EPA 2020/2021 RFS Proposal Outrages Biofuels Lobby

Despite assurances from Iowa Senators Charles Grassley and Joni Ernst that Monday’s EPA announcement of proposed target blending volumes for cellulosic ethanol, bio-diesel and other man-made bio-fuels for the next two years are “good news,” leaders in those rent-seeking industries reacted to the proposal with outrage.

The blending volumes, or Renewable Volume Obligations (RVOs), in question are the volumes targets each oil refiner must meet under the EPA’s longstanding Renewable Fuels Standard (RFS). The source of the biofuels lobby’s outrage stems from an apparent October 4 agreement between EPA officials and Nebraska lawmakers in which EPA indicated it would work with the U.S. Department of Agriculture (USDA) to factor in waivers that have been granted to certain refiners over the past couple of years.

Such exemptions have been granted to several independent refiners who were struggling with the high cost of blending the biofuels in the current challenging financial environment. EPA indicated that accounting for these exemptions will ensure the 15 billion net gallons of conventional biofuel obligation would be met in the proposed RVO level for 2020.

Interestingly, that is exactly what the EPA’s proposal issued on Monday would do, which is likely why the Iowa senators and other leading officials of biofuels-producing states reacted to it positively. However, the mandate-driven biofuels industry appears to be concerned that the proposal lacks the teeth needed to force EPA to fully take the exemptions into account.

Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw said, in part, that “the proposal today essentially asks Iowa farmers and biofuels producers to trust that EPA will do the right thing on SREs in 2021 when they have spent the last two years weaponizing SREs to unfairly undermine the RFS. It is unreasonable and counterproductive to expect Iowans to put their faith in EPA to fix the SRE problem when they were the ones who created the crisis in the first place.”

Naturally, Democratic presidential candidates took the opportunity to jump into the controversy. Former Vice President Joe Biden’s campaign issued a statement on what it referred to as “the Trump Administration’s continued sabotage of Iowa’s renewable fuels industry.” Minnesota Senator Amy Klobuchar accused President Donald Trump of being more interested in his “big oil buddies” than in the plight of farmers. She plans to visit a shuttered Iowa bio-diesel plant later this week, no doubt for a photo-op in the state that hosts the first presidential caucus every four years.

The people who never get mentioned in any of these policy discussions or political back-and-forths are the consumers, who must foot the bill for the government’s ongoing insistence upon propping up a set of industries in the form of higher prices at the gas pump and the grocery store. The RFS and its underlying policies benefit farmers and a handful of manufacturers, but their actual value to overall society remains an open and much-debated question. Indeed, the U.S. Government Accountability Office (GAO) issued a report earlier this year that found, despite the biofuels industry’s claims to the contrary, the RFS has resulted in neither lower gasoline prices nor lower emissions.

Despite the ongoing debate over whether it has produced any truly measurable results, the industry’s lobby has continued to be extremely successful. As the GAO report points out, the initial RFS “required that a minimum of 4 billion gallons of biofuels be blended into gasoline in 2006, rising to 7.5 billion gallons by 2012.” And here we sit, just seven years later, seeing the industry’s lobby “outraged” over a mandate for double that amount. It’s a little breathtaking, really.

Of course, that exponential growth in the program is really driven by politics, and the elevated importance of a quadrennial presidential caucus in a state that is home to fewer than 1% of Americans. Any presidential contender who does not travel to Iowa to make a pledge to not just continuing the RFS but raising its RVO mandate quickly finds him-or-herself looking past Iowa to the New Hampshire primary.

The likely reality for the other 99% of the U.S. population is that, unless and until some other state’s presidential nominating contest somehow gets moved to a spot ahead of Iowa, that mandate is destined to just keep on growing. The actual facts around whether the program is a benefit or detriment to society and the environment really don’t much matter.

Source: Forbes
Date: Oct 17, 2019