Ethanol industry: RFS waivers premature
WASHINGTON — Calls from some lawmakers for the Environmental Protection Agency (EPA) to waive the Renewable Fuel Standard (RFS) for the rest of 2012 “will not make it rain in Indiana or meaningfully lower corn prices,” said Bob Dinneen, Renewable Fuels Association (RFA) president and chief executive officer on Aug. 2.
“Calls to waive any or all of the RFS from the livestock lobby, oil industry, or their allies in Congress are not only premature, but void of justification,” Dinneen said. “The RFS contains a great deal of flexibility allowing obligated parties to meet RFS requirements in a variety of ways other than blending physical gallons of ethanol. The market is taking advantage of this flexibility as domestic ethanol demand for corn has fallen nearly 15 percent and production has dropped in the last six weeks. Simply put, the RFS is working and knee-jerk reactions to acts of God will not provide the kind of relief some are seeking.”
On Aug. 2, a bipartisan group of 156 members of Congress urged the EPA to reduce the federal ethanol mandate. Several groups representing the meat and poultry industries supported the initiative which is similar to one launched by a coalition of meat, poultry and dairy trade groups that petitioned the EPA for a waiver on July 30.
"Clearly, the Congress in 2007 anticipated that unforeseen circumstances would require the Environmental Protection Agency [EPA] to exercise flexibility with the RFS," the letter states. "We believe the current weather situation in the United States calls for exactly the kind of flexibility that was envisioned."
But according to academic research and RFA analysis, some 2.5 billion ethanol credits, known as Renewable Identification Numbers (RINs), are currently “in the bank.” These RINs were “banked” in years past as refiners used more ethanol than was required by the RFS. Should ethanol production be short this year, refiners can use these excess credits to show compliance with the RFS. By substituting paper RINs for physical gallons of ethanol, demand for corn by ethanol producers would fall.
“This year’s weather has been more than challenging for farmers and ranchers across the country. However, waiving the RFS will not make it rain in Indiana, bring pastures to life in the Plains, or meaningfully lower corn prices,” Dinneen said. “The pressure relief valves of the RFS are working today, easing demand for corn from ethanol while still allowing obligated parties to comply with RFS requirements. The fact of the matter is that grain will be produced – both here in the US and across the globe. The question will be how much and ultimately the market will ration demand. Ethanol producers have been the first to respond to these market signals by reducing output.”
Jim Greenwood, president and CEO of the Biotechnology Industry Organization (BIO) argued that waiving the RFS would not help livestock producers, farmers or producers but it could harm biotech companies developing advanced biofuels.
“Waiving the federal RFS even for one year will produce instability in the program for several years, causing uncertainty for companies investing in advanced biofuels and for farmers growing next-generation energy crops,” Greenwood said. “Conventional biofuel production has declined this year as corn prices have risen. Advanced biofuels are beginning to make headway in coming to market. In fact, the first gallons of cellulosic biofuel were brought to the commercial market just this past April.”