Strong Opposition to Renewable-Fuel-Standard Change

What issue has united API, biofuels groups and fuel retailers?

WASHINGTON -- In an “unprecedented” show of solidarity, eight fuel industry groups have signed a joint letter opposing a major change that the Environmental Protection Agency (EPA) is considering to the Renewable Fuel Standard (RFS).

The letter sent this week to EPA Administrator Gina McCarthy asks the agency to deny recent petitions that have requested moving the point of obligation for complying with the RFS further downstream.

Merchant refiners such as Valero and CVR Refining, as well as the American Fuel & Petrochemical Manufacturers (AFPM) refiners association, have been the main petitioners. As obligated parties under the RFS, refiners are required to meet certain blending quotas each year. If they fall short, they can buy Renewable Identification Numbers (RINs), or credits representing a gallon of ethanol blended into a gallon of gasoline or diesel.

Petitioners asked that the point shift to certain unobligated parties—in particular, large fuel retailers who blend at the rack, earning them RINs that they can then sell to obligated parties. As the EPA has boosted renewable fuels blending quotas, including most recently for 2017, the cost of those RINs have risen, which has financially squeezed refiners already dealing with slim margins because of low gasoline prices.

In November, the EPA announced it was proposing to deny the petitions, but opened a 60-day comment period before it makes its final decision. The letter to McCarthy is signed by not only fueling industry groups such as NACS, SIGMA and PMAA, but also biofuels groups such as Growth Energy and the American Petroleum Institute (API), which traditionally have been at odds on the efficacy and future of the RFS.

In the short, one-page letter to McCarthy, the associations acknowledged that each “has an individual, unique position—often conflicting—regarding the broader Renewable Fuel Standard (RFS) program.” Furthermore, they note it is “unprecedented for all of these undersigned groups to unite in a single letter to express a uniformly held position.”

That said, all of them oppose moving the point of obligation downstream, for their own reasons. API, for example, considers the RFS “broken” but believes moving the point of obligation distracts from more fundamental issues with the program. It is pushing for a more significant legislative fix. NACS, SIGMA and PMAA believe it would remove retailers’ incentive for blending. All agree it would add complexity to an already complex framework.

“There is no sound public policy rationale for moving the point of obligation and further, such a change would add complexity and uncertainty to the current RFS program,” the letter states.

“It speaks volumes that such divergent groups have coalesced around their opposition to changing the point of obligation under the RFS," said Tim Columbus, partner at Steptoe & Johnson LLP, Washington, D.C., and legal counsel for NACS and SIGMA, in a statement. “The position of the petitioners is simply self-serving and silly, and EPA would be wise to reject such a change in the program that would cause mass disruption in the fuels market.”

The eight groups that signed the letter to McCarthy include:

  • Advanced Biofuels Association (ABFA)
  • American Petroleum Institute (API)
  • Growth Energy
  • NACS
  • National Association of Truckstop Operators (NATSO)
  • Petroleum Marketers Association of America (PMAA)
  • Renewable Fuels Association (RFA)

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