RFS Waiver Proposal Hammered

OMAHA (DTN) -- Farmer Jim Greif pressed pause on harvest back on his wet farm in Monticello, Iowa. An EPA public hearing in Ypsilanti, Michigan, on the latest Renewable Fuel Standard proposal was just that important.

Greif was one of several farmers who traveled to the hearing to stand up against a proposal they say would not account for biofuel gallons lost to small-refinery exemptions.

It comes at a time when the farm economy can ill afford it, he told EPA.

"On my farm, this proposal is devastating," Greif said. "Not only am I impacted, but this will hurt all the corn farmers in the state of Iowa, and we have enough problems piled on us with low prices, wet weather and the ongoing trade disputes. The weather cannot be controlled, but our own government should be able to step up when called upon."

Gracelynn Dale, a farmer from Bureau County, Illinois, said recent doubts about the stability of the RFS have led many farmers to reconsider their futures.

When it comes to young farmers, she said, having market security, including the RFS, is an important factor in whether they'll stay in the business.

"I know many farmers who spent much of this year thinking, 'Why bother?' Why should we continue to place our bets on this year's crop?" she said.

"Why should we put in the effort when we aren't even sure what our global markets might be? A big answer: ethanol. As we look to the future, we should be celebrating ethanol. Young farmers like myself need to feel confident that the markets and opportunities our parents and grandparents fought for will not only be available but abundant. Fossil fuels are finite, but biofuels are renewable. We hear the word 'sustainable' every day, yet how sustainable is it to allow so many refineries to limit their ethanol use? It simply isn't."

The controversial proposal calls for EPA to use a U.S. Department of Energy estimate on waived gallons from 2015 to 2017, or about 770 million gallons to account for waivers in the 2020 blend volumes.

NOT STICKING TO DEAL

During testimony to the agency, biofuel and agriculture groups called out President Donald Trump's administration for not sticking to a deal they say called for a three-year rolling average of actual gallons exempted from 2016 to 2018, or about 1.35 billion gallons.

Illinois Farm Bureau Vice President Brian Duncan said the RFS has been a "game-changer" for Illinois agriculture.

New doubts about whether the RFS will actually include 15 billion gallons of corn ethanol has been challenging, he said.

"But the recent glut of waivers is chipping away at the integrity of the RFS and is taking an enormous toll on ethanol producers and the bottom lines of farmers in my part of Illinois and across the Corn Belt," he told EPA.

"We're bleeding because we're no longer blending anywhere near the volumes of ethanol today as we once did -- and it's noticeable. A running three-year average of DOE's recommended waived gallons was not on anyone's radar. This nation's corn and soybean farmers need a better deal."

RURAL IMPLICATIONS

Iowa Secretary of Agriculture Mike Naig said when EPA is making adjustments to the RFS, it has wide implications for families in rural areas.

Naig asked the agency to "double check its math" and include exemption projections based on gallons previously waived.

"EPA must consider the real-world ramifications of these decisions," he said.

"These rules are not merely words and numbers on paper, these rules have real impact on people in Iowa and across the country. Small rural communities in my home state, like Crawfordsville, Merrill and Sioux Center where ethanol plants have shut down, are feeling the effects first-hand. Hundreds of families have been impacted by these closures and have been forced to make hard, life-changing decisions because of the EPA's failure to uphold our president's promise."

Brian Thalmann, a Minnesota farmer and a member of the National Corn Growers Association, said the proposal gives the agency discretion to continue handing out small-refinery exemptions.

From 2016 to 2018, EPA granted 85 exemptions totaling about 4.04 billion ethanol-equivalent gallons.

"When it comes to the RFS, we need EPA to follow the law," Thalmann said. "We trusted the Oct. 4 announcement that EPA would fix this. The projection does not reflect EPA's action on waivers. This rule gives EPA free reign to change direction at any time. There's no reason to use (DOE) recommendations when the real numbers are right in front of us."

INDUSTRY GROUPS TESTIFY

Brian Jennings, CEO of the American Coalition for Ethanol, said EPA's proposal was a "classic bait and switch" and falls far short of what the industry expects.

"ACE members are furious with EPA's double-standard," Jennings said. "When it came to helping refineries escape RFS obligations, EPA rejected Department of Energy recommendations to exercise restraint, but now that EPA must restore volume to the RFS, the agency is suddenly embracing DOE recommendations because the result will keep a lid on refinery blending obligations going forward."

Renewable Fuels Association President and CEO Geoff Cooper said the ethanol industry was not opposed to small refineries receiving exemptions as long as they can prove hardship.

The concern is the proposal does not reflect the agreement reached between industry and President Trump, he said.

"This proposal fails to reflect the letter and spirit of the president's commitment to restore integrity to the RFS, fails to assure that the statutorily required 15-billion-gallon level for conventional biofuels will be met, and fails to restore stability in the marketplace by definitively ending the practice of allowing small-refinery exemptions from eroding RFS biofuel demand," Cooper said.

Growth Energy CEO Emily Skor said the EPA needs to "uphold the president's commitment" to farmers and biofuel workers.

"Midwestern lawmakers and governors have seen the damage firsthand and worked with the president to secure a deal that would start to undo the damage -- a deal that would honor this administration's commitments to farmers, biofuel producers, rural America, as well as small refineries," she said.

"But instead, the EPA has undercut the president's promise and has yet again tilted the table in favor of the nation's largest oil companies -- all at the expense of the American farmer."

API OPPOSES REALLOCATION

Patrick Kelly, senior fuels policy adviser at the American Petroleum Institute, said if the EPA reallocates 770 million gallons of biofuels to larger refiners in 2020, it will harm the industry.

"The misguided policy to reallocate exempt small-refinery obligations punishes the companies already complying with a challenging RFS standard," he said.

"Small-refinery exemptions have not materially impacted the amount of ethanol produced or blended into the domestic gasoline pool, according to EIA data. Reallocating these exemptions distorts the competitive marketplace and creates an un-level playing field among competing refineries."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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