OPINION A group of senators recently wrote a letter to President Donald Trump regarding the Jan. 24 decision by the U.S. Court of Appeals for the Tenth Circuit. The court found the U.S. Environmental Protection Agency had improperly exceeded its statutory authority in exempting three refineries from the Renewable Fuel Standard. The letter recycled several time-worn scare tactics, including disproven canards about renewable identification numbers – credits used to demonstrate compliance with the Renewable Fuel Standard. Notably one of the letter’s assertions about the impact of renewable identification numbers on refiners has been specifically refuted by both the court and the EPA.
The letter starts by claiming, “If allowed to stand the decision will put a dozen small refineries in the Tenth Circuit under severe financial strain and thousands of jobs at risk. If applied nationally it will jeopardize nearly all small refineries. More widely the decision will dramatically increase (Renewable Fuel Standard) compliance costs for refineries of all sizes and raise gasoline prices for American drivers.”
But in its decision the court pointed out that the EPA has for years acknowledged that refiners recoup their renewable-identification-numbers purchase costs, stating as recently as March 2019 that “(Renewable identification number) prices generally reflected market fundamentals and that obligated parties – including parties that purchase separated (renewable identification numbers) recover the cost of (renewable identification numbers) in the market price of gasoline and diesel fuel they sell.”
Despite that the court stated, “The EPA did not analyze the possibility of (renewable identification numbers) cost recoupment when it granted the refineries’ extension petitions.”
How can refiners claim they are being “harmed” when everyone knows they pass renewable identification numbers costs on to their customers at the terminal?
Nor have renewable identification numbers prices increased gasoline prices. A retrospective analysis conducted after a multiyear period when both inflated and reduced renewable-identification-numbers prices had been experienced concluded, “Changes in (renewable identification numbers) prices have not caused changes in retail gasoline prices.”
On the contrary a study conducted this past year determined that the (Renewable Fuel Standard) has reduced gasoline prices by an average of 22 cents per gallon in recent years and saved the typical American household $250 annually.
Put simply, refineries – many of which are part of large corporations – will not be in jeopardy from needing to comply with a 15-year-old law. And gasoline prices will not increase for American drivers as a result of Renewable Fuel Standard compliance.
The senators’ letter ends, “Since the decision the price of (Renewable Fuel Standard) compliance credits … has already tripled. If your administration does not appeal the decision, (renewable identification numbers) prices will increase exponentially.”
Renewable identification numbers prices have increased since the court’s ruling. But that’s reflective of prices having been artificially suppressed by the massive number of renewable identification numbers reinstated by the EPA in connection with exemptions during the past few years. Notably a significant portion of the increase occurred Feb. 26 when ethanol D6 renewable-identification-numbers prices were curiously bid up an unusual 17 percent on the day before the senators’ letter was released and a reported White House meeting was to be held. But it’s important to take a longer-term view. Renewable-identification-numbers prices remain almost two-thirds less than the levels experienced in late 2017, just prior to the start of the large-scale granting of exemptions. And allowing renewable-identification-numbers prices to reflect market conditions is essential to the expansion of increased ethanol blends such as E15 and E85. That in turn facilitates compliance with the Renewable Fuel Standard and acts as a governor on renewable-identification-numbers prices.
More broadly, a return to compliance will ensure that America reaps the full benefits of the Renewable Fuel Standard. In 2019 the ethanol industry supported almost 350,000 jobs and added $43 billion to our gross domestic product while displacing more than 500 million barrels of imported oil. The use of ethanol reduced carbon-dioxide-equivalent greenhouse-gas emissions by more than 50 million metric tons – reducing emissions by 35 percent to 50 percent compared to gasoline.
Don’t be distracted from the big picture by talking points that echo those of the refining industry and ignore the real damage that has been occurring – the harm to the biofuels industry from refinery exemptions that the court thoroughly discredited.