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RFS change to boost ag economy

By Staff | Oct 11, 2019




U.S. President Donald Trump recently provided a break to agriculture by instructing the U.S. Environmental Protection Agency to account for future small refinery exemptions in annual renewable fuel standard (RFS) rules. Biodiesel refineries and employees took a hit when the EPA misused small refinery exemptions, prompting nine companies to close their doors or reduce operations and lay off more than 200 employees. The EPA accounted for waived biofuel gallons using a three-year average of exempted gallons as an estimate.

“Proper accounting of the exemptions is vital to ensure that the annual RFS volumes send a reliable signal to biodiesel producers, who are making investments and plans for the future. The biodiesel industry relies on the RFS program to support continued growth and market development. While the proposal addresses the lost gallons from future exemptions, it does not provide for additional volumes of biomass-based diesel in 2021. We will continue to press EPA to send signals for future growth for biodiesel producers and soybean farmers,” said Kurt Kovarik, NBB Vice President of Federal Affairs, in a statement.

Iowa Farm Bureau president and producer Craig Hill said the organization and the ag industry as a whole are “encouraged” that the 15 billion gallons of renewable fuels will be kept by the administration.

“Burdened by six years of a downturned ag economy, depressed commodity prices and weather challenges that have wiped out crops for many, Iowa farmers welcome the good news. The 15 billion EPA biofuel requirements, coupled with promised action to keep biomass-based diesel sales and a recent decision to allow year-round sales of E15, is needed by grain farmers to remain sustainable and to help reduce carbon emissions for us all. But, it’s not just farmers who rely on Iowa-grown fuels; it’s all Iowans. More than 48,000 Iowans are employed by or depend upon the continued operation of the state’s biorefineries. Iowans who depend on those biofuel jobs also welcome the news to keep that 15-billion-gallon promise to farmers,” Hill stated.

The Iowa Soybean Administration noted that the announcement is a “critical first step to restore the integrity” of the RFS.

“ISA, soybean farmers and the broader biofuels community joined together on a united front in recent weeks to spur the administration to action. It delivered by addressing the continued misuse of small refinery exemptions (SRE), which have severely harmed the soybean and biodiesel industries for far too long. This action restores much-needed certainty in the marketplace by ensuring annual RFS volumes reflect waived gallons from future exemptions, thus helping eliminate wild production swings that destabilize the biofuels industry, farm operations and rural communities,” the association stated in a release.

Back in August, the Trump Administration announced its final decision on 38 applications for RFS refinery exemptions for the 2018 compliance year. Of 38 applications, six were denied and 31 were granted.

“The Trump Administration’s approval of 31 refinery exemptions from the Renewable Fuel Standard is just devastating news for our industry,” said Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw at the time of the announcement in August. “With this action, President Trump has destroyed over a billion gallons of biofuel demand and broken his promise to Iowa voters to protect the RFS. The vast majority of these exemptions are not justified under the law. Since this news began to leak this afternoon, RFS credit prices have freefallen to nearly zero, destroying much of the incentive to blend an incremental gallon of ethanol.”

Other than a resolution of the China trade situation, the only hope for a near-term boost for biofuels producers would be for EPA to follow the law and account for the estimated number of refinery exemptions when finalizing the pending 2020 RFS blending level rule, Shaw said in August. This would allow the EPA to reallocate the exempted gallons and end the demand destruction.

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