On December 1st, 2022, the Environmental Protection Agency announced its proposed Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) for 2023, 2024, and 2025. Unfortunately, as in years past, the Environmental Protection Agency (EPA) set the RVOs far too high above projected annual demand for refiners to realistically comply with – continuing the saga of independent refiners unjustly shouldering the financial burden of the RFS, rather than providing relief.
Ethanol’s chemical characteristics prevent it from being shipped in a pipeline, whether mixed with gasoline or otherwise, requiring it to blended into gasoline at a terminal downstream from a refinery. Independent refiners generally own few, if any terminals where blending occurs, so they are forced by the government to purchase tradeable credits known as Renewable Identification Numbers (RINs). These credits are purchased from “Big Oil” companies with large blending operations, large retail chains that also blend renewables but have no RFS obligation, or even from third party Wall Street speculators who have no connection to the fuel supply chain but who buy RINs with the intention of trading them for profit.
In 2005 when the RFS first became law, RIN credits ranged from a penny to a nickel each. Now, RINs are trading around $1.60 — that’s a 5,000% increase. While independent refiners have been vocal about having to spend more on RINs than all other operating expenses combined, their warning calls have been ignored by the EPA and various Administrations. Several U.S. refineries have had to close while some converted to renewable diesel manufacturing — shedding roughly 70% of a facility’s fuel product volume and 90% of the jobs in the process.
In announcing its latest RVOs for 2023 to 2025, EPA is proposing that refiners must somehow blend over 15 billion gallons of ethanol into the gasoline they make. This exorbitantly high blend rate will drive up RINs prices even further, threatening to eliminate remaining independent refiners and America’s energy independence once and for all, as we are already dependent on imports to make up the difference from the production lost by eight more domestic refineries shutting down or being converted to biofuel production between 2019 and 2021.
Fortunately, some elected officials on Capitol Hill have noticed the catastrophic consequences of the RFS and are actively working towards a solution. U.S. Senators Bob Casey (D-PA) and Chris Coons (D-DE), are joined by Representatives Mary Gay Scanlon (D-PA), Brendan Boyle (D-PA), Donald Norcross (D-NJ), and Brian Fitzpatrick (R-PA) in announcing plans to introduce legislation to alleviate soaring RINs costs associated with the Renewable Fuel Standard (RFS), because the original intent of Congress was for RINs to cover administrative costs, rather than get traded on an unregulated marketplace prone to trading abuse and fraud.
The soon-to-be-introduced legislation calls on EPA to create a low fixed-priced RIN that could be purchased and used for compliance with the conventional ethanol mandate at a sustainable and predictable price. Refiners would then have the option to purchase this RIN, or meet compliance under the RFS through their own blending, or by buying RINs in the marketplace.
By providing independent refiners with greater financial certainty and predictability, this legislation would:
- Protect tens of thousands of high-quality refinery jobs, many of which are union jobs and currently at risk due to RIN volatility and financial uncertainty.
- Lower costs for consumers at the pump, grocery store, and at home; plus,
- Enhance America’s energy independence by keeping domestic refineries open and operational, while enabling them to plan future investments.
This proposed legislation provides a critical lifeline to independent refiners who have endured a decade-long struggle with soaring RFS compliance costs. The legislation will also lower gas prices and prevent even greater fuel shortages. The sponsors’ commonsense solution strikes a balance between protecting independent refiners and spurring responsible investments in biofuel, which was also part of Congress’s original intent – now demand is being met by imports, which runs counter to the program’s goals of promoting America’s energy independence and security.
The RFS’s dysfunctional RINs compliance system has wide-ranging effects on America’s domestic energy economy. High RIN prices contribute to:
- RINs pose a hidden tax on every American consumer.
- Prices at the Pump. Current high RIN prices add between 20 to 30 cents per gallon that would be reduced if this legislation passes.
- Heating Oil Bills. This past winter, high RIN prices cost the average American household with a 500-gallon heating oil tank an extra $100.
- Grocery Bills. Unreasonably high biofuel mandates lead to increased demand and higher prices for key food ingredients and products by incentivizing their use in non-food fuels:
- Use of corn for ethanol – a key ingredient in countless food products. Soybean and canola oil are used for renewable diesel and aviation fuel
Thousands of refinery jobs and our nation’s energy security are at risk—EPA’s recent irresponsible, unachievable proposal just raised the stakes for independent refiners and our nation’s energy security even further.
The Fueling American Jobs Coalition applauds Senators Casey and Coons and Representatives Norcross, Boyle, Scanlon, and Fitzpatrick for their leadership in responding to the unbalanced, unachievable, irresponsible RINs program. Now, we are calling on the rest of Congress to protect tens of thousands of jobs, strengthen America’s energy security, and lower costs for consumers by supporting the sponsors’ efforts to bring balance back to our fuel supply and lower the price of gasoline at the pump.