Trump Shows Willingness to Ease RFS Requirements

Oil and ethanol supporters to meet this week to discuss fuel blending deal

WASHINGTON -- The Trump administration is attempting to broker a deal between oil and ethanol industry supporters over requirements of the Renewable Fuel Standard (RFS).

Sources told Reuters that the White House was slated to host a meeting Dec. 13 with legislators representing oil, biofuel and farming industry constituents to forge a deal that would lessen refiners’ burden in complying with the RFS, a program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels, primarily ethanol. The meeting would include staff from the offices of Republican Sens. Ted Cruz of Texas and Pat Toomey of Pennsylvania, representing the interests of the oil industry.

The week prior, a delegation of nine legislators representing refiner interests and led by Cruz met with President Trump. The president was open to reforming the RFS in a way that would be a “win-win” for refiners and farmers, Reuters reported. One idea reportedly discussed was capping the price of Renewable Identification Numbers (RINs), credits that obligated parties such as refiners can buy to demonstrate their compliance with RFS blending targets. Refiners have argued that escalating RIN prices—driven up by higher blending targets—are destroying their profits.

The ethanol industry and some fuel blenders have countered, however, that refiners build RIN costs into their profit margins and ultimately pass them along to consumers. A recent study by Wells Fargo confirmed that refining margins reflect RIN costs. Roger Read, a senior analyst for New York-based Wells Fargo, told Bloomberg that U.S. drivers have paid 48% to 83% of refiners’ RIN costs in 2017, compared to paying only 10% of the cost in 2013.

Representatives from corn-belt states declined to attend the first meeting with Trump, but they are sending staff to this week’s discussion. Staff from the offices of Republican Sens. Chuck Grassley and Joni Ernst of Iowa, and Deb Fischer of Nebraska will represent ethanol and farming industry concerns. The U.S. Environmental Protection Agency (EPA), which administers the RFS, and U.S. Department of Agriculture (USDA) will also have staff in attendance.

In brokering a deal, the Trump administration is attempting to free up the passage of nominees to the USDA and the EPA, some of which have been put on hold recently by both Cruz and Grassley in a political tit-for-tat over the efforts to tinker with the RFS.

A source told Reuters that the attendees of this week’s meeting could discuss possible remedies such as capping the price on RINs or giving waivers to some refiners who are at risk of bankruptcy. Over the past two months, Gov. Gregg Abbott (R) of Texas and Gov. Tom Wolf (R) of Pennsylvania have submitted waiver requests to EPA Administrator Scott Pruitt asking him to waive RFS blending obligations for their state or region because of the burden on refiners there.

Refiners have previously suggested that the government trim annual biofuel blending targets, let ethanol exports count toward their obligations or change the point of obligation—the party responsible for meeting the biofuel blending quotas—downstream to fuel blenders. However, in November, the EPA announced it was denying petitions to shift the point of obligation and had also modestly increased renewable volume obligations for 2018.

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