Will the EPA give in to state governors on ethanol credit waivers?

The pressure is growing on Scott Pruitt and the Environmental Protection Agency to do something… anything… about the costs being imposed on consumers and the energy sector by the Renewable Fuel Standard. According to Politico’s Morning Energy newsletter, there’s a meeting scheduled for Thursday in which President Trump will be talking to Ted Cruz and other interested parties about the subject.

But in a preemptive strike before that happens, Texas Governor Greg Abbott fired off a letter to the EPA asking for relief in the form of a waiver, getting Texas out from under the cost of the RIN credits (Renewable Identification Numbers) required if you can’t blend enough ethanol into your fuel. The “unique, adverse impacts” he cites here are completely self-inflicted wounds being imposed by our own government.

Ahead of a Thursday meeting between Trump, Sen. Ted Cruz and other senior officials about biofuels policy, Texas Gov. Greg Abbott formally asked for a Renewable Fuel Standard waiver from Pruitt. “The time is ripe for EPA to grant substantive relief from the unique, adverse impacts the RFS program is having on the state of Texas,” he wrote in a Friday letter .

“The extreme, detrimental impacts on large portions of the refining sector have now placed unacceptable burdens on the Texas economy and the economy and security of the nation as a whole.” Abbott, in particular, cited high RIN prices as causing hardship to refiners across the state.

Last month, Pennsylvania Governor Tom Wolf issued a similar request, citing the potential for severe economic harm. (Biomass Magazine)

Within the Nov. 2 waiver request letter, Wolf states that the EPA has the authority to reduce volume mandates, in whole or in part, based upon a determination that the implementation of the requirement would severely harm the economy of a state, region or the U.S. “Specifically, I request that you reduce the 2017 and 2018 volumes to a level that avoids the severe economic harm experienced by the Northeast region of the United States as a result of the high costs of purchasing RINs to comply with the RFS,” Wolf wrote. “The level for the implied conventional mandate should be no more than 9.7 percent of annual gasoline demand.

It’s no wonder that governor’s of oil producing and refining states are basically begging for relief. This program has been a disaster from the start, but the RIN credits have turned into a false market where people are attempting to cash in on the shifting value of the ethanol credits. While they started out fairly low, the last few years have seen steep increases as supplies of suitable ethanol have been strained. Cellulosic waiver credit prices were $0.49 and $0.64 per gallon in 2014 and 2015, respectively. In June of this year, they had reached as high as $1.18.

While many of you were told there would be no math in this course, you’re likely still able to see that the price has more than doubled in only two years. And that’s a dollar for each gallon of gasoline being refined and shipped to market if you don’t dilute it with the required amount of ethanol. (Which is a terrible fuel in terms of energy production and safety for small engines.) Who do you suppose winds up paying those costs? The manufacturer? (Insert laugh track here.)

If it weren’t for the glut of oil and gas hitting the market because of America’s growing dominance in production, this effect would already have gasoline back up over four dollars per gallon. And all it will take is one serious snag in the supply chain next year for that to become a reality. Small refiners are hurt the worst and they employ an impressive number of people in several states.

It’s time for the White House and the EPA to stand up to the corn producing states, at least enough to come to some sort of compromise. If we can’t rid ourselves of the worthless, destructive Renewable Fuel Standard entirely they should at least be able to negotiate some limited relief against these almost entirely negative effects. There are more than enough hungry people to buy and eat all the corn. We don’t need to burn it.