As a longtime Iowa resident with a family farm background, I understand how in some respects, the Renewable Fuel Standard is a vital market access tool, aiding corn farmers by fending off the damage oil industry subsidies do to the energy market.
However, as a Pittsburgh native, it’s also clear to me that other provisions have further empowered Big Oil interests unintentionally, and, by artificially strengthening their hold over the transportation fuel industry, jeopardize the job security of blue-collar refinery workers.
Predictably, as Congress and the Trump administration work to close corporate loopholes, these special interests are now resisting RFS reform, cloaking their financial interests under the guise of protecting the hardworking people of Iowa – individuals that receive no benefit from these specific provisions.
If there’s one thing my corn-farming neighbors hate, it’s being used as pawns to make Big Oil richer. In an effort to protect the blue-collar men and women of this country, allow me to correct the d.
How Big Oil Gets Rich
One of the stipulations of the RFS is that refiners either earn a minimum amount of tradable credits, called Renewable Identification Numbers (RINs), by mixing ethanol into their gasoline or – if they’re not capable of doing so – purchasing surplus RINs from other refiners who blended more than necessary.
Although ethanol requirements have laudably created more business for a lot of my corn farming neighbors who otherwise suffer from the government’s never-ending subsidization of the oil industry, this RINs system has threatened to throw thousands of middle-income refinery families across the nation onto the unemployment line.
This is because most refiners can’t blend fuel. That job is left to the largest oil companies, which can mix this limited-life mixture on their onsite facilities right before it’s pumped into the cars they serve.
Since their surplus RINs credits are in such high demand, their price has, to the joy of Wall Street traders and big oil firms, jumped from a few pennies at the start of the program to a high of over $1.40. Complying with RINs is so costly that companies, such as Philadelphia Energy Solutions, have even filed for bankruptcy.
Some people believe that this is a false narrative aimed at confusing regulators for public gain. While it’s true that some companies have arguably contributed to the problem by underinvesting in their refineries, there is no denying that cost of compliance – which sometimes payroll costs – has also been a critical factor.
As a result, small refineries have had no choice but to pass expenses onto consumers rather than absorb them internally. The wholesale price of gasoline and diesel reflects the compliance obligation of the refinery to obtain RINs.
Republicans’ Farmer-Friendly Solutions
Don’t get me wrong: for as long as we have oil subsidies, we will need government-mandated ethanol blending. But the Renewable Fuel Standard should assist corn farmers, not the oil tycoons that receive billions in subsidies.
Many Republican representatives understand this and have been willing to entertain solutions that keep the ethanol mandate in place as-is, thus not hurting farmers, while fixing some of the corporate welfare/wealth distribution problems with the RFS. Among some of the solutions offered have been caps on RINs prices and shifting the responsibility of mixing ethanol onto the big companies that blend the fuel.
Perhaps the most critical short-term solution has been small refinery exemptions granted to states at the request of a bipartisan coalition of governors. By resolving the unintended consequence of destroying small refineries, the EPA has protected scores of vulnerable middle-income families from a law that was created to protect middle-income families.
Big Oil’s Crocodile Tears
Although SREs and reduced RINs prices do not impact small farmers in the slightest – after all, ethanol blending requirements are retained as-is – the RFS special interests have been predictably trying to derail the EPA’s relief efforts.
These individuals claim that small refinery exemptions will hurt farmers by reducing demand for ethanol. They defend their baseless position with skewed data, seemingly to pad their bottom lines.
For example, these cronies utilize weekly data that shows drastic reductions in ethanol demand when even the Energy Information Administration says that “the weekly data are not expected to have the same level of accuracy as the preliminary monthly data when compared with final monthly data.”
When looking at the correct monthly data, it’s clear that domestic ethanol demand has not decreased. In fact, earlier this year, it actually sat at the highest it’s been in over a year. Wall Street and big oil will continue using the poor farmers of Iowa as a convenient excuse for fighting these sensible RFS reform measures.
Last week, 21 Republican senators sent a letter to Acting EPA Administrator Andrew Wheeler advising him not to reallocate the Renewable Fuel Standard compliance obligations from small refineries.
He shouldn’t. Contrary to what the recipients of the corporate welfare argue, there is no legitimate reason for small refineries to face a wrath of financial pain. Republicans’ RFS compromise solutions have protected both middle-income farmers and blue-collar refinery workers. They should expand their reform efforts, not shrink them to please the same wealthy oil interests that the RFS was created to protect against.