives for corn-based ethanol in favour of second generation ethanol made from waste material.
Skunes issued a statement saying the bill ignores new science showing the environmental benefits of crop-based ethanol. A study by the USDA shows corn ethanol results in 43 percent fewer greenhouse gas emissions compared to gasoline.
“(The bill) would have catastrophic consequences for our nation’s economy, our energy security and family farmers,” he said.
Sonny Perdue, U.S. secretary of agriculture, told farmers attending the conference that they have a powerful ally in Washington.
“I can tell you very unequivocally President Trump stands with corn farmers and he stands with biofuel farmers and he stands for the RFS,” he said.
Trump recently hosted a meeting with leaders of the ethanol and oil industries trying to broker a deal on the RFS. He was pushing for a deal that would give the oil industry the RIN cap it wants in exchange for allowing year-round sales of E15 ethanol.
Perdue has come under fire for his lack of support for the RFS but he said that criticism is misguided.
“I have not and will not support any policies in this country that diminish demand, undermine the RFS and are harmful to our agricultural producers,” he said.
However, he later told reporters that farm groups are sometimes too consumed with protecting the RFS rather than building demand in other ways because he pointed out that the mandates only go out to 2022.
“We ought to be smart in agriculture, understanding how we can build for the future rather than depending on one law that will expire,” said Perdue.
His priority in that regard is to eliminate the Reid Vapor Pressure (RVP) volatility waiver that prevents the sale of E15 blends of gasoline during the summer months in certain areas of the country.