Recognizing Today’s Reality to Shape a Better Tomorrow

FROM THE JANUARY ISSUE: Increasing demand for ethanol, RFS reset and promoting exports among ACE's 2019 priorities.
By Brian Jennings | December 27, 2018

Looking back to one year ago, ethanol renewable identification numbers (RINs) were fetching nearly 70 cents (a valuable incentive for ethanol blending), exports were swelling to record volumes, and EPA was promising to consider granting Reid vapor pressure (RVP) relief for E15.

As 2019 begins, EPA has handed out nearly 50 Small Refinery Exemptions like trick-or-treat candy and ethanol RINs have collapsed to around the 10-cent mark, advocated by Sen. Ted Cruz (R-Texas). This is our cold, hard reality today: RINs losing more than 80 percent of their value, ethanol prices flirting with record lows and profitability evaporating because supply outweighs demand. On the bright side, exports have been robust, and we are finally poised to clear the RVP hurdle now that President Donald Trump has directed the U.S. EPA to complete a rule-making to allow E15 use year-round.

Given this reality, increasing demand and market access for ethanol will be the single most important priority for ACE in 2019.

Since the president’s RVP announcement, we have been riding herd on EPA to release the proposed rule for public comment. Unfortunately, EPA insists upon waiting until February, leaving scarce time for a final rule to be in place before the 2019 summer driving season begins. For retailers already on the sidelines, EPA slow-walking the RVP rule could keep them from offering E15 to their customers through next summer.

In addition to seeing a legally defensible RVP rule through to the end, and likely having to defend it in court, we will keep EPA’s feet to the fire on SREs and insist upon reallocation of the waived gallons.
Speaking of court, the litigation ACE and others initiated on SREs and restoration of the waived gallons will pick up speed in the new year. It is insulting to rural America that farmers and ethanol producers are suffering real economic harm while refiners like Chevron and CVR enjoy record profits and are allowed by EPA to keep the RINs through the waivers. Lawsuits are never the preferred approach but sometimes EPA action (or inaction) leaves us with no other choice. Recall we were forced to sue former President Barack Obama’s EPA when it waived 500 million gallons from the Renewable Fuel Standard based on so-called blend wall constraints. We prevailed in this case and are still waiting for EPA to reveal how it plans to restore this lost demand volume.

In 2019, ACE will also carefully examine the changes EPA will propose for RIN trading, as part of the RVP rule-making, to make sure blenders and retailers are still able to use RINs to help them market higher ethanol blends.

The midterm elections changed the balance of power in Congress. Democrats will now control the House of Representatives while Republicans picked up a couple of seats to retain their majority in the U.S. Senate. Because ethanol is a bipartisan issue, it doesn’t really matter to us who controls Congress, but that won’t stop oil refiners and individual lawmakers from introducing legislation to repeal or reform the RFS.

In fact, two House Republicans unveiled “discussion draft” legislative language around Thanksgiving that would establish a minimum 95 research octane number (RON) fuel requirement in exchange for grave changes to the RFS, including sunsetting of volume obligations, overturning emissions anti-backsliding requirements, and gutting market access provisions for cellulosic and advanced biofuels. There are certain ideas in this legislative draft that, in isolation, might help ethanol. But the net effect of the entire legislative package would be very harmful to the ethanol industry and farmers.

Other priorities we will tackle in 2019 include export promotion, the RFS reset rule-making, and increasing ethanol demand through meaningful and thoughtful low-carbon and high-octane policies. Of course, ACE will continue working alongside retailers to expand the use of E15, E85 and midlevel blends.

These issues will be front and center during ACE’s annual D.C. Fly-in and Government Affairs Summit in 2019. Please mark your calendars to join us in Washington, D.C., April 2 to 3 at the Liaison Capitol Hill Hotel.

Author: Brian Jennings
Executive Vice President
American Coalition for Ethanol
[email protected]