Fight over renewable fuel rages across Middle America as memo proves consumers aren’t victims
TORONTO—Big oil and biofuel producers are always one spark away from a conflagration, and in late May, the Environmental Protection Agency threw a burning torch into no-man’s-land by announcing a proposal that would slow the mandated increase in biofuel blending in the U.S. in 2015 to 16.3 billion gallons from the 20.5 billion gallons initially mandated by congress.
The decision was seen as a victory for big oil, which hopes to keep the percentage of ethanol in transport fuel at no more than 10 per cent, a mark also known as the “blend wall.”
The agency said its decision was based on the fact many vehicles on the road are not built to run on a higher percentage of ethanol in gas, as well as the limited availability of renewable fuels other than ethanol.
The result was a crash in the price of Renewable Identification Numbers, or RINs, which track whether or not refiners are complying with the mandate. The value of ethanol RINs, which are generated by refiners for each gallon of ethanol mixed with gasoline, has collapsed by about 50 per cent since early May.
While big oil has argued that the RIN system raises the prices consumers pay at the pump, biofuel advocates have consistently denied the claim, and now, an EPA memo, dated May 14, has surfaced that confirms RINs don’t affect gas prices at the pump.
“It’s great to see that EPA is finally openly recognizing how the RIN market can work to transform the marketplace and recognizing that consumers are insulated from any impact from RIN trading among obligated parties,” Geoff Cooper, senior vice-president of the Renewable Fuels Association, said in a conference call.
The result vindicates the position ethanol advocates have been arguing for over two years, but does nothing to alter the proposed changes the EPA announced in May.
“Unfortunately the agency seems to have a bad case of schizophrenia,” Cooper added. “On one hand they’re publishing this memo and this detailed analysis that shows they fully understand how this RIN program can work, but then on the other hand they publish a proposal that completely cuts the RIN program off at the knees.”
Controversy surrounding the memo is only the latest in a long-running war of words between the renewable fuel industry and big oil, which biofuel advocates say the EPA is actively supporting with its proposed changes to legislation.
“It makes no sense. They’re only helping the oil companies by doing this,” said Bob Dinneen, president and CEO of the Renewable Fuels Association. “By failing to implement the statute… EPA is systematically destructing the RIN credit market and discouraging investment in new technology and infrastructure that would break the blend wall.”
Tom Buis, CEO of Growth Energy added that ethanol and biofuel are better for the environment than traditional gasoline, strengthen national security, and create jobs.
Opponents of renewable fuels, on the other hand, argue that producing ethanol raises food costs by occupying land that could be used for traditional farming, contributes to deforestation and the leads to the destruction of wetlands. They also claim biofuel performs more poorly in automobiles than traditional gasoline.