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Fuel rules ‘a net positive’ for ag

Fuel rules ‘a net positive’ for ag

Truck at fuel pump RFS standard

The Environmental Protection Agency retroactively reduced the renewable volume obligations (RVOs) for 2020 and 2021 under the Renewable Fuels Standard, but it also denied all remaining small refinery waivers.

At first glance, the Biden administration announcement regarding the Renewable Fuels Standard and biofuels looked awful. But as agricultural and biofuel industry leaders dug deeper, it didn’t look nearly as bad.

“Once you add up all the pros and cons, I would say it was a net positive for the industry,” says Troy Bredenkamp, senior vice president for government and public affairs at the Renewable Fuels Association.

Bredenkamp describes the series of announcements on Dec. 7 as a story of the good, the bad and the ugly, with the good overall outweighing the bad. That’s not the way many industry leaders initially saw it when the announcements first came.

Republican lawmakers slammed the Environmental Protection Agency’s decision to retroactively reduce the renewable volume obligations (RVOs) for 2020 and 2021 under the Renewable Fuels Standard. But other items in the series of announcements included a denial of all remaining small refinery waivers and the announcement of some federal spending on infrastructure.

The Iowa Renewable Fuels Association issued a statement slamming the RVO announcement but offering support for other items announced.

“The proposed rule from the Biden EPA falls woefully short of any attempt to leverage domestic biofuels to help lower fuel prices and carbon emissions,” IRFA Executive Director Monte Shaw said in a news release.

Shaw said the EPA missed an opportunity to send a message regarding climate and fuel price.

Other farm organizations, such as the American Soybean Association, issued releases expressing disappointment in the retroactive RVO changes but also said they were optimistic about other aspects of the announcement.

“It’s a mixed bag,” says Sam Kieffer, vice president for public affairs at the American Farm Bureau Federation.

Bredenkamp breaks down the series of announcements from his perspective at the RFA.

On the good side, the EPA set the RVO for 2022 at 15 billion gallons. That corresponds with the language in the original law, but it is the first time in several years the government has set the number at that level.

Also on the good side, the EPA is dealing with a 2016 court case where the Obama EPA was ruled to have illegally reduced that year’s conventional blend level by 500 million gallons. EPA is proposing to add half of those gallons to the 2022 RFS level and the other half in 2023.

And perhaps the best news for agriculture was the announcement the EPA is denying all 65 refinery exemption requests that had been pending since Biden took office.

“That’s a big deal,” Bredenkamp says.

It not only means the actual gallon number will be more accurate, but it also means that a bar has been set for receiving those exemptions, and it is a much higher bar than it was during the Trump administration.

There was also some good news for biomass-based diesel and advanced biofuels. The announcement increases the levels for those categories within the RFS.

Finally, the Biden administration also announced the long-awaited $700 million in COVID relief funding for biofuels producers.

But not everything was good. The bad includes the reduction in the 2021 RVO from 15 billion gallons down to 13.3 billion gallons.

The ugly in this was the retroactive re-opening of the 2020 RVO and the reduction of that number all the way down to 12.5 billion gallons. While fuel usage was down dramatically in 2020, the idea of going back and changing that number and setting it that low was a very bad thing for the industry, in part because it sets a precedent that such a thing could even be done.

That retroactive move obviously doesn’t change the amount of biofuels actually used in 2020, but it could increase the number of RINS that are not retired and could affect RIN prices. In that way it could potentially hurt ethanol usage and prices now.

The political thinking may have been to try to hold down fuel prices in the country,

Bredenkamp says. But he says it would be better for the administration to emphasize biofuels. He says in the first few days after the announcement, the RIN levels did not crater, which could be good news for the industry. Still, this was clearly bad news for the ethanol industry.

Industry leaders say it is possible they may challenge that retroactive change in court, but that decision has not been made yet.

“On balance,” Bredenkamp says of the various announcements, “we think it is marginally a net positive for the industry.”

CropWatch Weekly Update

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Gene Lucht is public affairs editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.

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