President Donald Trump reportedly may be considering an executive order to change the point of obligation in the Renewable Fuel Standard, according to the Renewable Fuels Association.
Bloomberg reported on Monday night the RFA joined billionaire energy investor Carl Icahn in asking the White House to change the rule, drawing outrage from a number of other ethanol and agriculture industry groups Monday night.
The RFA told DTN on Tuesday, however, it continues to oppose such a change but wanted to be sure such an order also would include lifting a key restriction on the use of E15 in the summer months.
The expansion of E15 is seen as vital to growing ethanol markets, as well as corn markets for farmers who provide feedstocks to ethanol plants.
An RFA spokesperson told DTN that to characterize the proposed change to the regulation as a deal would be inaccurate.
“We were told the point-of-obligation change was going to happen, whether we were involved or not,” RFA Communication Director Rachel Gantz told DTN. “We wanted to make sure E15 RVP parity was addressed.”
Then, the RFA offered a statement from its President and Chief Executive Officer Bob Dinneen, who said his group remains opposed to changing the point of obligation.
“We received a call from an official with the Trump administration, informing us that a pending executive order would change the point of obligation from refiners to position holders at the terminal, a potentially small increase in the number of obligated parties, but one which would distribute the obligation more equitably,” Dinneen said.
Dinneen added, “Despite our continued opposition to the move, we were told the executive order was not negotiable. Our top priority this year is to ensure consumers have year-round access to E15, and we would like the Trump administration to help cut through the red tape on this unnecessary regulation.
“Consumers are being denied access to the fuel blend due to EPA’s nonsensical disparate treatment of E10 and E15 with regard to volatility regulations, preventing E15 from being sold during the summer.”
The executive order reportedly will change the point of obligation from refiners and importers of gasoline and diesel to ethanol blenders. The plan also reportedly calls for expanding ethanol’s use during the summer.
In recent weeks, a number of biofuels groups filed comments with the U.S. Environmental Protection Agency, expressing opposition to changing the point of obligation. Groups opposed to the switch fear it would discourage expanded ethanol blending.
Groups that support the switch claim that obligating blenders would spread compliance costs through the renewable identification number, or RIN, market. That market is designed to allow obligated parties to show compliance with the law by buying either physical gallons or the credits attached to actual gallons produced.
In the past, EPA has opposed the switch because it would make the Renewable Fuel Standard more complex by expanding the number of companies required to comply from hundreds to thousands.
For years, the ethanol industry has called on the EPA to equalize the Reid vapor pressure, or RVP, regulations for E10 and E15 during the summer driving season. Because of those requirements, E15 has largely not been available to some wholesale suppliers and retailers who receive only E10 blends. The industry has contended that adding 5% more ethanol in the summer would actually reduce tailpipe emissions.
Ethanol increases the RVP, which measures the release of volatile organic compounds into the atmosphere. The RVP for gasoline is the lowest, or most stringent, during the summer months when the weather is hot. E10 currently receives an RVP waiver, which keeps the fuel in compliance with RVP requirements year-round. However, E15 is not given the same waiver, so it can’t be sold in the summer.
Reaction to the proposal from other biofuel interest groups and the nation’s largest ethanol company was swift and forceful. Those interests said in a variety of press statements they believe the RFA struck a deal with Icahn and the Trump administration.
“You’ve got one individual acting as if he has the ability to speak on behalf of ethanol; he doesn’t,” Growth Energy CEO Emily Skor said about Dinneen.
“Growth Energy represents the world’s largest biofuel producers as well as co-op-owned plants. I assure you this is no deal for anyone but Carl Icahn. If we had been approached with this deal, we would have flat-out rejected it. This would gut the RFS and violate the president’s commitment to the policy. And, in the end, those who lose the most will be everyday Americans.”
POET CEO Jeff Broin was critical of the action in a statement to DTN. POET is the largest corn-ethanol producer in the United States, and a cellulosic ethanol technology developer.
“It’s a bailout,” Broin said. “This was a back-room ‘deal’ made by people who want out of their obligations under the Clean Air Act, and frankly, it’s not a surprise. Carl Icahn has long been a self-interested, vocal critic of the program. We have been expecting this from the RFA as they have casually backed away from their support since an oil refiner became their largest member.”
In recent months, oil company Valero Energy’s biofuels division joined the RFA, although the parent company opposed the RFA’s stance on the point of obligation.
Broin, who is one of the founders of Growth Energy, said the action is “absent leading voices” in the biofuels industry, including that of his own company.
“Bob Dineen does not have the authority to negotiate on behalf of the biofuels industry, and Icahn does not have the authority to negotiate policy on behalf of the U.S. government,” Broin said in the statement. “Icahn found a willing partner in the RFA, whose largest member is an oil refiner in a similar situation to Icahn’s.
“The biofuels industry has worked hand-in-hand with gasoline retailers to grow consumer access to clean, high-octane E15 through our ‘Prime the Pump’ program. Our partner retailers have said time and again that changes to the point of obligation will stop that momentum.”
Brian Jennings, executive vice president of the American Coalition for Ethanol, said in a statement to DTN the change isn’t inevitable.
“Despite rumors, this is not a done deal and not a take-it-or-leave-it scenario,” Jennings said.
“Changing the RFS point of obligation and providing RVP relief will both require EPA rulemaking and public comments. ACE has long pursued a fix to the burdensome RVP regulation which currently prohibits the year-round sale of E15, but doing so in a tradeoff which would reward Carl Icahn and help refiners like Valero avoid their legal responsibilities under the Clean Air Act would backfire on our industry because some of the marketers and retailers we rely on to sell E15 and higher blends today would be saddled as obligated parties under the RFS tomorrow.”
Sen. Charles Grassley, R-Iowa, said during a news conference with agriculture journalists Tuesday he would not comment on specifics of such a proposal until he had time to research it.
“I’m going to keep my eye closely on EPA,” he said. “Anything that modifies the RFS by order or regulation is concerning to me. I will do anything to maintain the RFS. I don’t care if we have Trump or Obama as president, I’m going to work hard to maintain the integrity of the RFS program.”
DTN Energy Editor Brian Milne said he believes such changes to the RFS would help expand the E15 market.
“If this is the proposal, it would be an important victory for ethanol producers,” Milne said.
A waiver of the vapor pressure requirement would allow gasoline retailers to sell E15 all year, he said, as well as during the summer when gasoline demand is highest.