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DAVID KRUSE

Blowing up ethanol

March 17, 2017
Farm News

The ethanol/biofuel industry had an interesting escapade to review. White House officials reportedly engaged with Bob Dinneen who heads the Renewable Fuels Association informing him they were working on an executive order to drop the RIN purchase obligation, which is the enforcement obligation of the RFS, from petroleum refiners.

They were reportedly acting on behalf of President Trump's advisor on deregulation, Carl Icahn, who owns a refinery and has been an outspoken critic of the RFS. They reportedly told Dinneen that the proposed lapse of the RIN obligation for refiners was "non-negotiable."

Dineen's response was suspect as the RFA has members who are refiners including Valero and CHS that support the move by Icahn. So he didn't push back on the "non-negotiable" and reportedly instead went to trade the refinery RIN obligation for a vapor waiver for E-15, an act too far for which the industry was furious over.

POET and Growth Energy blasted Dinneen and the RFA for acting as the industry intermediary saying that "the proposal would eviscerate the RFS." Dinneen appeared to be a Trump/petroleum refinery supporter more than an ethanol producer representative.

On the biodiesel side, they promoted changing the recipient of the $1 gallon blender's credit to being a producer's credit so that imported biodiesel was no longer eligible for the credit. That would be a good move, but at this time a lot of that is surreal as the biodiesel credit expired, so does not exist anymore and I would not assume that Congress will reinstate it.

The news blew things up. Grain markets rallied-then sold off-consolidated, RIN values plummeted and Bloomberg reported that Icahn's refinery company stock gained more than $100 million in value. They did not make up the talks that occurred between the White House officials and the Renewable Fuels Association, but later inquiries from Sen. Grassley and Gov. Branstad produced a response from the White House that no executive order existed.

It existed in draft form up until the moment when Grassley and Branstad asked about it.

There is a lot of that going on in Washington today. The White House statement that no order existed was deceptive as they sure as heck were working on one and Carl Icahn was driving someone at the White House toward a working draft order that did what he wanted it to. I doubt that anyone working for the government made more money on the job than Icahn last week.

I have strongly noted that Trump's support for ethanol was, so far, superficial and that by appointing Scott Pruitt to EPA, Rick Perry to DOE, Carl Icahn as his chief advisor on deregulation, all of which are avid opponents of biofuels and strong Big Oil surrogates, that they would come after the RFS. It didn't take them very long to do so. The assurances that Trump would somehow change their spots or that the Renewable Fuel Standard law itself would prevent them from underming and dismantling is still suspect in my opinion.

There are waivers and petitions and mechanisms inside the law that if someone in charge wants to effectively gut it they can. RFS supporters, who took solace when Pruitt vowed to follow the RFS law, including our state's two U.S. senators, were gullible in thinking that meant something.

The foxes are in charge of the hen house and the chickens are very much on the menu. Donald is busy with other fish and Icahn has his full support.

Now if Dinneen were truly representing the ethanol/biofuel industry Dineen should have told the White House that in order to stay in good standing with the ethanol industry which helped elect them, that he expected the vapor waiver on E-15 to be implemented immediately absent any quid-pro-quoi.

The waiver is not something that should have to be traded for. It should be automatic from an administration that professes to support ethanol.

The background on this is that ethanol has vapor tendencies in the summertime. E-10 was given a vapor waiver to be sold year around. That should have happened for E-15 too, but the anti-ethanol, Obama-EPA held the waiver back. We would like to see E-15 replace the E-10 standard fuel. The petroleum industry wants to do what it can to limit loss of market share to ethanol and few stations want to commit to an ethanol blended fuel that cannot be sold year-around.

The lack of a waiver is just one barrier to expanding market access for ethanol. The ethanol industry should have put together a list of requirements that they expect the Trump EPA to implement to clear obstacles for biofuel market access and told those White House officials that they were "non-negotiable."

The Iowa Renewable Fuels Association (independent from RFA) told the Des Moines Register that "they do not support any deal or negotiations on the point of (RIN) obligation". This was an attempt to dismantle the RFS from inside the Trump administration. I don't think that it will be the last.

The White House should respond with a vapor waiver on E-15 so that the fuel can be marketed this summer.

David Kruse is president of CommStock Investments Inc., in Royal.

 
 

 

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