Challenges remain for Iowa renewable fuels advocates
Leaders pleased with ethanol decision, but still seek biodiesel increases
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Gazette-Lee Des Moines Bureau
Gazette-Lee Des Moines Bureau and Quad City Times
NEVADA, Iowa — It is “kind of Christmastime in Iowa,” Scott Pruitt said, a day after the agency he leads announced federal renewable fuel requirements.
Renewable fuels officials and supporters in Iowa were pleased with the EPA’s decision, which was announced Thursday, to maximize the amount of corn-based ethanol required to be blended in the nation’s fuel supply, a boon to Iowa’s agriculture-based economy.
But those renewable fuels officials also were dismayed the EPA declined to increase the amount of required biodiesel fuel production.
And oil refiners are feeling left out of the Christmas party; they sought changes to the renewable fuels standards, or RFS, and claim it is driving up their operating costs.
This was one of the more eventful years in terms of jockeying for renewable fuel targets. And it’s likely to continue.
“We solicit comment. We hear from all different parts of the country, from consumers and various parts of our energy economy,” Pruitt said in an interview during his visit to Iowa on Friday. “There are actually different views.”
The EPA largely held steady the amount of renewable fuels to be blended into the nation’s fuel supply at 19.3 billion gallons for 2018.
It was the decision to keep the required amount of biodiesel production at 2.1 billion gallons that disappointed industry officials.
Pruitt said the agency kept that number flat because the industry has never in one year produced the 2.5 billion gallons it sought for the requirement, and because the U.S. in 2016 imported 700 million gallons of biodiesel fuel from Argentina.
If the industry produces more, the biodiesel target could increase in future years, Pruitt said. He said he plans to watch production levels closely this year.
“Hopefully they can produce and that will impact the numbers going forward. But we haven’t done it yet, and we imported 700 million gallons last year from Argentina,” Pruitt said. “We shouldn’t be setting a number, in my view, that we have to rely upon people in Argentina to meet.”
That argument frustrates Monte Shaw, executive director of the Iowa Renewable Fuels Association.
Shaw noted in October the U.S. Department of Commerce ruled Argentina sold biodiesel fuel to the U.S. illegally below market value. And, Shaw said, biodiesel producers have not pushed to 2.6 billion gallons because of the lack of incentive in the federal requirements.
“There are a lot of different voices in the EPA, including the petroleum industry, and that’s kind of what they’ve been telling (Pruitt),” Shaw said Friday after listening to Pruitt speak to approximately 100 Iowa farmers and state leaders at an invitation-only event at a central Iowa farm. “What they should have looked at is, ‘What is the right number to live up to the letter and the spirit of the RFS, which was moving advanced renewable fuels forward.
“I’m not trying to be too critical,” Shaw added, “but this is an area where we don’t feel that they properly understand the industry yet and the intent of the legislation. So it’s our job to get a better understanding at the EPA and at the White House of that.”
While Pruitt will hear pleas from biodiesel producers, he also continues to hear from oil refiners, who expressed strong displeasure at the new renewable fuel requirements.
“Unfortunately, it appears that EPA did exactly what (Iowa’s U.S. Sen. Chuck Grassley) demanded, bowing the knee to King Corn,” Chet Thompson, president and chief executive of the American Fuel and Petrochemicals group, said in a statement. “We think this action is bad for U.S. manufacturing and American consumers and encourage Congress to finally fix the RFS.”
Grassley has been a powerful ally for the renewable fuels industry. He personally called President Donald Trump about renewable fuel issues after Pruitt earlier this year indicated he may reduce biodiesel targets and allow ethanol exports to count toward the RFS.
But oil interests have their own ally in U.S. Sen. Ted Cruz of Texas. As the issue was being debated, Cruz put a hold on the nomination of Bill Northey, Iowa’s ag secretary, to a top federal agriculture department post.
Cruz has proposed a meeting with the president and with renewable fuel backers to try to get relief for refiners who complain of the high cost of meeting blending targets.
“That’s good. Mideast peace,” Pruitt joked. “Dialogue is good.”
Trump has agreed to meet with oil industry leaders to discuss the RFS, according to a Reuters news service report published Friday.
Grassley was not invited to the meeting, his office said Friday. Grassley has previously called the prospect of a meeting between the White House and oil refiners over the RFS “a waste of time.”
Cruz’s office did not respond to messages with multiple questions regarding the RFS, his hold on Northey’s nomination and the reported oil industry meeting with Trump.
Pruitt acknowledged oil refiners’ frustrations, and said the credits for RFS compliance — Renewable Identification Numbers, or RIN — must be reformed. He said there may be some fraud and inflation in the process.
“It is imperative, absolutely imperative that we have RIN reform in some way,” Pruitt said. “We have to look at whatever steps that we have available in the toolbox to address RIN abuse and the high RIN cost.”
Shaw said one way to lower costs for refiners would be to make high-volume ethanol blends like E15 legal to sell year-round. Currently, E15 cannot be sold during the summer months, Shaw said.
Shaw said more E15 sold would mean more RIN, which would drive down costs.
Pruitt, during his remarks at the Friday afternoon event near Nevada, said his agency is studying whether it has the legal standing to approve E15 for year-round sale. He said if it is determined the agency can do so without Congressional approval, it will make E15 available year-round. If not, Pruitt said he would make a recommendation to Congress to change the law.
Pruitt, during the interview, said Iowa renewable fuels officials should be pleased the agency did not alter the entities responsible for fulfilling the renewable fuels requirement. The oil industry wanted the so-called point of obligation changed from refiners to retailers. Renewable fuels officials said that would have undermined the mandate.
And Pruitt noted the agency published the new requirements on time, in contrast to the previous administration, which twice delayed its final decision on RFS levels. Industry officials said that created a troublesome lack of certainty for producers.
“I’m really proud of our staff and our team,” Pruitt said. “I think we worked very diligently to do it on time, to address these numbers with objectivity and to look at these criteria in a way that is fair.”