Ethanol industry groups welcomed the Environmental Protection Agency’s proposed rule that would allow for year-around sale of E15, but the refiners were divided over accompanying proposals to reform the biofuel credit market.
The proposal released Tuesday would provide a Reid Vapor Pressure waiver for E15 and impose new regulations aimed at reducing volatility in the market for Renewable Identification Numbers, the credits used to track compliance with the Renewable Fuel Standard. The RVP standard currently prevent E15 sales during the summer driving season, which runs from June 1 to Sept. 15.
Some in the ethanol industry are worried that linking RIN reform with the E15 waiver could prevent EPA from finalizing the rule by June 1.
"It gives me grave concern — the fact that they're saddling RVP, the E15 rule-making, with this RIN reform activity," Brian Jennings, CEO of the American Coalition for Ethanol, told Agri-Pulse. "It could very well be the reason this doesn't get done by June 1st."
House Agriculture Committee Chairman Collin Peterson, D-Minn., echoed that concern. "The efforts to bring transparency to the RIN system are needed, but I’m afraid that connecting these two issues in one rule is going to bog down moving forward on both," Peterson said. "This would affect the E15 timeline and I would want to make sure it’s done by summer driving season."
The EPA plan includes four key reforms to the RIN market, and all four face their own issues:
- Prohibit certain parties from being able to purchase separated RINs;
- Require public disclosure when RIN holds exceed specified thresholds;
- Limit the length of time a non-obligated party can hold RINs;
- Increase compliance frequency from annually to quarterly.
The refining industry is divided over RIN reforms. Some companies stockpile the credits while others have to buy them on the market.
“RIN reform is very complicated, and we don’t think the process the administration went through was the best way to address issues with the market,” said Frank Macchiarola with the American Petroleum Institute.
API argues that limits on the amount of companies that can hold RINs and how long they can hold them are counterproductive. "If you're trying to provide a greater level of certainty within the market, if you're trying to provide — in any market — greater liquidity and price discovery ... those things go against what you're purporting to be trying to fix," he said.
But Brendan Williams, vice president of government relations for PBF Energy, said that the reforms don't go far enough. He said EPA should consider setting position limits on companies that hold RINs. Williams said position limits have worked in other commodity markets.
The Fueling American Jobs Coalition, a group representing union workers and small retailers calling for RFS reform, welcomed the RIN reforms, saying EPA had "adhered to the clear and unmistakable position articulated by the president that policy in this area must reflect a careful balance between the need to maintain jobs and investment in the vital refining sector and the desire of some in the biofuels sector to expand the use of higher blends of ethanol."
“Refiners, small business owners, and consumers concerned with the potential for price spikes and manipulation welcome long-overdue action to propose needed reforms,” the group said.
The coalition said the government has “ample experience” with similar market regulation, including commodities such as feedstocks for biofuels.
But Macchiarola said API will do everything it can during the public comment period to challenge this proposal and “if finalized, we will make sure this is challenged with all legal options” on the table.
The proposed rule has not been officially published in the Federal Register, but the prepublication version says the comment period will end April 29.
A public hearing on the proposed rule will take place in Ypsilanti, Mich., March 29.
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